BofI Federal Bank v. Erhart et al
Filing
65
ORDER Determining 54 Joint Motion for Discovery Dispute No. 3. Court grants in part and denies in part Plaintiff's Motion to compel production of the documents. Signed by Magistrate Judge Nita L. Stormes on 8/5/2016. (jah)
1
2
3
4
5
6
UNITED STATES DISTRICT COURT
7
SOUTHERN DISTRICT OF CALIFORNIA
8
9
10
13
ORDER DETERMINING JOINT
MOTION FOR DISCOVERY
DISPUTE NO. 3 AND GRANTING IN
PART AND DENYING IN PART
PLAINTIFF’S MOTION TO
COMPEL
Plaintiff,
11
12
Case No.: 15cv2353 BAS (NLS)
BofI FEDERAL BANK, a federal savings
bank,
v.
CHARLES MATTHEW ERHART, an
individual; and DOES 1-25, inclusive,
14
Defendant.
15
[Dkt. No. 54]
16
17
Plaintiff BofI Federal Bank (BofI) filed an action against its former employee,
18
defendant Charles Matthew Erhart, for federal computer fraud and various state claims
19
based on his alleged theft and dissemination of BofI’s confidential, privileged and
20
proprietary information.1 BofI and Erhart filed this third joint discovery motion to
21
determine the applicability of privilege to documents obtained—via a TRO—from
22
Erhart’s personal laptop, his girlfriend’s laptop, a USB device and a Gmail account. For
23
the following reasons, the court GRANTS in part and DENIES in part BofI’s motion to
24
compel production of the documents.
25
26
27
28
1
This action came on the heels of Erhart filing a whistleblower action against BofI based
on retaliation, wrongful termination and other claims. See Erhart v. BofI, Case No.
15cv2287 BAS (NLS).
1
15cv2353 BAS (NLS)
1
I.
RELEVANT BACKGROUND
2
On March 5, 2015, BofI management learned that Erhart, an entry level staff
3
internal auditor in its headquarters, failed to complete internal audits assigned to him and
4
that he had conducted his own “rogue” and unapproved investigations. FAC ¶¶ 28, 29.
5
The following day, BofI granted Erhart an unpaid leave of absence. FAC ¶ 40. But Erhart
6
never returned to work. FAC ¶ 40. BofI then terminated Erhart’s employment as of June
7
9, 2015 because Erhart abandoned his job. FAC ¶ 41. Erhart filed a whistleblower action
8
in retaliation, after which BofI suffered a severe decrease in its stock price. FAC ¶ 46. On
9
October 19, 2015, BofI filed this action, contending that Erhart’s disclosures caused
10
BofI’s stock price to plummet, resulting in hundreds of millions of dollars in lost market
11
capitalization. FAC ¶ 46; Jt. Mtn., p.5.
12
The court granted the parties’ joint motion for a Temporary Restraining Order
13
(TRO) against Erhart on November 10, 2015. (Dkt. No. 10.) The TRO requires, in part,
14
that Erhart:
15
16
17
18
Deliver to counsel for BofI all BofI records and documents and
any Confidential Information in any form, including but not
limited to documents or electronically stored information stored
in any medium within his or their possession, custody, or
control.
19
(Dkt. No. 10, at 2:15-19.) The TRO also prohibits Erhart and his counsel from copying,
20
destroying, deleting, altering, disclosing, reviewing, sharing, transmitting, and/or using
21
any confidential information belonging to BofI. (Id. at 2:1-14.) On November 16, 2015,
22
the court issued a supplemental restraining order that requires, in part, that Erhart:
23
24
25
26
Provide a list of all materials he (Erhart) removed from BofI,
including the date the item was taken (referred to as the
“Inventory”) [and] [p]rovide a list of all individuals to whom
Erhart or his agents, including counsel, has disclosed each item
on the Inventory.
27
(Dkt. No. 17, at 2:12-15.) Erhart agreed to sign a declaration confirming that the
28
Inventory and list of individuals are accurate and exhaustive. (Id. at 16-24.)
2
15cv2353 BAS (NLS)
1
In compliance with the TRO, Erhart produced to BofI his personal laptop, which
2
BofI’s forensic auditors inspected. (Dkt. 54-1, at 3:22.) The parties, however, now differ
3
on the scope of the TRO. Erhart contends that he cooperated in permitting BofI to have
4
forensic auditors inspect his computer “solely for the purpose of verifying that he did not
5
disseminate confidential information.” (Id. at 6:22-24.) Erhart argues that BofI went “far
6
beyond the consent given” in its inspection of Erhart’s computer exceeding the purpose
7
of determining that he did not disseminate confidential information. (Id. at 7:1-3.)
