Bridgewater, NJ (April 23, 2010) – Fernando Pinguelo, a Member of Norris McLaughlin & Marcus, P.A., appeared as a guest on Fox News Channel’s live web show, The Strategy Room, hosted by Kimberly Guilfolye.  Pinguelo was interviewed about today’s headlines featuring internet abuse, including the Security and Exchange Commission Office of Inspector General’s 5-year investigation that revealed SEC employees and contractors visiting porn sites and viewing sexually explicit pictures using government computers. Ms. Guilfoyle’s guests today also included Richard “Bo” Dietl and Dr. Kathryn Smerling. 

The Strategy Room airs weekdays from 9 a.m. to 5 p.m. ET for a discussion of the day’s top stories, plus a variety of hour-long shows on topics like business, health, technology, and entertainment.

“Casual use of the internet in the workplace is on the rise.  With up-to-the-minute Facebook statuses and Twitter ‘tweets,’ the use of company time for personal internet use has become common place.  This has become so common that it is obvious employees don’t realize their actions can be tracked and saved.  This new breaking story testifies to the fact that many workers don’t realize the implications of their actions online,” said Pinguelo.

Pinguelo, Co-Chair of the firm’s Response to Electronic Discovery and Information (REDI) Group, devotes his practice to complex litigation with an emphasis on business disputes, electronic discovery, and media and employment matters.  He has experience in all facets of litigation (trial, mediation, arbitration, and appellate) in both federal and state courts. As a former prosecutor, he has tried numerous cases.  Today, Pinguelo handles a broad spectrum of disputes including copyright infringement, misappropriation of trade secrets, fraud, breach of non-compete covenants, discrimination, and business torts, and is able to address a rapidly evolving crisis or emergency.

A leader in the emerging area of electronic discovery, Pinguelo works with business owners, C-level executives, in-house counsel, and human resources, information technology, and risk managers to develop strategies to manage business and legal issues related to electronic documents. He recognizes that complex contract and statutory considerations impact the evolving business environment. This understanding enables him to help clients comply with the broad array of laws that regulate document management. Pinguelo focuses on preventing claims and pursues strategies that enhance a client’s ability to manage electronic documents because he is keenly aware of the financial and public relations fallout that can result from high-profile electronic discovery abuses and negligence.

Notably, Pinguelo was involved in New Jersey’s first case addressing its new electronic discovery rule amendments, and has lectured numerous times on the topic, including at the Judicial College which provides judges with a wide range of academic programs. He has designed a state-of-the-art electronic discovery law course and teaches one of only a handful of such courses in the country at Seton Hall University School of Law.  Recently, the Fulbright Program, the U.S. government’s flagship international exchange program, designated Pinguelo a Fulbright Specialist for his work in eDiscovery, and he will engage in a project at a university in one of over 100 participating countries.  Pinguelo was also invited to be a member of eDiscovery Group of The Sedona Conference® Working Group Series, a prestigious series of think-tanks consisting of leading experts brought together by a desire to address various “tipping point” issues in each area under consideration.

To view the official press release, click here.

Pinguelo earned his J.D. from Boston College Law School in 1997 and his B.A., magna cum laude, from Boston College in 1994.  He is admitted to practice in New Jersey, New York, and the District of Columbia, and is the founder of eLessons Learned.

In Stengart v. Loving Care Agency, Inc., the Court held that an employee could “reasonably expect that e-mail communications with her attorney through her personal account would remain private, and that sending and receiving them via a company laptop did not eliminate the attorney-client privilege that protected them.”  The Court also held that the company’s attorneys violated an ethics rule by reading the “arguably privileged” e-mails and by failing to alert the employee that they had them.  But the Court did unleash at least one surprise by announcing that even a seemingly bulletproof company policy on workplace computer use that claims the employer could read an employee’s attorney-client communications would not be enforceable if the employee accessed the communication through a personal, password-protected e-mail account.

