Searching a Former In-House Counsel’s Computer, Quirky Question # 111

Quirky Question # 111:

We fired one of our in-house counsel.  He now has sued us for a variety of claims, all of which we think are bogus.  At the time his employment ended, we required him to turn in his company-owned computer.  We are reviewing it and finding that it contains a treasure trove of information useful to our defense of his case.  First, it contains evidence that corroborates our justification for the discharge decision – he just was not competent.  Second, it contains his ruminations about his litigation strategy, as well as  memos he prepared for his own lawyer regarding his potential claims.  Given that he composed all of these memos on his company-issued computer and left the memos on the computer when he departed, we assume that we can access and use this material?  Any problems with our assumption?

Dorsey’s Analysis:

Your question regarding your entitlement to review the computer records of your former in-house counsel, including records reflecting his communications with his own attorney, is complicated and implicates several different issues.  As you described, you discharged your former in-house counsel and he now has sued your company for various claims you believe to be “bogus.” You also described the fact that your review of your former in-house counsel’s computer revealed three different types of information you consider to be helpful to the defense of his lawsuit: a) information that you believe corroborates your justification for terminating him (i.e., information demonstrating that he was not competent; b) information reflecting your former employee’s reflections about his litigation strategy; and c) information contained in memoranda your former in-house counsel prepared for his own attorney.  In my view, these three categories of information call for different treatment.

Two prefatory comments also are relevant. First, the fact that your former employee was your in-house counsel is important, but not to the issues critical to your analysis. (Courts have mixed views regarding litigation by former in-house counsel, especially when their litigation involves any confidential communications relating to their responsibilities as in-house counsel. I have addressed these issues in a prior Blog posting; see QQ # 50.) Second, one key to the analysis of your situation is the language of your company’s electronic communications policies (assuming your company has such policies in place). You do not reference the policies in your question and my comments are limited that fact. With that caveat in mind, here are a few thoughts.

You identified three different categories of information. As referenced above, your treatment of the different types of information does not need to be (and should not be) uniform. With respect to the information relating to your former employee’s performance as one of your in-house counsel, your company should not be reticent to gather, organize and use this data. If the information demonstrates that your former in-house attorney was performing poorly, you will be able to use that data in the litigation he initiated.

With respect to the second category of information you have identified on the company computer used by your former employee – his reflections about his claims and/or litigation strategy – I would urge greater caution. Here, I would be sensitive to two issues. First, I would want to know what your company’s policies stated with regard to personal use of the company-issued computers. Did your policy provide that anything and everything created or stored on the company’s computers was subject to review and/or search by the company? Or, was your company’s policy less intrusive? A third option, of course, is that your company’s policies did not address this issue at all. With respect to either of the latter two contexts, I would encourage your company not to review these materials, at least not without prior judicial approval. The mere fact that your employee stored some of his personal ideas, or as you characterized them, his “ruminations,” about his claims on a company-issued computer does not necessarily mean that your firm has an unfettered right to review and use this data. My concern is that, absent a very clear policy stating that your company reserved the right to review all data of any kind placed on a company computer, a court might find your review of this information too intrusive. Second, a corollary to the last point is that the information relating to an assessment of the claims and the former in-house counsel’s analysis of his potential lawsuit, may reflect communications he had with his own attorney. Here, too, a court may well find your review of this data to be inappropriate.

The last observation spills over into the third category of information you identified in your question – information reflecting your former employee’s communications with his attorney. I addressed this issue in one of the early questions covered in this Blog in the context of email communications with counsel (see “Attorney-Client Privilege” by selecting that topic and review QQ # 12). As I previously described, there were relatively few judicial decisions analyzing how a former employee’s communications with his or her attorney via use of a company’s email system should be handled. The case previously discussed, a 2007 decision out of New York, found for the employer, concluding that the company had a right to review even privileged communications if sent through the company’s email system. Notwithstanding that decision, I suggested a more cautious and conservative approach.

Another issue raised by the fact pattern you described is a practical one. How can you sort through all of this material, some of which you have a legitimate right to review and some of which you do not, without reading the impermissible materials? In reality, you can’t. Even if you quickly skimmed or skipped over this material, there would be an appearance of impropriety that a court may be reluctant to let pass. Therefore, as described further below, you need to ensure that the review is not conducted by anyone who will be involved in defending the claims brought by your former in-house counsel. This specifically includes anyone employed by your outside counsel’s firm and anyone in your own Law Department.

