Arconic Inc. v. Novelis Inc.
Arconic Inc. v. Novelis Inc.
2018 WL 11317066 (W.D. Pa. 2018)
December 10, 2018

Conti, Joy Flowers,  United States District Judge

Search Terms
Clawback
Privilege Log
Attorney-Client Privilege
In Camera Review
Waiver
Failure to Produce
Protective Order
Special Master
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Summary
The court ruled that Arconic may claw back Exhibits 1 and 2, and Novelis' motion to compel production of those documents was denied. Arconic was required to produce Exhibit 3 with only Marinelli's first and second statements redacted, and Exhibits 4 through 6 to Arconic's Submission were not privileged and must be produced. The Protective Order was interpreted in accordance with the Report & Recommendation.
Additional Decisions
ARCONIC INC., Plaintiff,
v.
NOVELIS INC. and NOVELIS CORP, Defendants
CIVIL ACTION NO. 17-1434
United States District Court, W.D. Pennsylvania
Signed December 10, 2018

Counsel

Adam Adler, Pro Hac Vice, Christine E. Lehman, Connor S. Houghton, David A. King, Reichman Jorgensen LLP, Collin R. White, Pro Hac Vice, Aaron M. Panner, Pro Hac Vice, Kellogg, Hansen, Todd, Figel, & Frederick PLLC, Washington, DC, Antoinette C. Oliver, Katelin J. Montgomery, Meyer, Unkovic & Scott LLP, Pittsburgh, PA, Caroline M. Walters, Courtland L. Reichman, Karlanna M. Lewis, Pro Hac Vice, Reichman Jorgensen LLP, Redwood Shores, CA, Mohit Gourisaria, United States Attorney's Office, San Francisco, CA, Sarah O. Jorgensen, Reichman Jorgensen LLP, Atlanta, GA, for Plaintiff.
Charles Kelly, Michael J. Joyce, Saul Ewing LLP, Pittsburgh, PA, Holly A. Ovington, Pro Hac Vice, Marissa A. Lalli, Pro Hac Vice, Julia Prochazka, Pro Hac Vice, Mark A. Ford, Mark G. Matuschak, Pro Hac Vice, William F. Lee, Kate M. Saxton, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, Mindy Sooter, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, Denver, CO, Mitchell G. Stockwell, Pro Hac Vice, Charles A. Pannell, Pro Hac Vice, Jeffrey H. Fisher, Pro Hac Vice, Vaibhav P. Kadaba, Pro Hac Vice, Kilpatrick Townsend & Stockton LLP, Atlanta, GA, Joseph J. Yu, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, Leon Bradford Greenfield, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for Defendants.
Conti, Joy Flowers, United States District Judge

SPECIAL MASTER REPORT & RECOMMENDATION #26: RE: PRIVILEGE DISPUTE

Introduction
*1 This Report & Recommendation relates to a privilege dispute regarding three documents produced by Arconic then clawed back. Novelis first raised this issue in a November 2, 2018 Redfern chart in preparation for the November 13, 2018 hearing with the Special Master, asserting that the documents are not privileged and were improperly clawed back. Arconic responded in its November 8, 2018 Redfern chart response. At the hearing, the Special Master heard argument on the dispute and determined that in camera review of the documents was appropriate. On November 16, 2018, Arconic promptly delivered the documents for in camera review, along with several documents, which according to Arconic, are on its privilege log and support its assertion of privilege over the disputed documents (“Arconic Submission”).
On November 19, 2018, Novelis submitted a reply, based on its knowledge of the documents and circumstances of their production, disputing that they are privileged, and further arguing that any privilege has been waived by Arconic's handling of privileged documents in this litigation (“Novelis Reply”). On November 29, 2018, Arconic submitted a sur-reply, disputing Novelis’ arguments about waiver and attaching a declaration by Arconic counsel Michael Pine detailing the steps taken by Arconic to prevent the disclosure of privileged material and describing the circumstances of the inadvertent production of privileged documents in this litigation (“Arconic Sur-Reply;” “Pine Declaration”).
The Special Master has reviewed the disputed documents and the parties’ arguments.