Ever quickly peek at your web-based personal e-mail account while still at the office?  Yeah, many of us do, too; and we’d be willing to bet a ham sandwich that certain Justices on the New Jersey Supreme Court probably do, as well.  Peeking at her personal e-mail account while still at work is how plaintiff Marina Stengart ended up in front of those same Justices last winter.  After deciding to sue her employer on various employment discrimination charges, Stengart used a company-issued laptop to communicate with her attorney via her personal, password-protected Yahoo e-mail website.  At the time, Stengart had no idea that the laptop was automatically saving copies of each page that she viewed, to a temporary internet file cache folder on the laptop’s hard drive.  After Stengart quit and turned in the laptop, Loving Care forensically imaged the hard drive and discovered images of the e-mails Stengart exchanged with her attorney.  Believing that Stengart had waived any privilege claims, Loving Care’s attorneys cited one of the e-mails in an interrogatory answer.  That belief was supported, initially, by the trial judge who found that Stengart waived the privilege; but the trial court decision was reversed on appeal to the Appellate Division.

On challenge to New Jersey’s highest court, Loving Care argued that the attorney-client privilege did not attach to the e-mails because its company policy regarding computer and internet use at the workplace removed any expectation of privacy that Stengart may have had; and that she waived the privilege because she accessed her e-mail via the company’s computer and server.  The Court disagreed.  After first deeming Loving Care’s Policy “not clear” and as creating “ambiguity about whether personal e-mail use is company or private property,” the Court evaluated case law from other jurisdictions, giving particular attention to (and ultimately following) a Massachusetts case with nearly identical facts.

The Court considered factors by which an employee could be found to have a lesser expectation of privacy in attorney communications.  First, the court distinguished between the use of a company e-mail system as compared to a personal, web-based e-mail account (such as Yahoo or Gmail.)  E-mails transmitted via an employer’s e-mail account might be subject to less privacy than those sent via a personal web-based account.  Second, the Court noted that the physical location of the company’s computer might make a difference in the analysis, suggesting that an employee who works from a home office may be entitled to greater privacy than an employee whose communication is made via the company’s servers.  Third, the Court recognized that other jurisdictions have held that the existence of a clear company policy that prohibits personal computer use may diminish an employee’s expectation of privacy; but, as explained below, the New Jersey Court refused to consider the sufficiency of a company policy as a determination of whether the employer can pierce the attorney-client privilege.

In holding that Stengart’s e-mails were protected by the attorney-client privilege because she could reasonably expect them to remain private, the Court cited three reasons.  First, the Court noted that Stengart had both a subjective and an objectively reasonable expectation of privacy in the e-mails – she had used a password-protected account to access the messages and had not given her password to anyone at Loving Care.  The Court also noted that Stengart had not used the computer to conduct illegal activities.  Third, the Court seemed impressed that the e-mails contained the boilerplate language warning the reader that the information was only intended for the designated recipient and contained privileged attorney-client communications.  But, as mentioned above, the effectiveness of Loving Care’s “Electronic Communications Policy” on workplace computer use was not dispositive.

The Court determined that the Policy was ambiguous, lacked clarity, and failed to warn employees that even web-based e-mails could be forensically retrieved.  But, as the Court stated, even if the Policy were perfectly drafted, it would not be enough to pierce the attorney-client privilege:

[E]mployers have no need or basis to read the specific contents of personal, privileged, attorney-client communications in order to enforce corporate policy.  . . . [E]ven a more clearly written company manual—that is, a policy that banned all personal computer use and provided unambiguous notice that an employer could retrieve and read an employee’s attorney client communications, if accessed on a personal, password protected e-mail account using the company’s computer system—would not be enforceable.

Declining to rely on other states’ case law holding that a clear company policy banning personal e-mails could diminish an employee’s expectation of privacy in attorney-client communications, the Court added that a “zero-tolerance policy can be unworkable and unwelcome in today’s dynamic and mobile workforce and [we] do not seek to encourage that approach in any way.”

What about Loving Care’s attorneys?  Should they have immediately returned the e-mails (which were plastered with the standard “CONFIDENTIAL . . . Attorney-Client communication” language)?  The Court thought so, and ruled that Loving Care’s attorneys violated professional ethics rules by “not setting aside the arguably privileged messages once it realized they were attorney-client communications, and failing either to notify its adversary or seek court permission before reading further.”  Noting the absence of an appearance of bad faith, the Court reiterated that the attorneys “should have promptly notified opposing counsel when it discovered the nature of the e-mails.”

