Bof I Federal Bank v. Erhart

          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 ...