The Company Computer System, the Employee and Email Privacy

This post examines an opinion the California Court of Appeals for the Second District recently issued in a civil case:  American International Group, Inc. v. Superior Court, 2014 WL 7463887 (2014). The court begins by explaining how the case arose and what it involved: It began with “American International Group, Inc., and International Lease Finance Corporation” (collectively ILFC) suing

Air Lease Corporation (ALC), Plueger, and others, for, inter alia, breach of fiduciary duty and misappropriation of trade secrets. In the fifth amended complaint, ILFC alleges that Plueger was its chief operating officer (COO), but resigned and then became president and COO of a competing entity, defendant ALC.

American International Group, Inc. v. Superior Court, supra.

The Court of Appeals then notes that

ILFC has access to the emails that Plueger sent and received on ILFC computers during the period of time that he was in ILFC's employ. ALC and Plueger moved for an order compelling ILFC `to return, destroy, and otherwise make no use of any and all content of communications between Plueger and his attorneys that may be contained in any servers, computers, or other hard-copy or electronic media in their possession. [¶] This motion is made on the grounds that Plueger's communications with his counsel were privileged. . . .’

American International Group, Inc. v. Superior Court, supra.

It goes on to point out that

[n]early two decades ago, on November 5, 1997, Plueger signed the Employee Acknowledgement, which provides in part: `I understand that my computer at ILFC and the software and files on my computer are ILFC property. I have no right to privacy with respect to any information on my computer or when using ILFC's E-mail or voicemail systems. ILFC and its Network Administrator have the right without my permission to delete any unauthorized software on my computer.’

The Employee Acknowledgement begins: `This Personnel Policy Manual is an important document intended to help you become acquainted with ILFC. This Manual will serve as a guide; it is not the final word in all cases. Individual circumstances may call for individual attention.’

The manual provides in part:

`Personal Use of ILFC E–Mail System and Internet Access’

`The e-mail system and internet access provided by ILFC are for conducting company business. ILFC recognizes that some personal business and communications occur today by e-mail or over the internet instead of telephone calls. Thus, as in the case with personal telephone calls, a certain level of personal e-mails will be sent and received at work. Similarly, some personal use of ILFC's internet services may be necessary or convenient. However, use of ILFC's e-mail and internet access services should be kept to a minimum and must not interfere with your work. To the extent possible, they should be made during the lunch hour, break periods or after hours.’ . . .

`Monitoring of E–Mails and Internet Use for Non–Company Use and Pornographic or Inappropriate Content’

`An employee has no right to or expectation of privacy in his/her use of company computer systems or equipment. ILFC has the right to monitor, access, review, copy, delete, disclose and block an employee's e-mails, even those marked private, and monitor, disclose and block an employee's internet use without notice to or consent of the employee.’

American International Group, Inc. v. Superior Court, supra.

Plueger submitted a “declaration in support of the motion.” In which he stated that

he worked at ILFC for 24 years. In October 2008, Plueger and `other members of the ILFC management team’ hired a law firm,Munger, Tolles & Olson LLP (MTO), for advice connected to the anticipated sale of ILFC by its parent. ILFC paid MTO `for all of the ILFC-related work MTO did on [Plueger's] behalf.’

From October 2008 through March 26, 2010, Plueger used ILFC equipment, as well as his personal computer, to communicate with MTO. Plueger quoted from the emails which contained an advising footer, stating that the email was confidential, protected by attorney-client privilege or the attorney work product doctrine and instructing the recipient to delete the email. Plueger further stated in his declaration that ILFC `fully authorized and endorsed’ his use of MTO as counsel and paid MTO on his behalf.

Plueger stated that, as COO, he knew that ILFC did not monitor personal emails, except for two situations that did not apply to him: emails containing offensive language and emails from persons or companies forbidden to do business with U.S. companies. Based on his understanding of this practice, and the proviso in the Personnel Policy Manual that expressly states that the restriction on personal use of the ILFC computers is `”a guide”’ and `”individual circumstances”’ provided exceptions, Plueger believed that the emails sent to/from counsel were protected by the attorney-client privilege.

American International Group, Inc. v. Superior Court, supra.

The Court of Appeals goes on to explain that on June 20, 2014, the Superior Court

granted the motion. [The Superior Court] concluded that, while Plueger was bound by the policy, the policy, itself, `allows for exceptions based on circumstances.’ These circumstances include the employee manual's allowance of `a certain level of personal e-mails.’ Additionally, [the Court] found that ILFC had hired and paid MTO to advise Plueger; the hiring and paying of the law firm constituted a basis for Plueger to have a reasonable belief that his `individual circumstances’ exempted him from the general rule that e-mails between him and his counsel were not private.

The order was served electronically the same day. ILFC did not seek appellate review of the order at that time. A formal order was filed on August 22.

American International Group, Inc. v. Superior Court, supra.

The Court of Appeals then begins its analysis of the issues in the case, explaining that

ILFC contends that Plueger's communications with MTO are not protected by the attorney-client privilege (California Evidence Code § 952), because Plueger had acknowledged in writing that he had no right to privacy in any communications made on ILFC equipment and that the [Superior Court] erred in concluding that `individual circumstances’ gave Plueger license to ignore ILFC's clear technology-use policy.

American International Group, Inc. v. Superior Court, supra.

Not surprisingly,

ALC and Plueger counter that substantial evidence supports the findings of [the Superior Court] that ILFC policy allowed for individual circumstances where, in the case at bar, Plueger knew `for a fact’ that ILFC was not reviewing the content of his emails, ILFC allowed for limited personal use of its computer equipment, and ILFC authorized and paid for Plueger's consultation with counsel.

To the contrary, we are not bound by [the Superior Court’s] interpretation of the employee handbook and Employee Acknowledgement, but review those written instruments de novo. Parsons v. Bristol Development Co., 62 Cal.2d 861 (California Supreme Court 1965); Romo v. Y–3 Holdings, Inc., 87 Cal.App. 4th 1153 (California Court of Appeals 2001).

American International Group, Inc. v. Superior Court, supra.

The Court of Appeals goes on to explain that

[i]t is the burden of ALC and Plueger, as the parties claiming privilege, to establish that the emails were sent in confidence. Costco Wholesale Corp. v. Superior Court, 47 Cal. 4th 725 (California Supreme Court 2009). They did not carry this burden.

American International Group, Inc. v. Superior Court, supra.

The court then agreed with ILFC that Plueger had

no reasonable expectation that the emails sent or received on ILFC equipment were confidential; accordingly, the subject electronic communications destroy, or otherwise refrain from using the emails.

Appellate review of discovery orders is appropriate where, as here, the order prevents a party from a fair litigation of the case. OXY Resources California LLC v. Superior Court, 115 Cal.App. 4th 874 (California Court of Appeals 2004).

In 2002, we held in TBG Ins. Services Corp. v. Superior Court, 96 Cal.App. 4th 443 (California Court of Appeals 2002), that the advance notice of employer TBG Insurance Services Corporation (TBG) to a senior executive, Robert Zieminski, combined with Zieminski's written consent to the policy, defeated the claim that Zieminski had a reasonable expectation of privacy in the TBG-provided computer he used at home.

Zieminski, who had worked as a TBG senior executive for about 12 years, signed TBG's electronic and telephone equipment policy statement and agreed in writing that TBG had the right to monitor both of his computers. After TBG terminated Zieminski's employment for misuse of his office computer, Zieminski sued TBG for wrongful termination. The trial court denied TBG's motion to compel production of the home computer. TBG filed a petition for review in our Court. We concluded `that, given the employee's consent to his employer's monitoring of both computers, the employee had no reasonable expectation of privacy when he used the home computer for personal matters.’ TBG Ins. Services Corp. v. Superior Court, supra.

Zieminski did not assert that the home computer contained privileged information. That question was addressed by the [California Court of Appeals for the] Third District in Holmes v. Petrovich Development Co., LLC, 191 Cal.App. 4th 1047 2011).

In Holmes, the Third District [Court of Appeals] held that employee Gina Holmes's communications with her lawyer on her employer's computer equipment were not protected from disclosure by the attorney-client privilege. Holmes v. Petrovich Development Co., supra. The Third District emphasized that the computer `belong[ed] to the [company],’ that the company had a policy against using its computers for personal reasons, and that the employee was `aware of and agree[d] to these condition,’ going on to explain: `Holmes used her employer's company e-mail account after being warned that it was to be used only for company business, that e-mails were not private, and that the company would randomly and periodically monitor its technology resources to ensure compliance with the policy. Holmes v. Petrovich Development Co., supra.

