Court Finds Subject Matter Waiver: Plaintiff Entitled to Retain Privileged Email and Inquire into All Related Communications

Crossroads Sys., Inc. v. Dot Hill Sys. Corp., 2006 WL 1544621 (W.D. Tex. May 31, 2006)

In this patent case, Dot Hill Systems Corporation (“Dot Hill”) produced to Crossroads Systems, Inc. (“Crossroads”) an email drafted by Thomas Lavan (“Lavan”), Director of Intellectual Property for Chaparral Network Storage, Inc. (“Chaparral”), and sent to Chaparral’s outside patent counsel, Alan Davis. (During the litigation, Dot Hill acquired Chaparral, and Crossroads asserted patent infringement by Dot Hill based on Dot Hill’s original products and Chaparral’s products.) Dot Hill’s 30(b)(6) witness, Dana Kammersgard, was asked questions about the email during her deposition, but no objections were made based on attorney-client privilege.

Eighteen months later, Lavan was asked questions about the email at his deposition. Dot Hill objected based on attorney-client privilege, instructed Lavan not to answer questions about its substance, and subsequently asked Crossroads to return all copies. Crossroads replied that the privilege had been waived via voluntary production of the email and permitting Kammersgard to be questioned regarding its substance. Crossroads filed a motion to compel further testimony by Lavan based on the waiver, and Dot Hill filed a counter motion to compel the return of privileged documents.

The court held that Dot Hill had waived the privilege by disclosing the email without objection. It was clearly potentially privileged on its face. It was addressed to alan@huffmanlaw.net, described steps to avoid patent infringement, and was marked “Confidential – Attorneys’ Eyes Only.” Dot Hill’s argument that the production was inadvertent was not persuasive, since the disclosure was discovered at the Kammersgard deposition but Dot Hill did nothing to remedy the situation until Lavan’s deposition eighteen months later.

Dot Hill’s contention that the Kammersgard deposition was insufficient to put it on notice of the inadvertent disclosure since Kammersgard was not familiar with the email was deemed a “red herring” by the court:

Dot Hill’s counsel had in his possession sufficient facts that should have, at the very least, caused him to investigate the bases for asserting a claim of privilege, if not to assert the privilege then and there. Given that the email was addressed to an individual at huffmanlaw.net and the fact that the email’s substance related to infringement or non-infringement of the patents in suit, neither personal knowledge on the part of Kammersgard nor the employment of any great sleuthing skills should have been necessary to put Dot Hill on notice that it had produced a document that may have contained privileged communications that were made for the purpose of securing legal advice.

Dot Hill has not pointed to a single case in which an attorney’s outright failure to recognize a viable privilege objection may fall within the scope of the inadvertence exception to the voluntary waiver doctrine. Indeed, the majority of the cases Dot Hill cites in support of its position involve documents inadvertently disclosed because they were lost in the shuffle of large-scale document productions. Although such a “lost in the shuffle” argument may have saved the privilege initially, Dot Hill’s failure to take steps to effectuate the return of the email after specifically learning of its production at a deposition dooms its late attempts to assert the privilege.

(Citations omitted.)

The court further reasoned that even if Dot Hill could colorably claim that it did not have a sufficient basis to recognize the alleged inadvertent disclosure at the Kammersgard deposition, it still failed to act promptly enough after the initial Lavan deposition. Crossroads had denied requests for return of the email in writing two weeks after this deposition, but Dot Hill did not seek judicial relief for nearly three months, and even then only as part of its response to Crossroads’ motion to compel further testimony.

Because the attorney-client privilege was deemed waived, Crossroads was permitted to retain the email and inquire into all related communications. Objections based on relevance were denied. Lavan was not required to sit for another deposition, however, since Crossroads’ motion to compel was not timely filed.

The court ruled on several other motions unrelated to this discovery issue.