“Hey, Where’d You Get That Document?”

ESI has become one of the most despised three-letter combinations in corporate America (and the lawyers who dutifully serve it). The costs and risks associated with a company’s duty to preserve ESI are a headache of their own, but the dangers in production turn that headache into a full-fledged nightmare.

Ladies and gentlemen, Exhibit A: a decision issued against drug store chain Duane Reade in the Southern District of New York on February 28. The case is an FLSA collective action involving claims by assistant store managers that that they were improperly treated as exempt from overtime. During discovery, the employer identified relevant documents from its preserved ESI by using a list of search terms. And, it made sure to identify potentially privileged communications by searching for and flagging documents with the first and last names of its outside and in-house attorneys.

Sounds reasonable enough, doesn’t it? There were two million documents–that’s documents, not pages–included in their ESI production. Obviously, they couldn’t have outside counsel review everything. Search terms are a nice, reliable way to cull down a large volume of documents, right?

Well, despite these safeguards, the employer inadvertently produced an email from one Human Resources representative to another recounting her conversation with an in-house attorney (identified by name) regarding FLSA compliance. As it turned out, the email repeated an admonition from the attorney that assistant store managers–the particular group at issue in the case–generally were not performing a sufficient volume of exempt duties to justify their treatment as exempt employees.

Ouch. In legalese, that’s what we sometimes call a “bad fact.”

So, you might ask, how did this smoking Howitzer slip through the cracks? Because…..(drum roll)……only the attorney’s first name appeared in the document. ESI documents were searched for first and last names, so the memo wasn’t flagged. Oops. Even worse, the court ultimately did not require plaintiffs’ counsel to return the document or otherwise limit their use of it.

While that’s a pretty big load of bad news, there are at least a few encouraging points in the opinion. First, the court held that the memo was, in fact, privileged to the extent that the author of the email was repeating advice from in-house counsel. That’s no small victory.

Second, the court agreed that the employer acted reasonably in using search terms as a means of protecting its privileged documents. The only reason the court found that the privilege was waived was because the employer’s outside counsel was present at a deposition where plaintiffs’ counsel used the document as an exhibit for cross-examination, and conducted redirect on the document without asking the witness for the identities and roles of the people who were mentioned. While the employer’s counsel professed that they were not aware that the individual mentioned in the email was an in-house lawyer, the court noted that defense counsel was present for a deposition three weeks earlier where the in-house attorney was specifically identified.

The Bottom Line:There are very few–if any–airtight shortcuts to reviewing ESI, so pay close attention and get an iron-clad clawback agreement. And, make sure the names of your in-house legal staff are etched onto the brains of every outside attorney who touches the case.