Designing the right clawback agreement for privileged information

By Alexander Gay March 5, 20185 March 2018

Designing the right clawback agreement for privileged information

 

Think of it as “produce first and verify later”. 

With the growth of e-discovery use, counsel are relying more heavily on clawback agreements to mitigate against the inadvertent production of privileged documents. Here a few essential elements that should be considered by counsel when drafting such an agreement.

A clawback agreement should contain a provision that confirms that the inadvertent production of a privileged document does not constitute a waiver of privilege.  That may seem obvious, but the obligation that a party be made to return a privileged document is separate and apart from the waiver that may occur with from its production in the first place.   

It’s also important to broadly define what constitutes an “inadvertent disclosure” — not to be confused with reckless disclosure, a distinction that is lost to some counsel.  An overly narrow definition may not necessarily capture cases where counsel has failed to apply reasonable care to the production of documents.  As evidenced from recent U.S. case law, inadvertently producing documents twice may, for example, constitute an act of professional negligence that is not caught by the clawback agreement. This very point is alluded to by Justice MacLeod in the 2011 Ontario Superior Court ruling in L’Abbé v. Allen-Vanguard, when he wrote that “inadvertence will not by itself amount to waiver but this does not mean the court will protect a party from the reckless release of privileged documents.”  Sedona Canada principle No. 9 also addresses this issue.  While counsel can specify that the clawback agreement applies regardless of whether reasonable steps have been taken by counsel to prevent disclosure, it is unclear how the courts will react to clauses that allow for professional negligence or whether they can even be rolled up into a court order.   

Counsel should consider how best to introduce the clawback agreement, recognizing that every case is different and guided by different rules.  In Ontario, a clawback agreement may be included as part of a discovery plan.  Where there is no need for one, it can be a standalone agreement.  In some cases, it can even be rolled up into an order, such as forming part of a confidentiality order.  The advantage of an order, as opposed to an agreement, is that third parties are bound by it.  However, it may be difficult to amend an order or to include a unilateral termination right.

Counsel should include a provision that describes the various steps to be taken in ensuring that the privileged materials are contained once the clawback is triggered. Critical to protecting the information from improper use and further dissemination include notifying opposing counsel, containing the distribution and copying of the privileged documents, the swearing of an affidavit confirming destruction and the overall treatment of the privileged document.  Timing is a key consideration, as the courts generally require that counsel take immediate steps when faced with knowledge of an inadvertent disclosure.  The details on how the privileged document is to be managed are often missing from clawback agreements and can be very powerful when rolled into an order.

The clawback agreement should contain a provision that describes the process by which disputes should be resolved. One must be careful not to overlook details on what aspect of the dispute is to be put to a judge, who bears the burden of establishing the privileged nature of the document and the timelines for bringing the dispute forward or even the venue. 

Counsel can also fashion a clawback agreement that has broad application and that is not limited to only privileged documents.  For instance, there may be circumstances where a privilege claim is only discovered after oral discoveries have taken place and where the transcript contains discussions of the privileged document. Unless it is explicitly stated, the transcript may escape the application of the clawback agreement, especially where the obligations are only tied to documents produced. A clawback agreement can also be made to apply to different types of documents.  In commercial cases where there may be great sensitivity over certain intellectual property or other commercial information that may not be relevant to the proceeding, counsel can agree to have the agreement apply to this type of document.  The problem for many commercial parties is that involving themselves in litigation brings the risk of disclosure of sensitive commercial information that can often be their Achilles heel.   A clawback agreement can reduce this risk.

Ultimately, a clawback agreement can save time and expense, especially in the context of e-discovery where huge amounts of information are exchanged in litigation.  Counsel can exchange quickly, without having to be surgical in their review. But lawyers should we wary of relying too much on precedents without thinking through the particular needs of a file.  There is always room for creativity.   

Alexander Gay is General Counsel at the Department of Justice. He maintains a broad civil litigation practice, with an emphasis on commercial and trade disputes. He is also a part-time professor at the University of Ottawa (Faculty of Law) and the author of the Annotated Arbitration Act of Ontario, 1991. The author's views are his own.

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