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Tuesday, April 13, 2010

NJ Supreme Court Addresses Privilege in Employee Web-Based Personal Email Accounts

by Mehmet Munur

New Jersey Supreme Court ruled on March 30, 2010 that an employee did not waive attorney-client privilege to the emails she sent using her personal, web-based, password-protected email account from a computer owned by the employer. The employer had an Electronic Communication Policy that limited the employee’s expectation of privacy but did not explicitly discuss the use of personal email accounts on employer owned computers. The Court also stated in dicta that even a more clearly written policy would not be enforceable due to the public policy concerns over the attorney-client privilege. The Court also placed the burden of compliance with the ruling on attorneys by referring to the Rules of Professional Conduct. The case may require a re-write of electronic communication policies, at least as it relates to NJ employees. The case illustrates the importance of having clearly written policies that not only address the realities of personal use of employer-owned computers, but also the importance of properly implementing such policies.

The plaintiff, Marina Stengart, sued her former employer Loving Care Agency for employment discrimination. Stengart used the laptop provided by Loving Care to send emails to her attorney using her personal, web-based, password-protected Yahoo email account before turning in her laptop at the end of her employment. While she intended such communication to remain confidential, her laptop cached the emails in the temporary files folder. Loving Care imaged the laptop’s hard-drive for electronic discovery and found 7-8 of these emails, which had attorney-client privilege disclaimers. Attorneys for Loving Care reviewed these emails and referenced them in answering interrogatories. Plaintiff requested the immediate return of all other communication. Loving Care’s attorneys refused, Stengart moved for a temporary restraint. The trial court judge denied Stengart’s motion and found that the emails were not protected by attorney-client privilege because Loving Care’s Electronic Communication Policy had placed Stengart on notice that that the emails would be company property. The Appeals Court reversed and the New Jersey Supreme Court agreed with the Appeals Court. The New Jersey Supreme Court held that the Policy was ambiguous, that Stengart had both an objective and a subjective expectation of privacy, that the attorney-client privilege applied to the emails, and that the privileged had not been waived.

I. The Appeals Court Decision.

The Appeals Court overruled the trial court on four issues. First, the Appeals Court held that there was a genuine issue of material fact as to whether the Policy had been properly implemented. Second, it held that the Policy was ambiguous and that it did not specifically address web-based email use for personal reasons. Third, the Appeals Court held that the Policy was not enforceable due to the application of the attorney-client privilege. Lastly, it held that Loving Care’s attorneys were bound by the rules of professional conduct to bring the emails to the attention of the plaintiff’s attorneys or the court for a determination on the application of privilege.

First, the Appeals Court examined whether Loving Care’s Electronic Communication Policy had properly been implement. Stengart argued, with certification in support from former executives, that the Policy was not supposed to apply to Executives and that the Policy was not in effect during her time there. The Appeals Court concluded that there was a genuine issue of material fact as to whether the Policy applied to Stengart as an executive. The Appeals court relied on the multiple versions of the Policy that it found on the record with no information as to the effective dates of the Policy. This portion of Appellate Court Opinion highlights the importance of properly implementing Electronic Communication Policies. Such policies should be properly dated and properly disseminated to the workforce to extinguish any arguments that they are not applicable.

Second, the Appeals Court examined whether the terms of the Policy were sufficiently clear to warrant enforcement and whether the Policy covered the web-based Yahoo email account that Stengart used to communicate with her attorney. The trial court had held that the Policy put Stengart on notice that her communication would be subject to review as company property. The Appeals Court disagreed. Loving Care’s Electronic Communication Policy read:

[1] The company reserves and will exercise the right to review, audit, intercept, access, and disclose all matters on the company's media systems and services at any time, with or without notice. . . .

[2] E-mail and voice mail messages, internet use and communication and computer files are considered part of the company's business and client records. Such communications are not to be considered private or personal to any individual employee.

[3] The principal purpose of electronic mail (e-mail) is for company business communications. Occasional personal use is permitted.

The Appeals Court held that “company’s media systems and services” was not defined and it was not clear whether that included personal, password protected, web-based email accounts. Furthermore, the Appeals Court held that the lack of privacy for business communications conflicted with the occasional personal use that was permitted. Therefore, the Appeals Court held that the Policy was ambiguous.

Third, the Appeals Court turned to whether the Policy was enforceable. The Appeals Court examined the short history of employee manuals and their enforceability in contract theory. The Appeals Court wanted to reign in employee policies and wanted to create a reasonableness requirement on such policies before they could be enforced. Weighing the legitimate business interests of the employer against the interest in privacy of the employee, the Appeals Court appeared to argue that an employer could not make personal communications into company property by placing such language in a policy. Only after going into the history of employee-employer relationships and other cases in this area did the Appeals Court finally turn to the attorney-client privilege issues. The court held that “the company policy is of insufficient weight when compared to the important societal considerations that undergird the attorney-client privilege.”

