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  • Failure to Act Promptly in Rectifying an Inadvertent Disclosure May Waive Privilege

    Jacob v. Duane Reade, Inc., 2012 U.S. Dist. Lexis, 11 Civ. 0160 (February 28, 2012)

    The Plaintiffs in this action are Assistant Store Managers who are pursuing a collective action under the Fair Labor Standards Act (“FLSA”) for overtime wages against Duane Reade, Inc. and Duane Reade Holdings, Inc. (“Duane Reade”).  On February 28, 2012, the Southern District of New York ruled that a Defendant’s inadvertent disclosure of a two page email may waive the attorney-client privilege.  The email was produced as part of a two million page production of electronically stored information (“ESI”).

    At issue was an email sent from Duane Reade’s Human Resources Manager to Duane Reade’s Senior Director of Human Resources. The email specifically discusses a meeting between various members of Duane Reade’s Human Resource Department and Duane Reade’s in-house counsel, Julie Ko, who is referred to as “Julie” within the email.  The first half of the email contains “Julie’s” advice concerning what tasks the Assistant Store Managers must perform in order to be exempt from FLSA coverage.

    The day after the email was produced to Plaintiffs, the Plaintiffs deposed Duane Reade’s Vice President of Human Resources and directly addressed the email’s contents.  One of Duane Reade’s litigation counsel was present and conducted redirect examination with respect to the email; however, counsel failed to raise a privilege objection or attempt to identify who the “Julie” was who was referred to in the email.

    Approximately two months after the email’s production, Duane Reade filed a letter motion seeking a protective order declaring the email protected under the attorney-client privilege and ordering its return to Defendants.  The Court looked to its recent summarization of the law governing waiver through inadvertent disclosure:

    In determining whether an inadvertent disclosure waives privilege, courts in the Second Circuit have adopted a middle of the road approach.  Under this flexible test, courts are called on to balance the following factors: (1) the reasonableness of the precautions to prevent inadvertent disclosure; (2) the time taken to rectify the error; (3) “the scope of the discovery;” (4) the extent of the disclosure; and (5) an over[arching] issue of fairness.

    Utilizing this framework, the Court rejected Plaintiff’s assertion that the Defendants did not take reasonable steps in preventing the email’s disclosure.  The Court referred to the sheer volume of ESI produced, the Defendants’ usage of an outside vendor, the team of contract attorneys, lists of attorney names whose communications may be privileged, and search filters.  However, even with all of these precautions in place, the email was not identified as privileged because it was neither from nor to an attorney and no attorney was copied on the email.  Nevertheless, the Court ruled that Defendants waived the privilege because their attempt to rectify the issue was not prompt enough.

    The Defendants alleged that the relevant time-frame began upon recognition that the email was privileged.  The Court rejected this proposition because there were “numerous red flags” that should have suggested to Defendants’ counsel that the email likely contained privileged information.

    Therefore, the Court held that Defendants did not act “diligently in rectifying the inadvertent disclosure.”  The Defendants delay, combined with the email already being the subject of deposition, tipped the issue of fairness in Plaintiff’s favor.  Moreover, the Court reasoned that any prejudice toward Defendants is mitigated by the fact that the waiver only extended to the email produced.

    If your institution has questions or concerns about this topic and you would like further information, please email Cynthia Augello at caugello@cullenanddykman.com or call her at 516.357.3753.