United States District Court, E.D. Virginia, Alexandria Division
Bruce Lee United States District Judge
MATTER is before the Court on the Order of Magistrate Judge
Michael S. Nachmanoff regarding Defendant Jeanette S.
Diamond's ("Diamond") Motion for Entry of Order
Allowing Retention and Use of Documents (Doc. 93), Plaintiffs
Motion for Protective Order (Doc. 96), and Diamond's
objections thereto. The Court sustains Diamond's
Objection to the Magistrate Judge's Order on July 12,
2016, and grants her Privilege Waiver Motion for three
reasons. First, SecTek did not file its Privilege Log in a
timely manner, which amounts to a waiver of privilege.
Second, SecTek has failed to meet its burden in proving that
the 491 documents in question are privileged. Third, SecTek
failed to rectify the inadvertent disclosure within the time
frame delineated by the Discovery Plan. Accordingly, the
Magistrate Judge erred by denying Diamond's Privilege
SecTek, a Virginia corporation, provides security services to
businesses and governments. Doc. 67 at 1-2. Until 2012,
Defendant Diamond was the owner of TDG, a Texas corporation
also in the security business. Doc. 67 at 2-3. On February 3,
2012 (the "Closing Date"), SecTek, Diamond, and TDG
entered into a Stock Purchase Agreement ("SPA")
whereby SecTek purchased TDG from Diamond. See Doc
1, 71, 101. Pursuant to the section 3.9 of the SPA, by
signing, Diamond warranted that TDG had paid and was up to
date on all of its taxes. See SPA 3.9.1. On July 10,
2014, SecTek received notice from the New Mexico Tax
Department that TDG owed the New Mexico $1, 180, 483.47 in
Gross Receipts Taxes. See Doc. 71-1 at 69
(hereinafter "2014 Tax Assessment"). The 2014 Tax
Assessment stated that, if SecTek disputed the total amount
due, it should contact the New Mexico Department within 90
days. Id. On September 26, 2014, the Department
issued TDG a statement of the account, which included a
month-by-month breakdown of the total gross receipts tax owed
per month. Doc. 71-1 at 73. Of the months occurring before
the Closing Date, TDG owed $533, 085.23, not including taxes
and penalties. Id.; see also Doc. 71 at 8-9. In
spite of receiving both items, SecTek did not dispute the Tax
Assessment until October 14, 2014, six days after the 90-day
dispute period expired. Doc. 101-1 at 35-36. From the time
SecTek received the Tax Assessment on July, 14, 2014 until
October 24, 2014, SecTek did not inform Diamond of the Tax
Assessment, nor attempt to contact her to assist in defending
filed this suit against Diamond on December 8, 2015. Dkt. 1.
The parties submitted their Rule 26(f) Joint Proposed
Discovery Plan ("Discovery Plan") on March 16,
2016, which was approved by the Court and incorporated into
the Rule 16(b) Scheduling Order on March 28, 2016. Docs. 21,
30. In response to document requests by Diamond, SecTek began
producing documents around May 8, 2016, with the majority of
production made on May 13, 2016. Doc.94, Exh.2 ¶3.
2, 2016, SecTek filed a Motion for Partial Summary Judgment
(Doc. 70), which Diamond opposed (Doc. 81). On June 21, 2016,
Diamond filed a brief in opposition to SecTek's Motion
for Partial Summary Judgment, wherein she introduced, as an
exhibit, an email between SecTek CEO Wilfred Blood and
SecTek's New Mexico attorney, Suzanne Wood Bruckner. Doc.
81-3, "Exhibit C". On June 23, 2016, SecTek invoked
the claw back provision contained in the Section 16 of the
Discovery Plan, and sent a written request to Diamond
notifying her that she had inappropriately used Exhibit C.
Doc. 119-6. Diamond then re-filed her Opposition with a
replacement Exhibit on June 29, 2016. Doc. 88.
1, 2016, SecTek's counsel sent a letter to Diamond's
Counsel, requesting to claw back the production of 491
documents. Doc. 94-1. On July 8, 2016, however, Diamond filed
an Motion for Entry of an Order Allowing Retention And Use Of
Documents As To Which The Attorney-Client Privilege Has Been
Waived and for Expedited Hearing ("Privilege Waiver
Motion"). Doc. 93. On July 11, 2016, SecTek filed its
Motion for Protective Order and for Sanctions and Opposition
to Diamond's Privilege Waiver Motion ("Motion for
Protective Order"). Doc. 96. SecTek also filed a
privilege log, attached as an exhibit to the Motion for
Protective Order. Doc. 96, Exh. 7. On July 12, 2016,
Magistrate Judge Nachmanoff held a telephonic hearing on both
Motions. Judge Nachmanoff denied both motions by Order on
July 12, 2016. Doc. 97.
Rule of Civil Procedure 72(a) permits a party to submit
objections to a magistrate judge's ruling on
non-dispositive matters. Fed.R.Civ.P. 72(a); 28 U.S.C. §
636(b)(1)(A); see also Fed Election Comm'n v.
Christian Coal, 178 F.R.D. 456, 459-60 (E.D. Va. 1998).
As a non-dispositive matter, the review of a magistrate's
discovery order is properly governed by the "clearly
erroneous or contrary to law" standard of review.
See Jesselson v. Outlet Assocs. of Williamsburg, Ltd.
P'ship, 784 F.Supp. 1223, 1228 (E.D. Va. 1991).
a magistrate judge's decision is "clearly erroneous
or contrary to law" may a district court judge modify or
set aside any portion of the decision. Fed.R.Civ.P. 72(a).
The Fourth Circuit has held that the "clearly
erroneous" standard is deferential and that findings of
fact should be affirmed unless review of the entire record
leaves the reviewing court with "the definite and firm
conviction that a mistake has been committed."
Harman v. Levin, 772 F.2d 1150, 1153 (4th Cir. 1985)
(citing United States v. U.S. Gypsum Co., 333 U.S.
364, 395(1948)). A decision is considered contrary to law
"when it fails to apply or misapplies relevant statutes,
case law, or rules of procedure." Attard Indus.,
Inc. v. U.S. Fire Ins. Co., No. 1:10-cv-121, 2010 WL
3069799 at *1 (E.D. Va. Aug. 5 2010) (citing DeFazio v.
Wallis, 459 F.Supp.2d 159, 163 (E.D.N.Y.2006)). The
Eastern District of Virginia has noted that for questions of
law, "there is no practical difference between review
under Rule 72(a)'s contrary to law standard and [a]
de novo standard." Bruce v. Hartford,
21 F.Supp.3d 590, 594 (E.D. Va. 2014) (citation omitted).
Therefore, the Court reviews the factual findings of the
magistrate judge's Order for clear error, and reviews
de novo legal conclusions. Id. at 593-94.
Court sustains Diamond's Objection to the Magistrate
Judge's Order on July 12, 2016, and grants her Privilege
Waiver Motion for three reasons. First, SecTek did not file
its Privilege Log in a timely manner, which amounts to a
waiver of privilege. Second, SecTek has failed to meet its
burden in proving that the 491 documents in question are
privileged. Third, SecTek failed to rectify the inadvertent
disclosure within the time frame delineated by the Discovery
SecTek's Failure to Issue The Privilege Log in A Timely
Manner Amounts To A Waiver of Privilege
failed to issue the privilege log in a timely manner.
Although the discovery plan does not contemplate a specific
due date for the privilege log, Fed.R.Civ.P. 26(b)(5)(A)
addresses the issue of when a party is to produce a privilege