This post was written by Matthew R. Sheldon and Alexander “Sandy” Y. Thomas.

On September 19, 2008, President Bush signed into law the long-awaited Federal Rule of Evidence Rule 502; “Attorney-Client Privilege and Work Product; Limitations on Waiver” (“Rule 502”). Rule 502 addresses waiver of the attorney-client privilege and work product doctrine in the context of disclosures to a federal agency or during a federal proceeding.

Among other benefits, Rule 502 adds some needed clarity to the question of what constitutes a waiver if privileged or work product material is inadvertently disclosed to an opponent in litigation. It also addresses the scope of a waiver and the impact such a waiver may have in other federal and state court proceedings.

Prior to Rule 502’s enactment, federal courts generally took three positions regarding the issue of inadvertent disclosure. Some courts found that only an intentional disclosure acts as a waiver, providing clients with the highest level of protection. Other courts found that any inadvertent disclosure of privileged information, regardless of a corporation’s effort to avoid such a mistake, acted as a waiver. Most courts, however, adopted a “middle ground” approach wherein an inadvertent disclosure acts as a waiver only if the disclosing party was careless in disclosing privileged information and failed to request its return in a timely manner. Rule 502 mirrors the middle ground approach in many respects.

While adding clarity to the thorny issue of inadvertent disclosure, it remains to be seen if Rule 502 will have a substantial impact on litigation practices, especially in the context of electronic discovery. The principal purpose behind Rule 502 is to lower litigation costs associated with discovery by, among other things, reducing the potential impact of an inadvertent disclosure. As long as the producing party takes reasonable precautions to prevent an inadvertent disclosure, the provisions of Rule 502 will likely protect that party from a broad subject matter waiver if the party mistakenly discloses privileged or work product material to its adversary. With this added protection, parties are expected to direct fewer resources to privilege and work product reviews (i.e., parties will rely more heavily on less-expensive electronic searches for privileged and work product information), thereby reducing litigation costs. The enactors of Rule 502 also hope that fewer discovery battles will occur, given the increased clarity in the law of waiver provided by Rule 502.

Although Rule 502 may offer additional protection to parties who disclose privileged or work product material during litigation, counsel will in many instances still choose to conduct thorough privilege and work product reviews, considering that the cost of disclosing confidential information to your adversary remains high, even if the information is subsequently returned or if a court determines that disclosure of such information does not constitute a broad subject matter waiver. In addition, discovery disputes will still likely erupt over interpreting the specific provisions of Rule 502 and what actually constitutes “reasonable steps” to protect privileged and work product material.

Of equal importance is Rule 502’s requirement that any agreement between parties regarding the disclosure of privileged or work product material must be included in a court order if it is to be effective against third parties. Thus, counsel who wish to enter into an agreement with their adversary regarding the disclosure of privileged or work product information would be wise to make sure that the agreement is reduced to a court order.

Despite some of its deficiencies, Rule 502 is a step in the right direction. Confidential information of the client will receive enhanced protection, which is a welcome development in the face of recent assaults on the attorney-client privilege and work product doctrine.