Quon May Hold Meaning For Private Employers Seeking Access to Private Communications

On June 17, 2010, in Ontario v. Quon, the United States Supreme Court decided that the City of Ontario, California could review the non-work-related text messages to and from a City police officer on a City-issued electronic pager. Because the opinion involved a governmental employer and was largely grounded in a 4th Amendment analysis, many private employers have paid Quon little attention. But that would be a mistake, especially for those facing trade secret and non-competition matters. Quickly accessing and collecting so-called “private communications” can play a vital role in amassing the evidence needed to support a restraining order or preliminary injunction. Despite the fact that much of the analysis in Quon would be irrelevant in the private employment context, the Supreme Court expressly held that the review of the officer’s personal text messages on the employer-issued pager “would be ‘regarded as reasonable and normal in the private-employer context.’” (Slip op. at 16). Consequently, knowing what was done and how it was done in Quon may provide even private employers with a roadmap for approaching such issues, and then provide from the highest court in the land legal support for the reasonableness of the employer’s conduct.

Quon’s facts, and the assumptions that the Supreme Court made about them, are worth a brief review. First, the Court noted that the City “reserve[d] the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources,” but that the policy “did not apply, on its face, to text messaging.” Slip op. at 2. Further, “[a]lthough the Computer Policy did not cover text messages by its explicit terms, the City made clear to employees, including Quon,” through statements at various meetings and in a written memorandum that “[text] messages sent on the pagers ‘are considered e-mail messages. This means that [text] messages would fall under the City’s policy as public information and [would be] eligible for auditing.’” Id. at 3 (bracketed language in original). On the other hand, Quon argued that he could reasonably expect that his text messages would remain private based on the City’s past practice. Each pager issued to officers was allotted a limited number of characters sent or received each month. Id. at 2. According to Quon, the City told him that an audit of his text messages would be unnecessary if he paid the excess charges for any use that exceeded the monthly limit. Id. at 9. Because he paid for those excess charges, id. at 3, Quon argued that he had a reasonable expectation that the City would not review the contents of his text messages.

Rather than resolve this dispute, the Supreme Court assumed for the purpose of its analysis that “Quon had a reasonable expectation of privacy in the text messages sent on the pager provided to him by the City,” slip op. at 12, yet nonetheless found that the City’s review of the personal text messages was appropriate and reasonable for the governmental employer acting without a warrant. Slip op. at 12-13. Important factors supporting the Court’s finding of reasonableness were (i) the City did not search any text-messages sent during off-duty hours; and (ii) the City searched only a sample – i.e., only two months of messages sent by Quon rather than all of the months during which he exceeded his monthly character allotment. The Court concluded that, despite any expectation of privacy, such a search was reasonable for a government employer and would have been “‘regarded as reasonable and normal in the private-employer context.’” (Slip op. at 16).

Central to that conclusion was the concept that the recognition of an employee’s expectation of privacy was not tantamount to conceding that such privacy would remain wholly inviolate:

Even if he could assume some level of privacy would inhere in his messages, it would not have been reasonable for Quon to conclude that his messages were in all circumstances immune from scrutiny. Quon was told that his messages were subject to auditing. As a law enforcement officer, he would or should have known that his actions were likely to come under legal scrutiny, and that this might entail an analysis of his on-the-job communications. Under the circumstances, a reasonable employee would be aware that sound management principles might require the audit of messages to determine whether the pager was being appropriately used. …From [the Ontario Police Department]’s perspective, the fact that Quon likely had only a limited privacy expectation, with boundaries that we need not here explore, lessened the risk that the review would intrude on highly private details of Quon’s life. OPD’s audit of messages on Quon’s employer-provided pager was not nearly as intrusive as a search of his personal e-mail account or pager, or a wiretap on his home phone line, would have been. That the search did reveal intimate details of Quon’s life does not make it unreasonable, for under the circumstances a reasonable employer would not expect that such a review would intrude on such matters. The search was permissible in its scope. (slip op. at 14).

The Court expressly noted that, given the employee’s limited privacy expectation (based on the City’s electronic communication policy, the fact he was told that his text messages might be audited and the fact that his position as a police officer might require an analysis of his on-the-job communications) the government employer would not reasonably to expect that an employee would place highly private details of his life into messages on his employer’s physical device. (slip op. at 14). When the Court later expressly concludes that such a “search would be ‘regarded as reasonable and normal in the private-employer context,’” the Supreme Court can be said to be validating for a private employer that same right reasonably to expect that an employee would avoid placing highly private details of his life into messages on his employer’s physical device when the employee had been advised his employer might audit such communications.

In the wake of decisions like Stengart v. Loving Care [see previous blog post here], where the New Jersey Supreme Court dictated much less latitude for employers, even the brief mentions in Quon that reference private employers are welcome ones.