8
9
Conversely, BofI contends that Erhart turned over his computer with no limitations
except for these: “(1) do not review Erhart’s browser history; and (2) designate “for
10
attorney’s eyes only” any information that BofI’s outside counsel deemed to be personal
11
and irrelevant to the lawsuit and do not share this information with BofI.” (Id. at 3:1-3.)
12
BofI argues that its inspection remained within this permitted scope. (Id. at 3:3-4.) BofI
13
further argues that “[n]either Erhart nor his counsel mentioned that there were or may be
14
privileged information in the production and they did not instruct BofI to segregate or
15
otherwise not review, any privileged communications or work product information.” (Id.
16
at 4:4-7.) BofI further explains that the computer forensics vendor informed BofI’s
17
counsel that they found attorney-client communications, and that BofI thus refrained
18
from opening or reviewing those documents. (Id. at 4:8-14.)
19
BofI notified Erhart of its findings, and Erhart responded that he was asserting all
20
privileges available under the law. (Id. at 7:4-8.) The parties met and conferred, and four
21
issues concerning the requested documents remain: (1) Whether documents sent to third
22
parties for alleged safekeeping are privileged; (2) Whether the attorney-client privilege
23
applies to BofI’s documents sent by Erhart to his counsel; (3) The relevance of medical
24
issues and whether or not any applicable medical privilege applies; and (4) Whether an
25
alleged “law enforcement” privilege exists, and whether it applies to BofI documents sent
26
to law enforcement. (Id. at 2:22-27.)
27
///
28
///
3
15cv2353 BAS (NLS)
1
2
3
II.
LEGAL STANDARDS
A. Relevance.
Under Federal Rule of Civil Procedure 26(b)(1), a party “may obtain discovery
4
regarding any nonprivileged matter that is relevant to any party’s claim or defense and
5
proportional to the needs of the case, considering the importance of the issues at stake in
6
the action, the amount in controversy, the parties’ relative access to relevant information,
7
the parties’ resources, the importance of the discovery in resolving the issues, and
8
whether the burden or expense of the proposed discovery outweighs its likely benefit.”
9
Fed. R. Civ. P. 26(b)(1). Once the party seeking discovery has established that its request
10
meets this relevancy requirement, “the party opposing discovery has the burden of
11
showing that the discovery should be prohibited, and the burden of clarifying, explaining
12
or supporting its objections.” Bryant v. Ochoa, 2009 U.S. Dist. LEXIS 42339, at *1
13
(S.D. Cal. May 14, 2009) (citations omitted).
14
15
B. Law Regarding Privilege.
Erhart argues that under the Erie doctrine, the court should apply California law
16
regarding privilege to this case. (Dkt No. 54-1, at 15:26-27.) He cites Federal Rule of
17
Evidence 501, which provides that “state law governs privilege regarding a claim or
18
defense for which state law supplies the rule of decision.” Fed. R. Evid. 501. BofI argues
19
that Federal law governs privilege here, because “Federal law regarding privilege applies
20
to Federal question cases.” Nehad v. Browder, 2016 U.S. Dist. LEXIS 62594, at *10
21
(S.D. Cal. May 10, 2016). Here, there is federal question jurisdiction because BofI’s
22
Seventh Claim for Relief arises under a federal statute. (See Dkt. No. 1, at 2:7-9.) The
23
other seven claims are state law claims.
24
“In cases where federal privilege law governs the claim over which the Court has
25
original subject matter jurisdiction, federal privilege law also applies to supplemental
26
state claims as well.” Stein v. Tri-City Healthcare Dist., 2013 U.S. Dist. LEXIS 77810, at
27
*4 (S.D. Cal. June 3, 2013) (citing Religious Tech. Ctr. v. Wollersheim, 971 F.2d 364,
28
367 n.10 (9th Cir. 1992) and Crowe v. County of San Diego, 242 F. Supp. 2d 740, 750
4
15cv2353 BAS (NLS)
1
(S.D. Cal. 2003)); Agster v. Maricopa County, 422 F.3d 836, 839 (9th Cir. 2005). For
2
example, in Stein, the plaintiff filed a whistleblower claim for retaliatory discharge,
3
asserting ten causes of action arising under state and federal law. 2013 U.S. Dist. LEXIS
4
77810, at *2. The defendants argued that the plaintiff could not prosecute a specific state
5
claim without revealing information protected by attorney-client privilege. Id. at 4. The
6
court held that federal privilege law governed all claims because under Fed. R. Evid. 501,
7
“federal privilege law governs the rule of decision for federal question claims . . . federal
8
privilege law applies to Plaintiff's state law claims as well.” Id.
