Business executives’ use of office e-mail to communicate in personal matters has become ubiquitous. When those e-mails involve otherwise privileged communications with personal counsel, the executives risk waiving the attorney-client privilege.
In the landmark case involving this issue, In re Asia Global Crossing, Ltd. (PDF), a Chapter 11 trustee sought the production of otherwise privileged e-mails between the five principal officers of the debtor corporation. The Asia Crossing court started from the proposition that an employee may have a reasonable expectation of privacy in a work e-mail account, but that expectation may be reduced by office policies and practices. Thus, the court concluded that the use of an office e-mail system to send privileged communications does not automatically destroy privilege.
The court adopted a four-part test to determine whether the employee using office e-mail has a reasonable expectation of privacy in the work computer and e-mail account: (1) Does the corporation maintain a policy banning personal use of e-mail; (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 e-mails; and (4) Did the corporation notify the employee and was the employee aware of the use and monitoring policies. In Asia Crossing, the court found that it could not conclude, as a matter of law, whether the debtor had a policy concerning personal use of office e-mail, whether any monitoring had occurred or whether the employees involved had notice of any such policy or monitoring. Further development of the record was required before the court could find waiver of the attorney-client privilege.
A recent Delaware Chancery case, In Re Information Management Services, Inc., illustrates how a record to support waiver of the privilege can be established even where no actual monitoring of e-mail occurred. Information Management Services, Inc. (IMS) is a close corporation, with two family trusts each owning 50 percent of the corporation. Effective day-to-day management and control over the corporation rested with the Lake family. The Burton family was a passive investor, but when a Burton family member was hired by IMS as an employee and saw what he considered to be gross mismanagement by Lake family executives, derivative litigation between the two families erupted. The Burton family sought discovery of privileged communications between the Lake family executives and their personal attorneys that were made using the office e-mail both before and after the filing of the lawsuits.
The IMS court found that the attorney-client privilege that otherwise applied to the e-mail communications was waived. The IMS policy manual plainly stated that the company had unrestricted access to all communications sent using office computers and should not be considered private. The Lake family executives did not seriously contest that they knew about this policy. In fact, some of the Lake executives’ e-mails acknowledged their diminished expectation of privacy in using office e-mail. The court also concluded that the company had reserved the right to monitor personal e-mails even though there was no evidence that it actually did so. The court observed that any actual monitoring of office e-mail accounts would, in most cases, make any expectation of privacy even less reasonable. The absence of actual monitoring in the context of a company policy warning of no privacy in office email was not enough to create a reasonable expectation of privacy. After reviewing the Asia Crossing factors, the IMS court appended several additional sections to its opinion, examining federal and state law to evaluate if the employees had a reasonable expectation of privacy arising from any government statutes and emphasizing the unique factual setting in the case: two warring families in a close corporation. The court concluded that “a more typical derivative action plaintiff” might not “be able to obtain otherwise privileged communications sent using a work e-mail account during periods pre-dating the point when the stockholder gains standing to sue.”
The handful of cases in this area turn on a variety of factors. Many courts appear reluctant to find waiver in the context of office e-mail on facts nearly identical to other courts finding waiver. All cases finding privilege waiver rely on the burden of proof that generally is on the party seeking to assert the privilege. Many cases emphasize the clarity (or lack thereof) of the company policy concerning the lack of privacy in office email and the weight of the evidence whether the employee actually or constructively knew about the company’s policy. A few courts, in finding no waiver, have focused on the company’s limited interpretation of or failure to monitor its work e-mail usage policies. Other courts, like IMS, tend to diminish the absence of actual monitoring in finding waiver. The courts all make a distinction between office e-mail and web-mail that has a locked account and password. An employee is considered to have a greater privacy interest in the latter. The courts also consider state statutes that may protect the employee’s expectation of privacy in office e-mails or require that privacy expectations are only diminished if the employer follows specific procedures. Like so many other attorney-client privilege paradigms, the actual outcome in any of these cases can only be determined with a careful sifting of the specific facts and circumstances in each case.
The views expressed in this article are exclusively those of the authors and do not necessarily reflect those of Sidley Austin LLP. This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers.