Michigan Prof Gave Up Privilege Over Communications With His Attorney When He Gave Up His Hard Drive, Martoma Court Rules

Picture an employee who finds himself in legal trouble or has a dispute with his employer, and hires a personal attorney to work through the issue.  The employee might think that his communications with his attorneys are privileged and immune from discovery in litigation.  But what if the employee uses his work computer to store those communications, and then hands over his computer to his employer upon resignation?  How does that affect the privilege?

A recent ruling from Judge Gardephe of the U.S. Southern District of New York answers this question in a way that employees in this situation won’t like.  The ruling involves the ongoing trial of Mathew Martoma of SAC Capital Advisors for alleged insider trading.  (For press coverage of the trial, see CNN and the New York Times.)  A key witness against Martoma will be Sidney Gilman, a former professor at the University of Michigan who says that he provided tips to Martoma about a failing drug trial.  In advance of trial, Martoma’s lawyers asked the court to order Gilman to produce his attorneys’ work product.  They argued that Gilman had knowingly waived any privilege over that work product because it was stored on hard drives that Gilman returned to the University when he resigned.

The court sided with Martoma and against Gilman and the U.S. government, which joined Gilman in arguing against disclosure.  Judge Gardephe ruled that at the time Gilman returned his hard drives, he was in an “adversarial posture” with the University because it had announced that it was investigating his activities.  By “returning electronic devices” to his adversary that “contained alleged work product material, Dr. Gilman waived whatever work product protection might otherwise exist with respect to the materials stored on these devices.”  Gilman argued that his disclosure was involuntary because he was pressured to return the devices or lose his pension benefits.  But Judge Gardephe disagreed, writing that “pressure is not sufficient to demonstrate that production is involuntary.”  Rather, production through “compulsory legal process” is required in order to show that a disclosure was involuntary and not a waiver.

As Judge Gardephe’s decision shows, employers and others can successfully argue that when an employee’s communications with his attorney are stored on a computer that the employee then returns to an adversarial employer, the employee waives the privilege over those communications.  The employer can also use its policies in support of an argument that the employee waived the privilege.  For example, in one case, the employer had a policy that its computers could only be used for business and that employees waived any personal right to privacy that they had over material created, sent, or saved using its systems.  The court relied on this policy in finding that the employee waived any privilege by using company computers and email to correspond with his lawyers.  Scott v. Beth Israel Medical Ctr., 17 Misc.3d 934 (Sup. Ct. N.Y. Co. 2007). 

For employees and the attorneys who represent them, Judge Gardephe’s ruling illustrates that they should be careful not to conduct substantive conversations through an employee’s work email address or on the employee’s work-issued computers.  If an employee later finds himself in litigation with his employer, or even facing criminal charges, discovery of these communications, which could be extremely damaging, is a very real possibility.  Sometimes, courts have limited an employer’s ability to discover and use an employee’s personal communications with attorneys even if the employee used a work computer for those communications.  See, e.g., Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F. Supp. 2d 548 (S.D.N.Y. 2008) (employer precluded from using emails that it obtained by accessing employee’s personal email account with login stored on its computers).  But that will be small consolation if the judge in your case rules the other way.

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