Attorney Notes Get Work Product Protection From North Carolina Court Of Appeals

A novel issue of work product privilege was decided today by the North Carolina Court of Appeals in Boyce & Isley, PLLC v. Cooper.  The Court held that an attorney's verbatim copying of the text of selected documents at a document production was entitled to the protection of the privilege.

Here are the facts: during a document production, an attorney for the Defendant made notes on her laptop computer of the documents being reviewed. Her notes included "short snippets of verbatim text from certain documents" and her "thoughts regarding them and her theories of the case."

Plaintiff moved to compel production. The trial court ordered the production of the lawyer's notes, but the Court of Appeals accepted an interlocutory appeal of the issue and reversed.

The precedent the Court found to be similar consisted of federal cases holding that an attorney's highlighting of documents constituted protected work product.  The Court of Appeals held that "the act of defendants' counsel of inputting text from [plaintiff's] files into her laptop is analogous to an attorney highlighting select portions of copied documents." 

The Defendants also argued that the lawyer's selection of a few items to record verbatim -- out of thousands of pages of documents produced -- warranted the protection of the work product privilege.  The Court agreed, and held moreover that this was opinion work product entitled to absolute protection:

Defendants contend that the disclosure of the notes would direct plaintiffs to the few documents and portions thereof that defendants' counsel focused on and considered significant enough to emphasize from among a vast number of items. We agree. Consequently, we conclude that the verbatim text entered in the computer of defendants' counsel qualifies as opinion work product and is not discoverable, especially where plaintiffs. . . already have the underlying, original documents in their possession. As such, the trial court abused its discretion by concluding otherwise. Furthermore, even assuming, arguendo, that the verbatim text here qualifies merely as ordinary work product as opposed to opinion work product, we agree with defendants that plaintiffs have neither argued nor shown that there is a “substantial need” or “undue hardship” to justify production, particularly given that [plaintiffs have] all of the underlying documents in [their] possession.

The Court also observed that "in cases that involve reams of documents and extensive document discovery, the selection and compilation of documents is more crucial than legal research."  (quoting Shelton v. American Motors Corp., 805 F.2d 1323 (8th Cir. 1986)).

I've used the term "privilege" in this post, the Court of Appeals said that work product is actually a "qualified immunity."

Jim Phillips and Charles Coble of Brooks Pierce represent the Defendant.

 

New Federal Rule of Evidence 502 Deals With Attorney-Client Privilege, Waiver, And Inadvertent Production

There's going to be a new Federal Rule of Evidence, approved by voice vote in the House this week and unanimously by the Senate earlier this year.  It's on President Bush's desk for signature (that's him signing the baseball in the picture at the left), and should be on the books in the next few weeks.  

The new addition to the Rules is Rule 502, titled "Attorney-Client Privilege and Work Product: Limitations on Waiver."  New Rule 502 covers the scope of a waiver of privilege and the issue of inadvertent production of privileged documents, among other waiver related issues. 

The full text of the Rule is at the bottom, but here's a synopsis:

  • If a waiver of privilege is found, the waiver extends to undisclosed communications or information only if (1) the waiver is intentional,  (2) the other communications involve the same subject matter, and (3) the communications "ought in fairness to be considered together."  Rule 502(a).
  • If the disclosure is inadvertent, it does not operate as a waiver in either federal or state court if (1) the disclosure was inadvertent, (2) the holder of the privilege took "reasonable steps to prevent disclosure," and (3) the holder "promptly took reasonable steps to rectify the error."  Rule 502(b)
  • If the disclosure was made in a state court proceeding, it doesn't operate as a waiver in a federal proceeding if either the disclosure wouldn't have been a waiver under the federal rule, or it wouldn't be a waiver under state law. Rule 502(c).
  • If the Court enters an Order (like a consent Protective Order) that a disclosure will not be a waiver, that Order will bar any determination by another federal court or a state court that a waiver has occurred.  In other words, such a judicially approved non-waiver provision will have effect beyond the pending litigation, which isn't the case now.  Since parties can provide by such an agreement that, for example, there will be no waiver irrespective of the care taken by the disclosing party, no-waiver provisions will no doubt become stock provisions in Protective Orders. An agreement between the parties on waiver issues won't be effective unless it becomes part of a Court Order.  Rule 502(d) and (e).

The new Rule resolves conflict between courts throughout the country on whether an inadvertent production results in waiver.  North Carolina's District Courts had reached different conclusions on that issue.  Scott v. Glickman, 199 F.R.D. 174 (E.D.N.C. 2001) and Parkway Gallery v. Kittinger/Pennsylvania H. Group, 116 F.R.D. 46 (M.D.N.C.1987) followed the flexible approach espoused by the new Rule, but the Western District had held that even an inadvertent production waived privilege, in Thomas v. Pansy Ellen Products, Inc., 672 F. Supp. 237 (W.D.N.C. 1987).

The Rule takes effect immediately upon the President's signature.  It applies to all cases filed after its enactment, and applies to pending cases "insofar as is just and practicable."

I read about Congress' passage of the Rule on the Electronic Discovery Law blog. The full text of the Rule is below, the explanatory note is here.

 

Rule 502. Attorney-Client Privilege and Work Product; Limitations on Waiver

                                                                                                   

The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection.