Fourth, the Appeals Court addressed the issue of whether counsel for Loving Care had violated New Jersey Rule of Professional Conduct 4.4 requiring a “lawyer who receives a document and has reasonable cause to believe that the document was inadvertently sent . . . not [to] read the document [,] to, if he or she has begun to do so, . . . stop reading the document, [to] promptly notify the sender, and [to] return the document to the sender.” The trial court found that Loving Care’s attorneys did not have an affirmative duty to alert the plaintiff that it was in possession of the emails. The Appeals Court was not convinced and held that the Loving Care attorneys had violated the rule. The Appeals Court remanded the case to determine whether counsel should be disqualified.

Thus, the Appeals Court reversed the trial court, ordered the emails to be destroyed, and remanded the case for a hearing on disqualification of Loving Care’s attorneys.

II. The Supreme Court Opinion

The Supreme Court modified and affirmed the judgment of the Appellate court and created a bright line rule in dicta for attorney-client privileged communications from personal web-based accounts using employer owned computers. On appeal, the Supreme Court only addressed the ambiguity of the Policy, the application of the privilege, and the application of the ethics rule. Unlike the Appeals Court, the Supreme Court did not determine whether the Policy had been properly implement. Instead, the Court simply assumed that the Policy applied.

The Supreme Court agreed with the Appeals Court that the language of the written policy was ambiguous. The court then turned to the reasonable expectation of privacy by Stengart in her communications with her attorney. However, the Supreme Court did not take the same reasonableness approach to limit all employer policies regarding electronic communication as the Appeals Court did. Instead, the court distinguished between company provided email accounts and web-based personal email accounts based on 4th Amendment cases by analogy, tort of intrusion on seclusion, NERA v. Evans, Quon v. Arch Wireless, In re Asia Global Crossing, and others. The Court also emphasized the importance of company policies in diminishing the reasonableness of employee’s claim to privacy. The Court analyzed the reasonableness of Stengart’s expectation of privacy both objectively and subjectively. Her use of a web-based, password protected account—the password to which she did not save on her computer—led the Court to conclude that Stengart had a subjective expectation of privacy for the communication. The ambiguity of the Policy and the fact that it did not address personal email accounts led the Court to conclude that her expectation of privacy was objectively reasonable. The Court rejected any arguments of waiver as well and concluded that the communications were privileged.

The New Jersey Supreme Court also went one step further and created a bright line rule in dicta. Court did not mention the same reasonableness requirement in Electronic Communication Policies that the Appeals Court mentioned. Instead, the court stated that companies were free to “adopt lawful policies relating to computer use to protect assets, reputation, and productivity of a business and to ensure compliance with legitimate corporate policies.” However, the Court stated that

Employers have no need or basis to read the specific contents of personal, privileged, attorney-client communications in order to enforce corporate policy. . . . [E]ven a more clearly written company manual – that is, a policy that banned all personal computer use and provided unambiguous notice that an employer could retrieve and read an employee’s attorney-client communications, if accessed on a personal, password protected e-mail account using the company’s computer system – would not be enforceable.

The Court then turned to the ethics issue and agreed with the Appeals court. In effect, both courts appointed the attorneys for the employer as the custodian of an employee’s communication with his attorneys. Loving Care’s attorneys argued that the New Jersey Rule of Professional Conduct 4.4 was meant to address situations where attorneys inadvertently received communications from third parties and not this particular situation where the plaintiff had left them behind. The Court disagreed with the characterization of emails found in the cache of a browser as “left behind” and agreed with the Appeals Court in stating that the counsel for Loving Care had violated the New Jersey Rule of Professional Conduct 4.4 by not setting aside the privileged communications, and failing to notify its adversary or the court. Therefore, in New Jersey, if a company finds potentially privileged emails, its attorneys will be ethically bound to inform opposing counsel or the court about these emails before they use them, or risk disqualification.

With this decision, the New Jersey Supreme Court joins a line of cases, similar to NERA v. Evans,  holding that attorney-client communications creates a special case for employer Electronic Communication Policies. However, it is unique for creating a bright line rule for attorney-client privileged emails using personal web-based email accounts. Additionally, by placing the onus of compliance with the rule on the attorneys instead of the businesses, the court ensures that the rule will be followed.

The decision is also important because the Supreme Court did not follow the reasonableness approach to Electronic Communications Policies that the Appeals Court wanted to put in place. Such an approach for the content of all Policies could not simply be based on the attorney-client privilege, but would have to have another basis in the tort of intrusion upon seclusion. Interestingly, the Supreme Court neither struck down, nor agreed with that portion of the Appeals Court opinion.

III. Conclusion

The New Jersey Supreme Court opinion demonstrates the importance of proper drafting and implementation of Electronic Communication Policies. Such Policies should be updated to take into effect the realities of employee’s use of personal web-based email use at work. Companies may either completely ban the use of employees’ personal use of company computers or allow such personal use but specifically address issues related to the privacy of such communications. Updating such Policies will allow companies to decide to what extent they will limit an employee’s expectations of privacy in the personal of use employer-owned computers. Either way, the employer’s decision regarding attorney client privileged communications must be accurately reflected in their policies, or such policies may not be upheld in court. Additionally, such policies should be properly dated and properly disseminated to the workforce to extinguish any arguments that they are not applicable.