Opinion ID: 790117
Heading Depth: 2
Heading Rank: 1

Heading: Privilege Log Proceedings

Text: 3 The district court referred all discovery matters to a magistrate judge under Federal Rule of Civil Procedure 72(a). The discovery proceedings that form the basis of this appeal are cumbersome, but the detailed discussion of those proceedings that follows is a prerequisite to explaining why and how the magistrate judge (and thereby the district court) abused his discretion in sanctioning Equitable. 4 During discovery, Equitable produced more than 20,000 documents but initially withheld approximately 750 documents, asserting the attorney-client privilege. Equitable submitted a privilege log listing the withheld documents. Based on Equitable's descriptions of the withheld documents, Emerald challenged the privilege log, suspecting that some documents were not privileged. Specifically, on December 6, 2001, Emerald moved to strike the log and requested that all non-privileged documents on the log be disclosed. At a hearing on December 11, 2001, the magistrate judge expressed concern about having to review a large number of documents in camera, 1 and Equitable conceded the need to improve its document descriptions and revise the log. 5 Equitable submitted an amended privilege log on December 27, 2001. Unsatisfied, Emerald moved, on January 4, 2002, to strike the amended log and to compel production of all non-privileged documents on the log. Shortly before the January 9, 2002, hearing on the motion, Equitable volunteered a second-amended privilege log to address Emerald's concerns. In these logs, Equitable was tackling privilege issues involving in-house counsels, their notes, their e-mails, and fine line distinctions between legal and nonlegal (i.e., business) advice. At the hearing, Emerald balked at the second-amended log, and the magistrate judge required Equitable to produce a third-amended privilege log. 6 Five days later, Equitable submitted the third-amended log. At a status hearing on January 18, 2002, Emerald informed the magistrate judge that it had some qualms about the third-amended log but reported that it was pleased with Equitable's willingness to work with Emerald to resolve its remaining concerns. The magistrate judge therefore instructed the parties to continue to meet and confer on the matter. By this juncture, Equitable had reduced the log to some 465 entries, about a half box of documents. 7 The spirit of cooperation was short-lived. At a hearing on February 8, 2002, Equitable sought the return of certain documents that it had inadvertently produced, i.e., privileged documents mistakenly released to Emerald. That narrow issue spilled over into a larger debate about Equitable's third-amended log and about when e-mails to an in-house counsel are protected by the attorney-client privilege. One document sparked the debate (and is illustrative of the privilege issues that led to this appeal). The document was an e-mail to an in-house counsel recounting a high-level meeting between Equitable and Emerald. Equitable viewed the e-mail as a confidential communication seeking legal advice. The magistrate judge disagreed, ruling that the document was not privileged, and, as a result, denied the request for the document to be returned. Emerald seized this opportunity to raise concerns about Equitable's ability to evaluate the other documents still listed on the third-amended log. Emerald expressed a lack of confidence in Equitable and its log as a whole. However, at the previous hearing, the magistrate judge had again expressed reluctance at a full, document-by document, in camera review. Emerald thus asked the magistrate judge to review, not the half box of documents that remained, but rather a sample of the documents in camera to check and see if all non-privileged documents had been purged. Under the proposal, the magistrate judge would review every fifteenth document on the log until he reached a total of ten documents. The magistrate judge adopted the proposal. 8 The magistrate judge announced his results on March 20, 2002, in a written opinion. Equitable properly claimed the privilege in six of the ten documents and in portions of two others. However, the magistrate judge also found that two full documents were not privileged. The ten-document sample was composed of e-mails, handwritten notes, and the like, involving in-house counsels. The magistrate judge closely parsed these documents. For example, he found that one e-mail—authored by an in-house counsel and sent to several Equitable employees, including two other in-house counsels—was privileged but that nine handwritten words by an in-house counsel on a copy of the e-mail were not privileged because it appeared that the handwritten words were not shared with anyone and did not concern legal advice. The magistrate judge then ordered Equitable to disclose the non-privileged material. 9 At another status hearing on March 27, 2002, Emerald made an oral motion to strike the third-amended log and to order Equitable to disclose each document—non-privileged as well as privileged—on the log. Emerald argued for this global disclosure by again claiming that the log as a whole was unacceptably tainted by erroneous assertions of privilege, citing the February 8 and March 20 rulings for support. To further bolster its proposal, Emerald allied itself with the magistrate judge's previously expressed reluctance for full in camera review, claiming that inspecting all the documents would be an outrageous task. R.181 at 13. The magistrate judge declined global disclosure but required Equitable to produce a fourth-amended privilege log, encouraging Equitable to reduce the number of log entries. However, with an eye on the future, the magistrate judge agreed with Emerald's comments about in camera review and stated: I don't think I'm going to be prepared to go through 400 documents. Id. at 17. 