Media Room

dedicated, diverse counsel helping you reach your goals

 

AllianceBernstein, L.P. v. Atha: Ex-Employee Required to Turn Over iPhone for Inspection by Trial Court in Trade Secret Dispute

 
by John Marsh 21. November 2012 07:30

One of the most hotly-contested issues in any trade secret and non-compete case is the scope of permissible discovery to determine to what extent a former employee may have misappropriated trade secrets.  An important battleground that does not receive much attention, however, is whether a former employer can inspect the personal mobile devices of the former employee. 

A recent case out of the Appellate Court for the First Department of New York (Manhattan), Alliance Bernstein, L.P. v. Atha, provides some guidance on how courts are attempting to balance the many thorny issues that arise in these requests.  As I explain below, in that case, the appellate court ordered that the iPhone be turned over to the trial court so that it could conduct its own inspection to determine whether the forbidden information was on the phone. (A PDF of the opinion can be found below).

Why is this Case Noteworthy?  Because they generally arise in the context of emergency injunctive proceedings, trade secret and non-compete cases involve not only expedited discovery (i.e., fast-paced document requests and immediate depositions) but also what might potentially be intrusive forms of discovery directed at finding out whether confidential information or trade secrets have been taken. 

Sometimes requests directed to the employee's personal devices are unnecessary because the former employee has left a digital trail behind, having either emailed documents to his or her personal email account or clearly deleted files.  In cases where a technically savvy employee may have left no obvious digital trail behind, former employers will generally retain the assistance of forensic computer consultants who will inspect the former employee's company-owned computer, laptop or mobile device to find out what might have been accessed, copied or deleted.  The results of that investigation can greatly assist the former employer's counsel in demonstrating, either directly or circumstantially, that confidential information was taken.

Of course, that search for information may not end there. Consequently, one of the frequent flash points in discovery is whether a former employer can inspect the personal laptop, mobile device or phone of an employee to find out whether information was taken.  In the era of "Bring Your Own Devices" (BYOD), this request may become critical in trade secret or non-compete cases, given the interface between the employer's servers and databases and the former employee's personal smartphone. 

As you might expect, former employees are resistant to these requests, generally citing privacy concerns as well the potential trade secrets of their new employer that might be uncovered and misused by their former employer.  With the exponential growth of smartphones and tablets and the fact that so many people now also perform work on these personal devices, these issues loom even larger today.

To my surprise, however, decisions laying out guidelines or rules in this area are exceedingly rare.  This is probably due to the fact that courts routinely direct the parties to reach some type of compromise or because courts don't have the opportunity to issue lengthy written opinions on discovery disputes in these expedited proceedings.  In any event, there is not much recent authority to guide employers and employees in these disputes.

Background and Analysis of the Case:  In this case, AllianceBernstein sued one of its former financial advisors, William Atha, claiming that he had breached his employment agreement by, among other things, allegedly stealing his former employer's confidential client contact data so that he could solicit those clients at his new firm.  AllianceBernstein sought and received a TRO preventing him from using that information, and it then sought discovery as to Atha's personal iPhone, arguing that Atha had serviced its clients over that phone and that the device contained the contact information for those clients. The trial court agreed and directed Atha to deliver his iPhone within five days so that AllianceBernstein could obtain the contact information it requested.

Atha secured what amounted to an emergency interlocutory appeal and successfully reversed the trial court's order in part.  The First Department engaged in a somewhat hasty balancing test (understandable under the circumstances), finding that the TRO in place adequately protected AllianceBernstein and attempting to balance the privacy and commercial interests of Atha against the need for relevant information sought by AllianceBernstein. 

The First Department found that ordering production of the iPhone, with its "built-in applications and Internet access, is tantamount to ordering the production of his computer."  However, the First Department acknowledged the former employer's right to the information but was concerned about giving an adverse party too much "irrelevant" information.  As a result, the appellate court struck a compromise, ordering that "the iPhone and a record of the device's contents shall be delivered to the trial court for an in camera review to determine what if any information contained on the iPhone is responsive to plaintiff's request."

The Trade Secret Litigator's Takeaway:  On its face, the First Department's decision is Solomon-like, allowing the employer to get the contact information that it sought but still protecting the privacy and commercial interests of the former employee and his new employer.  My only concern with the decision is whether the trial court has the expertise or resources to conduct the in camera inspection.  Assuming it does not, who will bear the costs of the forensic consultant engaged by the court?

As a general matter, I can't emphasize enough how the landscape has changed over the past 5 years over these types of discovery requests.  Prior to the advent of the smartphone and tablets, in my experience, courts generally ordered the discovery of personal computers, reasoning that trained forensic consultants from each side would figure out a reasonable compromise on the protocols for search terms and devices.  However, in the era of BYOD and the blurring of the personal and professional, I sense that there is a greater reluctance by courts to tread into these areas because of that profoundly greater overlap.  Frankly, the analysis should be the same:  can the plaintiff make a prima facie showing that there has been misappropriation and that evidence of that misappropriation exists on the personal mobile devices? 

However, my experience and everything that I have heard and read tell me that courts are far more careful with these requests.  Expect more decisions like this one, as courts and parties grapple with these issues and try to strike a balance between discovery of relevant information and protecting the privacy interests of the former employee.

AllianceBernstein v. Atha.pdf (33.35 kb)

Share on Facebook  Share on Twitter  Share on Linked In

Add comment




  Country flag
biuquote
  • Comment
  • Preview
Loading


About John Marsh

John Marsh Hahn Law AttorneyI’m a Columbus, Ohio-based attorney with a national legal practice in trade secret, non-compete, and emergency litigation. Thanks for visiting my blog. I invite you to join in the conversations here by leaving a comment or sending me an email at jmarsh@hahnlaw.com.

Disclaimer

The information in this blog is designed to make you aware of issues you might not have previously considered, but it should not be construed as legal advice, nor solely relied upon in making legal decisions. Statements made on this blog are solely those of the author and do not necessarily reflect the views of Hahn Loeser & Parks LLP. This blog material may be considered attorney advertising under certain rules of professional attorney conduct. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon advertisements.

BlogRoll

Download OPML file OPML