American International Group, Inc. v. Superior Court, supra.

It goes on to point out that in Holmes v. Petrovich Development Co., supra, that District of the state Court of Appeals

explained that the attorney-client privilege did not apply, because `Holmes used a computer of defendant company to send the e-mails even though (1) she had been told of the company's policy that its computers were to be used only for company business and that employees were prohibited from using them to send or receive personal e-mail, (2) she had been warned that the company would monitor its computers for compliance with this company policy and thus might “inspect all files and messages . . . at any time,” and (3) she had been explicitly advised that employees using company computers to create or maintain personal information or messages “have no right of privacy with respect to that information or message.” . . . [¶] [T]he e-mails sent via company computer under the circumstances of this case were akin to consulting her lawyer in her employer's conference room, in a loud voice, with the door open, so that any reasonable person would expect that their discussion of her complaints about her employer would be overheard by him.’ Holmes v. Petrovich Development Co., supra.

Holmes v. Petrovich Development Co., LLC, 191 Cal.App. 4th 1047 2011).

The Court of Appeals then returns to the question at issue in this case, explaining that

[a]lthough ILFC did not regularly monitor electronic communications and may never have actually opened or reviewed any emails, ILFC had expressly warned in the Employee Acknowledgement that all files belong to ILFC and that there was `no right to privacy’ in any information on the computer or in the emails. Plueger had signed the Employee Acknowledgement and does not deny that he knew what he was signing. ILFC's Personnel Policy Manual states that ILFC `has the right to monitor, access, review, copy, delete, disclose and block an employee's e-mails, even those marked private.’ (Italics added.)

That the emails sent between Plueger and MTO were marked as privileged does not override the express provisions that Plueger acknowledged in writing that he would have no privacy interest in them.

In issuing the order, [the Superior Court] cited language in the Personnel Policy Manual stating that it is a `guide’ and `not the final word in all cases. Individual circumstances may call for individual attention.’ The manual recognizes that `a certain level of personal e-mails will be sent and received at work.’ The manual shows ILFC intended a flexible application of the personnel policy, but it does not contradict the express statements that the computer system belongs to ILFC, which expressly warns its computer users that it can `monitor, access, review, copy, delete, disclose and block an employee's e-mails. . . .’ ILFC cautioned that `use of ILFC's e-mail and internet access services should be kept to a minimum,’ and certainly did not give Plueger carte blanche to use ILFC's computer system.

It was not reasonable for Plueger to believe his communications with counsel on ILFC computers were private; thus, by using the computer system that ILFC was free to monitor, Plueger's communications were not private nor confidential.

American International Group, Inc. v. Superior Court, supra.

The court also noted that the fact that ILFC hired and paid for MTO to represent Plueger

individually in 2008–2010 does not support his claim of confidentiality. Plueger asserts that ILFC's hiring and paying the law firm constituted approval of Plueger's communications with the firm and its permission to use ILFC's computer, thus ILFC implicitly acknowledged that the attorney-client privilege protected the communications. To the contrary, given that Plueger stated in his declaration that in October 2008, Plueger and `other members of the ILFC management team’ hired MTO and that MTO continues to represent ILFC, Plueger was aware that MTO served two masters. At the time he communicated with the firm, Plueger—as COO and as part of the management team that hired MTO to represent ILFC—knew that MTO was ILFC's law firm and, thus, Plueger was aware that the firm had dual loyalties to both Plueger and ILFC. Any expectation of confidentiality of communications between the firm and Plueger would have been unreasonable.

For the aforementioned reasons, Plueger's email communications via the ILFC computer system are not confidential and, thus, are not protected from disclosure by the attorney-client privilege.

American International Group, Inc. v. Superior Court, supra (emphasis in the original).

So the Court of Appeals reversed the decision of the Superior Court Judge:

THEREFORE, let a peremptory writ issue, commanding [the Superior Court] to vacate its August 22, 2014 order, granting the motion for return, destruction and nonuse of John Plueger's email communications stored on International Lease Finance Corporation's computer hard drives, and to issue a new and different order denying same, in Los Angeles Superior Court case No. BC483370, entitled American International Group, Inc., et al. v. Air Lease Corporation et al.

International Group, Inc. v. Superior Court, supra.

If you are interested, you can read more about the context from which the original lawsuit arose in the news story you can find here.