A recent decision from the Superior Court of New Jersey, Stengart v. Loving Care Agency, Inc., No. A-3506-08T1 (June 26, 2009), validated my previous conservative recommendations and provides some guidance to the question you posed. In Stengart, the court considered the issue of whether an employee’s emails with her attorney, sent from the employee’s personal, password-protected, Web-based email account, but via her employer-issued laptop computer, were the employer’s property. The District Court found that they were, holding that the employer’s electronic communications policy, set forth in its employee handbook, provided the employer the right to create a forensic image of the computer hard-drive and review the information on the hard-drive, including information that otherwise would have been encompassed by the attorney-client privilege. The appellate court reversed.

The court of appeals spent some time reviewing the factual record to assess whether the communications policy relied on by Loving Care Agency had ever been finalized, adopted, and published to its workforce. The appellate court also considered provisions of the policy (assuming that it had been adopted) that seemed inconsistent with the broad employer claim that it was entitled to review all information on the hard-drive, particularly the portions of the policy authorizing employees to utilize the computers for limited “personal use.” The court also found ambiguities regarding whether the communications policy extended to password-protected, web-based email accounts, that an employee accessed via the company-owned laptop. The appeals court noted that even if it affirmed the lower court’s determination on these two issues (with which it clearly disagreed), it nevertheless “reject[ed] the company’s ownership of the computer as the sole determinative fact in determining whether an employee’s personal emails may become the company’s property.”

As the New Jersey court noted, “Although plaintiff’s emails to her attorney related to her anticipated lawsuit with the company, the company had no greater interest in those communications than it would if it had engaged in the highly impermissible conduct of electronically eavesdropping on a conversation between plaintiff and her attorney while she was on a lunch break.” The court further found that there was “no legitimate business interest” served by the company’s claims that all private communications on a company computer were company property.

Finally, the Stengart appellate court was deeply troubled by the company’s intrusion into the attorney-client privilege. (In Stengart, the company had imaged the hard-drive and outside counsel had reviewed all of the privileged communications without apprising the ex-employee of its actions. These facts only were revealed in discovery.) Noting that the attorney-client privilege was “venerable” and had been “recognized in the English common law prior to our Nation’s birth,” the court stressed that the privilege was basic to the relationship of trust and confidence between client and attorney. Given the importance of the attorney-client privilege, the court observed, “In weighing the attorney-client privilege, which attaches to the emails exchanged by plaintiff and her attorney, against the company’s claimed interest in ownership of or access to those communications based on its electronic communications policy, we conclude that the latter must give way.” The court therefore found that the company policy “is of insufficient weight when compared to the important societal considerations that undergird the attorney-client privilege.” Given the actions of the employer’s outside counsel in reviewing the employee’s privileged communications, and the obligations imposed on counsel when they receive or obtain access to privileged communications, the court remanded the issue of whether the employer’s outside counsel should be disqualified from further participation in the litigation and/or should be subjected to some other sanction.

The principles of the Stengart case apply with equal force to your situation. In my estimation, it would be imprudent to review the attorney-client privileged communications between your former in-house counsel and his lawyer. If these communications already have been reviewed, those who engaged in the review likely will be precluded from participation in the defense of the litigation. Whether any other actions need to be taken with respect to those individuals can’t be discerned from the facts set forth in the question.

To the extent that the materials relating to your former employee’s reflections on the litigation and/or his privileged communications have not been reviewed as yet, your position will be stronger. You then could explore at least two alternative options. The hard drive could be reviewed by a forensic computer expert, simply for the purpose of sorting through the data and categorizing the information. Alternatively, the information could be reviewed by an independent outside law firm, with the understanding that this firm will neither be involved in the defense of the litigation nor communicate with you regarding the content of the privileged data. The role of this firm would be to organize the data for the purposes of providing your company the information that it is entitled to receive (material falling into your first category of data) and to isolate from your company the information you should not review. Finally, I recommend that you immediately notify your ex-employee and his lawyer that you have this data in your possession and that you will not be reviewing it pending a judicial determination. At that point, either your ex-employee could move for the return of the information or you could seek guidance from the court regarding how this information should be handled.

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