Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_07-cv-00522/USCOURTS-almd-2_07-cv-00522-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Declaratory Judgement

---

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

KOCH FOODS OF ALABAMA LLC, )

an Alabama Limited )

Liability Co., )

)

Plaintiff, )

) CIVIL ACTION NO.

v. ) 2:07cv522-MHT

) (WO) 

GENERAL ELECTRIC CAPITAL )

CORPORATION, a Delaware )

Corporation, )

)

Defendant. )

OPINION AND ORDER

Plaintiff Koch Foods of Alabama, LLC (Koch Foods)

brought this lawsuit, concerning the ownership of certain

poultry processing equipment, against defendant General

Electric Capital Corporation (GE Capital). GE Capital,

in removing this suit from state court, invoked this

court’s diversity-of-citizenship jurisdiction under 28

U.S.C. § 1332. The case is currently before the court on

a discovery dispute arising from Koch Foods’ inadvertent

disclosure of a privileged document. The United States

Magistrate Judge granted Koch Foods’ motion for a

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protective order, and GE Capital filed objections. For

the reasons that follow, GE Capital’s objections will be

overruled.

I. STANDARD OF REVIEW

A district court reviewing a magistrate judge’s

discovery order is, in general, limited by statute and

rule to reversing that order only if it is “clearly

erroneous or contrary to law,” 28 U.S.C. § 636(b)(1)(A);

Fed. R. Civ. P. 72(a). Put another way, in the absence

of a legal error, the district court may reverse only if

there was an “abuse of discretion” by the magistrate

judge. Cf. Cooter & Gell v. Hartmarx Corp., 496 U.S.

384, 401 (1990) (“When an appellate court reviews a

district court’s factual findings, the abuse-ofdiscretion and clearly erroneous standards are

indistinguishable: A court of appeals would be justified

in concluding that a district court had abused its

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discretion in making a factual finding only if the

finding were clearly erroneous.”). 

II. FACTS

On September 7, 2007, Koch Foods produced 3,758 pages

of documents pursuant to discovery requests. Upon

reading the documents, GE Capital discovered, tucked in

the middle of a 37-page lease agreement, the second page

of a three-page email exchange between the Chief

Financial Officer of Koch Foods and Koch Foods’ counsel.

Koch Foods learned that the email had been produced when

GE Capital presented it at the October 19, 2007,

deposition of Koch Foods’ Chief Financial Officer. 

Koch Foods immediately objected that the document was

privileged and should be returned, contending that the

two brief emails in the document had both been

specifically identified in its privilege log.

Additionally, Koch Foods’ counsel avers that he did not

intend to produce the document, did not see it despite

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several reviews of the discovery package, and would have

removed it had he seen it. All other non-privileged

emails in the produced documents were bundled together

and separated from the lease. 

The United States Magistrate Judge granted Koch

Foods’ motion for a protective order. GE Capital

contests the order on five grounds, four of which concern

the proper standard for inadvertent disclosure under

Alabama law. The fifth ground is that, even if the order

adopted the correct standard for inadvertent disclosure,

Koch Foods nevertheless has failed to establish that it

did not waive the privilege.

III. DISCUSSION

A. Debate Over Proper Standard for Inadvertent Waiver 

of Attorney-Client Privilege

The parties do not dispute that the document is

privileged. The question concerns solely the proper

standard for determining whether inadvertent waiver of

attorney-client privilege has occurred. Because the

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1. Although the instant case is controlled by state

law, federal cases are quoted because “the bulk of the

debate” on inadvertent waiver of privilege “has occurred

in federal courts.” John T. Hundley, “Inadvertent

Waiver” of Evidentiary Privileges: Can Reformulating the

Issue Lead to More Sensible Decisions? 19 S. Ill. U. L.J.

263, 268-29 (1995). It should also be noted that many

cases consider whether an attorney’s inadvertent

disclosure waives the client’s privilege, but that

(continued...)

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court has diversity jurisdiction, it must apply Alabama

substantive law and federal procedural law, see Erie R.R.

