A recent Delaware Court of Chancery letter opinion presents an interesting twist concerning the applicability of the attorney-client privilege to emails between a party and his attorneys where the emails were stored on a server controlled by the adverse party. In Lynch v. Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. Nov. 18, 2019), Vice Chancellor Morgan T. Zurn concluded that the emails were privileged because of a "statutory override" of the common-law analysis based on the law of the controlling jurisdiction.

The underlying dispute involved the ownership and management of Belleville Holdings, a Delaware limited liability company, which was a holding company for ownership interests in various Argentine companies. The plaintiff, Carlos Lynch, and the defendant, R. Gonzalez, were co-managers of Belleville until Lynch acquired a controlling interest in the company and appointed himself Belleville's sole manager. The case concerned whether Lynch properly acquired his controlling interest in the company.

Gonzalez operated a network of affiliated companies that did business throughout Latin America under the brand "Albavision." Gonzalez directly or indirectly owned the entities that comprised Albavision. The privilege issue concerned emails on a server owned by Televideo, a company affiliated with Albavision that Gonzalez controlled. Televideo provided email service to multiple entities, including Belleville and its subsidiaries, for a fee using the domain name "albavision.tv." Employees of Belleville and its subsidiaries were given albavision.tv email addresses for use in their jobs. Those employees, including Lynch, were aware that Gonzalez, through Televideo, indirectly controlled the email addresses and server.

The emails at issue were between Lynch and two attorneys employed by Belleville. Lynch and the attorneys used their Albavision email accounts to communicate with each other. The attorneys used the email addresses to provide legal advice to Belleville's subsidiaries, but also to provide Lynch with advice on personal matters. When using the Albavision addresses to communicate about Lynch's personal legal matters, Lynch and the attorneys understood that the attorneys were acting as Lynch's personal attorneys even though they were using their employer-provided email addresses.

When Lynch made himself the sole manager of Belleville, the company's email accounts were migrated from the Televideo-hosted Albavision email addresses to email addresses owned and controlled by Telearte, a Bellville subsidiary in Argentina.

Prior to the litigation, Gonzalez searched Lynch's Albavision emails and the emails of other employees of Telearte who had used the Albavision server. Because the defendants controlled the Albavision server, the plaintiffs could not access the Albavision email accounts of Lynch and the attorneys. The plaintiffs contended that by searching and then refusing to turn over the Albavision emails, the defendants violated the plaintiffs' attorney-client privilege under Delaware and Argentine law. The plaintiffs claimed that Lynch had an expectation of privacy in the Albavision emails between himself and the attorneys, and that the emails reflecting legal advice the attorneys gave Lynch in his personal capacity (which included advice concerning his acquisition of the controlling interest in Belleville) were privileged. The defendants argued that the plaintiffs did not have any expectation of privacy in emails hosted on the Albavision server, knowing that Gonzalez and Televideo could access and control those emails.

Zurn first sought to determine whether the Albavision emails between Lynch and the attorneys could be confidential, where they were made using work email addresses that the authors knew could be accessed by third parties, namely Gonzalez and Televideo. To determine whether they had a reasonable expectation of privacy in the emails, Zurn considered the four factors identified by the U.S. Bankruptcy Court for the Southern District of New York in In re Asia Global Crossing, and adopted by Vice Chancellor Travis Laster in In re Information Management Services Derivative Litigation. Those factors were: did the corporation maintain a policy banning personal or other objectionable use; did the company monitor the use of the employee's computer or email; did third parties have a right of access to the computer or emails; and did the corporation notify the employee, or was the employee aware, of the use and monitoring policies? Zurn concluded, based on the Asia Global factors, that Lynch's Albavision emails were not confidential.

However, Zurn noted that in Information Management, the court recognized a potential statutory override of the Asia Global analysis. Specifically, if the controlling jurisdiction had a statute on the confidentiality of  work emails, that statute could alter the results of the Asia Global analysis.

Zurn first had to determine which sovereign might be the source of a statutory override. Televideo had custody of the Albavision emails and was the entity that would have to comply with local law in handling those emails. The law where Televideo conducted its business would govern its control and use of the emails. Televideo was a Florida corporation with its principal place of business in Florida, and the Albavision server was physically located in Florida. However, Televideo provided email hosting services for a fee to Belleville's subsidiary in Argentina, and had an obligation to abide by Argentinian law with respect to services provided in that country. For that reason, Zurn decided that Argentinian law must be the source of any statutory override.

Next, Zurn had to determine whether Argentinian law superseded the Asia Global factors. After considering affidavits submitted by the parties' experts, Zurn concluded that under Argentinian law, the plaintiffs had a reasonable expectation of privacy in the Albavision emails. The Argentine Constitution and other Argentinian laws gave individuals a broad right of privacy in their written correspondence, especially when they assumed that their correspondence would remain private or that a third party's interception of the correspondence would be improper. The defendants failed to demonstrate to Zurn that their intrusion into the Albavision emails was proper, especially under the Argentine Constitution's broad privacy guarantee.

Zurn concluded that the Albavision emails were confidential communications under Rule 502 and were privileged to the extent that they contained communications between Lynch and the attorneys related to Lynch's personal legal matters and unrelated to his status as a Belleville co-manager. The defendants were prohibited from accessing the emails between Lynch and his counsel that related to Lynch's personal legal matters, such as his acquisition of his interest in Bellville. Further, the defendants were prohibited from accessing any post-migration emails sent after Lynch named himself Belleville's sole manager and that were stored on the Telearte server. At the time Lynch and the others began using the Telearte server, Gonzalez had a reasonable expectation of adversity and did not have a reasonable expectation of shared client status, rendering Lynch's post-migration emails confidential. The defendants were permitted access to any pre-migration emails between Lynch and counsel that were unrelated to Lynch's personal legal matters, related to Lynch's role as Gonzalez's co-manager and their work for Belleville, and were sent before Gonzalez had reason to believe that there was adversity between himself and Lynch.

The letter opinion is significant for several reasons. First, it dealt not with the typical fact pattern involving an employee's emails on the employer's server and the employer's right to access those emails, but rather a party's emails located on a server owned and controlled by a future adversary in litigation. Second, it illustrates how the so-called "statutory override" operates in practice to supplement the Asia Global factors. Third, it is a cautionary tale about the need for individuals and businesses to understand the complications and consequences of decisions regarding the hosting and security of emails and other electronically stored information. Lastly, it belies the old adage that possession is nine-tenths of the law when it comes to the right to access another's emails.

Barry M. Klayman is a member in the commercial litigation group and the bankruptcy, insolvency and restructuring practice group at Cozen O'Connor. He regularly appears in Chancery Court.

Mark E. Felger is co-chair of the bankruptcy, insolvency and restructuring practice group at the firm.