On May 23, in SEC v. Reserve Management Co. Inc.,1 the U.S. District Court for the Southern District of New York ruled that an employee does not have a reasonable expectation of privacy with respect to communications with a spouse through an employer’s email system. In reaching its decision, the court employed the four-part test from In re Asia Global Crossing Ltd.2 to determine if the employee had a reasonable expectation of privacy. Key to the court’s analysis was the presence and actual notice to employees of an email policy that both forbade personal communications and warned employees of possible disclosure of company-controlled email communications.

Background

Reserve Management Co, Inc. (RMCI), under the leadership of its president, Bruce Bent II, managed a money market mutual fund known as the Reserve Primary Fund (Fund). RMCI invested $785 million of the Fund’s assets in Lehman Brothers debt. Just days after Lehman Brothers’ bankruptcy announcement,the Fund’s net asset value dropped to less than $1 per share. In response to RMCI’s handling of communications with investors regarding the Fund’s vulnerability to Lehman Brothers and its effect on investor assets, the Securities and Exchange Commission (SEC) filed fraud charges against RMCI. During discovery, RMCI withheld approximately 60 emails between Mr. Bent and his wife, asserting the marital communications privilege. The SEC subsequently moved to compel production of these emails.

In determining whether there was a valid marital communications privilege claim, the court found that it was undisputed that the Bents were married and that they intended to convey messages to each other. However what was in dispute was whether their communications were made in confidence.