Selling Computers to 3rd Party Equals Waiver of Attorney-Client Privilege

In a decision that makes you think “well, of course,” the U.S. District Court for the Eastern District of Tennessee held that selling business computers to a third party constitutes a waiver of any privileged material that may be housed on those computers.

In Stooksbury v. Ross, 2012 WL 3779113 (E.D. Tenn. Aug. 31, 2012), the Court was forced to manage post judgment discovery.   At some point during the case, the defendant sold its business computers to a third party.  The plaintiff wanted to image these computers, but the defendant argued that they contained information protected by the attorney-client privilege. Noting the well-established rule that the attorney-client privilege “is generally considered waived if a client voluntarily reveals otherwise protected communications to third parties, the Court ruled that the defendant’s “decision to sell a vessel containing privileged communications with counsel to a third party must certainly be interpreted as voluntarily revealing those communications to the third party.”  And finding the privilege “unequivocally waived,” the Court ordered full imaging of the defendant’s computers.

PoP Analysis. Duh! Of course this conduct constitutes waiver.  Apparently the defendant here believed that it retained some type of confidentiality interest in the privileged information housed on computers that it voluntarily sold.  The more appropriate action would have been to image the computer before selling–so to avoid any spoliation arguments–and wipe the outgoing computers clean of all information.  The defendant then could have used the image to identify and protect any information that it deemed privileged.  The Court’s decision in Stooksbury, while obvious, serves as reminder that businesses oftentimes take the attorney-client privilege for granted.  In reality, it takes disciplined diligence to establish and avoid waiver of the privilege.