There are some practical tips for employer communication policies. Such policies should be all inclusive – covering cell phones, e-mail, text messaging, etc. The fact that the written policy in this case did not expressly cover text messages caused some confusion. Also, although the Supreme Court tried to state that it was not opining as to how advances in communication technology may impact an employee’s expectation of privacy, it went on to make several such statement (much to the dismay of Justice Scalia). For example, the Court observed that, on the one hand, the pervasive use of cell phones and text message means that some people may consider them to be “necessary instruments for self-expression, even self-identification” which would strengthen the case for an expectation of privacy; but the Court also noted that “the ubiquity of those devices has made them generally affordable, so one could counter that employees who need cell phones or similar devices for personal matters can purchase and pay for their own.” (slip op. at 11). This later point also provides some practical guidance—perhaps employers should add to their electronic communications policy a statement along the lines of the following: An employee who desires to send or receive personal communications unreviewable under this policy should purchase and use his/her own cell phone/text messaging device and service plan.
 

 

A Pennsylvania No-Compete Primer

In Pharmethod, Inc. v. Caserta, __ F.3d __ (3d Cir. 2010), the Third Circuit vacated and remanded the district court’s entry of a preliminary injunction enforcing a no-compete based on the trial judge’s failure to fully explain his factual and legal conclusions. The case is noteworthy because the Third Circuit provided what amounts to a primer on Pennsylvania non-compete law to help guide the district court on remand. Here is a summary of the Third Circuit’s guidance:

• Restrictive covenants are not favored in Pennsylvania and, due to the inherently unequal bargaining positions of employer and employee, such agreements are closely scrutinized. The court is required to balance the employer’s protectable business interest against the employee’s interest in earning a living in his or her chosen profession, and then balance the result against the public interest.

• In balancing such equities, some Pennsylvania courts are reluctant to enforce restrictive covenants against an employee who was involuntarily terminated.

• In Pennsylvania, post-employment restrictive covenants are enforceable if: (i) they are incident to an employment relationship between the parties; (ii) the restrictions imposed by the covenant are reasonably necessary for the protection of the employer; and (iii) the restrictions imposed are reasonably limited in duration and geographic extent.

• Legitimate business interests that may be protected by a restrictive covenant include protecting trade secrets, confidential information, good will or unique/extraordinary skills. Eliminating competition or gaining an economic advantage do not constitute legitimate business interests.

• Geographic restrictions must also be reasonable. Courts will uphold restrictive covenants with broad geographic limits only where the employee’s duties and customers were equally broad.

• Pennsylvania courts may “blue pencil” restrictive covenants by granting enforcement that is limited to those portions which are reasonably necessary for the protection of the employer. However, Pennsylvania case law favors non-enforcement of gratuitously overbroad restrictive covenants.
 

The "Authorized Access" Issue Under the Computer Fraud and Abuse Act

Earlier this year, Aon Risk Services Northeast Inc. (“Aon”) brought suit in the United States District Court for the Southern District of New York against Marsh USA Inc., Marsh & McLennan Companies, Inc. (together, “Marsh”), and three former employees. In its Amended Complaint, Aon asserted that the defendants transferred a “pre-packaged book of business” to Marsh, primarily by the former employees’ “illegal downloading of Aon proprietary trade secret information.” Aon asserted a claim under the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. §1030, against the three former employees, and asserted nine common law claims, including misappropriation of trade secrets, breach of contract and unfair competition, under New York state law against Marsh and the former employees.

The Court issued an Order granting an application by defendants to dismiss all of the state law claims, on the grounds that they are different from and substantially predominate over Aon’s lone federal claim under the CFAA. See Aon Risk Servs. Northeast, Inc. v. Kornblau, 10 Civ. 2244 (RMB), 2010 U.S. Dist. LEXIS 38140 (S.D.N.Y. Apr. 19, 2010). The state law claims were dismissed without prejudice to their renewal in an appropriate forum. On April 23, 2010, Aon re-filed its nine state law claims in the Supreme Court of the State of New York, New York County, Index No. 601058/10.

The three former employees have now moved to dismiss the only remaining claim, under the CFAA. In their brief, they argue that the CFAA claim is deficient because they did not exceed their authorized access to Aon’s computers. The former employees state that the CFAA prohibits unauthorized access to protected computers, not unauthorized use of those computers and the confidential information thereon. This issue -- the application of the CFAA to alleged employee computer abuse -- is the subject of numerous court decisions across the country, some of which interpret the CFAA’s “without authorization” language broadly, and some of which interpret it narrowly, as the former Aon employees urge.

The procedural history of the case so far shows that Aon’s pairing of the CFAA claim with its state law claims -- the gravamen of its Complaint -- has not worked out well. If the CFAA claim was included in order to secure federal jurisdiction over the dispute, it was unsuccessful; the Court’s Order dismissing the state law claims led Aon to commence a second action in state court. While the Court has yet to rule on the former employees’ motion to dismiss the CFAA claim, Aon’s CFAA claim may lack the requisite allegations to withstand the motion to dismiss. If so, Aon’s efforts to go on the offensive against the alleged unfair competitors will result in two setbacks straight out of the gate.