In the midst of the financial crisis, another bill signed by President Bush has been, for the most part, overlooked, but warrants understanding by in-house counsel for employers and HR professionals that may assist with case management.

Specifically, S. 2450 and new Federal Rule of Evidence 502 give protections to employers (and others) against waiver of the attorney client privilege and work product immunity.  An interesting interview with one of the judges responsible for formulating the bill appeared in the federal court newsletter earlier this year.

Bill Ruskin, a former colleague of mine who publishes the brand-new Toxic Tort Litigation Blog, has a good post summarizing the developments. 

The biggest development is new Rule 502 that was added to the Federal Rules of Evidence.  The new rule provides for protections against waiver of the attorney-client privilege and work product immunity.

As Ruskin states:

The practical effect of the new legislation should be to reduce the often staggering legal costs corporations often incur in complex litigation, particularly in producing electronic discovery.  In drafting the legislation, the Advisory Committee of Evidence Rules recognized that lawyers spend significant time and effort preserving the attorney-client privilege and work product.  Under the prior rule, if a protected document was produced, even accidentally, there was a risk that a court would find a subject matter waiver that would apply, not only to the instant case and document, but to other cases and documents as well.  Thus, lawyers placed an enormous amount of effort (and expense) into pre-disclosure document review to protect against inadvertent disclosure.  Although waiver issues always have been a concern in document-intensive litigation (and will no doubt continue to be in the future), the increased discovery burden created by e-discovery brought this issue to the boiling point over the past two years.  Under the new rule, the jeopardy to corporations (and their law firms for permitting a waiver) is substantially mitigated.

So What Does the Rule Really Say?

• Subsection (a) provides that in the event the court determines a party has disclosed information or communication that waives the attorney-client privilege, the waiver will only apply to the information disclosed unless the holder of the privilege intentionally produced the privileged information or communication in a misleading manner;
• Subsection (b) provides that the inadvertent disclosure of privileged information or communication in a federal proceeding will not result in a broader subject matter waiver if the holder of the privilege inadvertently disclosed the information or communication and took reasonable steps to prevent disclosure and rectify the error;
• Subsection (c) provides that disclosure of privileged information or communication in a state court proceeding will not operate as a broader subject matter waiver of the attorney-client privilege in a subsequent federal proceeding if the disclosure does not constitute a waiver under Rule 502 or is not a waiver under the law of the state where the disclosure occurred;
• Subsection (d) provides that if a federal court enters an order that the disclosure of documents containing privileged information or communication does not constitute a broader subject matter waiver, that order is enforceable against any party in subsequent federal or state court litigation;
• Subsection (e) allows parties to enter into confidentiality agreements protecting against subject matter waiver in the event of the inadvertent disclosure of privileged information or communication in a federal court proceeding.

The Bottom Line For Employers

Despite the new rule’s forgiving nature, employers should still take great pains to protect the attorney-client privilege and take care when producing documents.  The new rule is designed really to prevent draconian consequences from applying from an inadvertent disclosure — but an inadvertent disclosure can still hurt an employer a great deal.  For example, privileged discussions regarding the pros and cons of a layoff may be quite damaging at trial if inadvertently released.

So for employers, coming up with a workable system on how documents are to be produced is critical to keeping leaks to a minimum and ensuring that the attorney client privilege is preserved to maximum effect.  In addition, make sure that any documents disclosed in administrative proceeding follow the same precautions.