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Clawback Agreements Provide a “Clear Answer” When Privileged Documents are Inadvertently Produced

A clawback agreement should be a top priority for counsel handling any case involving e-discovery. Clawback agreements prevent waiver of the privilege in the event that a party inadvertently produces privileged documents — a risk that increases substantially with the increased volume of electronically stored information involved in today’s e-discovery matters.

The case of Brookfield Asset Management, Inc. v. AIG Financial Products Corp. (S.D.N.Y. Jan. 7, 2013) demonstrates how beneficial clawback agreements can be. The parties had entered into a Federal Rule of Evidence 502(d) agreement that included a stipulation that the “production of any documents in this proceeding shall not, for the purposes of this proceeding or any other proceeding in any other court, constitute a waiver by Defendants of any privilege applicable to those documents, including the attorney-client privilege.” Subsequently, AIG inadvertently produced privileged draft board minutes for which the redacted text was visible to the adversary. In finding that the minutes were still covered by the privilege, U.S. Magistrate Judge Frank Maas relied upon the “clear answer” provided by the parties’ Rule 502(d) stipulation that had been entered as a court order.

The case provides two nuggets of practical guidance for litigants:

1. Negotiate a clawback agreement and have the court enter it as an order.

During the meet and confer session at the outset of a case, negotiate an agreement governing the inadvertent production of privileged information with opposing counsel. The clawback agreement should then be tendered to the court for entry as an order.

Importantly, under Rule 502(d), a federal court order concerning preservation, privilege or waiver governs in other federal or state proceedings, thus extending the protections to third parties in unrelated litigation.

2. Monitor the work of e-discovery vendors.

In resolving the dispute over AIG’s inadvertently accessible redacted text, Judge Maas wrote that “this emphasizes the need for counsel for a producing party to keep a watchful eye over their e-discovery vendors.” Hiring a third-party e-discovery provider does not mean that a litigant can abdicate responsibility for a document production. Instead, counsel must find an e-discovery provider that it can partner closely with; forming this symbiosis will show the court the party took reasonable precautions against the inadvertent disclosure of protected documents. The party should also assess the provider’s experience with protecting privileged and redacted documents, and inquire about the QA / QC steps undertaken prior to a production going out the door.

Gabriela P. Baron is Vice President of Business Development at Conduent. She can be reached at

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