Privilege and Privacy in the Context of Company Email: Recent Canada vs US Cases

Peerenboom v Marvel Entertainment (2016 NY Slip Op 31957(U))  is drama-driven case in which the New York County Supreme Court afforded Toronto businessman Harold Peerenboom the right to obtain the private emails of Isaac Perlmutter, the CEO of Marvel Entertainment Inc (“Marvel”). Perlmutter had claimed privilege over the emails; Peerenboom - who ultimately prevailed - argued that Permutter had sent them via his work email server and in doing so, had thereby waived privilege.

The Factual Background

The dispute between the two men centered on the management of the tennis club at the individuals’ exclusive compound in Palm Beach, Florida, where both men vacation over the winter. Following the dispute, anonymous letters defaming Peerenboom (and falsely accusing him of child molestation and murder) were sent to persons living and working at the luxury condominium complex where the two men reside.

Peerenboom commenced an action in the Circuit Court of Palm Beach County, Florida, alleging that Perlmutter and his wife were the persons responsible for sending the defamatory letters. Since Perlmutter allegedly utilized Marvel’s email server for his electronic communications (in his capacity as CEO of the company) Peerenboom issued subpoenas in a Florida action and addressed these subpoenas to Marvel to obtain any communications sent and received by Perlmutter or his wife through Marvel’s email server that were referable to Peerenboom and others involved in the dispute.

As Marvel’s principal office is in New York, Peerenboom thereafter commenced the proceeding against Marvel to enforce the subpoenas in the New York County. Despite not being named as a party to the proceeding, Perlmutter submitted three separate motions for a protective order, alleging that the emails sought by Peerenboom were protected from disclosure by various privileges, such as: the attorney-client privilege, the work-conduct privilege, the common-interest privilege, a purported accountant-client privilege, a limited principal-agent privilege, and the marital privilege.

Peerenboom opposed the motions, contending that Perlmutter waived all privileges, inasmuch as Perlmutter sent or received the emails on Marvel’s server. Marvel’s written computer usage handbook includes the following provision:

“[H]ardware, software, email, voicemail, intranet, and Internet access, computer files and programs—including any information that you create, send, receive, download, or store on Company assets—are Company property and [the Company] reserve[s] the right to monitor their use, where permitted by law to do so” [emphasis added].

The Decision

Justice Nancy Bannon, writing for the New York Supreme Court, held that Perlmutter had not satisfied the burden imposed on a person asserting any form of privilege, mainly that the information sought was immune from disclosure. Furthermore, the Court held that, “since privileges shield from disclosure pertinent information, and therefore constitute obstacles to the truth-finding process, they must be narrowly construed.”

In particular, Justice Bannon held that Perlmutter did not have a reasonable expectation of privacy in connection with electronic messages sent and received on Marvel’s server, and consequently waived the attorney-client and work-product privileges in connection with them. The Court agreed with Peerenboom that the use of a proprietary email system, subject to a computer usage policy such as that adopted by Marvel, constituted a waiver of any privilege that would otherwise be unilaterally asserted in instances of otherwise confidential communication.

Consequently, Perlmutter’s claims pertaining to attorney-client privilege and work-conduct privilege were dismissed.

As a consequence of having waived the attorney-client and work-product privileges with respect to all communications on Marvel’s server, the Court concluded he must necessarily have also waived the privileges in connection with communications that may have been relayed through an intermediary.

The Court also rejected Perlmutter’s contention that the common-interest privilege prevented the disclosure of communications between himself and Stephen Raphael, who assisted him in financing the Florida litigation. For this privilege to apply, the communication sought to be protected must relate to actual or anticipated litigation. Perlmutter did not show that the communication he sought to protect was relevant to the matter,  “in furtherance of a common legal interest”, and or that he and Raphael had a reasonable expectation of confidentiality (in respect of these communications).

With respect to marital privilege, the Court concluded that all electronic communications between Perlmutter and his wife on the Marvel server that were confidential in nature were protected by the marital privilege, unless knowingly shared. Conversely, all electronic communications between Perlmutter and his wife on the Marvel server that were not confidential in nature, but requested in the course of the litigation, were required to be turned over to Peerenboom.

The Takeaway

Peerenboom v Marvel is an informative case for companies with cross-border operations in the United States (and in particular, those with headquarters in the New York County). It sheds light on instances where employees will not be successful in evoking privilege over communications sought to be included in relevant litigation, particularly where a company’s policy specifically excludes the possibility of privacy in such circumstances. It remains to be seen if the decision will be appealed.

The Perenboom decision stands in sharp contrast to a similar recent decision of the Ontario Superior Court of Justice in Narusis v. Bullion Management Group (see our previous blog post here). In Narusis, the company had engaged a contractor to deliver certain services, and in this context, provided the contractor with a corporate e-mail account. The contractor used this corporate e-mail account to exchange e-mails with his lawyer about a legal dispute he had with the company.

With respect to a motion claiming Narusis had waived privilege over these emails, the court concluded that the facts of the case indicated that Narusis had not, implicitly or explicitly, waived his solicitor-client privilege over the e-mails. However, in its analysis, the court suggested that had Narusis been an employee (instead of a contractor), and/or signed the company policy governing such things and/or had personal e-mails been forbidden, the outcome may have been different

The Court in Narusis also went on to distinguish an employee's right to privacy from the protection afforded to communications under solicitor-client privilege, noting the two concepts are very different, and serve very different purposes.

Companies working across the border should mindful of the interpretation of their policies and actions by courts in Canada and the US.

For more information about our  Firm’s Technology expertise, please see our Technology group page.

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