NJ Supreme Court Says NJ Employee's Yahoo E-Mails Protected By Attorney-Client Privilege

In an extremely important case that we have followed closely over the past year, the New Jersey Supreme Court recently confirmed that the attorney-client privilege protects an employee's e-mails sent to her attorney through her private Yahoo account while accessing her work computer.  Stengart v. Loving Care Agency, Inc. (A-16-09)(March 30, 2010).

We first reported on this case in March 2009, when the trial judge found in favor of the employer by holding that the employee's e-mails to her attorney were discoverable in her wrongful discharge case against her employer. On appeal, in July 2009, the New Jersey Appellate Division reversed the trial court, finding that the employee had a reasonable expectation of privacy when she used her private Yahoo e-mail account to communicate with her attorney, notwithstanding that she used her company's computer to access her Yahoo account.

The New Jersey Supreme Court, an ardent advocate of protecting its citizens' individual rights, unanimously affirmed the Appellate Division's decision. Writing for the unanimous Court, Chief Justice Rabner commented:

In the past twenty years, businesses and private citizens alike have embraced the use of computers, electronic communication devices, the Internet, and e-mail. As those and other forms of technology evolve, the line separating business from personal activities can easily blur. In the modern workplace, for example, occasional, personal use of the Internet is commonplace. Yet that simple act can raise complex issues about an employer’s monitoring of the workplace and an employee’s reasonable expectation of privacy.

Each e-mail that the employee's attorney sent to his client contained the following confidentiality clause warning readers that:

THE INFORMATION CONTAINED IN THIS EMAIL COMMUNICATION IS INTENDED ONLY FOR THE PERSONAL AND CONFIDENTIAL USE OF THE DESIGNATED RECIPIENT NAMED ABOVE. This message may be an Attorney-Client communication, and as such is privileged and confidential. If the reader o2f this message is not the intended recipient, you are hereby notified that you have received this communication in error, and that your review, dissemination, distribution, or copying of the message is strictly prohibited. If you have received this transmission in error, please destroy this transmission and notify us immediately by telephone and/or reply email.

The subject matter of the e-mail messages exchanged between Stengart [the employee] and her attorney "appears to relate to Stengart’s working conditions and anticipated lawsuit against Loving Care," the Court recognized.

At least two attorneys from the law firm representing the employer (the “Firm”), reviewed the e-mail communications between Stengart and her attorney. The Firm did not advise opposing counsel about the e-mails until months later.

In responding to the employee's pretrial discovery demands the Firm stated that it had obtained certain information from “e-mail correspondence” -- between Stengart and her lawyer -- from Stengart’s “office computer on December 12, 2007 at 2:25 p.m.” In response, Stengart’s attorney sent a letter demanding that the Firm identify and return all “attorney-client privileged communications” in its possession. The Firm identified and disclosed the e-mails but asserted that Stengart had no reasonable expectation of privacy in files on a company-owned computer in light of the company’s policy on electronic communications.

The employer and its counsel relied on an Employee Handbook that they maintain contains the company’s Electronic Communication policy (Policy). The record contains various versions of an electronic communications policy, but Stengart argued that none applied to her as a senior company official.

The company's Policy states, in relevant part:

The company reserves and will exercise the right to review, audit, intercept, access, and disclose all matters on the company’s media systems and services at any time, with or without notice. . . . . E-mail and voice mail messages, internet use and communication and computer files are considered part of the company’s business and client records. Such communications are not to be considered private or personal to any individual employee.

The principal purpose of electronic mail (e-mail) is for company business communications. Occasional personal use is permitted; however, the system should not be used to solicit for outside business ventures, charitable organizations, or for any political or religious purpose, unless authorized by the Director of Human Resources.

In reviewing the company's Policy, the New Jersey Supreme Court concluded that the Policy does not address personal e-mail accounts at all. "In other words, employees do not have express notice that messages sent or received on a personal, web-based e-mail account are subject to monitoring if company equipment is used to access the account," the Court explained. "The Policy also does not warn employees that the contents of such e-mails are stored on a hard drive and can be forensically retrieved and read by [the employer] Loving Care," the Court further remarked. The Court also opined that "the Policy creates ambiguity about whether personal e-mail use is company or private property."

Noting the lack of any precedent in New Jersey law, the Court referred to cases from other states, and in particular was persuaded by a Massachusetts court case, National Economic Research Associates v. Evans, 21 Mass. L. Rptr. No. 15, at 337 (Mass. Super. Ct. Sept. 25, 2006), which contained very similar facts. In Evans, the employee used a company laptop to send and receive attorney-client communications by e-mail. As did Stengart, this employee also used his personal, password-protected Yahoo account and not the company’s e-mail address. The e-mails were automatically stored in a temporary Internet file on the computer’s hard drive and were later retrieved by a computer forensic expert. The expert recovered various attorney-client e-mails; at the instruction of the company’s lawyer, those e-mails were not reviewed pending guidance from the court.

The employer in Evans also had a similar company written policy that governed the use of the company's laptop computers, which warned that compute resources were the company's property and that e-mails were not confidential and could be read during "routine checks." However, the policy did not expressly declare, or implicitly suggest, that all Internet communications would be monitored - such as e-mails sent from an employee's personal e-mail account. Consequently, the Evans court found that the employee had a reasonable expectation of privacy when communicating with his attorney through his private e-mail account with Yahoo.

Applying the reported decisions from other states, including the Massachusetts court in Evans, the NJ Supreme Court held that under these circumstances Stengart [the employee] could reasonably expect that e-mail communications with her lawyer through her personal, password-protected, web-based e-mail account would remain private, and that sending and receiving them using a company laptop did not eliminate the attorney-client privilege that protected them. As the NJ Supreme Court explained:

Stengart plainly took steps to protect the privacy of those e-mails and shield them from her employer. She used a personal, password-protected e-mail account instead of her company e-mail address and did not save the account’s password on her computer. In other words, she had a subjective expectation of privacy in messages to and from her lawyer discussing the subject of a future lawsuit.

This decision by the NJ Supreme Court will have profound effects for the employer/employee relationship going forwards, as well as how employees communicate with their attorneys during the work day.

For employers, this decision suggests that companies must have a clear and comprehensive written policies that provide sufficient notice or warning that accessing private e-mail accounts on the employer's computers is expressly prohibited, and that such e-mails will constitute company property if transmitted through the company's computer system.

For employees, careful attention must be paid to employer handbooks and company policies governing the use of computers and e-mail communications.

One must wonder whether the NJ Supreme Court would have reached the same decision had Loving Care's Policy governing employees' e-mail communications expressly incorporated e-mails sent through private e-mail accounts. Regardless, it is hard to imagine the NJ Supreme Court declining to apply the attorney-client privilege in circumstances like these.