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The Bama Companies, Inc. v. Stahlbush Island Farms, Inc.

United States District Court, N.D. Oklahoma

August 19, 2019

THE BAMA COMPANIES, INC., Plaintiff,
v.
STAHLBUSH ISLAND FARMS, INC., Defendant.

          OPINION AND ORDER

          JODI F. JAYNE, MAGISTRATE JUDGE UNITED STATES DISTRICT COURT

         Before the Court is Plaintiff's Discovery Motion Pursuant to Fed. R. Civ. 26(b)(5)(B) (“Motion”) (ECF No. 43), which was filed under seal. Plaintiff The Bama Companies, Inc. (“Bama”) requests that the Court (1) preclude Defendant Stahlbush Island Farms, Inc. (“Stahlbush”) from “clawing back” privileged documents pursuant to Federal Rule of Civil Procedure 26(b)(5)(B) (“Rule 26(b)(5)”); and (2) find that Stahlbush waived attorney-client privilege as to the documents. In response, Stahlbush acknowledges that disclosure of the privileged documents occurred but urges the Court to apply Federal Rule of Evidence 502(b), which provides that disclosure does not operate as a waiver if certain requirements are met.

         The Court ordered expedited briefing, ordered Stahlbush to submit the documents for in camera review, and conducted oral argument on August 7, 2019.[1] For reasons explained below, the Motion is granted, and the Court finds that privilege has been waived.

         I. Facts Relevant to Resolution of Motion

         Bama alleges as follows. In March of 2017, Bama discovered twelve stones in fruit pies made with black raspberries sold to Bama by Stahlbush. Bama notified Stahlbush, and Stahlbush cooperated with Bama in investigating the issue. Ultimately, Stahlbush informed Bama it did not have the necessary insurance coverage, and Bama filed this lawsuit asserting claims for breach of contract and negligence against Stahlbush on December 27, 2017.

         The documents at issue in the Motion consist of email communications between Stahlbush employees and Stahlbush's counsel, Ben Fetherston (“Fetherston”), from March to June of 2017 (“emails”). All emails relate to the pre-suit investigation of Bama's claims. Within the emails is a statement by Keeley Jensen (“Jensen”), Stahlbush's quality assurance manager, to Fetherston that “Black Raspberries have been determined as the source of the stones” (“3/21/17 Email”). ECF No. 43-10 at 3. Bama does not dispute that the communications are subject to the attorney-client privilege.

         On or around August 20, 2018, Stahlbush responded to Bama's first set of discovery requests. Bama's requests encompassed the emails, but Stahlbush did not produce a privilege log or otherwise identify the emails as responsive. During oral argument, Stahlbush's counsel stated she did not recall reviewing the emails during her document review over a year ago, but she speculated that they were withheld based on Stahlbush's vagueness and overbreadth objections. Counsel also speculated that privilege was perhaps overlooked, because some of the privileged communications are within a chain of emails that include communications with Bama.

         Much later in the litigation, Stahlbush retained a testifying expert, Dr. Reilly. Stahlbush's counsel inadvertently produced the emails to Dr. Reilly for review in preparing her expert opinions. Dr. Reilly's report contains a long list of “documents reviewed, ” which includes the emails. ECF No. 43-8 at 7-16. On July 2, 2019, the day before Dr. Reilly's deposition, Stahlbush produced all documents to Bama that had been produced to Dr. Reilly, including the emails. On July 3, 2019, Bama's counsel questioned Dr. Reilly extensively about the 3/21/17 Email, which contains the communication from Jensen to Fetherston that black raspberries had been determined as the source of the stones. Dr. Reilly admitted she had reviewed the 3/21/17 Email. During this questioning, Stahlbush's counsel failed to raise any privilege objection or demand that counsel cease questioning about the 3/21/17 Email, as permitted by Federal Rule of Civil Procedure 30(c)(2). During oral argument, counsel explained that she failed to object because she did not immediately recognize the document and was unsure of its status as privileged.

         On or around July 7, 2019, Bama's counsel sent an email to Stahlbush's counsel to inquire whether Stahlbush had failed to produce other unresponsive documents. Stahlbush's counsel did not make any claw-back demand at that time. On July 11, 2019, Stahlbush's counsel “began communicating with Bama's counsel on the privilege issue” and indicated that “a clawback was necessary.” ECF No. 47-1. On July 26, 2019, three weeks after the deposition, Stahlbush sent a “claw back” letter to Bama pursuant to Rule 26(b)(5)(B), asserted attorney-client privilege as to the emails, and provided a privilege log, which is attached as Exhibit 12 to the Motion. Bama ceased all use of the privileged emails and filed the sealed Motion requesting a ruling from the Court, as required by Rule 26(b)(5)(B).

         II. Analysis

         There is no dispute that (1) the emails are privileged attorney-client communications; and (2) they were disclosed to third parties in this federal proceeding, including Dr. Reilly and Bama. The issue is whether such disclosures resulted in waiver of privilege. As its legal basis for avoiding waiver, Stahlbush relies on Federal Rule of Evidence 502(b). Rule 502(b) sets “default standards governing the inadvertent disclosure of information that is subject to the attorney-client privilege or other protections.” Certain Underwriters at Lloyd's, London v. Nat'l R.R. Passenger Corp., 218 F.Supp.3d 197, 201 (E.D.N.Y. 2016). Rule 502(b) provides that disclosure of privileged documents does not constitute waiver if three requirements are met:

(1) the disclosure is inadvertent;
(2) the holder of the privilege . . . took reasonable steps to prevent disclosure; and
(3) the holder of the privilege . . . took reasonable steps to rectify the error, including (if applicable) following Federal ...

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