10 Equitable submitted the fourth-amended log on April 19, 2002, and disclosed a number of additional documents, thereby reducing the number of log entries to 432. Unappeased, Emerald immediately began insisting on a global disclosure of each document on the log at the next status hearing on April 22, 2002. Emerald again claimed a lack of confidence in the log and orally moved to strike it based upon Equitable's past performance. Emerald's counsel requested additional sampling, telling the magistrate judge: [O]bviously, I don't think you need or should sit down and go through 432 documents. R.147 at 11. To which the magistrate judge responded: Well, I'm not going to. Id. Equitable countered Emerald's position by arguing that it should not be forced to disclose indisputably privileged material (such as the documents from the March 20 opinion that the magistrate judge found to be completely privileged) simply because the magistrate judge disagreed with Equitable's good-faith assertions of the privilege for another document. The magistrate judge, wanting to see if Emerald had concrete problems with the new log (as opposed to problems with Equitable's past performance), declined to sample or strike the log at that juncture and instead required both sides to confer with each other on any specific problems identified in the new log and report back. 11 At yet another status hearing on May 9, 2002, Emerald reported concerns over a number of entries on the fourth-amended log. Realizing that, in light of his prior comments, the magistrate judge was inclined against full in camera review, the parties proposed the following procedure to resolve Emerald's concerns: Emerald would move to compel the production of ten or fifteen documents and then the magistrate judge would review that limited number in camera. On May 20, 2002, Emerald filed its motion to compel, requesting sixteen documents. After Emerald filed the motion, Equitable released two of the sixteen, believing that the two were privileged but deciding to waive the privilege as a good-faith effort to help bring an end to the matter. On June 5, 2002, the magistrate judge ruled from the bench on the remaining fourteen documents and found eight to be privileged, two to be partially privileged, and four to be non-privileged. He then ordered the production of the non-privileged material. The matter appeared to be at an end. 12 However, still dissatisfied with these partial disclosures, Emerald resurrected its complaints about the entire log weeks after the June 5 ruling and again pressed for global disclosure. It did so on July 25, 2002, by filing a motion for discovery sanctions under Federal Rules of Civil Procedure 26 and 37. Emerald reasoned that disclosure of every document without further review was an appropriate sanction in part because, with more than 400 documents at issue, any plenary in camera inspection [by the magistrate judge would be] completely unmanageable. R.186 at 15. Nevertheless, in addition to the global-disclosure sanction, Emerald alternatively asked that the magistrate judge appoint a special master to review the remaining documents at Equitable's expense. 13 The magistrate judge did not pursue the special master alternative. Rather, at the August 14, 2002, hearing on the motion, the magistrate judge sua sponte formulated his own procedure to determine if he would impose the global-disclosure sanction: Emerald would select twenty of the remaining documents on the fourth-amended log and then Equitable would submit those twenty for in camera review. This was not a random sample; every document that had not already been reviewed in camera was fair game. Then, if the magistrate judge found four or more of the twenty to contain non-privileged material, he would sanction Equitable by ordering a disclosure of every document remaining on the log. On the other hand, if he found three or fewer to contain non-privileged material, he would deny Emerald's motion. 14 Two days later, Equitable moved to amend the magistrate judge's procedure, arguing in part for the special master alternative. Further, since much had happened since the fourth-amended log was submitted on April 19, Equitable requested an opportunity to evaluate the log in light of all the post-April 19 developments so as to prevent Emerald from unfairly taking advantage of the magistrate judge's sanction procedure and gaining a windfall of privileged material. On August 27, 2002, the magistrate judge rejected Equitable's requests from the bench, refusing all alternatives and marching forward with his sanction procedure from the August 14 hearing. 15 After some more wrangling and two additional hearings, the magistrate judge announced his decision on the record on September 23, 2002. He first ruled that four documents were not protected by the attorney-client privilege but that the other sixteen were. Curiously, he then denied Emerald's motion, stating that he would not sanction Equitable because he believed that his August 14 ruling was that four and no more equaled no sanction. R.228 at 3-4. Emerald challenged the magistrate judge's recollection, accurately stating that the rule was, if there were four or more non-privileged documents, we get everything. Id. After a recess, the magistrate judge corrected his error and included a fifth document on the list of the non-privileged. The magistrate judge thus reversed his earlier ruling and granted the motion, ruling that he could not rely on the integrity of the log. Id. at 7. To support his sanction, the magistrate judge only offered the following: 16 The Court is very well aware of the fact that, generally speaking, a finding of bad faith is required to strike an entire privilege log. The Court has no direct information that [Equitable] is dealing in bad faith, but the Court draws the inference from a total of five privilege logs on which a sampling showed at least 25 percent of the privilege log being non-privileged[;] the Court infers bad faith from that statistic, especially in view of the known professional competence of the attorneys for [Equitable]. They know what they're doing .... [T]herefore[,] the entire privilege log is stricken and the order is that all the documents listed on the privilege log shall be disclosed. 17 Id. at 7-8. This disclosure was to include thirty-three documents that the magistrate judge himself found to contain privileged material: eight from his March 20 ruling, ten from his June 5 ruling, and fifteen from his September 23 ruling. 18 Equitable protested the inference of bad faith, the privilege rulings on the individual documents, and, as it had done before, the sanction procedure, contending that it was being unjustly penalized for good-faith differences of opinion on the applicability of the privilege in the difficult area of material involving in-house counsels. Equitable raised these arguments at the September 23 hearing, in its motion for reconsideration, at the September 27, 2002, hearing on the motion for reconsideration, in its objections to the district judge, and at the October 16, 2002, hearing on the objections, all to no avail. Ultimately, after exhausting all avenues by the end of October 2002, including an unsuccessful mandamus petition to this court, Equitable released the documents to Emerald. 19