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August 2008

Graves Amendment reviewed

The Graves Amendment is a federal statute that essentially abolished vicarious liability of rental car companies for the negligent driving of renters.  The Graves Amendment stated, in pertinent part, as follows:

"a) In general. An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, orpossession of the vehicle during the period of the rental or lease, if-- (1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner)." 49 USCS § 30106.

Like it or not, this federal statute overturned well-settled law in D.C.

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Discovery of electronically stored information (ESI)

I. Victor Stanley, Inc. v. Creative Pipe, Inc ., 2008 U.S. Dist. Lexis 42025 (D. Md. May 29, 2008)

Held: That assertions of a/c privilege and work product immunity regarding 165 electronic documents were waived by the voluntary production of the documents to plaintiff by defendants.

Court noted that defendants originally requested that the Court approve a "clawback agreement" under Hopson v. Mayor of Baltimore , 232 F.R.D. 228 (D. Md. 2005), but later withdrew that request when the discovery deadlines were enlarged by four months. It is essential to the success of the use of "clawback agreements" in avoiding waiver that the production of inadvertently produced privileged electronic data "must be at the compulsion of the court, rather than solely by the voluntary act of the producing party, and that the procedures agreed to by the parties and ordered by the court demonstrate that reasonable measures were taken to protect against waiver of privilege and work product protection." The Hopson case tells you how to develop a factual record that would permit a non-waiver agreement to be approved by the Court. (There is a proposed Fed. R. Evid. 502 before Congress which would protect against waiver in these circumstances but it has not been passed into law yet.)

Court stated that 4th Circuit appears to be heading for the "strict approach" to waiver based on inadvertent production, namely, "there is a waiver because once disclosed, there can no longer be any expectation of confidentiality . . . ."   Even under the "intermediate approach", waiver would have been imposed, because the defendants here did not create a record that would support a finding of inadvertent disclosure.

The intermediate test requires the court to balance the following factors to determine whether inadvertent production of attorney-client privileged materials waives the privilege: (1) the reasonableness of the precautions taken to prevent inadvertent disclosure; (2) the number of
inadvertent disclosures; (3) the extent of the disclosures; (4) any delay in measures taken to rectify the disclosure; and (5) overriding interests in justice.

Judge Grimm seems to be saying that to make such a showing, a party essentially needs expert testimony from ESI specialists to discuss the reasonableness of the keyword searching methods and verification sampling.

Key quote:

The message to be taken from O'Keefe, Equity Analytics, and this opinion is that when parties decide to use a particular ESI search and retrieval methodology, they need to be aware of literature describing the strengths and weaknesses of various methodologies, such as The Sedona Conference Best Practices, supra, and select the one that they believe is most appropriate for its intended task. Should their selection be challenged by their adversary, and the court be called upon to make a ruling, then they should expect to support their position with affidavits or other equivalent information from persons with the requisite qualifications and experience, based on sufficient facts or data and using reliable principles or methodology.

For those understandably concerned about keeping discovery costs within reasonable bounds, it is worth repeating that the cost-benefit balancing factors of Fed. R. Civ. P. 26(b)(2)(C) apply to all aspects of discovery, and parties worried about the cost of employing properly designed search and information retrieval methods have an incentive to keep the costs of this phase of discovery as low as possible, including attempting to confer with their opposing party in an effort to identify a mutually agreeable search and retrieval method. This minimizes cost because if the method is approved, there will be no dispute resolving its sufficiency, and doing it right the first time is always cheaper than doing it over if ordered to do so by the court.

II. Continental Casualty Co. v. Under Armour, Inc ., 537 F.Supp. 2d 761 (D. Md. Feb. 13, 2008)

Held: Insurance company waived attorney-client privilege and work product by posting information on a section of its claims website which it had been accessible to the plaintiff's insurance broker. Plaintiff's broker downloaded the information and gave it to the plaintiff, which was a disclosure entirely outside the discovery process. Since the broker is the agent of the plaintiff insured, disclosure to the broker waived both the a/c privilege and the work product doctrine. Disclosure to an agent is tantamount to disclosure to the principal.

This opinion suggests that the better practice is to caption all of your status letters and evaluations to the insurer as privileged material, to flag potential privilege issues.  With insurers moving towards paperless files and remote access, an attorney can no longer be sure that third parties will not somehow be inadvertently given access to the file.

III. Hopson v. Baltimore, 232 F.R.D. 228 (D. Md. Nov. 22, 2005)

This opinion tells you how to set up the record to support a "clawback agreement" that
will work, at least until the new Fed. R. Evid. 502 is passed by Congress.

IV. Nuts and Bolts

A. Guidelines for discovery of ESI- from the U.S. Dist. Court for the District of Kansas

I've seen this highly recommended as a good 3 page summary of counsel's discovery obligations regarding ESI. It also has an appendix that outlines what you should be prepared to discuss in an ESI conference.  (Thanks to Jim Calloway.)

The suggested ESI protocol for the U.S. District Court for the District of Maryland is somewhat longer.

B. Possible consultants to use

Sensei Enterprises in Fairfax, Virginia

Kroll Ontrack

The Changing Legal Profession

A couple of good articles have come to my attention about the changing legal profession.  First, there is a good retrospective paper available as part of the "Virtual Law Library" on the D.C. Bar website:

The Changing Legal Profession, by Abe Krash.  Abe Krash practiced for 50 years with Arnold & Porter.  Here's a quote:

As Judge Rifkind noted, “an apprenticeship under a good master” is a critical part of learning the craft of lawyering. In the past, when firms were smaller, partners knew many of the associates, and they had an interest in training them for the reason that a goodly number of associates would become partners in the future. However, as to many associates with whom they now work, partners do not have such an interest. As I have noted, the turnover rate of associates at most large firms is extremely high, and only a handful of associates will be elevated to partnership. There is accordingly a diminished incentive for partners personally to invest valuable time in training associates who will leave the firm. A partner may understandably ask: why should I devote a lot of effort to training this associate when he or she will be gone from the firm in a year or two?

Coincidentally, there is a recent article in Findlaw, "Junior Associates - The State of the Legal Profession",which states at one point:

The training and loyalty of junior associates is closely tied to the issue of high salaries. Lack of "real world" legal training haunts most junior associates, who are routinely assigned to tedious document review projects.

Training a highly-paid first year associate who will most likely move on in a couple of years is a dilemma faced by many firms. According to the panel, 78% of lawyers are leaving their firms after only 1 or 2 years.