eDiscovery Case Update: J-M Manufacturing Tries to Clawback Privileged Documents at Issue in McDermott Malpractice Case
September 19, 2011
One of the most talked about cases from an eDiscovery perspective this year is the case against McDermott Will & Emery for alleged malpractice in the disclosure of privileged documents. McDermott’s former client, J-M Manufacturing, has contended that 3,900 privileged documents were erroneously produced as part of 250,000 J-M electronic records that were reviewed under McDermott’s supervision. In late July, J-M filed an amended complaint to its case, naming Navigant Consulting, Stratify and Hudson Legal as third party vendors hired by McDermott to run documents through a filter to identify potential attorney-client privilege documents and perform review of those documents.
Now, J-M has filed a motion seeking clawback of 3,400 privileged documents it contends that McDermott wrongfully produced, claiming the US government and, then, their opponents in the case, received the documents erroneously from McDermott.
The malpractice case was filed in California Superior Court, but was successfully moved to federal court by McDermott. Recently, Hobson Dungog Bernardino + Davis, representing J-M in this case, filed a motion to remand the case to state court.
J-M says the first production of privileged documents in the case, in response to federal subpoenas, occurred in 2007 and 2008. Stratify was hired by McDermott to search 1.3 million electronic files to identify potentially responsive and privileged files. J-M claims it took “various precautions to identify and segregate documents that were subject to attorney-client privilege.", but that McDermott turned over files to the government that were not properly screened for privilege. J-M retrieved those documents through an informal July 2007 “clawback” agreement with the government. Both parties agreed to “return, sequester or destroy any inadvertently produced privileged materials.”
According to the filing, J-M then turned over a second production to the government assuming that its McDermott and its vendor, Stratify, had properly conducted the privilege review as previously instructed. However, on May 20, 2010 (two months after McDermott had been dismissed), attorneys for one of the relators (John Hendrix at Day Pitney), notified J-M that they held potentially privileged documents, J-M requested the return or destruction of the 3,400 privileged documents in June 2010, but was rebuffed by Day Pitney attorneys, who rejected the request saying J-M had waived privilege by not taking “reasonable steps to prevent disclosure” as specified in Federal Rule of Evidence 502 and Federal Rule of Civil Procedure 26. J-M has contended that the production of privileged documents was inadvertent and not a waiver.
On February 18, 2011, almost a year after McDermott had been dismissed, J-M entered into a joint clawback agreement with all relators. Ironically, in a June 3, 2011 email to Day Pitney attorneys, Sheppard Mullin noted an additional production in 2011 by them of 500 allegedly privileged documents as Stratify (still being used as the vendor in this case) “mistakenly released approximately 9,650 ESI files without first presenting them for attorney review”. As these documents may fall under the February 2011 clawback agreement, the plaintiffs have expressed willingness to destroy these documents.
As Sheppard Mullin has been disqualified in federal court due to conflict of interest, J-M has hired yet a third mega-firm in the False Claims case, Paul Hastings. The False Claims Act case is still awaiting trial, so it may be difficult for J-M at this point to show how the disclosure of privileged documents has caused it damages.
So, what do you think? Should J-M Manufacturing be able to clawback its privileged documents? Is it too early to assess malpractice against McDermott? Please share any comments you might have or if you'd like to know more about a particular topic.