McSwain v. HOMAG Machinery N. America, Inc. is a case every legal operations team should study. It highlights a product liability case where an inadequate privilege log forced the court to choose from four unfavorable remedial options for the defense. The case involved a workplace fatality during machine repair, but the compliance lesson focuses on the intersection of state substantive law and federal procedural requirements when asserting privilege in diversity jurisdiction.
The Challenge
The defendant, Stiles, submitted a privilege log deemed insufficient by the court. The plaintiff's counsel moved to compel, citing two issues: subject matter waiver due to inadvertent production of privileged materials and deficiencies in the log that hindered meaningful evaluation of the privilege claims.
The legal operations team faced a dual-law problem. South Carolina substantive law determined whether communications were privileged, while federal procedural rules dictated how the privilege log must be constructed and submitted. Missing either standard risks waiver.
The court found that communications between the defendant's general counsel and other employees were not primarily for securing legal advice, failing South Carolina's substantive test for privilege. This resolved the waiver question, but the privilege log still needed review under federal procedural standards.
The Environment and Constraints
Federal diversity cases operate under the Erie Doctrine, established in Erie R.R. v. Tompkins. This principle requires federal courts to apply state substantive law and federal procedural law. For privilege determinations, this creates a dual compliance requirement.
Your team must satisfy South Carolina's (or the applicable state's) substantive criteria for privilege: Was the communication primarily for securing legal advice? Did it involve an attorney-client relationship? Was confidentiality maintained?
Separately, you must meet federal procedural requirements for the log: provide enough detail for opposing counsel to assess each claim without viewing the document. Rule 26 doesn't specify exact fields, but courts expect more than boilerplate entries.
The court in McSwain stated: "The production of a privilege log asserting attorney-client privilege over certain documents in order to withhold that information from discovery is procedural and, therefore, governed by federal law."
This matters because your privilege log can be procedurally compliant under federal standards yet fail substantively under state law, or vice versa. You need both.
The Approach Taken
Stiles's log apparently lacked sufficient detail for the plaintiff to evaluate privilege claims. The court didn't publish the log format, but its ruling makes clear the descriptions were inadequate.
When faced with an insufficient log, the court identified four options:
- Allow resubmission of a more detailed log
- Deem the inadequacy a waiver of privilege
- Conduct in camera review of all withheld documents
- Conduct in camera review of a sample of withheld documents
The court engaged in "detailed factual analysis" and granted the plaintiff's motion in part, denied it in part. We don't know which option the court selected, but reaching this decision point signals a compliance failure.
Results and Measurable Outcomes
The court found the privilege log insufficient. It also determined that certain communications between general counsel and other employees weren't privileged under South Carolina law because they weren't primarily for securing legal advice.
For your team, this means two distinct failures occurred:
Substantive failure: Communications that should never have been logged as privileged appeared on the log.
Procedural failure: The log didn't provide enough information for opposing counsel to assess privilege claims.
Either failure alone justifies a motion to compel. Together, they put the court in the position of choosing remedies, all costly for the withholding party.
What They Should Have Done Differently
First, apply the state's substantive privilege test before logging any document. If communications between your general counsel and business teams address operational decisions, project management, or business strategy, even with attorney participation, they likely aren't privileged. South Carolina requires the primary purpose be securing legal advice. Document that analysis.
Second, build your privilege log to exceed minimum federal procedural standards. Include:
- Document date
- Author and recipients (by role if names are sensitive)
- Document type (email, memo, draft)
- Brief description of subject matter without disclosing privileged content
- Specific privilege claimed (attorney-client, work product)
- Basis for the privilege (e.g., "Communication from outside counsel to client providing legal advice regarding liability exposure")
Generic entries like "Legal advice regarding business matter" won't survive scrutiny.
Third, when you're in federal court on diversity jurisdiction, assign someone who understands the Erie Doctrine. Your privilege review team needs to know that state law governs the "what" (is this privileged?) and federal law governs the "how" (does our log comply with Rule 26?).
Takeaways for Your Team
Map your dual compliance requirements early. In diversity cases, identify the governing state's privilege law and federal procedural requirements before you begin document review. Build review workflows that test both standards.
Train reviewers on primary-purpose analysis. The fact that an attorney is copied on an email doesn't make it privileged. The communication must be primarily for securing legal advice under the applicable state's test. Business communications with attorney participation fail this test.
Invest in privilege log quality upfront. Courts have four remedial options when your log is insufficient, and none favor you. Resubmission delays your case. Waiver is catastrophic. In camera review is expensive and unpredictable. Build a defensible log the first time.
Document your privilege determinations. When you withhold a document, record why it satisfies both the state substantive test and the federal procedural requirement. If opposing counsel challenges your log, you'll need to defend individual entries with specific reasoning.
McSwain demonstrates that privilege log compliance isn't a single-jurisdiction question in federal diversity cases. Your team needs fluency in both state privilege doctrine and federal discovery procedure. Miss either standard, and you're explaining to the court why it should give you a second chance, or worse, why inadvertent waiver shouldn't apply.
