Email Boilerplate as Notice under Rule 26(b)(5)(B)

Meg Franklin, Associate Member, University of Cincinnati Law Review

In Harleysville Ins. Co. v. Holding Funeral Home, an electronic confidentiality notice was not strong enough to protect attorney-client privilege.[1] The court held that the attorney-client privilege was effectively waived because counsel failed to take “reasonable steps to prevent [the privileged information’s] disclosure or to rectify the situation.”[2] Yet, the opposing counsel’s use of the privileged information resulted in court sanctions.[3] The court found that the defense counsel had acted contrary to rules of ethics and civil procedure.[4] Most notably, a confidentiality notice contained in an email served as notice under Fed. R. Civ. P. 26(b)(5)(B).[5] This holding, while effectively punishing the defense counsel’s unethical behavior, is contrary to general understanding of Rule 26(b)(5)(B).

Harleysville Ins. Co. v. Holding Funeral Home

On February 9, 2017, a magistrate judge in the Western District of Virginia denied Harleysville Insurance Company’s motion requesting the disqualification of defendant’s counsel for improper, unauthorized access to privileged information.[6] The magistrate judge denied the motion because Harleysville waived its privilege by “putting sensitive materials on an unprotected file-sharing site.”[7] However, the magistrate judge also held that the defense counsel “acted improperly by accessing the materials and using them without notifying the plaintiff’s counsel and asking for a court ruling.”[8] Consequently, defense counsel had to bear the plaintiff’s cost of the motion.[9]

The motion arose during a dispute over a fire loss claim.[10] While preparing the claim, an employee for Harleysville’s parent company emailed surveillance footage of the fire loss scene to the National Insurance Crime Bureau (“NICB”).[11] The email contained a hyperlink to an internet-based electronic file sharing service operated by Box, Inc. (“Box folder”).[12] The Box folder was not password protected, but the email containing the hyperlink to the Box folder included a confidentiality notice.[13] Six months later, the same employee uploaded the entire case file to the same Box folder to share it with counsel.[14] Thus, the hyperlink that had been emailed to NICB could then access the entire case file.[15] Yet, the Harleysville counsel was not the only one to receive the hyperlink to the case file. During discovery, NICB shared the email containing the hyperlink with defense counsel.[16] After receiving the hyperlink, defense counsel downloaded and reviewed the case file.[17]  Harleysville subsequently discovered that defense counsel had access to these the case file through a discovery request.[18]

The court held that Harleysville had waived its attorney-client privilege and work-product protection.[19] In its analysis of both attorney-client privilege and work-product protection, the court relied on Harleysville’s failure to protect the electronic file with a password.[20] In fact, the magistrate judge analogized the situation as the “cyber world equivalent of leaving its claims file on a bench in the public square and telling its counsel where they could find it.”[21] The court noted that this holding promotes a better public policy by placing the burden on a company to protect its privileged information when the company implements a new technology.[22] Since Harleysville’s actions waived its privilege to the case file, the court found it was unnecessary to disqualify defense counsel.[23]

Although Harleysville did not succeed on its motion to disqualify defense counsel, the magistrate judge nonetheless imposed sanctions on defense counsel.[24] The court found that defense counsel acted improperly by downloading and reviewing the case file without notifying the plaintiff.[25] This finding was supported with ethics rules and a rule of civil procedure.

The court found that the defense counsel “[k]nowingly disobe[d] or advise[d] a client to disregard a standing rule or a ruling of a tribunal made in the course of a proceeding” contrary to the Virginia Rules of Professional Conduct.[26] The violated “standing rule” was Fed. R. Civ. P. 26(b)(5)(B)[27] and its state equivalent.[28] Federal Rule of Civil Procedure 26(b)(5)(B), also known as the “clawback clause,” states:

Information Produced. If information produced in discovery is subject to a claim of privilege or of protection as trial-preparation material, the party making the claim may notify any party that received the information of the claim and the basis for it. After being notified, a party must promptly return, sequester, or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; must take reasonable steps to retrieve the information if the party disclosed it before being notified; and may promptly present the information to the court under seal for a determination of the claim. The producing party must preserve the information until the claim is resolved.[29]

According to the court, that defense counsel should have realized that the hyperlink contained privileged information because the email contained a confidentiality notice.[30]  In other words, the relevant notice that triggered 26(b)(5)(B) was the confidentiality notice. Thus, although the court denied the plaintiff’s motion, the defense counsel had to cover the costs of the motion proceedings.[31]

The Power of the Confidentiality Notice

In Harleysville, the confidentiality notice contained in the email was considered notice to the defense counsel under Fed. R. Civ. P. 26(b)(5)(B). This is notable because under 26(b)(5)(B), the receiving party does not have the burden of notifying the producing party of any inadvertent disclosure.[32] Therefore, receiving notice as a boilerplate email confidentiality notice may not meet the general understanding of notice to most practitioners.

First, the plain language of the rule gives the producing party discretion to notify the receiving party of the privilege after the materials were produced.[33] In contrast, the confidentiality notice is given concurrently to the production of the privileged materials. Second, the rule seems to impose the responsibility on the producing party to actively notify the other party. In contrast, one could view boilerplate email confidentiality notices as a passive form of notification.

Yet, at least one other court held that “to the extent that such boilerplate does put a receiving attorney on notice that he is in possession of privileged material, he may have an ethical obligation to cease review of the material and return it to the transmitting party.”[34] A counterargument to this holding may argue that a boilerplate confidentiality notice does not effectively put the receiving attorney on notice. Perhaps the effect of the notice could be diluted from industry-wide overuse of confidentiality notices.