 

(a)            Disclosure made in a federal proceeding or to a federal office or agency; scope of a waiver. When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if:

(1)            the waiver is intentional;

(2)            the disclosed and undisclosed communications or informa­tion concern the same subject matter; and

(3)            they ought in fairness to be considered together.

(b)            Inadvertent disclosure. When made in a federal proceeding or to a federal office or agency, the disclosure does not operate as a waiver in a federal or state proceeding if:

(1)            the disclosure is inadvertent;

(2)            the holder of the privilege or protection took reasonable steps to prevent disclosure; and

(3)            the holder promptly took reasonable steps to rectify the error, including (if applicable) following Fed. R. 25 Civ. P. 26(b)(5)(B).

(c)             Disclosure made in a state proceeding. — When the disclosure is made in a state proceeding and is not the subject of a state-court order concerning waiver, the disclosure does not operate as a waiver in a federal proceeding if the disclosure:

(1)            would not be a waiver under this rule if it had been made in a federal proceeding; or

(2)            is not a waiver under the law of the state where the disclosure occurred.

(d)            Controlling effect of a court order. — A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court – in which event the disclosure is also not a waiver in any other federal or state proceeding.

(e)             Controlling effect of a party agreement. — An agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.

(f)             Controlling effect of this rule. — Notwithstanding            Rules 101 and 1101, this rule applies to state proceedings and to federal court-annexed and federal court-mandated arbitration proceedings, in the circumstances set out in the rule. And notwithstanding Rule 501, this rule applies even if state law provides the rule of decision.

(g)            Definitions. — In this rule:

(1)            “attorney-client privilege” means the protection that applicable law provides for confidential attorney-client communications; and

(2)            “work-product protection” means the protection that applicable law provides for tangible material (or its intangible equivalent) prepared in anticipation of litigation or for trial.

Court Of Appeals Cases Today: Arbitrator Immunity, Sanctions, And Work Product Decisions

It was a busy opinion day today in the North Carolina Court of Appeals: there were 44 published opinions, three of which I'm commenting about briefly below.  The three involve a range of issues, including arbitrator immunity, Rule 11 sanctions, and an technical point about subpoenas in state tax refund litigation and also work product privilege.

The arbitrator case, Dalenko v. Collier, addressed an issue of first impression in North Carolina, whether an arbitrator is entitled to judicial immunityPlaintiff, a pro se litigant who had been unsuccessful in an arbitration heard by former Judge Collier, sued him for allegedly being personally interested in the case and biased.  The Court of Appeals held (relying on Burns v. Reed, 500 U.S. 478 (1991)) that whether a private citizen acting as an arbitrator is entitled to judicial immunity depends upon a "functionality test."  It stated:

defendant was sitting as an arbitrator to resolve a dispute pending in the courts of Wake County. Under the functionality test, defendant was entitled to judicial immunity and was immune from the claims asserted in the instant case. Plaintiff's complaint alleges conduct which was clearly within the course and scope of the arbitration proceeding. Plaintiff's claims were barred by arbitrator immunity, and the trial court correctly found them to be frivolous.

The Dalenko case also affirmed an award of Rule 11 sanctions against the Plaintiff, and also found that Plaintiff was collaterally estopped from pursuing her claims against the arbitrator since she had raised those same claims in seeking a vacation of the arbitration award.

In Ward v. Jett Properties, LLC, the Court affirmed the entry of Rule 11 sanctions against a pro se litigant who had sued his landlord for allowing other tenants to play football "within striking distance of his car" and to "dart around" on "metal skooters." To me, the significant point worth noting about Ward is that one of the reasons the Court found the Complaint to be "legally insufficient" for Rule 11 purposes was that it had been dismissed on a Rule 12(b)(6) motion.  The Court held "though the mere fact that a cause of action is dismissed upon a Rule 12(b)(6) motion does not automatically entitle the moving party to have sanctions imposed. . . . it is often indicative that sanctions are proper."  The fact that Ward had filed forty two other lawsuits in the past six years, at least one of which was identical to the one before the Court, was undoubtedly a factor in the affirmance.

Last, the work product case is In the Matter of the Summons Issued to Ernst & Young, LLPIt involves a subpoena issued by the North Carolina Department of Revenue to the accounting firm of Ernst & Young for documents relating to the tax refund lawsuit between the DOR and Wal-Mart.  Wal-Mart intervened and challenged the subpoena. 

Before it got to the work product issue, the Court resolved a threshold issue whether the Rules of Civil Procedure apply to subpoenas issued by the DOR pursuant to N.C. Gen. Stat. § 105-258.  The DOR argued that the Rules didn't apply, the Court of Appeals disagreed and said that they did.  The applicability of the Rules made a difference to Wal-Mart, which was arguing that the Court didn't have subject matter jurisdiction because the DOR hadn't issued a summons and filed a Complaint.  Although Wal-Mart prevailed on its argument about the application of the Rules, the Court denied the Motion to Dismiss because "the statute provides jurisdiction to the Wake County Superior Court upon application by the Secretary of Revenue."

On the work product side of things, the issue was whether some of the documents prepared by E&Y had been done "in anticipation of litigation."  Wal-Mart argued that the documents had been prepared by the accountants specifically for its restructuring, not for tax return purposes and not for purposes of its audit; that it had been billed separately for the work; that the partner who had done the work anticipated that there might be litigation from various tax authorities; and that the documents were not prepared in the ordinary course of business.  The Court found this insufficient to determine the applicability of the privilege, and remanded the case for an in camera review by the trial court.