A tour of Virginia's privilege landscape
June has brought privilege and inadvertent disclosure to the forefront in Virginia, with recent decisions on the subject from both the U.S. District Court for the Western District of Virginia and the Supreme Court of Virginia, and a new state statute that takes effect on July 1.
Beginning in the federal world, W.D. Va. Chief District Judge James P. Jones handed down an opinion on June 2nd in King Pharamceuticals v. Purdue Pharma (case no. 1:08CV00050), related to whether a new drug (Embeda) infringes on certain patents for pain medication. Judge Jones' opinion dealt with two privilege-related discovery motions.
First, in defending against Purdue's claim of willful infringement, King intends to rely upon advice of counsel and therefore has waived privilege. When Purdue sought documents between King and counsel related not just to validity, enforcement, or infringement of the patents at issue but also related to possible licensing arrangements with Purdue, however, King drew the line. Judge Jones found that those documents were unlikely to be relevant and therefore denied Purdue's attempt to compel their disclosure.
Second, Purdue produced during the litigation a copy of a slide presentation created by an in-house attorney and given at a meeting of its Business Development Committee after the litigation had commenced. The presentation had been redacted, reflecting that it was reviewed for privilege before production. When King brought the document out at a deposition, however, Purdue contended that four pages of the document should have been withheld in their entirety, rather than redacted, and sought to claw the document back pursuant to FRCP 26(b)(5)(B), FRE 502(b), and the protective order entered in the litigation. Noting that millions of documents had been produced by the parties, Judge Jones held that Purdue had taken reasonable steps to prevent disclosure and had acted promptly in taking reasonable steps to rectify the error. He therefore ruled that the privilege had not been waived because the inadvertent disclosure had met the test of FRE 502(b).
Moving to the Virginia state court system, the Supreme Court of Virginia on Thursday, June 10th, handed down an opinion in Walton v. Mid-Atlantic Spine Specialists (Rec. No. 091009). The Court reversed a circuit court’s ruling that privilege had not been waived. Discussing and relying on federal case law, the Court distinguished between truly involuntary disclosures (through criminal activity or bad faith, etc.) and inadvertent disclosures, and the Court adopted a new test for whether waiver had occurred through an inadvertent disclosure in a state proceeding. (FRE 502(b) binds those in state courts as well as federal but only with respect to inadvertent disclosures made in federal litigation or federal administrative proceedings.)
The new Virginia test, heavily influenced by Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 104 F.R.D. 103 (S.D.N.Y. 1985) and other federal cases, holds that “waiver may occur if the disclosing party failed to take reasonable measures to ensure and maintain the document’s confidentiality, or to take prompt and reasonable steps to rectify the error.” Virginia courts must take five factors into account in making this determination: “(1) the reasonableness of the precautions to prevent inadvertent disclosures, (2) the time taken to rectify the error, (3) the scope of the discovery, (4) the extent of the disclosure, and (5) whether the party asserting the claim of privilege or protection for the communication has used its unavailability for misleading or otherwise improper or overreaching purposes in the litigation, making it unfair to allow the party to invoke confidentiality under the circumstances.” None of the factors is alone dispositive, and this is a non-exclusive list of relevant factors (pursuant to well-established Virginia law that waiver is a fact- and case-specific determination).
Applying the new test, the Supreme Court ruled that privilege had been waived on a letter that a doctor had written to his attorneys, in which he admitted a crucial fact – that he did not know whether he had examined the right x-ray. Although the doctor attempted to keep litigation materials separate from medical files (in different binders), he did not label his litigation binder as containing privileged materials, and his attorneys apparently did not do a privilege review before production by the document vendor they had engaged. Neither the amount of document discovery nor particular time constraints on a production offered a potential excuse. Moreover, the letter had also been disclosed in a Worker’s Compensation Commission proceeding, the defendants delayed in attempting to rectify the disclosure, and the doctor’s testimony at trial had at least the potential to mislead the finder of fact without testimony related to the letter. In short, this was not a close case.
(For another blog's take on Walton, see Steve Emmert's always informed and entertaining analysis of the June 10, 2010 batch of Supreme Court of Virginia opinions at www.virginia-appeals.com.)
Finally, the Supreme Court’s opinion notes that its opinion is in harmony with another significant development in Virginia privilege law. On July 1, Va. Code § 8.01-420.7 will take effect. Like FRE 502, the new state statute promulgates general rules for the scope of a privilege waiver, inadvertent disclosures, and the effect of protective orders and agreements between parties regarding privilege. Note that its language is very similar, but not identical, to FRE 502. So, although one can assume that federal law will be persuasive (citing the Supreme Court’s Walton decision as an example of federal influence), it bears some watching in the future to determine if any substantive differences between state and federal practice develop.
The case involves claims of infringement of a patent acquired by MicroAire from 3M on a carpal tunnel release surgical instrument useful for “probing body cavities and manipulating tissue contained therein under continuous observation.”