9
However, “as a matter of comity,” federal courts should ascertain and consider the
10
relevant interests of corresponding state law. Anderson v. Marsh, 312 F.R.D. 584, 589
11
(E.D. Cal. 2015). “The ultimate determination regarding the weight to be given to the
12
state interest resides with the federal court.” Id. Accordingly, the court will examine
13
privilege assertions under both federal and state law.
14
15
III.
DISCUSSION
A. Documents Sent to Third Parties.
16
During its review of Erhart’s computer, BofI identified one email, dated March 17,
17
2015, in which Erhart forwarded to his mother an email with attachments that he had sent
18
to his counsel (Dkt. No. 54-1, at 8:11-13.) BofI argues that by forwarding certain
19
documents to a third party—his mother—Erhart waived any attorney-client privilege
20
under both Federal and California law. (Id. at 9:1-2.) BofI states that when the parties
21
met and conferred on June 21, 2016, Erhart argued that all of his communications with
22
third parties, not just the March 17, 2015 email, are privileged because he sent the
23
information for safekeeping after fearing for his life. (Id. at 18-22.) Erhart provides no
24
legal authority for this assertion. (Id. at 11:15.) BofI argues that because Erhart had
25
already sent documents to his attorney, he “cannot credibly claim” that he needed to
26
subsequently send them to his mother for safekeeping purposes. (Id. at 10:18-21.) BofI
27
further argues that “the existence of the documents themselves is evidence in support of
28
BofI’s claims against Erhart.” (Id. at 10:21-22.)
5
15cv2353 BAS (NLS)
1
There is no established federal or state authority recognizing any privilege of
2
documents sent to third parties for safekeeping. Moreover, “privileges against forced
3
disclosure . . . are not lightly created nor expansively construed, for they are in derogation
4
of the search for truth.” United States v. Nixon, 418 U.S. 683, 709-10 (1974). Erhart’s
5
documents, therefore, are not privileged simply because he sent them to his mother for
6
safekeeping.
7
“Federal law ‘recognizes a privilege for communications between client and
8
attorney for the purpose of obtaining legal advice, provided such communications were
9
intended to be confidential.’” Cohen v. Trump, 2015 U.S. Dist. LEXIS 74542, at *33
10
(S.D. Cal. June 9, 2015) (quoting Gomez v. Vernon, 255 F.3d 1118, 1131 (9th Cir.
11
2001)). Accordingly, the attorney-client privilege is generally waived when a party
12
voluntarily discloses private information to third parties, because “the disclosure destroys
13
the confidentiality upon which the privilege is premised.” Id. However, the disclosure to
14
a third party is not in itself dispositive of a waiver. Id. Where disclosure to a third party
15
“‘is indispensable in order for the communication to be made to the attorney, the policy
16
of the privilege will protect the client.’” Id. at 34 (quoting Himmelfarb v. United States,
17
175 F.2d 924, 939 (9th Cir. 1949)). But, when the disclosure “is merely for convenience,
18
the privilege is removed from whatever communications are made.” Id.
19
Erhart’s claims do not sufficiently show the necessity of emailing the information
20
to his mother. Erhart asserts he did not waive the attorney-client privilege by sending
21
documents to his mother because he sent the information for safekeeping after fearing for
22
his life. (Dkt. No. 54-2 ¶ 8.) However, Erhart had already sent the attached documents to
23
his counsel, rendering the forwarding of the documents to his mother unnecessary. (See
24
Id. ¶ 4.) Accordingly, if Erhart felt compelled to delete the information pertaining to BofI
25
out of fear for his life, he did not have to also email it to his mother for safekeeping; he
26
had already emailed it to his counsel, who was surely securely holding the information.
27
Erhart thus does not sufficiently show indispensability of disclosing the present
28
information to his mother, foregoing any privilege.
6
15cv2353 BAS (NLS)
1
California law equally recognizes an attorney-client privilege, which protects
2
information exchanged between an attorney and client for the purpose of consultation and
3
furthering the legal interest of the client. Cal. Evid. Code § 952. However, disclosure to
4
third parties constitutes a waiver of the privilege provided the disclosure is not
5
“reasonably necessary” for executing the legal purpose of the attorney-client
6
communication. Cal. Evid. Code § 912. Erhart failed to show the necessity of forwarding
7
attorney-client communication to his mother; thus, even under California law, Erhart has
8
waived any attorney-client privilege with respect to this information.