Although the effectiveness of the confidentiality notice may be debatable, it is at least compliant with Committee Note to 2006 amendment to Rule 26(b)(5) which advises “[t]hat notice should be in writing unless the circumstances preclude it.”[35]

Conclusion

Confidentiality notices may not affect every situation.  In Harleysville, a confidentiality notice was used to show that the defense counsel failed to follow federal and Virginia rules of civil procedure.  Although the confidentiality notice could not protect the privilege that was waived, it helped Harleysville recover costs.  Therefore, attorneys receiving emails containing a boilerplate confidentiality notice should consider the possible consequences before taking advantage of attachments or hyperlinks.

 

[1] No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714 (W.D. Va. Feb. 9, 2017).

[2] Id. at *17.

[3] Id. at *22-24.

[4] Infra, n. 24, 25, 26.

[5] Infra, n. 27.

[6] Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *1 (W.D. Va. Feb. 9, 2017).

[7] Joan C. Rogers, Putting Papers on File-Sharing Site Waived Privilege, Bloomberg BNA (February 22, 2017), https://www.bloomberglaw.com/print/X1FF3BSS000000.

[8] Id. See also, § 2016.3 Privileged Matter—Inadvertent Production of Privileged Material in Discovery, 8 Fed. Prac. & Proc. Civ. § 2016.3 (3d ed.)(explaining, “Rule 26(b)(5)(B) permits a privilege holder to give notice of production of privileged material and thereby prevent further use of the material in the litigation until there is a ruling on whether privilege applies, but it does not alter the standards for determining whether there has been a waiver.”)

[9] Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *24 (W.D. Va. Feb. 9, 2017).

[10] “Plaintiff, Harleysville Insurance Company . . . has sued the defendants seeking a declaratory judgment that it does not owe the defendants’ fire loss claim for an October 22, 2014, loss of a funeral home in Castlewood, Virginia, based on the fire being intentionally set, material misrepresentations and failure to cooperate. The defendants have filed counterclaims alleging breach of insurance contract and bad faith against Harleysville.” Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *2 (W.D. Va. Feb. 9, 2017).

[11] Id. at *2-3.

[12] Id.

[13] “CONFIDENTIALITY NOTICE: This e-mail contains information that is privileged and confidential, and subject to legal restrictions and penalties regarding its unauthorized disclosure or other use. You are prohibited from copying, distributing or otherwise using this information if you are not the intended recipient. If you received this e-mail in error, please notify me immediately by return e-mail, and delete this e-mail and all attachments from your system.” Id. at *3.

[14] Id. at *4.

[15] This was done to share files with the Haryleysville counsel. Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *4-5 (W.D. Va. Feb. 9, 2017).

[16] Id. at *4-5.

[17] Id. at *5.

[18] Id.

[19] Id. at *13, 17.

[20] Id. at *10-19.

[21] Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *13 (W.D. Va. Feb. 9, 2017).

[22] Id. at *14.

[23] Id. at *23-24.

[24] “The conclusion that the acts of Harleysville, in hindsight, waived any claim of privilege or work-product protection over its Claims File does not, however, provide an answer to whether defense counsel acted properly under the circumstances and whether any sanction should be imposed.” Id. at *18.

[25] Id. at *19-20.

[26] Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *18 (W.D. Va. Feb. 9, 2017) (quoting Va. Sup. Ct. R. Rule 3.4).

[27] Which states that the “receiving party, after being so notified ‘. . . must promptly return, sequester, or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; must take reasonable steps to retrieve the information if the party disclosed it before being notified; and may promptly present the information to the court under seal for a determination of the claim.’” Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *19 (W.D. Va. Feb. 9, 2017).

[28] Va. Sup. Ct. R. 4.1(b)(6)(ii) states, “[u]pon receiving such notice, any party holding a copy of the designated material shall sequester or destroy its copies thereof, and shall not duplicate or disseminate such material pending disposition of the claim of privilege or protection by agreement, or upon motion by any party. If a receiving party has disclosed the information before being notified of the claim of privilege or other protection, that party must take reasonable steps to retrieve the designated material.” Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *19 (W.D. Va. Feb. 9, 2017).

[29] Fed. R. Civ. P. 26(b)(5)(B).

[30] Id. at *22-23. Interestingly, the court found that the defendant counsel’s use of the Virginia State Bar Hotline for advice “belies any claim that they believed that their receipt and use of the materials without Harleysville’s knowledge was proper under the circumstances.” Id. at *22.

[31] Harleysville Ins. Co. v. Holding Funeral Home, No. 1:15cv00057, 2017 U.S. Dist. LEXIS 18714, at *24 (W.D. Va. Feb. 9, 2017).

[32] Defendant did not have a duty to notify plaintiff that it had inadvertently disclosed a privileged email in Mt. Hawley Ins. Co. v. Felman Production, Inc., 271 F.R.D. 125 (S.D. W. Va. 2010). § 2016.7Privileged Matter—Privileged Information Produced, 8 Fed. Prac. & Proc. Civ. § 2016.7 (3d ed.).

[33] See, supra, n. 28.

[34] Resolution Tr. Corp. v. First of Am. Bank, 868 F. Supp. 217 (W.D. Mich. 1994).

[35] “Such circumstances could include the assertion of the claim during a deposition.” Committee Note to 2006 amendment to Rule 26(b)(5).

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