Information Management Services (IMS), Inc. is a Maryland-based company, co-owned by two families, the Lakes and the Burtons, who are currently at loggerheads. A recent opinion from the Delaware Chancery Court spells out the full background and nature of the current litigation, but the Cliff Notes version is that the Burtons are suing the Lakes for breaching their fiduciary duties as officers and directors of IMS, for “mismanaging the company”; while the Lakes are countersuing the Burtons for ”breaching their fiduciary duties by denying bonuses to management, causing the Company to incur liability to reimburse the federal government for amounts tied to the unpaid bonuses, and publicly disseminating confidential information about the Company.” Once-allied families now at each other’s throats? It’s positively Shakespearean.
Before and after the commencement of litigation, the defendants used their work email accounts “to communicate with their personal attorneys and advisors” and so all these emails were collected up. Defendants asserted attorney-client privilege. Next:
The defendants prepared a privilege log that identified 362 emails and attachments sent between August 2012 and March 2013. The Burton trusts then moved to compel IMS to produce the emails, arguing that the attorney-client privilege did not apply because William and Andrew communicated using work email accounts maintained on the IMS servers.
The IMS Policy Manual specifies that the Company has “unrestricted access to communications sent using Company computers and that personal use of IMS computers” should not be considered private.” As owners, “it is not seriously disputed” that the defendants knew about this, and indeed, there are emails from them that say things like “I‟m switching over to my commercial email, just so I don‟t leave any more tracks about [one of the Burtons] in my IMS box.” Here’s how the Chancery Court frames the issue in the instant opinion:
Delaware courts have not addressed whether an employee has a reasonable expectation of privacy in a work email account.
The court’s analysis focused on factors set out in In re Asia Global Crossing, Ltd. Firstly, since IMS had an explicit policy on the (lack of) privacy in work computers and email accounts, as mentioned above, that weighed in favor of production. The second factor is “does the company monitor the use of the employee‟s computer or e-mail?” In other words, having a policy is all well and good, but does the Company actually act in accordance with that policy? In the instant case, defendants “submitted affidavits saying that IMS never in fact conducted email monitoring” and also, that, as senior officers at the Company, they made the decision as to whether an employee’s email would be monitored. As a result of this position of seniority, they argued, their expectation of privacy is heightened. No dice.
Legally, [defendants] are wrong… The board of directors, not senior management, has the final say on accessing any employee‟s email. Moreover, because of their statutory obligation to manage the business and affairs of the corporation and the concomitant fiduciary duties they owe to the corporation and its stockholders, individual directors have informational rights that are “essentially unfettered in nature.”
Even so, because IMS never actually did monitor any emails, this second factor is treated as neutral. The third question under the Asia Global analysis is “do third parties have a right of access to the computer or e-mails?” The resolution here:
This is a straightforward case involving work email. IMS, a third party to the communication [between defendants and their attorneys], had the right to access [defendants'] emails when they communicated using their work accounts. Although [defendants] took the precautionary step of putting the phrase “subject to the attorney client privilege” in the subject line, they failed to take more significant and meaningful steps to defeat access, such as shifting to a webmail account or encrypting their communications. The third Asia Global factor favors production.
The next factor also favors production, as the question is “did the corporation notify the employee, or was the employee aware, of the use and monitoring policies?” As senior officers, defendants are likely to have known about IMS’ policy. With the factors thus far weighing largely in favor of production, the court looks at whether there’s any statutory reason not to compel, but finds no federal or state law that overrides the concept that work accounts carry no expectation of privacy. So, in conclusion, the motion is granted.