Cybercrimes; the Clawback

No one wants to be a defendant in litigation, and now, it is going to be obvious that there is a great need for protection incase you are on either side of the case in litigation.

The Clawback

We are not referring to the drop of a stock price. We are referring to a voluntary written agreement between the two parties in a civil litigation case to protect confidentiality and privacy of the electronically stored information during e-discovery in a trial. Electronic filing is used in most courts and a Clawback agreement allows access to large volumes of documents so that one party can gain access to the specifics that they are looking for. The agreement states that a request must be made in writing and that there must be a specific request for a document.

The procedure demands that the producing party be permitted to “claw back” or demand the return of privileged information if the requesting party tries to use it. The problem is that the information has already been electronically transmitted and viewed and this can include privileged communications, photos, trade secrets, e-mails, links, hidden formulas, client information, financial information, metadata, banking information, codes, taxes, pensions, insurance, passwords and all sorts of private information, now in the hands of a third party (or fourth or fifth).

So much discovery information is divulged and exposed in the courts that attorneys have to hire “e-vendors” to keep track of the trace of electronic information. One of the main uses of these agreements is in debtor-creditor law in the use of uncovering assets and in the cases of taxation, class actions and litigation. The problem in the courts is in deciding if these agreements preserve privilege or create negligence.

The case law on the effectiveness of clawback agreements is equally discordant on both sides of the case. Although some courts have found in particular cases that clawback agreements preserved privilege when it would otherwise have been waived, other courts have disregarded them entirely; and even courts that have enforced them have reached different conclusions about the meaning of similar provisions.

In Cardiac Pacemakers Inc. v. St. Jude Medical Inc., 2001 WL 699850, No. IP96-1718-C-H/G (S.D. Ind. May 29, 2001), 3,500 pages of privileged materials were produced in the mistaken belief that they had been screened for privilege. Applying the middle-of-the-road approach, privilege was waived, but the court held that the clawback agreement in that case modified the otherwise applicable law and preserved privilege, as there was no deliberate decision to waive privilege.