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Privilege Waived for Failure to take “Reasonable Means” to Preserve Confidentiality

Posted in CASE SUMMARIES

Pacific Coast Steel, Inc. v. Leany, No. 2:09-cv-12190-KJD-PAL, 2011 WL 4573243 (D. Nev. Sept. 30, 2011)

Plaintiffs purchased the assets of several companies in which Defendant Leany had an ownership interest and hired him as an Executive Vice President of Pacific Coast Steel (“PCS”).  Leany was eventually terminated and his computer seized.  The privileged documents at issue in this opinion were either on Leany’s work computer at the time of his termination or had been migrated to a PCS server from one of defendants’ servers that was purchased by the plaintiffs.  When litigation ensued, defendants sought the return of the privileged documents in plaintiffs’ possession and a protective order prohibiting inquiry into certain areas related to those documents.  The court declined to grant the protective order upon finding that defendants’ privilege was waived because of their failure to “take reasonable means to preserve the confidentiality of the privileged information.”

Upon plaintiffs’ purchase of the defendant corporations’ assets, Defendant Leany was hired and began working as a Vice President for PCS.  In that capacity, Leany was given his own office and continued to use the computer he had used prior to plaintiffs’ acquisition, although that computer now belonged to PCS.  Prior to his termination, Leany was informed that the contents of all pre-merger communications would be merged onto a single PCS server, but took no effort to remove the allegedly privileged information from the system.  He was also aware of the corporate policy of PCS that the computer system and its contents were the property of the company and that use of the computer system could be and was monitored.  Moreover, when presented the opportunity to take copies of his computer and files following his termination, he made no effort to remove any of the confidential or privileged information.

Taking all of this into account, the court found that “Leany waived any privilege he may have had to privileged or confidential materials he left on the Century computer he used by failing to take reasonable means to preserve the confidentiality of the privileged matter.”  The court further found that “Leany simply could not have a reasonable expectation of privacy in e-mails he failed to remove or otherwise protect from disclosure after the acquisition of the Century entities’ assets by PCS.”  Accordingly, the court denied defendants’ motion for a protective order and request for the return of the privileged documents.