Importance Of Clawback Agreement

In the world we currently practice – a technological world that, in some cases, requires the production of terabytes of data and millions of documents – everyone should be familiar with recovery agreements. Recovery agreements are typically included in broader confidentiality agreements and/or protection orders that maintain protection of attorney-client privilege as well as other privileges in the event of accidental disclosure by either party. In the federal system, these agreements are specifically dealt with by Federal Rule of Evidence 502 (FRE 502). In the second context, safeguard orders containing recovery provisions protect against renunciation,” unless the process of making documents itself has been “totally ruthless.” Second Circuit courts “have largely followed this approach,” the court notes, citing case law from both eastern and southern New York. This approach, Jolson J. explains, seeks to recognize the value of recovery agreements, without allowing them to “protect a party from the consequences of ruthless behavior.” For recent decisions in a case dealing with these issues relating to recovery agreements and waivers, see Irth Sols., LLC v. Windstream Commons., LLC, Case No. 2:16-cv-00219, 2017 WL 3276021 (N.D. Ohio aug. 2, 2017), Reconsideration den., 2018 WL 575911 (N.D. Ohio Jan. 26, 2018).

Section 502 takes a two-step approach. First, the waiver of subject matter is generally limited to cases where either an intentional disclosure (502 (a)) or an accidental disclosure that the holder of the privilege did not take reasonable steps to prevent it (502 (b)). Therefore, if the parties to a dispute have not reached an agreement and the Scheduling Order says nothing about the collection of accidentally disclosed privileged documents, the parties themselves could be in a legal Donnybrook, if a party reveals that it has accidentally handed over privileged documents, and if the receiving party disputes whether “appropriate measures” were actually taken to prevent accidental disclosure. . . .