December 17, 2007

Federal legal reform is still conceivable in a Democratic Congress, so long as it doesn't directly touch the pockets of the trial bar. One of the greatest expenses in litigation is document discovery, especially in an age of e-mail. It's not simply a matter of photocopying file cabinets: there is something called attorney-client privilege, and if a privileged document is produced to the opposing side, it can argue that the privilege has been waived, and it is entitled to all of the privileged documents. Because of the huge consequences of a mistake in production, parties must expend huge resources on attorneys reviewing documents to ensure that the privileged documents are withheld. Some courts have ordered the return of inadvertently produced privileged documents (and some state bars have even held it unethical to fail to return inadvertently produced privileged documents), but there is no consistency in this, so the incentive is to overspend on defensive lawyering. The increased cost of discovery means that a complaint that gets to the discovery stage has a greater chance of forcing an extortionate settlement, even if illegitimate.

S. 2450, introduced by Sens. Leahy and Specter, would implement a new Federal Rule 502, establishing a presumption for the return of inadvertently produced privileged documents. The effect on litigation expense will be small, but material, to the benefit of everyone except attorneys, though the impact may be overwhelmed by recent developments in the federal law of privilege recognition.

Update, Dec. 18: And an example of the problem at Drug and Device Law Blog.