Menu

Expect Focus Life, Annuity, and Retirement Solutions, April 2020

Cases of Purloined Company Documents: When Terminated Employees Steal

Securities Inquiries, Examinations & Enforcement   |   Life, Annuity, and Retirement Solutions   |   Financial Services Regulatory   |   Securities & Investment Companies   |   April 13, 2020
Download   
Share Page

The employee is terminated, and her laptop and phone seized. On being escorted from the premises, human resources admonishes that all internal company email and other business documents belong to the company, not her, to which she indignantly insists that she does not possess any such documents. When the former employee files suit against the company two months later, the allegations of corporate misconduct are supported by exact quotes from multiple company documents, including both those on which she has been copied and others to which she has no legitimate access, such as privileged communications between the company and counsel.

Such scenarios have been commonplace, including for insurance companies and securities firms. The company has been the victim of what the literature on attorney misconduct politely references as “purloined documents” — confidential documents that are provided to the terminated employee’s lawyer outside “normal channels” of discovery or investigation by persons who are not authorized to turn over the documents.

What Is the Company’s Relief?

The authorities are split as to whether there is a black letter rule of professional conduct that designates an attorney’s possession or review of purloined documents as unethical. Courts, however, are generally less equivocal. In New York, for example, the possession or use of purloined documents in general, and attorney-client privileged documents in particular, has repeatedly been held to be unprofessional behavior that warrants a sanction.

The sanction, however, is not necessarily dismissal of the complaint. Not all thefts are equal. Dismissal is less likely if the stolen documents, though “confidential” (as most businesses claim their documents to be), would certainly have been subject to disclosure during the normal course of discovery. It is a different situation to steal documents that were protected from disclosure by the attorney-client privilege or the work product doctrine and that therefore provided the employee with information that she would not have otherwise obtained and could not be “unlearned.”

Such privileged document theft poses a greater danger to the integrity of the courts and the litigation system, and complaints in these cases often are dismissed. However, there is limited prejudice to the truth-finding function if the purloined documents would have been disclosed anyway. Accordingly, with admonishments, and perhaps financial sanctions, courts have often permitted the use of purloined but discoverable documents or admitted them with restrictions.

To some degree, therefore, theft pays (or, at least, is not seriously sanctioned) if limited to non-privileged material. The moral for companies is to redouble their efforts to keep departing personnel from absconding with confidential information rather than relying on courts to protect confidentiality.

 


©2020 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.