9
10
The court, therefore, overrules any objection on the basis of Erhart sending
documents to third parties for safekeeping.
11
B. Attorney-Client Privilege.
12
BofI seeks an order confirming that it may review BofI documents that Erhart sent
13
to his counsel because those documents, it argues, are not subject to attorney-client
14
privilege. (Dkt. No. 54-1, at 11:20-21.) Erhart does not address whether the documents
15
are privileged and instead argues that he addressed the issue of whether he waived
16
attorney-client privilege in a motion currently pending before the district judge, and that
17
it is too late for BofI to presently raise the issue. (Id. at 12:20-26; See Dkt. No. 34.)2
18
However, at issue here is whether the requested documents are privileged, not whether
19
Erhart waived any privilege.
20
“The attorney-client privilege extends to communications between client and
21
attorney for the purpose of obtaining legal advice.” Gen-Probe Inc. v. Becton, Dickinson
22
& Co., 2010 U.S. Dist. LEXIS 49436, at *6 (S.D. Cal. May 19, 2010). Simply relaying
23
factual information to an attorney does not activate the attorney-client privilege:
24
25
26
2
27
28
In his Opposition to Motion for Determination of Waiver of Privilege (Dkt. No. 34),
Erhart argues that he did not waive his attorney-client privilege with respect to the
documents that BofI found on his computer when Erhart turned his computer over to BofI
for inspection.
7
15cv2353 BAS (NLS)
1
The protection of the privilege extends only to communications
and not to facts. A fact is one thing and a communication
concerning that fact is an entirely different thing. The client
cannot be compelled to answer the question, ‘What did you say
or write to the attorney?’ but may not refuse to disclose any
relevant fact within his knowledge merely because he
incorporated a statement of such fact into his communication to
his attorney.
2
3
4
5
6
7
Upjohn Co. v. United States, 449 U.S. 383, 395-96 (1981) (internal quotes and citations
8
omitted); see also United States v. Burroughs, 167 F.R.D. 680, 683 (S.D. Cal. Feb. 20,
9
1996).
10
In general, any documents that Erhart sent to his counsel that contain mere facts or
11
data concerning BofI are not protected by attorney-client privilege. Erhart must produce
12
these documents to the extent that the purely factual information can be extracted from
13
any privileged communications. See Fox v. Shinseki, 2013 U.S. Dist. LEXIS 82087, at
14
*17-18 (N.D. Cal. June 10, 2013) (ordering non-privileged email attachments produced
15
where the emails themselves were privileged). The issue of waiver does not apply to
16
these documents because they were never privileged in the first place. Conversely, direct
17
communications between Erhart and his counsel that go beyond facts pertaining to BofI
18
may be protected by attorney-client privilege.
19
In sum, Erhart must produce any of BofI’s documents that contain mere facts or
20
data. If not already done, Erhart must produce a privilege log as to any specific
21
documents for which he asserts attorney-client privilege. By August 19, 2016, BofI must
22
turn over to Erhart’s counsel a USB drive with the documents from Erhart’s computer so
23
that she can review them for privilege. Erhart must produce responsive documents and a
24
privilege log to BofI’s counsel by September 9, 2016.
25
C. Medical Privilege.
26
BofI seeks to compel Erhart to produce medical documents and communications
27
pertaining to his medical leave that he forwarded to his mother. (Dkt. No. 54-1, at 13:6-
28
10.) BofI argues that there is no physician-patient privilege recognized under Federal law,
8
15cv2353 BAS (NLS)
1
and that Erhart has waived any medical privilege recognized by California law by
2
forwarding his medical information and communications to his mother. (Id. at 13:12-18.)
3
Erhart argues that his medical condition is not at issue in this case. (Id. at 15:12.) BofI,
4
however, contends that Erhart raised his medical issues during his deposition when he
5
testified that he was fearful of bodily harm and that he delayed returning his BofI-issued
6
laptop because he was meeting with his physician. (Id. at 14:23-25.) BofI argues that
7
Erhart also placed his mental state at issue in several of his defenses and other publicly
8
filed pleadings, thus rendering the patient-litigant exception to any physician-patient
9
privilege. (Id. at 14: 22-28.)