To learn more about Stengart and its rise to the Supreme Court, visit our exclusive Stengart Watch feature which posts articles (and video) on each of the Stengart decisions and on related cases in other jurisdictions.

The defendants failed to take reasonable measures to ensure that all business communications were preserved as per the legal hold notice instructions, which ultimately lead to spoliation of the documents and sanctions for acting grossly negligent.  Through various motions and testimony of one the defendant’s IT director, it became clear that defendants relied on backup tapes in order to retrieve documents which were at issue, the reliance on which was flawed from the start.  For example, poor preservation of documents, lack of communications regarding the document retention policy, lack of communication between counsel and client, and flawed technical infrastructures failed to capture all deleted emails sent and received by the company.

The defendant’s failure to institute a legal hold was improper because it ultimately led the defense to present materially inaccurate information during the discovery proceedings.  For example, the IT director filed an inaccurate affidavit and defense counsel represented to have provided all the documents within their clients’ custody to the plaintiffs, when they had not.  The court noted a breakdown in the relationship between counsel and the IT department.  While the court found that the IT director was to blame for the failure to communicate with anyone about the deletion policy, counsel for the broker was also to blame for failing to investigate.

When faced with electronic discovery demands, hold a meeting of the minds between counsel, the client’s IT Department, and all relevant employees involved in the issue.  Be very clear as to what information needs to be culled and preserved from all electronic mediums.  Most importantly, keep clear lines of communication open among all interested team members so that accurate information can be disseminated.

It is essential to establish and disseminate clear and concise instructions for document preservation and legal hold notices in order to protect the integrity of your documents. Complete reliance on backup tapes to protect documents when litigation ensues is not only risky, but also can lead to significant problems.  Electronic discovery obligations have brought back office operations into the spotlight of litigation.  Your IT department is not only responsible for maintaining and supporting your technical infrastructure but also it is critical that the department also becomes legally savvy in order to protect your business in the emerging landscape of eDiscovery demands.

In Kounellis v. Sherrer, 529 F.Supp. 2d 503 (D.N.J. 2008), plaintiff prisoner brought a Section 1983 action against correctional officers and prison officials after the officers allegedly assaulted the prisoner in retaliation for his filing of administrative complaints against the officers.  After the alleged assault, the prisoner repeatedly requested a copy of the video surveillance footage from a camera in the area of the alleged assault.  Defendants never provided the prisoner with the copy.  Nor was a copy ever preserved, thus depriving the prisoner of the only source of evidence other than his word that he was assaulted.  As a result, the defendants were subjected to sanctions including an award of attorneys’ fees and an adverse inference jury charge.

To be subject to sanctions for spoliation of evidence, the party facing sanctions must have had a duty to preserve relevant evidence in anticipation of probable litigation that if not preserved would harm the other party’s case.  In short, someone who has something that the other party needs cannot intentionally or negligently (i.e., conveniently) lose the evidence.

In Kounellis, the defendants were supposed to preserve video surveillance footage because the footage was the only evidence, other than the prisoner’s word, that an assault had taken place.  To make matters worse, the defendants also knew that charges against the prison had been filed which would require litigation.  As a result, the defendants had relevant evidence in their possession while they also knew that that evidence would be needed by the prisoner at the disciplinary hearing.  Unfortunately, that evidence was never held onto and the prisoner was deprived of the only evidence that could support his side of the story.

In sanctioning the defendants for spoliation of evidence, the judge determined that it was the defendants’ fault for losing the evidence and the prisoner’s case suffered as a result.  As a result, the defendants were subject to monetary penalties.  More importantly, the jury was instructed by the judge that they were allowed to assume that the missing surveillance footage would have been harmful to the defendants.

The ability to prevent spoliation depends on whether the spoliation was intentional or negligent. Accidents do happen and future accidents can be prevented by establishing rigid procedures for preserving evidence when that evidence may be needed in a lawsuit.

Suddenly find yourself at the wrong end of a trade secrets litigation?  Heed this advice: When the court says “preserve,” that means documents, files, data, and BlackBerry^® smartphones.  Thus, be sure to instruct your clients not to wipe the memory from their BlackBerrys or other handheld devices before turning them in; or else, your client may be subject to sanctions.

