Attorney-Client Emails Don’t Always Have Their Privileges

Attorney-Client Emails Don’t Always Have Their Privileges

What happens in Vegas, stays in Vegas … and what you email your attorney from a company email account in Delaware, can be accessed by that company in Delaware according to the decision by the Delaware Court of Chancery on the In re Information Management Services case.

Information Management Services, Inc. (IMS), a Delaware corporation based in Maryland that provides analytical software and tools for biomedical research, was founded by Robert Burton and William Lake, Sr. They worked together until William Sr.’s retirement in 2007, followed by Robert’s passing in 2010.

The Burton and Lake families each beneficially own 50 percent of the company through their respective trusts.  The company’s board of directors consists of Robert Burton’s widow and son, Evelyn and Michael Burton, and William Lake, Sr.’s wife and son, Jean and Andrew Lake. Day-to-day control of the company lies with the Lake family. William Lake, Sr.’s sons, William and Andrew, and a non-party person are the most senior executives at the company.

And away we go …

On December 31, 2012, the Burton trusts filed a complaint alleging that William Lake had breached his fiduciary duties and mismanaged IMS and that Jean and Andrew Lake had breached their fiduciary duties by protecting William and enabling him to continue to run the company. The Lake Trust responded in kind on January 28, 2013 by filing a complaint alleging that Evelyn and Michael Burton breached their respective fiduciary duties. The complaint also alleged that Evelyn and Michael did so in order to eventually force a sale of their IMS stock or IMS in its entirety.  The two actions were then consolidated into one proceeding.

During discovery, IMS advised the Burton parties that William and Andrew Lake used their work — not Web-based — email accounts before and after filing the lawsuit to communicate with counsel. When IMS collected the emails, William and Andrew asserted attorney-client privilege and did not invoke the work-product doctrine. The Burton trusts moved to compel production of the emails by arguing that the privilege did not apply because William and Andrew used accounts maintained on company servers and despite their precautionary step of placing the phrase “subject to attorney client privilege” in the subject line.

Though the court acknowledged that Delaware courts “have not addressed whether an employee has a reasonable expectation of privacy in a work email account,” it still granted the motion to compel the release of those emails and attachments exchanged between William and Andrew and their attorneys using their work email accounts.

The court applied In re Asia Global Crossing, Ltd. and determined that William and Andrew could not invoke attorney-client privilege when using work email accounts. It also noted that all IMS employees were notified of computer privacy through a company policy manual, of which a section reads, “You should assume files and Internet messages are open to access by IMS staff.” All IMS employees included executives William and Andrew Lake.

The court added a cautionary note about the consolidated derivative action, calling it a “dispute between two families, each possessing 50 percent of the stock and enjoying equal representation on the Board.” It went on to say that it is not clear “whether a court would analyze privilege similarly in a more traditional derivative action involving a stockholder plaintiff with a relatively nominal stake and a board comprising individuals without any affiliation with the suing stockholder.”

While one waits for such a case, perhaps refrain from sending any private emails from work in the meantime.

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