Discussion
I. Applicability of Attorney-Client Privilege to Disputed Documents
According to Arconic, the three documents all relate to communications with Greenberg Traurig, LLP patent counsel, Heath Briggs and are all drafted by Arconic employee, Jim Marinelli, a primary developer of A951 technology. The first disputed document, which was marked at as an exhibit at the deposition of Arconic witness, Sherri McCleary, is an analysis of Novelis’ patent application compared to Arconic's disclosures to Novelis pursuant to the parties’ license agreement. (Arconic Submission Ex. 1 (“Exhibit 1”).) This document on its face contains no discussions with, or references to, counsel. The second document is another draft of this analysis and includes several instances of “note to Heath.” (Id. Ex. 2 (“Exhibit 2”).) The third document is an electronic chat between Marinelli and another Arconic employee, Shawn Murtha, discussing, among other things, the request from Briggs for Marinelli to produce the aforementioned analysis. (Id. Ex. 3 (“Exhibit 3”).)
After McCleary's August 15, 2018 deposition, Arconic investigated Exhibit 1 further and confirmed the circumstances of its authorship, learning that Marinelli wrote it at the direction of Briggs. (Pine. Decl. ¶ 6.) This led Arconic to run searches for other related documents, which led to the discovery of Exhibits 2 and 3. (Id.) Within a week of the McCleary deposition, on August 21, 2018, Arconic informed Novelis that it wished to clawback the inadvertently produced documents.
*2 To support its assertion that the documents are privileged, Arconic submitted for in camera review five contemporaneous emails between Marinelli and Briggs that, according to Arconic, show that Marinelli prepared the analysis at the request of counsel and therefore reflect legal advice. (Arconic Submission at 1, Exs. 4-8.)
Novelis, having reviewed Arconic's Submission but not Exhibits 4 through 8 (which are currently withheld as privileged), argues that “the face of each document [Exhibit 1, 2 or 3] provides no indication whatsoever that it was prepared for this lawsuit or was ever transmitted to Briggs.” (Novelis Reply at 1.) Novelis further argues, “[s]imply because other arguably privileged communications existed around the same time does not establish that the challenged documents are privileged.” (Id.)
The five additional privileged documents submitted by Arconic support its contention that they provide context for Exhibits 1, 2 and 3. Exhibits 4 through 6 are emails in a thread with the subject, “Novelis A951 patent application, status of fact gathering,” in which Briggs and Marinelli discuss the timing of Marinelli's work, dated between January 10 and 25, 2017. Specifically, on January 25, 2017, Marinelli informed Briggs that Marinelli would “get you the ‘first cut’ of the information by” January 27 or January 30. Exhibits 7 and 8, are emails with the subject, “Claims and Comments.” They reflect that Marinelli submitted his analysis (Exhibit 2) on January 31, and Briggs’ response, which discusses legal advice regarding Marinelli's analysis. Therefore, the Special Master finds that there is sufficient evidence to conclude that Exhibits 3-8 relate directly to Exhibits 1 and 2. The question, then, is whether the analysis drafted by Marinelli (a non-lawyer) can be protected by privilege.
The test for whether a communication is properly withheld on grounds of privilege is whether “the information is relayed for the purpose of obtaining legal counsel.” Upjohn Co. v. United States, 449 U.S. 383, 394–95 (1981). “Where client and counsel share technical information, that communication is privileged as long as it was made for the purpose of securing legal advice or legal services, or conveying legal advice.” SmithKline Beecham Corp., 232 F.R.D. 467, 477 (E.D. Pa. 2005) (documents reflecting technical exchanges with counsel for purposes of patent application were privileged); see also Cottillion v. United Ref. Co., 279 F.R.D. 290, 305 (W.D. Pa. 2011) (document is privileged where a non-lawyer provides input “gathered at the direction of [counsel], for the purpose of assisting him in providing legal advice and formulating legal strategy”); Santrade, Ltd. v. Gen. Elec. Co., 150 F.R.D. 539, 545 (E.D. N.C. 1993) (“The attorney-client privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.”)
