In Lubrizol Corp. v. IBM Corp., No. 1:21-CV-00870-DAR (N.D. Ohio Feb. 18, 2024), Ohio Magistrate Judge Jennifer Dowdell Armstrong denied IBM’s Rule 502(d) order request, finding that it was “unclear whether a court has the authority to enter a Rule 502(d) order that covers intentional, rather than inadvertent, disclosures of privileged documents and information”. She also granted Lubrizol’s motion to compel privileged information regarding IBM’s preservation efforts, anticipation of litigation and when IBM identified the disputed custodians as individuals who might possess information relevant to the case.

Case Discussion

In this case where the plaintiff alleged breach of contract and fraud a project to implement a new enterprise resource planning software, Lubrizol amended its complaint to add a claim that IBM committed the tort of spoliation under Ohio law when it deleted the electronically stored information of several IBM personnel who worked on the S/4HANA project.

Lubrizol alleged that, between July 2019 and October 2021, IBM deleted the email boxes of a number of IBM personnel who played key roles on the S/4HANA project, that IBM failed to implement a litigation hold until May 2021, after Lubrizol filed its complaint in April (and was “explicit about its plan to sue IBM” as early as April 2020). Lubrizol also alleged that, even after IBM implemented a litigation hold, IBM applied it to only a handful of consultants who worked on the project, while failing to send it to “hundreds” of other individuals, “dozens” of whom allegedly played important roles, did not issue a broader litigation hold until October and November 2021, and that additional evidence was destroyed in the interim.

As the dispute continued, IBM’s submitted a Rule 502(d) order request which would authorize IBM to produce, without waiving the attorney-client privilege or attorney work product protection: (1) all documents and communications concerning “the preparation, implementation, institution, application, and dissemination by IBM of document preservation and litigation holds” through May 15, 2021; (2) responses to Lubrizol’s interrogatories on the same subject; and (3) a Rule 30(b)(6) witness on the same subject. Lubrizol objected, arguing that Judge Armstrong “lack[ed] authority to enter a Rule 502(d) order that would permit IBM to intentionally, rather than inadvertently, disclose privileged information without constituting a subject matter waiver of all other documents and communications on the same topic.”

Judge’s Ruling

Regarding IBM’s Rule 502(d) order request, Judge Armstrong stated: “As an initial matter, I agree with Lubrizol that it unclear whether a court has the authority to enter a Rule 502(d) order that covers intentional, rather than inadvertent, disclosures of privileged documents and information. The Sedona Conference has taken the position that a court may do so, opining that ‘[a] Rule 502(d) order may address not only inadvertent waiver, but also instances in which intentional disclosure will not result in waiver.’…A number of courts, however, have reached the opposite conclusion, holding that Rule 502(d) does not extend to intentional disclosures.”

After rejecting IBM’s citation of Warner Bros. Records Inc. v. Charter Communications, Inc. as “not persuasive in the circumstances presented here”, Judge Armstrong stated: “I conclude that the Rule 502(d) order that IBM is proposing here is not appropriate in scope and is not likely to “narrow and refine” the parties’ arguments for two reasons…First,… I am concerned that the time frame IBM has selected—through May 15, 2021—may exclude relevant communications regarding IBM’s preservation efforts or implementation of a litigation hold… Second, I am troubled by the possibility that IBM’s proposed Rule 502(d) order would enable it to disclose documents that support its spoliation position while continuing to withhold other, less favorable, documents.”

As a result, Judge Armstrong ruled as follows regarding IBM’s Rule 502(d) order request: “I therefore conclude that the scope of IBM’s proposed Rule 502(d) does not eliminate the risk of selective disclosure and that it is not likely to meaningfully narrow the disputes between the parties. And, as IBM correctly notes, nothing in the text of Rule 502(d) appears to give me the authority to unilaterally impose on IBM a broader waiver of the privilege than IBM has itself agreed to.”

Regarding spoliation and waiver of privilege, Judge Armstrong (applying the three-factor Hearn test), stated: “I agree that IBM took an “affirmative act” under the first prong of the Hearn test when it sent a letter disputing Lubrizol’s spoliation claim by asserting that IBM did not reasonably anticipate litigation before the filing of the complaint in April 2021 and had not identified certain custodians as potentially relevant until Lubrizol served its disclosures… By arguing that it did not reasonably anticipate litigation before April 2021, IBM has made relevant the advice that it received from counsel regarding its document preservation efforts and whether litigation was reasonably likely prior to that date… Finally, the third factor of the Hearn test is satisfied because applying the privilege would deny Lubrizol access to information that is vital to its spoliation claim.”

As a result, Judge Armstrong stated: “In sum, I hold that IBM has waived privilege with respect to: (1) IBM’s document preservation efforts; (2) whether IBM reasonably anticipated litigation at the time of the alleged spoliation; and (3) when IBM identified the disputed custodians as individuals who might possess information relevant to the case. I also hold that IBM has not waived privilege with respect to any other topic and may redact privileged information from otherwise responsive documents to the extent that information deals with other topics. IBM is hereby ordered to produce all responsive documents within 30 days of the date of this order.”

So, what do you think? Are you surprised that the Court denied IBM’s Rule 502(d) order request? Please share any comments you might have or if you’d like to know more about a particular topic.

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