In a classic understatement, Judge Gale said in a North Carolina Business Court opinion last Thursday that "North Carolina case law addressing problems inherent in electronic discovery. . . is not yet well developed." Op. ¶50. But in Blythe v. Bell, 2012 NCBC 42, the Judge went ahead and posted some road signs along that undeveloped and difficult path.
The issue in Blythe was waiver of attorney-client privilege. The Defendants had produced 3.5 million documents on two hard drives of which 1700 turned out afterwards to be potentially privileged. They made a motion for an order compelling the return of the privileged documents, which Judge Gale denied, ruling that the privilege had been waived.
The first lesson of the case is the test the Court will follow in determining whether an inadvertent disclosure will result in a waiver of attorney-client privilege in an electronic production. It is that the Court will consider "(1) the reasonableness of the precautions taken to prevent inadvertent disclosure; (2) the number of inadvertent disclosures; (3) the extent of the disclosures; (4) any delay in measures taken to rectify the disclosures; and (5) the overriding interests of justice." Op. ¶52. You might remember that test from the infamous case of Victor Stanley, Inc. v. Creative Pipe, Inc. (D. Md. 2008).
Judge Gale didn't get much past the reasonableness of the precautions, which he said was "paramount." That was especially so given the size of the production by the Bell defendants. He ruled that the "degree of those efforts should increase as the potential volume of documents to be produced increases." Op. ¶54.
The "sheer volume" of the production suggested that "more than minimal efforts" have been taken to guard against an inadvertent production. But the precautions were almost non-existent.
The Defendants had hired a computer consultant -- a firm named "Computer Ants" -- to process their email. The person overseeing the production for Computer Ants had limited experience in litigation matters. His employment background included stints as a truck driver and a Bass Pro Shops Security Manager. Defendants' counsel had told Computer Ants to withhold from production any emails with their email address extension (hickorylaw.com), but those emails had been included in the production. The form of the production was also a problem. The documents were not searchable unless they were opened individually.
To further underscore the lack of precautions, the Defendants hadn't reviewed the documents gathered by Computer Ants before providing them. Judge Gale stopped short of applying a bright line test that a failure to conduct a privilege review before production would establish waiver, but said that "efforts by a consultant demand a degree of oversight...." Op. ¶61. He held that "counsel cannot altogether delegate the need to guard against production of privileged communications to an outside consultant." Op. ¶63 (emphasis added).
Judge Gale said that he took "no pleasure in finding the waiver of attorney-client privilege." Op. ¶65. The opinion reflects a caution that general North Carolina state court trial practice may not be as experienced in electronic discovery as federal court practice is. (Op. ¶56).
That gap of experience has got to be closing at this point. This isn't the first clarion call from the Business Court on the obligations of North Carolina counsel with regard to e-discovery. I wrote about a decision by Judge Tennille from a couple of years ago which sent a "message for counsel" about e-discovery.