It is clear from the materials received that Marinelli prepared Exhibits 1 and 2 at the direction of counsel. Exhibits 4 through 6 reflect Briggs following up with Marinelli as to when his “Novelis A951 patent application ... fact gathering” would be complete. On January 25, Marinelli told Briggs to expect the analysis by January 30 and submitted it on January 31. That same day, Briggs replied with legal advice about Marinelli's analysis. “Thus, although the report was not legal in nature, its value to counsel in formulating ongoing legal strategy and providing future advice regarding plaintiff's existing and potential claims readily is apparent.” In re Federated Mutual Funds Excessive Fee Litig., 2010 WL 11469561, at *4 (W.D. Pa. 2010). Further, Arconic's counsel represented in a sworn declaration that Marinelli confirmed he drafted the analysis at the direction of counsel. (Pine Decl. ¶ 6.) Attorney-client privilege applies to these documents.
*3 As to Exhibit 3, the chat between Marinelli and another employee discussing legal advice from Briggs, discussions of legal advice by non-lawyer employees are protected by attorney-client privilege. See Craig v. Rite Aid Corp., No. 4:08-CV-2317, 2012 WL 1079472, at *3 (M.D. Pa. Mar. 30, 2012) (“Where a corporate client is concerned, ‘privileged communications may be shared by non-attorney employees in order to relay information requested by attorneys.’ ”); Cuno, Inc. v. Pall Corp., 121 F.R.D. 198, 202–03 (E.D.N.Y. 1988) (same).
However, Exhibit 3 only discusses legal advice from Briggs in certain portion of the chat (Marinelli's first and second statements therein). Accordingly, the Special Master recommends that Arconic produce the chat with redactions of only those portions.
As to Exhibits 4 through 6, they relate to the timing of Marinelli's analysis, but do not include any discussions of that analysis or Brigg's request for it. Because they contain no request for, or provision of, legal advice, these documents should be produced.
II. Waiver
Novelis additionally asserts that Arconic waived any privilege that protected Exhibits 1, 2 and 3 because Arconic has not taken reasonable steps to prevent the production of privileged documents. Specifically, Novelis argues that Arconic “has relied solely on electronic search terms to identify privileged documents” and has “inadvertently produced hundreds of privileged documents.” (Arconic Reply at 3, 4.) Further, Novelis argues that Arconic has not taken steps to rectify its inadvertent disclosures, such as not objecting to the document's use at the deposition of Ms. McCleary. (Id. at 4.) Arconic responds that, under the Protective Order, it was not obligated to take steps in advance of production to prevent disclosure because the Protective Order provides for “unconditional clawback rights.” (Arconic Sur-Reply at 1-2.)
Novelis relies on Rule 502(b), and the cases thereunder, to support its assertion that Arconic was required to take “reasonable steps” to prevent disclosure to be entitled to claw back the documents, and Arconic relies on Rule 502(d), which it argues is expressly included in the Protective Order, and on which it relied:
The production of privileged or work protected documents, ESI or information, whether inadvertent or otherwise, is not a waiver of the privilege or protection from discovery in this case or any other federal or state proceeding. This Protective Order shall be interpreted to provide the maximum protection allowed by Federal Rule of Evidence 502(d).
(Protective Order ¶ 3(g), Dkt. 79 (emphasis added).)
Under Rule 502(d), a “federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court — in which event the disclosure is also not a waiver in any other federal or state proceeding.” F.R.E. 502(d). The Advisory Committee Notes for the Rule state that 502(d) allows that “the court order may provide for return of documents irrespective of the care taken by the disclosing party; the rule contemplates enforcement of ‘clawback’ and ‘quick peek’ arrangements as a way to avoid the excessive costs of preproduction review for privilege and work product.” Fed. R. Evid. 502(d), 2008 advisory committee's note (emphasis added).
