Believe it or not, when you (the good guy) accidently produce in discovery an internal memo which is subject to attorney-client privilege to the bad guys (the guys suing you), the bad guys might not give back all the copies.  And, if you are really unlucky, the bad guys will distribute it to other bad guys also suing you for similar reasons.  You might even litigate the issue to the Fifth Circuit court of appeals and win, but the cat will be out of the bag.

In the Fifth Circuit case Exxon Mobil v. Hill, No. 13-30830 the Court held that an internal memo discussing the radioactivity of material (and its harm) was subject to attorney-client privilege. The Court held that the nature of its creation precluded the need to provide the memo in discovery (even though people got very sick from the radiation).  However, the cautionary tale is that even though the plaintiff returned a copy, he did not return all copies of the memo that was accidently shared.  What ensured was years of litigation.

At the center of the case is a memo drafted by Exxon’s in-house counsel concerning whether to provide radioactivity test results (related to drilling pipe) to a potential contractual counter party who was offering to clean the drilling pipe as a contractor.  In the memo, the in-house counsel opines that Exxon should only provide the information specifically requested by the contractor and that Exxon would not provide the additional information which showed a significantly higher level or radioactivity.

Not surprisingly, litigation ensued over the course of many years after numerous workers became sick from the radioactivity on the drilling pipe.  In the course of one of the many lawsuits “Exxon accidently produced..” the memo.  Exxon’s counsel realized the mistake and invoked the claw back provision (which should require the other side to give back the document).  The opposing counsel did, in fact, return the copy he received.  But, the attorney also “kept a copy of the [] memo and distributed it to other plaintiffs’ attorneys, who in turn attempted to use it in the other cases.”

What following was another parallel set of litigation in which Exxon sought to assert the privilege over the memo in numerous state and federal courts with mixed results.

The 5th circuit, in considering whether to permit the assertion of privilege over the document, held that the memo was privileged.  While the court construed Louisiana state law, the Louisiana version of the rule of evidence is fairly similar to the Texas rule governing privilege.

The 5th circuit stated “The []memo reflects the advice by in-house counsel concerning the disclosure of certain data during negotiations.  Context here is key: The document was prepared during contract negotiations in which both side were assisted by legal counsel.  The negotiations, according to the record, involved a number of legal issues, including indemnity for downstream tort claims, storage and handling of nuclear residue, licensure, trade secrets and other issues.”

Thus, the memo was subject to attorney-client privilege.  But, the general counsel reading this post are not now reaffirming their belief in the technical protections of the attorney-client privilege. Rather, the underlying lesson here is: don’t accidentally send documents that are subject to the attorney client privilege out the door.  Easier said than done (and paid for).  Here, Exxon won the battle and lost the war.

In some litigation arenas, the trend is to produce everything and then figure out what was subject to privilege (for cost reasons).  For lenders who might be exposed to other similar litigation, the relief you have in not paying for a more thorough vetting of documents might be replaced by the anxiety of litigating about it more years.