In United States v. Sensient Colors, Inc., 2009 U.S. Dist. LEXIS 81951 (D.N.J. Sept. 9, 2009), U.S. Magistrate Judge Joel Schneider held that the attorney-client privilege and work-product protections were not waived as to the first set of documents inadvertently produced by plaintiff.  However, the privilege and protections were waived as to all subsequent inadvertently produced documents because plaintiff failed to take timely and appropriate steps to rectify the error as required by FRE 502(b)(3).

Plaintiff produced approximately 45,000 electronic and paper documents (approximately 450 boxes or a total of 135,000 pages) to defendants on six different dates between May 2008 and February 2009. In August 2008 defendant returned 81 documents it deemed privileged.  In September, plaintiff confirmed that 80 of the 81 documents were privileged and inadvertently produced ("The September Letter").  In October 2008, defendant identified and returned another 89 privileged documents causing plaintiff to produce a supplemental privilege log in November ("the November Letter") claiming that most of the inadvertently produced documents were privileged or otherwise protected. In December 2008 during a deposition, plaintiff claimed that an exhibit tendered by defendant was privileged and inadvertently produced.  In March 2009, plaintiff identified another document as inadvertently produced. In April 2009, plaintiff acquired a new computer application and commenced a "re-review" of its entire 47,000 document database.  In June 2009, plaintiff identified another 91 inadvertently produced documents.  In July 2009, plaintiff found three more inadvertently produced documents and again in August wrote to defendant about six more.

The court ruled that the inadvertent production issues were controlled by FRE 502(b) which prevents waiver of privileged materials if: (1)  the disclosure was inadvertent, (2) the holder of the privilege or protection took reasonable steps to prevent the disclosure, and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Fed. R. Civ. P. 26(b)(5)(B).

Based on a totality of the circumstances, the court held that that the documents identified in the September Letter were privileged and were entitled to Rule 502 protection.  The court found that the plaintiff's document production was substantial given plaintiff's review of 47,000 documents and production of 45,000 documents.  Out of those 45,000 documents only 214 were at issue.  The court also agreed with plaintiff that the privileged information was not self-evident in the review and could have easily been (and indeed was) overlooked.  The court further found that plaintiff took reasonable steps to prevent the disclosure, including employing a sophisticated computer program to conduct its privilege review. The court was also willing to forgive plaintiff's counsel for getting up to speed with the computer software. "Unfortunately, mistakes occurred. Plaintiff should not be unduly punished for occasional mistakes that occurred while it started to use new software to organize and sort its documents."

The court took into consideration the "substantial" resources plaintiff put into the document production, including the employment of 12 trained "professionals" to conduct the review.  The court noted that plaintiff conducted quality assurance/quality control to (1) ensure completeness of the review, (2) minimize false negatives, i.e., designations of privileged information as non-privileged, and (3) minimize false positives, i.e., designations of discoverable information as privileged.  The court also found that plaintiff took reasonable steps to rectify the error and, prior to September 2008 had no reason to suspect that its document production was problematic.  Once, plaintiff was notified, it rectified the error within eight work days which the court ruled was both timely and reasonable.

The court found that although plaintiff's subsequent disclosures were inadvertent, that plaintiff did not take reasonable steps to rectify the error once it found out about the disclosure.  The court held that after the defendant's initial letter raising the inadvertent production in August 2008, plaintiff was on notice that there was a problem with its document production and privilege review.  At a minimum, the letter should have prompted plaintiff to promptly re-assess its procedures and re-check its production.  Instead, plaintiff waited until November 2008.  The court also noted that plaintiff provided "no meaningful details" to explain what steps it took to rectify the error after receiving defendant's initial letter in August 2008.  The court found that it was not until April 2009 that plaintiff re-reviewed its entire production and did not complete that review until August 2009, nearly one-year later.