The defendants in a trade secrets theft case learned this lesson the hard way when the District Court in Florida slapped them with sanctions after they turned in freshly “wiped” BlackBerrys.  The court interpreted the freshly sanitized BlackBerrys as evidence of bad faith that justified sanctions.  But you might be thinking: “A BlackBerry wiped clean? Who cares!  All the e-mails the other side could possibly want are readily available on the server.”  This type of thinking could get you in trouble.  Let’s see why.

After plaintiff Southeastern Mechanical Services, Inc. (“SMS”) prosecuted employees of a construction services company (“Defendants”) with theft of trade secrets, they obtained a court order requiring Defendants to preserve “all computer files, data, documents, or similar information on their computers” until otherwise notified.  The court also prohibited Defendants from “destroying any and all information and documents potentially relevant to” SMS’s claims.  Defendants’ in-house counsel properly requested employees to turn in their laptops and BlackBerrys, but seemingly failed to warn them to refrain from wiping the BlackBerrys’ internal memory.

The BlackBerrys ultimately made their way into the hands of SMS’s computer forensics expert who quickly determined that (a) they had been wiped clean, and (b) the “wiped-clean” condition was no accident.  Even the Defendants’ own forensic expert conceded at a deposition that only “intentional actions” would result in a full BlackBerry data wipe.  That was all the court needed to hear.

The court considered SMS’s requests to sanction Defendants by granting either (a) default judgment, (b) a ruling as to the improper use of trade secrets, or (c) an adverse inference jury instruction.  In Florida, a court may impose sanctions based on evidence spoliation when the opposing party, in bad faith, destroys evidence it had a duty to preserve and that had once existed.  The destroyed evidence must also be “crucial” to the other party’s case or defense.  Thus, for the court to justify issuing the sanctions requested against Defendants, it would need to conclude that the deleted BlackBerry data was crucial to SMS’s case.

With minimal deliberation, the court first concluded that “evidence existed at one time” on the BlackBerrys and that Defendants had a duty to preserve that evidence.  But was that evidence crucial to SMS’s case?  And had Defendants deliberately wiped the BlackBerrys in bad faith?

The “crucial” requirement was easy.  The court concluded that a “substantial and complete” destruction of data justified a finding that the destroyed evidence would have helped SMS’s case and its loss was prejudicial.

The court next noted that the BlackBerrys could have only achieved a “wiped” state following deliberate and intentional actions; and that it was “suspicious” that, following months of use, the BlackBerrys contained no “e-mails, text messages, calendar entries, or records of telephone calls.”  It all reeked of bad faith.  The court discounted the Defendants’ suggestion that SMS’s forensic expert could have accidentally deleted the files from the BlackBerrys.

Defendants argued that it didn’t matter that they had wiped the BlackBerrys before returning them because any e-mails that had been deleted were mirrored on their server, and they had already given SMS copies of those e-mails.

The court, however, was not impressed.  It pointed out that Defendants had used their BlackBerrys for both work and personal e-mail accounts; and the personal e-mail accounts were not mirrored on the employer’s server.  For one Defendant, the court calculated that approximately three weeks’ worth of potentially relevant data had been deleted.  Based on all facts at hand, the court granted SMS an adverse inference jury instruction based on the Defendants’ failure to preserve their BlackBerrys.

While this case dealt specifically with BlackBerrys, the lesson learned should be applied to any smartphone or other handheld device that can store data, including iPods, digital cameras, and GPS devices.  To avoid spoliation sanctions, make it clear to all employees that they should not perform any data wipes, system resets, scrubs, scours, or other similar actions once the duty to preserve exists.  Bottom line: don’t go near the “Wipe Handheld” choice in the “Security Options” menu.

By day, Laura J. Tyson handles e-discovery issues for a boutique litigation firm in Roseland, NJ, while at night she completes her J.D. at Seton Hall Law School in Newark, NJ.

In this March 2009 case stemming from a multi-million dollar construction dispute, the project owner agreed to produce all project-related emails and ESI from its non-party construction manager.  The issue before the Court concerned the production of the construction manager’s emails from its server, and how to separate unrelated emails from project-related emails.