Co. v. Tompkins, 304 U.S. 64 (1938), and the substantive

nature of privilege therefore requires that Alabama law

determine the question of unintentional waiver of

attorney-client privilege. See Somer v. Johnson, 704

F.2d 1473, 1479 (11th Cir. 1983) (state statute

protecting certain records from discovery or introduction

into evidence is substantive, not procedural). Alabama

law, however, does not clearly specify this standard. It

is therefore useful to map out the existing legal

landscape.

In considering the contentious issue of inadvertent

waiver, three general lines of authority have emerged.1

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1. (...continued)

question is not at issue here. 

6

A traditional, strict-liability approach holds a party

responsible for maintaining the confidentiality of its

information and, as such, that party will pay the price

of waiver if it accidentally discloses a privileged

document. See, e.g., In re Sealed Case, 877 F.2d 976,

980 (D.C. Cir. 1989) (“The courts will grant no greater

protection to those who assert the privilege than their

own precautions warrant.”); FDIC v. Singh, 140 F.R.D.

252, 253 (D. Me. 1992) (Carter, J.) (“One cannot ‘unring’

a bell ... [A]lthough Plaintiff produced the memorandum

inadvertently, it waived its privilege.”). 

The most lenient standard takes an intent-based

approach, treating waiver of attorney-client privilege

like the relinquishment of other known rights, such that

a “waiver” cannot possibly be “inadvertent.” See, e.g.,

Mendenhall v. Barber-Greene Co., 531 F.Supp. 951, 954

(N.D. Ill. 1982) (Shadur, J.) (“The better-reasoned rule

is that mere inadvertent production does not waive the

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privilege.”); Conn. Mutual Life Ins. Co. v. Shields, 18

F.R.D. 448 (S.D.N.Y. 1955) (Dimock, J.) (documents are

privileged where “there is no evidence that defendants

intended to waive any privilege”). 

Between these two extremes lies a balancing-test

approach that considers the totality of the circumstances

surrounding the disclosure rather than applying a per se

waiver rule. One oft-cited case for this position is

Alldread v. City of Grenada, 988 F.2d 1425 (5th Cir.

1993), which upheld the use of a five-part test

considering “(1) the reasonableness of precautions taken

to prevent disclosure; (2) the amount of time taken to

remedy the error; (3) the scope of discovery; (4) the

extent of the disclosure; and (5) the overriding issue of

fairness.” Id. at 1433. The Fifth Circuit Court of

Appeals explained:

“In our view, an analysis which permits

the court to consider the circumstances

surrounding a disclosure on a

case-by-case basis is preferable to a

per se rule of waiver. This analysis

serves the purpose of the attorney

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client privilege, the protection of

communications which the client fully

intended would remain confidential, yet

at the same time will not relieve those

claiming the privilege of the

consequences of their carelessness if

the circumstances surrounding the

disclosure do not clearly demonstrate

that continued protection is warranted.”

Id. at 1434. In some instances, the intent-based

approach and the totality-of-the-circumstances approach

appear to merge. See, e.g., Stratagem Dev. Corp. v.

Heron Intern. N.V., 153 F.R.D. 535, 544 (S.D.N.Y. 1994)

(Kram, J.) (stating that a waiver “must be intentional

... to be effective,” then considering precautions taken

to avoid disclosure).

B. Alabama Standard for Inadvertent Waiver

Alabama law does not fall neatly into any of these

categories. Neither the rules of evidence, case law, nor

bar opinions offer any decisive resolution. 

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2. GE Capital’s statement that Rule 510 “focus[es]

on whether the act of disclosure was voluntary, not

whether the disclosing party intended his or her act of

disclosure to effect a waiver of any otherwise applicable

privilege,” Def.’s Supp. Br. (Doc. No. 29), at 5, fails

to resolve the definitional question. GE Capital’s

apparent conclusion that waiver should be analyzed with

reference to coercion, rather than intention, does not

make it so. It is therefore not possible to conclude, as

GE Capital does from the affidavit of Koch Foods’

attorney, Zhiyuan Xu, that “Koch’s disclosure here was

plainly voluntary.” Id. Xu, apparently using an intentbased approach, plainly states “I never intended to

produce [the document] and would have removed it had I

seen it in the document production before delivery.”

