Designer Skin LLC v. S & L Vitamins, Inc., et al.
In re: Asia Global Crossing, Ltd., et al.
322 B.R. 247 (Bankr. S.D.N.Y., March 21, 2005)
Employee Does Not Waive Attorney Client Privilege Simply By Communicating Over Company Email System
Court holds that the use of a company's e-mail system by an employee to send personal e-mails to the employee's personal counsel does not, without more, waive any attorney client privilege in such communications. Whether a waiver had occurred must instead be resolved by examining the employee's subjective and objective expectations that the communications would be confidential. In analyzing this question, Courts should look for guidance to cases that address an employee's privacy rights in e-mail sent over company e-mail systems, which hinge on the resolution of a similar question -- the reasonableness of an employee's expectation of privacy in such e-mails. Issues of fact as to the existence and application of company computer usage policies, and whether employees were warned that the Company could inspect e-mails sent over the company's system, prevented the Court from resolving the issue at this time.
The Court further held that any privileges attendant to certain additional e-mails between company employees and their personal counsel had been waived by their voluntary transmission of such e-mails both to counsel representing the company, and to a consultant rendering services to the company.
Employees Use Company Email System To Send Email To Personal Counsel
Various officers (the "Officers") of Asia Global Crossing ("AGC" or the "Company") sent personal e-mail over AGC's company e-mail system to their personal counsel ("Server E-mails").
AGC filed for bankruptcy protection. A Trustee was thereafter appointed, who began an investigation into certain transactions involving the Officers. In connection with this investigation, discovery was sought from the Officers pursuant to Fed. Bankruptcy Rule 2004.
After the Officers were directed to leave AGC's premises, it was discovered that copies of the e-mails at issue were still resident on the Company's e-mail servers. The Trustee brought this motion to compel the Officers to produce these e-mails. The Officers resisted, claiming the Server E-mails were privileged. The Trustee responded by asserting that any privilege had been waived by the use of the Company's e-mail system to transmit these e-mails.
The Trustee also sought to compel a consultant of AGC to produce various e-mails between the Officers and their counsel. These e-mails had been voluntarily sent both to this consultant, and to attorneys then representing AGC. Again, the Officers claimed that these e-mails were protected by applicable privileges.
No Per Se Waiver
The Court rejected the Trustee's claim that the Officers had waived any privilege that attached to the Server E-mails simply by transmitting them over the Company's e-mail system. Said the Court:
The Court found support for this conclusion in New York and California statutes that provide that "a privileged communication does not lose its privileged character for the sole reason that it was sent by e-mail or because persons necessary for the delivery or facilitation of the e-mail may have access to its content." (citing NY CPLR § 4548 and Cal. Evid. Code § 917 (b)).
Employee's Expectation Of Confidentiality Central
Applying Federal Law, the Court held that for a communication to be privileged, it must be confidential. This, in turn, required the party claiming privilege to establish both that he subjectively intended it to remain confidential, and that "under the circumstances, [the communication] was reasonably expected and understood to be confidential."
In analyzing this later, objective component, the Court held it was appropriate to look at cases which had addressed an analogous issue - namely, whether an employee has a protectible right of privacy in e-mail sent over a company e-mail system. As explained by the Court, in analyzing whether an employee has a reasonable expectation of privacy, courts look at "four factors: (1) does the corporation maintain a policy banning personal or other objectionable use, (2) does the company monitor the use of the employee's computer or e-mail, (3) do third parties have a right of access to the computer or e-mails, and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies."
These factors should be applied in determining whether an employee objectively could expect his privileged communications with counsel to remain confidential when transmitted over a company e-mail system. Said the Court:
Issues of fact precluded the Court from resolving this issue on the instant motion. The parties disputed whether AGC had a computer usage policy apprising them of the possibility their e-mails could be inspected, if AGC had monitored employees' e-mail pursuant to such policy, and if AGC had given its employees notice of either such policy, or monitoring activities. I am advised by counsel for one of the parties that this issue was never resolved by the Court, because the underlying dispute was subsequently settled.
Attorney Client and Work Product Privileges Waived By Transmission Of Emails To Third Parties
The Court did hold that the Officers had waived any privilege in e-mail communications between them and their counsel, which they had voluntarily shared with both AGC's bankruptcy counsel, and a consultant rendering services to AGC. Said the Court:
Similarly, any work product privilege that attached to these communications were waived by disclosing them to an adversary. "Since the communications involved a potential dispute between the [Officers] and [AGC], the disclosure of the communications to [AGC's] attorney and consultant obviously put the communication in the hands of the [Officers'] adversary."