Business Law Journal

In Militello v. VFarm 1509, partners in a cannabis business initiated litigation against each other for, among other things, breaches of fiduciary duty.  2023 WL 2579204 (Mar. 21, 2023).  The company hosted their e-mail accounts on a Google Workspace, “G-Suite.”  To support their claims in the lawsuit, one of the partners accessed the company’s G-Suite account and retrieved numerous e-mails, including many e-mails between the Defendant and their spouse which were, arguably, protected by spousal privilege.  The Plaintiff then provided these and other e-mail communications retrieved from the G-Suite account to their counsel.

After Defendants learned about this, they moved to disqualify Plaintiff’s counsel.  According to Defendants, the company did not have permission to access the e-mail accounts or read the private communications in them and thus, they should not be permitted to use the evidence or any counsel who had access to that information.  As has been done for years, Plaintiff opposed this motion, arguing that there was “no reasonable expectation” of privacy over communications sent through a corporate network on a corporate email account and thus, Defendants’ rights were not violated.

The Court of Appeal disagreed with the Plaintiff.  While the Court recognized that an individual employee may not have a reasonable expectation of privacy in e-mail communications made through the employer’s system, the Court agreed that the Defendants did have a reasonable expectation here because Plaintiff “presented no evidence [that the company] had a policy prohibiting [her] from using her [company] email account for personal communications or indicating her account would be monitored to ensure compliance with that restriction”  Id. at 5.  The Court also noted that there was no evidence that the Defendant had agreed to any policy like this.

In other words, an employer cannot assume that employees know that their work e-mail accounts are being monitored.  Instead, an employer must have a written policy informing employees of this fact, and the employee must acknowledge and agree to that policy. 

Finally, Plaintiff argued that because she was a director of the Company, she had the right to access all Company books and records, including emails on the Company’s server.  The Court of Appeal rejected the argument noting that the Bylaws did not put Defendants on notice that their communications with their spouses were not confidential.  To that end, the Court of Appeal commented “it is by no means clear a director’s right to inspect corporate books and records includes the surreptitious review of another director’s individual email account on the company’s G Suite.”  Id. at 6.

What does this mean for businesses moving forward?

First, it is critical that all businesses review their employee handbooks and other similar policy and procedure documents to make absolutely clear that the employer (1) will have access to the employee’s e-mail accounts (and other similar accounts), (2) that the employer’s computer systems are to be used for business purposes only, and (3) that the company will periodically monitor those accounts.

Second, having a policy on the books is not enough.  You must receive signed acknowledgement from your employees that they have received, and understood these policies.

Third, without having such policies and procedures which are also distributed and applied to directors and officers, you may be unable to use valuable evidence of a director or officer engaging in a breach of fiduciary duty against you or your company.

Fourth, if you believe that there may be evidence on your employee’s work accounts or computer systems, discuss the matter with your attorney.  They will be able to ensure that the collection and review is done in an appropriate manner which will protect your rights and permit your attorneys to utilize any beneficial information that you may find.

AALRR has a team of attorneys well-versed in these matters.  If you have any concerns about the appropriateness of your company’s policies and procedures, please contact counsel as soon as possible so they can assure that you and your business are in the best position to protect their rights when disputes arise.  Additionally, in the event that a dispute does arise, do not hesitate to contact counsel immediately as they can assure that you follow all of the appropriate steps and reduce the risk of key information obtainable from employee accounts is not deemed inadmissible.

This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

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