Pl.’s Ex. D (Doc. No. 22), at 3.

9

1. Ala. R. Evid. 510

First, the relevant rule of evidence, Ala. R. Evid.

510, offers no meaningful guidance. It states that a

person waives the privilege if he “voluntarily discloses

or consents to disclosure of any significant part of the

privileged matter,” but it does not explicate the meaning

of “voluntary,” which can assume the substantially

different meanings of “intentional” or “uncoerced.”2

Black’s Law Dictionary (8th ed. 2004). A definition

meaning “intentional” would correspond with the intentbased approach, while “uncoerced” suggests the strict

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approach. GE Capital, presumably, defines “voluntary” as

“uncoerced,” while Koch Foods defines it as

“intentional.” No Alabama cases have interpreted this

rule with reference to the three general approaches to

inadvertent waiver of attorney-client privilege, so the

rule cannot provide definitive guidance. 

It should be noted, however, that, in at least one

State, the word “voluntary” in a privilege-waiver statute

has been construed as referring to intent, not coercion.

It therefore forbids the strict approach to waiver, in

that the idea that inadvertent production can produce

waiver is the “antithesis” of the principle that “the

waiver of a privilege imports the intentional

relinquishment of a known right.” Abamar Housing & Dev.,

Inc. v. Lisa Daly Lady Decor, Inc., 698 So.2d 276, 278

(Fla. Dist. Ct. App. 1997). The Abamar court then

applied the totality-of-the-circumstances test, which it

deemed the majority rule, and not the pure intent-based

approach. Id. at 279. The Florida Supreme Court

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recently upheld the application of the totality-of-thecircumstances test in Lightbourne v. McCollum, 969 So.2d

326 (Fla. 2007) (page numbers unavailable). 

2. Alabama case law

Alabama cases are unhelpful in determining the proper

state standard for inadvertent disclosure. The primary

two Alabama cases on the subject, Bassett v. Newton, 658

So.2d 398 (Ala. 1995), and Ex parte Bettis, 549 So.2d 23

(Ala. 1989) (Maddox, J., dissenting in part), have both

been described as “deal[ing] with the inadvertentdisclosure issue curtly or in ways that do not fit any of

the [usual] methods of analysis.” John T. Hundley,

Annotation, Waiver of Evidentiary Privilege by

Inadvertent Disclosure--State Law, 51 A.L.R. 5th 603

(1997). 

While Bassett does “directly address voluntary

disclosure and waiver,” Def.’s Objections to Order (Doc.

No. 33), at 1, it does so in circumstances that are

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factually distinct from this case. In Bassett, a state

representative sued the Legislative Reference Service,

seeking copies of a proposed bill after the bill’s

sponsor had already published notice of it. The

Legislative Reference Service refused the request,

“claiming that [it] has an attorney-client relationship

with legislators and that release of the bill’s details

would violate the attorney-client privilege.” 658 So.2d

at 400. The Alabama Supreme Court found attorney-client

relationship that would create privilege, as the Legal

Reference Service issued no legal advice; instead, it

found only a requirement of confidentiality. Id. at 401.

See also Ex parte Taylor Coal Co., Inc., 401 So.2d 1, 8

(Ala. 1981) (“A substantial difference in the law is made

between the attorney’s ethical responsibility with

reference to disclosure of confidential information and

his privilege not to testify in court concerning his

client’s secrets.”). Moreover, the court in Bassett had

no doubt that the “client,” the bill’s sponsor, “did

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decide to waive the requirement of confidentiality,” as

he made statements that were “intended to be communicated

to third persons.” 658 So.2d at 401. 

Despite GE Capital’s contentions, to the extent that

Bassett suggests support for any of the three main

approaches, it seems to lean not toward the strict

approach urged by GE Capital but toward the more lenient,

intent-based approach or the totality-of-thecircumstances approach. Crucially, the court noted that

“[t]raditionally, waiver is described as an intentional

relinquishment of a known right.” Id. at 402. By

framing waiver of attorney-client privilege with

reference to waiver of other rights, the court implicitly

aligned itself with the camp holding that waiver, by

definition, cannot be accidental. See Mendenhall, 531

F.Supp. at 955 (“We are taught from first year law school

that waiver imports ‘the intentional relinquishment or

abandonment of a known right.’”). GE Capital emphasizes

Bassett’s statements regarding how “voluntary disclosure”

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3. Black’s Law Dictionary defines “voluntary” as “1.