In planning the search, the project owner suggested keywords specific to the names of the parties and the project, which were likely to be under-inclusive.  The other parties requested  the use of generic construction project keywords such as “build” and “claim” that would have triggered production of a vast amount of unrelated emails and ESI.  The non-party construction manager, not wanting to be involved in the litigation, offered very little assistance in the development of the search terms.  The parties’ inability to establish a keyword search compromise compelled the court to develop the terms of the keyword search, with little information and guidance from the parties.

Chastising the parties and counsel for these recurring problems, the Court emphasized the need for counsel to cooperate with each other and get adequate information from email authors and document custodians in order to successfully develop a keyword search.  The Court underscored the importance of advanced planning by those qualified to develop the search methodology, along with the need for quality control to assure accuracy and completeness of the search.  The party who selects the method must be able to explain it to the Court, including reasons for using the particular method, why the method was appropriate, and how it was properly applied.

Outside Counsel must cooperate when it comes to e-discovery issues.  In formulating and conducting searches of emails and ESI, obtaining input from clients, email authors, and ESI custodians is key; and the use of quality control methods assures accuracy and completeness of the keywords and search.  Not only will these techniques make the eDiscovery process easier and more reliable, but also courts now expect counsel to employ such methods without having to be told to do so.

“It” (Stengart, the fuss, the Supreme Court of New Jersey, this post, all this blog attention) all boils down to whether this employee had a reasonable expectation of privacy in emails between the employee and her lawyer sent and received (during work hours) using the employer’s computer and IT systems.

According to the trial court, Stengart did not have a reasonable expectation of privacy and the emails were properly retrieved and used by the employer and its lawyers in defense of the lawsuit.  According to the appeals court, not only did she (have a reasonable expectation of privacy), but also the appeals court took issue with the way the company lawyers handled the situation and queried whether the lawyers acted inappropriately when they retrieved and used these emails – and whether they should be sanctioned and/or thrown off the case.  Ouch!

This case is serious stuff, my friends, for lawyers, employees, and employers alike.  For those new to the case, here are some key elements of the Stengart line of cases for you to consider as the whole world (and blogosphere) awaits a ruling by the Supreme Court of New Jersey on the issues both the trial and appeals courts addressed and ruled upon.

The Facts (in a nutshell)

Loving Care Agency (the defendant in the case) is in the business of providing home care services for children and adults. The plaintiff, Maria Stengart, was its Director of Nursing for all of Loving Care’s branches as well as the Branch Manager at Loving Care’s Fort Lee office. Ms. Stengart was also one of the first two employees when Loving Care first opened for business in 1994.

Loving Care maintains an employee handbook which is distributed to all employees and which is also available to employees electronically via Loving Care’s servers. During Ms. Stengart’s tenure as Director of Nursing and Branch Manager for Loving Care, she assisted in the creation and distribution of the employee handbook. Among other things, the handbook governs an employee’s use of Loving Care’s computers and other technology resources. Under a section entitled “Electronic Communications,” the handbook provides, among other things:

• Technology resources are considered company assets.
• Email and voicemail 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 email is for company business communications. Occasional personal use is permitted; however, the system should not be used to solicit for outside business ventures.
• Certain uses of the email system are specifically prohibited, including but not limited to job searches or other employment activities outside the scope of company business.

During her employment at Loving Care, Ms. Stengart was provided with a company-issued laptop computer and assigned a Loving Care email account for business use. She also maintained a personal email account through Yahoo. Ms. Stengart occasionally accessed her password-protected Yahoo account to write emails during work hours on her company-issued laptop.

In December 2007, Ms. Stengart resigned from Loving Care. Two months later, she filed a lawsuit against Loving Care alleging that the hostile work environment had led to her constructive discharge. In April 2008, Loving Care’s attorneys in the employment lawsuit caused to have made an image of Ms. Stengart’s company laptop computer hard drive. The image preserved the electronic information contained on her employer-issued laptop. The hard drive was then sent to a company that could restore and recover deleted information located on the hard drive.

The Legal Path

eDiscovery: In October 2008, Loving Care served plaintiff its Answers to Ms. Stengart’s first set of interrogatories. In response to an interrogatory, Loving Care stated that it had obtained information contained in “email correspondence from Ms. Stengart’s office computer on December 12, 2007 at 2:25 p.m.” between plaintiff and her lawyer. This email was uncovered by the company hired to restore and recover deleted information located on the hard drive of plaintiff’s employer-issued laptop. The email in question was sent from Ms. Stengart’s password protected Yahoo account to her lawyer.

