Inadvertent Disclosure Did Not Waive Privilege and Crime Fraud Exception Held Not to Apply Even Though Disclosed Document May Show That Plaintiff's Counsel Told Plaintiff It Had a Weak Legal Claim

May 22, 2013

After the plaintiff, Peerless Industries, Inc. ("Peerless") produced an arguably privileged document to the defendant, Crimson AV LLC ("Crimson"), Peerless asserted that the document was inadvertently disclosed and was privileged. Crimson filed a motion to compel production of the document, particularly asserting that it should be produced under an exception to the attorney-client privilege.

As explained by the district court, "Defendants have filed a motion for an in-camera inspection of a particular document inadvertently produced by plaintiff [dkts. 230, 231]. Defendants seek a ruling that this document is discoverable, and not to be returned to plaintiff based on the inadvertent disclosure provision of the parties' protective order, because of the crime-fraud exception. We deny that request and find plaintiff's inadvertent disclosure did not waive the attorney-client privilege."

As basis for asserting the crime-fraud exception to the attorney-client privilege, Crimson argued that "this document demonstrates that the law firm representing plaintiff filed, and continues to pursue, a lawsuit against defendants knowing that it is without legal merit. Defendants reference portions of the document, arguing that plaintiffs counsel recognized plaintiff did not have a strong patent infringement claim, and noted that litigation would only 'distract and delay' defendants entry into the market place. But plaintiff's potential improper goal in pursuing this case does not constitute a crime or fraud. Though plaintiff's counsel may have advised their client that it had a weak legal claim, we simply cannot stretch the crime-fraud exception to reach to this type of circumstance."

The district court rejected the improper purpose claim as basis to assert the crime-fraud exception to the attorney-client privilege: "We are aware of defendants' concern throughout this litigation that the lawsuit was brought for an improper purpose. We also accept for purposes of this motion that defendants believe this document may shed some light on their concerns. But again, at this point in the litigation this single document acknowledging the weakness of a legal claim does not support a finding that plaintiff brought a frivolous claim 'in order to obtain an advantage unrelated to obtaining a favorable judgment.'"

Finally, the district court concluded that the document was produced inadvertently and was privileged: "As noted by plaintiff, the inadvertently produced document provided that it was 'Privileged and Confidential; Attorney-Client Privileged; Attorney Work Product,' at the top of the page. Defendants promptly contacted plaintiff to inform it of its error in producing the document. Now it is time for defendants to, pursuant to the protective order in place between the parties, promptly return it to plaintiff."

Accordingly, the district court denied the motion to compel.

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This case highlights the importance of making sure that privileged documents are not produced even if the protective order contains a claw back provision for inadvertently disclosed documents. This document, even though clawed back, will likely haunt the plaintiff throughout the litigation.

Peerless Industries, Inc. v. Crimson AV, LLC, Case No. 11-cv-01768 (N.D. Ill. May 14, 2013)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.