Done by design or intention <voluntary act>” and “2.

Unconstrained by interference; not impelled by outside

influence <voluntary statement>.”

14

bars an assertion of privilege but fails to consider that

Bassett, unlike the instant case, concerns a disclosure

that was undeniably voluntary and intended. Def.’s

Objections to Order (Doc. No. 33), at 3. GE Capital

seems to assume that the opposite of “voluntary” is

“coerced,”--i.e. Koch Foods’ disclosure was voluntary

because it was not compelled--when the proper dichotomy

is between “voluntary” and “unintended.” The word does

have both meanings, but in the context of Bassett it

clearly refers to intention, even if the court declined

to announce explicitly its allegiance to the intent-based

approach.3

 See 658 So.2d at 401 (“We have held that the

attorney-client privilege does not cover statements that

are intended to be communicated to third persons. That

intent divests from the statement any confidential

status.”) (emphasis added).

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Bassett offers only a hint of the Alabama Supreme

Court’s preferred approach to inadvertent disclosure, but

Ex parte Bettis offers even less. The only written

opinion in the case is the dissent, which neither has

precedential value, nor is on point as to inadvertent

disclosure. Justice Maddox argues that the trial court

erred in allowing a certain document to come into

evidence against some of the defendants and that mandamus

therefore should have been granted. 549 So.2d at 23. He

lists the defendants’ multiple reasons for why the

relevant document should be inadmissible--one of which is

“that the inadvertent disclosure of the letter did not

work as a waiver of the right to claim [attorney-client]

privilege”--after which he simply states “I agree with

the arguments of the defendants.” Id. at 26. But when

he continues on to a more in-depth analysis, he discusses

only the work-product doctrine and concludes that the

letter is protected as “the mental impressions and legal

opinions of the attorneys involved,” which are protected

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under Ala. R. Civ. P. 26(b)(3) and not by rules of

privilege. Id. 

3. Opinions of the Alabama State Bar 

and American Bar Association

Finally, the last authorities relied on by the

parties, two opinions from the Alabama State Bar and two

from the American Bar Association (ABA), all fail to

direct the inquiry into the correct standard for

inadvertent waiver of attorney-client privilege. Indeed,

not one of the four opinions directly turns on the issue

of waiver. Instead, they concern the ethical duties of

attorneys upon receipt of a document inadvertently sent

by opposing counsel. Both Alabama opinions, dated April

8, 1996, and April 12, 1996, discuss a 1992 ABA opinion

recommending that lawyers in this situation should

“refrain from examining the materials,” “notify the

sending lawyer of the receipt of the materials,” and

“abide by the instructions of the sending lawyer.” The

ABA opinion also includes a statement regarding waiver

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that endorses the totality-of-the-circumstances approach,

as described in Hartman v. El Paso Natural Gas Co., 763

P.2d 1144, 1152 (N.M. 1988), and states that a “review of

the relevant cases demonstrates, with few exceptions, an

unwillingness to permit mere inadvertence to constitute

a waiver.” Something more, the ABA opinion continued,

“like a failure of counsel to spend any time reviewing

the documents to be produced in discovery, is required

before a waiver is found.” 

The April 12 Alabama opinion uses the ABA opinion to

conclude that the receiver of an inadvertent fax should

destroy it and not report its contents to his client.

The April 8 opinion, however, responds to a situation

where a party inadvertently provided its adversary with

a letter from its attorney among other discovery

documents, and the opinion concluded that “there would be

no ethical impropriety in your using the document in

question to support your client’s position.” (emphasis

added). While GE Capital relies on this opinion’s

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statement of the “obvious” distinction between “the

failure of the opposing party to adequately review the

documents provided” and “a facsimile transmission

inadvertently received by the wrong party,” this

unexplained distinction (which, incidentally, the court

finds bizarre) seems to concern only ethical

confidentiality and not waiver. The opinion further

confuses confidentiality and waiver by citing to the ABA

opinion’s statement regarding waiver without noticing

that the ABA opinion uses inadvertent waiver of attorneyclient privilege only as an analogy to the ethical duty

of confidentiality.

