Protorae Law
Mike Holm | LeClairRyan | UBP Team

Unfair Business Practices



This blog focuses on unfair business and trade practices such as business conspiracy, breach of fiduciary duty, misappropriation of trade secrets and other proprietary information, fraud, tortious interference with contracts and other unfair business practices that are not neatly defined. Since we are located in Tysons Corner, Virginia, many of the cases discussed will come from Virginia, Maryland and the District of Columbia courts. We hope the reader finds this blog instructive.

Friday, February 1, 2008

Use of Company Computer Waives Attorney-Client Privilege

Another significant aspect of the Virginia Supreme Court’s recent decision in Banks v. Mario Industries of Virginia, Inc., 650 S.E.2d 687 (2007), http://www.courts.state.va.us/opinions/opnscvwp/1061348.pdf, relates to its discussion of the expectation of privacy when employees use work computers and how that relates to the attorney-client privilege. In Banks, one of the defendants used his work computer to prepare a memorandum to his personal attorney relating to his plans to resign from Mario's employment and start a competing firm. Once he had completed the memorandum he printed it out to send to his attorney and then deleted it from his computer. During the litigation, Mario's forensic examiner was able to recover the document from the computer’s deleted files. It was offered into evidence at trial and admitted over objection.

On appeal, the defendant argued that the contents of the memorandum were protected by the attorney-client privilege. The Supreme Court disagreed. Noting that Mario's employee handbook authorized employees to use their company computers for personal business but provided that there was no expectation of privacy if they did so, the Court found that the attorney-client privilege had been waived.

The decision is bereft of any in-depth analysis of the potential ramifications of this decision, particularly in this electronic world. Those ramifications, however, may be far more significant than the Court intended by its holding.

The Court premised its holding on its opinion in Clagett v. Commonwealth, 472 S.E.2d 263 (Va. 1996). There a witness, after testifying, overheard a conversation between defense counsel discussing a factual misstatement she had made during her testimony. She relayed the conversation to the prosecutor who recalled her to the stand to correct the testimony. The defense objected in part asserting that the conversation overheard was protected by the attorney-client privilege. On appeal, the Court found no error in allowing the additional testimony. In doing so, it held that the privilege can be waived "where the communication takes place under circumstances such that persons outside the privilege can overhear what is said." Id. at 270. The Court, however, qualified that holding. "Nothing in the record indicates that Moore overheard the attorney’s conversation intentionally or surreptitiously." Id.

In Banks, the Court ignored the qualifier, relying only on the general principle. Yet, the forensic expert who recovered the memorandum did so by scrubbing the hard drive and recovering a deleted file. It certainly could be argued that the effort was intentional and, indeed, surreptitious, given that Cook plainly intended to eliminate the memorandum by deleting it after printing it out to send to his attorney. Under such circumstances, and particularly in the context of electronic files, the test to establish waiver should be more stringent than the whether it can be overheard or retrieved test used by the Court in Banks.

For now, however, this decision could be of significant benefit in litigation by employers against former employees for unfair business practices. By providing in an employee handbook, or other materials provided to employees when hired, that the use of company computers, while permitted, comes with no expectation of privacy, otherwise privileged documents recovered from the former employee’s work computer should be admissible into evidence at trial. (To maximize the strength of this argument, the notice regarding absence of privacy should be a document signed by the employee.) On the other hand, for employees who seek to establish their own competing business, this opinion is a cautionary tale.

Hopefully, the Court will have the occasion to revisit this ruling in subsequent cases and provide a more analytical framework for making determinations of privilege waiver with regard to electronic documents.

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