Email from In-house Counsel Forwarded within Company Retains Privilege; Inadvertent Production Does Not Waive Privilege

Premiere Digital Access, Inc. v. Central Telephone Co., 360 F.Supp.2d 1168 (D. Nev. 2005)

Premiere Digital Access, Inc. (“Premiere”) is suing Central Telephone Co. d/b/a/ Sprint of Nevada (“Sprint”) for breach of contract, violation of the covenant of good faith and fair dealing, restraint of trade, and unconscionable contract. Premiere, an Internet service provider (“ISP”), had an agreement with Sprint whereby Sprint was to provide certain services to facilitate Internet access for Premiere’s customers.

The agreement included Sprint’s acceptable use policy, which prohibited the posting of certain content on Sprint’s servers. It also provided that Sprint could terminate services if there is a failure to remedy a breach of contract within 14 days of written notice. Sprint alleges that it received complaints in connection with the use by Premiere’s customers of Sprint’s facilities. As a result, Sprint shut down certain web sites maintained by these customers which promoted spammers. Sprint later terminated all services to Premiere following 3 days notice when Premiere’s customers allegedly continued to engage in prohibited practices. Premiere claims that this termination shut down its business, its customers had not violated Sprint’s policy, and it never received the requisite 14 day termination notice.

On December 25, 2002, Sprint produced 1,280 pages of documents in response to a request under Rule 26 of the Federal Rules of Civil Procedure. This included a 5 page string of email between Sprint employees containing a forwarded thread authored by in-house counsel. The thread authored by counsel contained advice regarding how to terminate a different customer (this customer had formerly been Premiere’s ISP), recommending 5 days notice to cure prior to termination.

Sprint claims that it was not aware that the email had been inadvertently produced until nearly a year later when it was mentioned in Premiere’s response to a motion for summary judgment. Sprint sent a letter to Premiere on July 29, 2003 seeking return of the documents and enclosing a redacted version. Premiere refused, claiming that the documents were not privileged or, in the alternative, if they were privileged waiver had occurred.

Sprint filed a motion for a protective order, seeking return of the documents and prohibiting Premiere from using them. The magistrate judge found that Sprint did not meet the burden of establishing the privilege and denied the motion. The judge reasoned that the privilege must be narrowly construed and that Sprint had the burden of proof. Motion for reconsideration was denied, which brought this matter to district court where the determination can be set aside if it is found to be clearly erroneous.

Sprint argues that state law should apply under Federal Rule of Evidence 501 since the email goes to the issue of notice and breach, which involves state law claims. Under state law, Sprint claims that the email is clearly privileged as per Nev.Rev.Stat. 49.095. Also, there was no waiver based on Nev.Rev.Stat. 49.105 and Nevada Supreme Court precedent. See Manley v. State, 115 Nev. 114, 121 n. 1, 979 P.2d 703 (1999).

Premiere argues that federal law applies since some claims are federal and federal law governs privilege in federal question cases. Premiere’s analysis under federal law indicates that the communication was not privileged since it was between Sprint employees and not a lawyer – the forwarded email was the equivalent of a verbal account of the attorney’s advice. Further, it argues that counsel was acting with a “business purpose” rather than a “legal purpose” such that no privilege attaches.

The Court finds the choice of law issue not dispositive, since the communication is privileged regardless. The email authored by counsel is severable from that between the non-lawyers, and thus is considered separately.

Roy Haverkamp, author of the email, is a Nevada attorney and clearly falls under the definition of attorney according to the Nevada law governing privilege. Sprint employees fit the definition of “representative” of the client. See Nev.Rev.Stat. 49.045, 49.075. The communication is to discern legal ramifications, and is for a legal purpose. In Nevada, waiver is only via voluntary client disclosure. Here, there was involuntary disclosure by counsel. Under Nevada law, the document is privileged. See Nev.Rev.Stat. 49.105; Manley, 115 Nev. At 121 n. 1, 979 P.2d 703.

The communication is also privileged under federal law. Privilege attaches where legal advice is sought, it was from a professional legal adviser in his capacity as such, the communication was relating to that purpose, the communication was made in confidence, and the communication was by the client. See Admiral Ins. Co. v. U.S. Dist. Court for the Dist. Of Arizona, 881 F.2d 1486 (9th Cir. 1989). In-house counsel qualifies as an attorney for purposes of the privilege, and his communications as in-house counsel with employees in the scope of their employment knowing that they are securing legal advice from in-house counsel is privileged. See Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677 (1981).

…the communication at issue was unquestionably protected by the attorney-client privilege, under both Nevada and federal law,…the Court must find that the order of the magistrate judge was clearly erroneous and subject to reversal…The Court ORDERS that all copies of the privileged document be returned or destroyed, and that only an appropriately redacted version of the e-mail correspondence may be used by Plaintiff in these proceedings.