Coburn Group, LLC v. Whitecap Advisors LLC
80 Fed. R. Serv. 307, 2009 U.S. Dist. LEXIS 69188, 640 F.Supp.2d 1032 (2009)
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Rule of Law:
Under Federal Rule of Evidence 502(b), the inadvertent disclosure of work-product protected material during discovery in a federal proceeding does not waive that protection if the disclosure was unintentional, the holder took reasonable steps to prevent disclosure, and the holder promptly took reasonable steps to rectify the error.
Facts:
- Coburn Group, LLC (Coburn) claimed in a lawsuit that Whitecap Advisors LLC (Whitecap) breached an oral contract to pay Coburn fees for referring investors to Whitecap.
- Whitecap provided its attorneys with computer hard drives containing approximately 72,000 pages of potentially responsive documents for discovery in the lawsuit.
- Whitecap's lead counsel assigned two experienced paralegals, with 17 and 16 years of experience, to review the documents for five weeks following a detailed protocol to identify responsive and privileged material.
- On March 6, 2008, Whitecap produced approximately 40,000 responsive documents to Coburn in hard-copy form, and a CD with electronic copies followed in June 2008.
- On September 26, 2007, Whitecap employee Brian Broesder sent an e-mail to Whitecap principal Eric Kamisher titled “Requests on Coburn Filing,” providing information gathered to respond to requests by Whitecap's attorneys.
- During Brian Broesder's deposition on July 14, 2008, Coburn’s counsel began questioning him about the e-mail, which was the first time Whitecap's counsel realized the e-mail had been produced.
Procedural Posture:
- Coburn Group, LLC (Coburn) filed a lawsuit against Whitecap Advisors LLC (Whitecap), claiming breach of an oral contract.
- Whitecap filed a motion to dismiss Coburn's complaint for lack of personal jurisdiction, which the District Judge denied on October 3, 2007.
- After Coburn filed an amended complaint, Whitecap filed a second motion to dismiss, which was also denied by the District Judge.
- In July 2008, during discovery, Whitecap's counsel realized that an e-mail believed to be work product had been produced to Coburn's counsel.
- Whitecap's counsel immediately objected to the use of the e-mail during a deposition and requested its return from Coburn's counsel.
- Whitecap and Coburn's counsel engaged in discussions regarding the return of the e-mail, with Coburn agreeing to 'quarantine' the documents while researching the issues.
- On August 5, 2008, Coburn's counsel sent a letter refusing to return the e-mail and indicating their intent to use it.
- On September 5, 2008, Whitecap filed a Motion to Compel Return of Documents and to Strike Deposition Testimony in the United States District Court for the Northern District of Illinois, which was heard by a United States Magistrate Judge.
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Issue:
Does the inadvertent disclosure of work-product protected material during discovery in a federal proceeding waive that protection under Federal Rule of Evidence 502(b) if the producing party demonstrates the disclosure was unintentional, they took reasonable steps to prevent it, and promptly acted to rectify the error?
Opinions:
Majority - Geraldine Soat Brown, United States Magistrate Judge
Yes, the inadvertent disclosure of a work-product protected document during discovery did not waive that protection under Federal Rule of Evidence 502(b) because Whitecap took reasonable steps to prevent disclosure and promptly acted to rectify the error. The court found that the e-mail constituted work product, having been prepared in anticipation of litigation (after the lawsuit was filed) to assist Whitecap's attorneys, and involved the selection and organization of information by Whitecap’s employee. Applying Fed.R.Evid. 502(b), the court concluded that the disclosure was inadvertent because Whitecap did not intend to produce the document, distinguishing 'inadvertent' from the reasonableness of prevention efforts. Whitecap took reasonable steps to prevent disclosure, given the large volume of documents (72,000 reviewed, 40,000 produced) and the use of experienced paralegals following a specific, lawyer-supervised protocol; the fact that only three documents out of 72,000 slipped through reinforced this finding. Furthermore, Whitecap took prompt, reasonable steps to rectify the error; its counsel immediately objected at the deposition, requested the e-mail's return the next day, and the subsequent delay in filing the motion was mutually agreed upon while the parties researched the issue. The court rejected Coburn’s argument of 'substantial need' under Rule 26(b)(3)(A)(ii), finding that the e-mail's content was not dramatically inconsistent with Whitecap's prior statements and that Coburn had other means to obtain the relevant information. Finally, the court dismissed Coburn's reliance on an Illinois ethics opinion, noting that Federal Rule of Evidence 502 governs in federal court and newer Illinois ethical rules suggest notification rather than use of inadvertently produced documents.
Analysis:
This case is significant for its interpretation and application of Federal Rule of Evidence 502(b), particularly concerning inadvertent disclosures in the context of extensive electronic discovery. It clarifies that 'inadvertent disclosure' under 502(b)(1) refers simply to an unintentional production, separating it from the reasonableness inquiry under 502(b)(2). The ruling provides practical guidance on what constitutes 'reasonable steps' to prevent and rectify disclosure, acknowledging the inevitability of mistakes in voluminous discovery while rejecting a strict 'all reasonable means' standard or the necessity of post-production review. This decision reinforces the protection of work product, even when mistakenly produced, thereby reducing the burden on litigants engaging in high-volume document production and promoting efficient resolution of discovery disputes.
