Goldstein v. Colborne Acquisition Co.
2012 U.S. Dist. LEXIS 75743
N.D. Ill.2012Background
- R3, R4, and Lysa were shareholders in Colborne 1; R3 was president and 90% owner, with R4 and Lysa each owning 5% and serving as officers.
- Colborne 1 was judgmented in New Jersey in 2008 for Mamacita, Inc. and later pursued in Illinois; after UCC sale, Colborne 2 acquired Colborne 1’s assets on May 19, 2009.
- Mamacita sued Colborne 1; Colborne 1 filed for Chapter 7 in Nov. 2010; the Bankruptcy Trustee stepped into Mamacita’s shoes to obtain pre-UCC sale emails from Colborne 1.
- Colborne 2 possesses the emails and argues there is no contractual provision that pre-UCC emails remain Colborne 1’s property; Colborne 2 contends it owns all assets and emails.
- R3, R4, and Lysa request protective orders claiming attorney-client privilege over pre-sale emails; the Trustee seeks production under three grounds: estate ownership, waiver via employee conduct, and privilege implications of personal data.
- The Court previously noted disputes over whether the Trustee can waive the corporation’s privilege and whether individual officers waived their own privilege by using work emails.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Trustee owns the pre-UCC sale emails and can compel production | Trustee owns estate emails and controls production | Colborne 2 asserts ownership and argues privilege applies | Trustee’s ownership question not dispositive; production ordered under privilege considerations |
| Whether R3 waived attorney-client privilege by consenting to the Colborne 1 asset sale | R3 consents to sale, which included emails, implying waiver | R3’s consent to sale should not automatically waive privilege | R3 waived by deliberate disclosure in sale agreement; privilege not protected for his emails |
| Whether R4 and Lysa waived privilege by use of company email to communicate with their attorney | Policy and company email use indicate waiver | Use of email not necessarily a waiver if confidentiality reasonably believed | Waiver found; their belief in confidentiality was not reasonable given policy and ownership of emails |
| Whether minor children’s health information and Social Security numbers may be redacted and treated as confidential | Redaction is permissible to protect sensitive data | Redaction may hinder discovery | Redact SSNs; label health-related documents confidential; produce remaining emails within 7 days |
| Sanctions for misrepresentation by the trustee’s counsel and related delay | Misrepresentation delayed proceedings; sanctions appropriate | No specific argument beyond contested discovery practices | Sanctions: DiMonte and firm not to bill Trustee for March 22 appearance or related briefing; other sanctions declined |
Key Cases Cited
- In re Asia Global Crossing, Ltd., 322 B.R. 247 (S.D.N.Y. 2005) (four-factor privilege waiver test guiding workplace email privacy)
- Muick v. Glenayre Elecs., 280 F.3d 741 (7th Cir. 2002) (no reasonable expectation of privacy in workplace computer files with notice of audit)
- Simons v. United States, 206 F.3d 392 (4th Cir. 2000) (emphasizes notice of policy as part of waiver analysis)
- Upjohn Co. v. United States, 449 U.S. 383 (1981) (confidential relationship needs case-by-case consideration)
- In re L & S Indus., 989 F.2d 929 (7th Cir. 1993) (trustee authority to waive privilege when acting like management)
- United States v. Hatfield, 2009 WL 3806300 (E.D.N.Y. 2009) (influential in development of privilege-work email considerations)
- United States v. Evans, 113 F.3d 1457 (7th Cir. 1997) (designates burden on proving essential elements of privilege)