Loving Care’s answer to this interrogatory prompted Ms. Stengart to demand that all emails between her and her lawyer held by Loving Care be returned or destroyed. She claimed that the attorney-client privilege protected all such emails. Loving Care refused to return or destroy the emails, claiming that the content of the emails was not protected by the attorney-client privilege because Ms. Stengart waived the privilege by using Loving Care’s computer and server during business hours to make the communication. Ms. Stengart thereafter filed an Order to Show Cause alleging Loving Care’s attorneys breached her attorney-client privilege when Loving Care recovered and retained email correspondence made between her and her lawyer.

The trial court: The court determined that Loving Care’s policy (as detailed above) placed plaintiff on notice that all of her internet-based communications are not to be considered private or personal. In addition, Loving Care’s policy put employees on notice that the technology resources made available to employees were to be used for work-related purposes, particularly during business hours. The court found that the company’s policy adequately warns employees that there is no reasonable expectation of privacy (not outright prohibition of use) with respect to any communication made on company issued laptop computers and servers, regardless of whether the email was sent from Ms. Stengart’s work email account or her personal web-based email account. It was with Loving Care’s technology resources, laptop computer, and company time that Ms. Stengart communicated with her lawyer.

Thus, the court found that when Ms. Stengart decided to use company time, equipment, and resources to communicate with her lawyer, she did so with knowledge that such use would not be personal or private to her. Ms. Stengart’s choice of using her employer’s resources to communicate with her lawyer was her voluntary choice; and the court held that it constitutes a waiver of her attorney-client privilege.

The appeals court: The appeals court reversed the trial court and remanded the case.  The appeals court held that employees have a reasonable expectation of privacy in personal communications on a company owned computer. In sum, it held that a policy purporting to transform all private communications into company property “merely because the company owned the computer used to make private communications“ furthers no legitimate business purpose.

The appeals court concluded reversal of the trial court by addressing the issue of attorney discipline for the company’s law firm that uncovered and kept the emails. The appeals court determined that the law firm violated New Jersey Rule of Professional Conduct 4.4(b) because the lawyers failed to cease reading and examining the emails upon discovery and failed to notify plaintiff’s lawyer promptly of their discovery. The appeals court ultimately determined that whether the company’s attorneys should be disqualified is a matter for resolution upon remand to the trial court.

Where The Case Stands, Today

On July 29, 2009, the Supreme Court of New Jersey granted a motion for leave to appeal the appellate division ruling.  See 200 N.J. 204 (2009).  On December 2, 2009, the Court heard oral argument on the case.  You may view the oral argument webcast at:   http://njlegallib.rutgers.edu/supct/args/A_16_09.php (click on Video Feed )

A decision is expected any day.  Click here for immediate notification of the Supreme Court of New Jersey’s decision and other eDiscovery posts.

eLessons Learned has been following the Stengart case closely since its inception.  Read our past blog posts and coverage of this important case here.

Plaintiff had argued that the company failed to demonstrate that it had ever adopted or distributed the policy in question, that she was unaware that the policy applied to her, and even if the policy did exist, the company had not previously enforced it. The company argued that it had disseminated the policy, and that the policy did apply to the plaintiff. The appellate court determined that issues of material fact existed as to whether the policy at issue was in place and disseminated at the time of plaintiff’s employment and as to whether the policy applied to plaintiff; and that these issues could not be resolved by the trial judge without a hearing on the matter.

The appellate court held that employees have a reasonable expectation of privacy in personal communications on a company owned computer. In sum, it held that a policy purporting to transform all private communications into company property “merely because the company owned the computer used to make private communications“ furthers no legitimate business purpose.

The appellate court concluded by addressing the issue of attorney discipline for the company’s law firm who uncovered the emails. The appellate court determined that the law firm violated New Jersey Rule of Professional Conduct 4.4(b) because the lawyers failed to cease reading and examining the emails upon discovery, and failed to notify plaintiff’s attorney promptly of their discovery. The appellate court ultimately determined that whether defendant’s counsel should be disqualified is a matter for resolution upon remand to the trial court.

Click here for full article.