The utility of the two Alabama State Bar opinions is

further muddled by the ABA’s withdrawal of its 1992

opinion in 2005. Notably, the 2005 opinion directly

changes only the ethical duties of attorneys who receive

inadvertently misdirected documents. It refers to ABA

Model Rule of Professional Conduct 4.4(b)’s narrowing of

a receiving lawyer’s obligations by requiring only that

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she notify the sender, therefore relieving her of the

obligation to avoid reading the materials and abide by

the directions of the sending lawyer. The 2005 opinion

nevertheless undercuts the 1992 opinion’s statement about

waiver, as it quotes Comment 2 to Rule 4.4, which

clarifies that “whether the privileged status of a

document has been waived” is “a matter of law beyond the

scope of these Rules.” All in all, the court is

reluctant to conclude that the four ethical opinions have

any bearing on the question of inadvertent waiver of

attorney-client privilege. 

4. Determination and Application of 

Alabama Standard for Inadvertent Waiver

The United States Magistrate Judge, observing that

“the Alabama Supreme Court has not specifically provided

a rule relating to the effect of inadvertent disclosure

on privileged information,” Order (Doc. No. 32), at 4,

used the totality-of-the-circumstances approach from

Alldread. In doing so, he reasoned:

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“In the case at hand, Koch Foods

produced approximately 3,758 pages of

documents in response to GE Capital’s

document requests. It was clear that

Koch Foods intended to assert the

privilege as the document at issue is

listed on the privilege log. There is

no indication counsel for Koch Foods

failed to spend any time reviewing the

documents, and the fact that a single

piece of paper was inadvertently

disclosed does not, in the eyes of this

Court, rise to a failure of the opposing

party to adequately review the documents

disclosed. As such, the Court

determines the privilege has not been

waived and thus, the document is

privileged and protected.”

Id. This analysis correctly determines that, under the

balancing approach, Koch Foods has successfully

established that it did not waive attorney-client

privilege as to the document at issue.

The Alabama Supreme Court in Bassett appeared to rule

out the strict approach to waiver, but it offered no

clear guidance as to the choice between the pure intentbased approach and the totality-of-the-circumstances

approach. The magistrate judge adopted the totality-ofCase 2:07-cv-00522-MHT-TFM Document 75 Filed 01/17/08 Page 20 of 22
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the-circumstances approach. This court agrees with the

magistrate judge.

The totality-of-the-circumstances approach, rather

than a per se intent-based approach, appears to be the

modern trend. See Abamar, 698 So.2d at 278. But, more

importantly, the totality-of-the-circumstances approach

allows for a more comprehensive and sensitive assessment

of the often complex and sensitive concerns presented in

inadvertent waivers. As the Fifth Circuit Court of

Appeals explained in Alldread, the approach “serves the

purpose of the attorney client privilege, the protection

of communications which the client fully intended would

remain confidential, yet at the same time will not

relieve those claiming the privilege of the consequences

of their carelessness if the circumstances surrounding

the disclosure do not clearly demonstrate that continued

protection is warranted.” 988 F.2d at 1434.

This court therefore holds that, if the Alabama

Supreme Court were to confront the issue of inadvertent

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waiver, it would likely adopt the more comprehensive and

sensitive totality-of-the-circumstances analysis; this

court further holds that the magistrate judge correctly

adopted and applied that approach here. As such, the

magistrate judge’s protective order cannot be deemed

“clearly erroneous and contrary to the law.” Fed. R.

Civ. P. 72(a).

***

For the foregoing reasons, the magistrate judge

properly found the document at issue to be privileged,

and it is ORDERED that defendant General Electric Capital

Corp.’s objections (Doc. No. 33) are overruled.

DONE, this the 17th day of January, 2008.

 /s/ Myron H. Thompson 

 UNITED STATES DISTRICT JUDGE

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