The Pine Declaration tacitly acknowledges that Arconic did not conduct a comprehensive review of its documents prior to production, but explains the steps taken immediately following the McCleary deposition to investigate Exhibit 1, and then to determine that Exhibits 2 and 3 were also privileged. (Pine Decl. ¶ 6.) Within a week of the deposition, Arconic informed Novelis that it intended to clawback the documents. (Id.) At the deposition, McCleary was only asked a few questions about Exhibit 1, and because she had never seen it before, she did not provide any substantive testimony that could constitute waiver of privilege over it. (Novelis Reply, Ex. A.)
*4 The Protective Order was not intended to obviate the need for a party to conduct a document review of its own documents before producing them, but rather to give each party comfort that if several documents were missed, they could be clawed back. It was not intended to shift the burden of identifying privileged documents to the adversary, who is reviewing the documents for use in the case and in depositions. However, because Arconic had a belief that Rule 502(d) provided unconditional protection against waiver, in this instance, the Special Master recommends that Arconic be permitted to claw Exhibits 1, 2 and 3 back and that the Court deny Novelis’ motion to compel them. A party that reasonably relied on its understanding of the clawback rule should not face a waiver of this important privilege.
That said, the choice of methodology by Arconic not to perform a comprehensive privilege review of its documents prior to production, and instead to rely on electronic searches of its privilege search terms (plus “spot checks” (Pine Declaration ¶ 3)), is what led to this clawback fight (and the one raised earlier, see R&R No. 22 at 1-2). This methodology imposes an excessive burden on the Special Master to repeatedly rule on these issues, which could have been prevented in the first place. It is clear that Arconic's methodology is not doing a sufficient job at preventing privileged material from being produced, leading to confusion at or after depositions; uncertainty by the adversary about which documents it can use to prepare its case and use at depositions, etc.
Therefore, going forward, the following Order shall govern how the Protective Order is interpreted by the Special Master:
1. Each party is expected to review its own documents prior to production to identify privileged documents that fall through the search screen pursuant to the parties’ Privilege Log Protocol;
2. Arconic has 30 days from the entry of this Report & Recommendation to review its already produced documents to identify any that were produced, and as to which privilege is claimed. Arconic should identify them to Novelis and request a clawback on each of those;
3. For the review under Paragraph 2, after a meet and confer, if the parties cannot agree on whether one or more documents is privileged, each disputed document will be presented via letter brief to the Special Master in one omnibus motion, with numbered paragraphs matching each other's numbering, so that each issue and response is readily apparent in a side-by-side comparison;
4. For document productions made after the date of this Report & Recommendation, pre-production review shall be done by both parties. Rule 502(b) will govern the clawback standard, with due consideration of Rule 502(d), where necessary and appropriate. But for purposes of avoiding undue motions to the Special Master, and undue disputes between the parties about privilege clawbacks, relying entirely on 502(d) without pre-production review is an inefficient use of resources; and
5. No principle of “use immunity” or “fruit of the poisonous tree” analogy will apply to the knowledge (as distinguished from the documents themselves) that Novelis has derived from seeing Exhibits 1, 2 and 3, or any documents previously produced then clawed back. The reliance on 502(d) in lieu of reviewing documents prior to production risked ringing that cannot be unrung. Accordingly:
a. Except for impeachment, no document that has been clawed back can be introduced into evidence; the Special Master does not now rule on whether, and to what extent, any of the privileged documents can be used for impeachment purposes if a witness testifies inconsistently with those documents;
b. The deposition questioning about Exhibit 1 during Ms. McCleary's deposition shall not be struck because no privileged information was given; and
*5 c. There shall be no objection to any future deposition questions based on an argument that such questions could only have been asked by having seen Exhibits 1, 2 or 3, or any documents previously produced then clawed back.
Conclusion
For the foregoing reasons, the Special Master recommends that the Court order that:
(1) Arconic may claw back Exhibits 1 and 2, and Novelis’ motion to compel production of those documents is denied;
(2) Arconic shall produce Exhibit 3 with only Marinelli's first and second statements redacted;
(3) Exhibits 4 through 6 to Arconic's Submission are not privileged and therefore shall be produced; and
(4) The Protective Order going forward shall be interpreted in accordance with this Report & Recommendation.
A proposed Form of Order will be filed by the Special Master as Report & Recommendation #27.
S/ Faith S. Hochberg