10
BofI offered to stipulate that Erhart’s medical condition is not relevant to this case,
11
and asks him to withdraw the assertion that being fearful of bodily harm rendered him
12
unable to work. Erhart has not responded to BofI’s repeated offers to so stipulate, which
13
BofI contends is indicative that Erhart will raise his medical and mental conditions in
14
defense. (Id. at 15:2-5.) Erhart asserts that he has not pled any type of emotional distress
15
damages, and that he did not put his medical condition at issue merely by stating that he
16
feared for his life. (Id. at 16:15-24.) Erhart argues any medical documents are irrelevant
17
to this suit. (Id. at 16:26-27 – 17:1-2.)
18
19
1.
Relevance of Medical Documents.
BofI argues that Erhart’s medical information and communications are relevant
20
because they pertain to Erhart’s medical leave from BofI. (Id. at 13:8-9.) But BofI does
21
not clarify how Erhart’s medical information relates to BofI’s claims. Erhart asserts that
22
he “has not pled any type of emotional distress damages or placed his medical condition
23
at issue in this action.” (Id. at 16:15-16.) BofI counters that Erhart’s statements suggest
24
emotional distress and other mental condition defenses. (Id. at 15:2-7.) Because Erhart
25
has yet to assert any claim or defense related to his medical condition, the court sustains
26
his relevance objection as to the medical documents. See Redon v. Ruiz, 2015 U.S. Dist.
27
LEXIS 163801 at *17 (S.D. Cal. Dec. 4, 2015) ("Medical records unrelated to the
28
conditions put in issue by a plaintiff are not relevant and are thus not discoverable,
9
15cv2353 BAS (NLS)
1
regardless of whether a specific privilege is applicable") (internal quotes and citations
2
omitted). If his mental state later comes into issue, though, the court will re-evaluate the
3
relevance of the medical documents
4
2.
Privilege for Medical Documents.
5
If Erhart’s medical condition is later raised, his medical communications may
6
nevertheless be protected from discovery. Under federal law, there is no physician-patient
7
privilege protecting medical records from discovery. Fritsch v. City of Chula Vista, 187
8
F.R.D. 614, 633 (S.D. Cal 1999). However, “The Supreme Court has recognized a
9
limited privacy interest in the confidentiality of one’s medical records, derived implicitly
10
from the United States Constitution.” Soto v. City of Concord, 162 F.R.D. 603, 618 (N.D.
11
Cal. July 17, 1995) (citing Whalen v. Roe, 429 U.S. 589, 599-600 (1977)). But this right
12
to privacy is not absolute. Id. When determining whether to order a production of medical
13
records, “a court must balance the requesting party’s interest in reviewing the records
14
against the patient’s right to maintain the medical records as private.” Larson v. Bailiff,
15
2015 U.S. Dist. LEXIS 94188, at *12 (S.D. Cal. July 17, 2015) (citing Soto, 162 F.R.D.
16
at 619).
17
18
19
20
21
An analysis under California law may also render Erhart’s medical
communications privileged:
California law recognizes a medical records privilege that
allows a patient to refuse to disclose, or prevent another from
disclosing, confidential communications with a physician in the
course of the patient-physician relationship.
22
23
Johnson v. Northwest Airlines, Inc., U.S. Dist. LEXIS 30731 at *7 (N.D. Cal. March 30,
24
2009). California courts have also found that medical information falls within the state
25
and federal constitutional right of privacy. Brown v. Mortensen, 51 Cal. 4th 1052, 1071;
26
People v. Stritzinger, 34 Cal. 3d 505, 511.
27
28
If medical documents later become relevant, the parties should re-evaluate the
applicability of privilege as to the specific documents.
10
15cv2353 BAS (NLS)
1
2
D. Law Enforcement Privilege.
The court has already addressed the applicability of a law enforcement privilege
3
and found that it does not apply here. (See Order on Joint Motion for Discovery Dispute
4
No. 2.) Erhart’s counsel is not a government entity, and even if she could show a
5
connection to one, she fails to make the requisite “substantial threshold showing” through
6
a personal statement by a responsible official with personal knowledge of the underlying
7
issues. See Perez v. United States, 2016 U.S. Dist. LEXIS 11036, at *10-11 (S.D. Cal.
8
Jan. 29, 2016). Therefore, the court overrules Erhart’s objections based on the law
9
enforcement privilege.
10
11
IT IS SO ORDERED.
Dated: August 5, 2016
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
11
15cv2353 BAS (NLS)
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?