United States District Court, S.D. California
ORDER DETERMINING JOINT MOTION FOR DISCOVERY DISPUTE
NO. 3 AND GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION TO COMPEL [DKT. NO. 54]
HON.
NITA L. STORMES UNITED STATES MAGISTRATE JUDGE.
Plaintiff
Bof I Federal Bank (Bof I) filed an action against its former
employee, defendant Charles Matthew Erhart, for federal
computer fraud and various state claims based on his alleged
theft and dissemination of Bof I’s confidential,
privileged and proprietary information.[1] Bof I and Erhart
filed this third joint discovery motion to determine the
applicability of privilege to documents obtained-via a
TRO-from Erhart’s personal laptop, his
girlfriend’s laptop, a USB device and a Gmail account.
For the following reasons, the court GRANTS in
part and DENIES in part Bof
I’s motion to compel production of the documents.
I.
RELEVANT BACKGROUND
On
March 5, 2015, Bof I management learned that Erhart, an entry
level staff internal auditor in its headquarters, failed to
complete internal audits assigned to him and that he had
conducted his own “rogue” and unapproved
investigations. FAC ¶¶ 28, 29. The following day,
Bof I granted Erhart an unpaid leave of absence. FAC ¶
40. But Erhart never returned to work. FAC ¶ 40. Bof I
then terminated Erhart’s employment as of June 9, 2015
because Erhart abandoned his job. FAC ¶ 41. Erhart filed
a whistleblower action in retaliation, after which Bof I
suffered a severe decrease in its stock price. FAC ¶ 46.
On October 19, 2015, Bof I filed this action, contending that
Erhart’s disclosures caused Bof I’s stock price
to plummet, resulting in hundreds of millions of dollars in
lost market capitalization. FAC ¶ 46; Jt. Mtn., p.5.
The
court granted the parties’ joint motion for a Temporary
Restraining Order (TRO) against Erhart on November 10, 2015.
(Dkt. No. 10.) The TRO requires, in part, that Erhart:
Deliver to counsel for Bof I all Bof I records and documents
and any Confidential Information in any form, including but
not limited to documents or electronically stored information
stored in any medium within his or their possession, custody,
or control.
(Dkt. No. 10, at 2:15-19.) The TRO also prohibits Erhart and
his counsel from copying, destroying, deleting, altering,
disclosing, reviewing, sharing, transmitting, and/or using
any confidential information belonging to Bof I.
(Id. at 2:1-14.) On November 16, 2015, the court
issued a supplemental restraining order that requires, in
part, that Erhart:
Provide a list of all materials he (Erhart) removed from Bof
I, including the date the item was taken (referred to as the
“Inventory”) [and] [p]rovide a list of all
individuals to whom Erhart or his agents, including counsel,
has disclosed each item on the Inventory.
(Dkt. No. 17, at 2:12-15.) Erhart agreed to sign a
declaration confirming that the Inventory and list of
individuals are accurate and exhaustive. (Id. at
16-24.)
In
compliance with the TRO, Erhart produced to Bof I his
personal laptop, which Bof I’s forensic auditors
inspected. (Dkt. 54-1, at 3:22.) The parties, however, now
differ on the scope of the TRO. Erhart contends that he
cooperated in permitting Bof I to have forensic auditors
inspect his computer “solely for the purpose of
verifying that he did not disseminate confidential
information.” (Id. at 6:22-24.) Erhart argues
that Bof I went “far beyond the consent given” in
its inspection of Erhart’s computer exceeding the
purpose of determining that he did not disseminate
confidential information. (Id. at 7:1-3.)
Conversely,
Bof I contends that Erhart turned over his computer with no
limitations except for these: “(1) do not review
Erhart’s browser history; and (2) designate “for
attorney’s eyes only” any information that Bof
I’s outside counsel deemed to be personal and
irrelevant to the lawsuit and do not share this information
with Bof I.” (Id. at 3:1-3.) Bof I argues that
its inspection remained within this permitted scope.
(Id. at 3:3-4.) Bof I further argues that
“[n]either Erhart nor his counsel mentioned that there
were or may be privileged information in the production and
they did not instruct Bof I to segregate or otherwise not
review, any privileged communications or work product
information.” (Id. at 4:4-7.) Bof I further
explains that the computer forensics vendor informed Bof
I’s counsel that they found attorney-client
communications, and that Bof I thus refrained from opening or
reviewing those documents. (Id. at 4:8-14.)
Bof I
notified Erhart of its findings, and Erhart responded that he
was asserting all privileges available under the law.
(Id. at 7:4-8.) The parties met and conferred, and
four issues concerning the requested documents remain: (1)
Whether documents sent to third parties for alleged
safekeeping are privileged; (2) Whether the attorney-client
privilege applies to Bof I’s documents sent by Erhart
to his counsel; (3) The relevance of medical issues and
whether or not any applicable medical privilege applies; and
(4) Whether an alleged “law enforcement”
privilege exists, and whether it applies to Bof I documents
sent to law enforcement. (Id. at 2:22-27.)
II.
LEGAL STANDARDS
A.
Relevance.
Under
Federal Rule of Civil Procedure 26(b)(1), a party “may
obtain discovery regarding any nonprivileged matter that is
relevant to any party’s claim or defense and
proportional to the needs of the case, considering the
importance of the issues at stake in the action, the amount
in controversy, the parties’ relative access to
relevant information, the parties’ resources, the
importance of the discovery in resolving the issues, and
whether the burden or expense of the proposed discovery
outweighs its likely benefit.” Fed.R.Civ.P. 26(b)(1).
Once the party seeking discovery has established that its
request meets this relevancy requirement, “the party
opposing discovery has the burden of showing that the
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