Fiber Materials, Inc. v. Subilia

• Decision Date: 16 July 2009
• Docket Number: Docket: BCD-08-648.
• Citation: 2009 ME 71,974 A.2d 918
• Parties: FIBER MATERIALS, INC. v. Maurice SUBILIA et al.
• Court: Maine Supreme Court

974 A.2d 918

2009 ME 71

FIBER MATERIALS, INC. v. Maurice SUBILIA et al.

Docket: BCD-08-648.

Supreme Judicial Court of Maine.

Argued: May 20, 2009.

Decided: July 16, 2009.

George T. Dilworth, Esq. (orally), M. Katherine Lynch, Esq., McCloskey, Mina & Cunniff, LLC, Portland, ME, for Maurice Subilia.

Michael A. Nelson, Esq. (orally), Joseph H. Groff III, Esq., Jensen Baird Gardner & Henry, Portland, ME, for Fiber Materials, Inc.

Panel: CLIFFORD, ALEXANDER, LEVY, SILVER, MEAD, and GORMAN, JJ.^*

Majority: CLIFFORD, LEVY, SILVER, MEAD, and GORMAN, JJ.

Concurrence: ALEXANDER, J.

MEAD, J.

[¶ 1] Fiber Materials, Inc. (FMI), commenced this action against its former president, Maurice Subilia, and others, alleging that Subilia defrauded FMI and deprived it of business opportunities by competing with FMI without its knowledge while he was still FMI's president. Subilia appeals from an order entered on the Business & Consumer Docket (Humphrey, C.J.) denying his motions to strike three paragraphs of FMI's complaint, and to disqualify FMI's attorneys. Subilia contends that the court was required to grant his motions because FMI improperly made use of a memorandum protected by attorney-client privilege that it discovered on his FMI-owned laptop computer. Because no exception to the final judgment rule applies we dismiss this interlocutory appeal. We take the opportunity to comment, however, on the treatment of the memorandum by FMI's attorneys prior to the trial court having an opportunity to rule on issues raised by Subilia on his claim of privilege.

I. BACKGROUND

[¶ 2] FMI, which is incorporated in Massachusetts, is a Maine-based company specializing in manufacturing advanced composite materials for government entities and private industry. Maurice Subilia served as its president from 1978 to 2007. During that tenure, Subilia was convicted of violating federal export control laws and fined $250,000. In the counterclaim in this case, Subilia asserts that FMI reimbursed him for the fine, as it was obligated to do, in the form of a payment classified as ordinary income. The classification of the payment resulted in significant tax liability, for which Subilia unsuccessfully sought additional reimbursement from FMI. Subilia sought legal advice concerning the indemnification issue from his daughter, who is an attorney admitted to practice in Maine. His daughter referred him to the law firm of Verrill Dana.

[¶ 3] In March 2006, Verrill Dana produced a three-page memorandum (the Verrill Dana memo), which discusses the pros and cons of the merits of Subilia's potential indemnification claim. The memo is stamped at the top of each page: "ATTORNEY/CLIENT PRIVILEGE CONFIDENTIAL WORK PRODUCT." It was e-mailed to Subilia's daughter, who in turn e-mailed it to her father at his FMI e-mail address.

[¶ 4] Subilia had a laptop computer issued to him by FMI, as well as a personal laptop. He used his FMI laptop daily at work, took it home with him, and took it on vacation. FMI's in-house counsel, Jennifer Beedy, an attorney admitted to practice in Maine, testified at a hearing that it was not a violation of FMI's computer policy for Subilia to use his laptop for personal purposes. FMI had in place a written "E-Mail and Computer Use Policy," originally promulgated in 1999 and reissued in 2006. Among its provisions were declarations that users have no expectation of privacy in anything they stored on the company's computer system, that they expressly waived any right of privacy to such material, and that FMI reserved the right to monitor anything on its computer network. As company president, Subilia participated in meetings explaining the policy to employees. In 1999 and again in 2006, Subilia signed an acknowledgement that he had read and agreed to comply with the policy. After the policy was enacted, Beedy recalled Subilia authorizing the monitoring of employee computers on one to three occasions.

[¶ 5] In April 2007, federal agents from Immigrations and Customs Enforcement, the FBI, and the IRS came to the FMI corporate offices to question Subilia regarding an investigation into whether he had bribed an Army official. Attorney Beedy initially attended the meeting at Subilia's request, but left when he indicated that the subject matter did not involve FMI, and the agents were equivocal about FMI's potential involvement. That evening, Subilia went home with his FMI laptop to find federal agents waiting with a search warrant. In executing the warrant, the agents took a mirror image of the laptop's hard drive.

[¶ 6] Two days later, Subilia resigned from FMI and left with the company's laptop. Attorney Beedy asked Subilia's secretary to get the laptop back. The secretary spoke to Subilia's wife, who, following what she described as "a big fight" with her husband, returned the laptop to FMI that afternoon. Beedy locked the laptop in a file cabinet. At some point Subilia's attorney requested access to the laptop; the request was refused.

[¶ 7] A few days after gaining custody of the laptop, unsure of FMI's involvement in the government investigation and knowing that federal agents had taken a mirror image of the laptop's hard drive, Beedy advised FMI's chairman, Walter Lachman, that they should examine it. Lachman agreed, and Beedy conducted a general, non-forensic search of the hard drive after obtaining Subilia's password from FMI's information technology department. She eventually found the Verrill Dana memo on the hard drive ("C:" drive) and read it at least twice.

[¶ 8] Because of the memo's content and markings, Attorney Beedy initially considered it to be privileged. In deciding what to do next, she contacted the ABA Ethics Search Service and spoke to an attorney, who sent Beedy materials to review. Beedy also consulted the Maine Bar Rules and spoke to an Assistant Bar Counsel, who said she would get back to Beedy. Attorney Beedy eventually concluded that there was no ethical prohibition against turning the memo over to FMI officials. Before obtaining an opinion from the Bar Counsel's Office, she took the laptop containing the memo to Massachusetts and turned it over to Lachman and another FMI attorney. Beedy testified that after she turned the laptop over to FMI officials, she received a message the same day from the Assistant Bar Counsel she had spoken to previously, saying "Call me back." Beedy did not return the call.

[¶ 9] In October 2007, FMI filed a six-count complaint against Subilia and the other defendants in the Superior Court, alleging fraud, breach of fiduciary duty, usurpation of business opportunities, interference with contractual relations, misappropriation and conversion, and violation of the Uniform Trade Secrets Act. Three paragraphs of the 131-paragraph complaint specifically refer to the Verrill Dana memo. The case was accepted for transfer to the Business & Consumer Docket. In July 2008, Subilia filed a two-count counterclaim, alleging that FMI failed to fully indemnify him for the criminal fine that he paid, and that it invaded his privacy in reading and publishing the Verrill Dana memo. FMI has pending a motion to dismiss the counterclaims, or be granted summary judgment.

[¶ 10] In November 2007, Subilia moved to strike the three paragraphs citing the Verrill Dana memo from the complaint, and to disqualify FMI's attorneys on the ground that they had gained an incurable tactical advantage from reviewing privileged information. FMI's response to the motions attached the full text of the disputed memo as an exhibit. At Subilia's request, the trial court ordered the memo sealed seven days later.

[¶ 11] Concluding that discovery in the case-in-chief could not proceed until the motions to strike and to disqualify counsel were resolved, the court held a testimonial hearing in October 2008. By written order, the court denied both motions, ruling that (1) the Verrill Dana memo was not a "confidential communication" under the circumstances presented, and thus not protected by attorney-client privilege;¹ and (2) there was therefore no basis on which to disqualify FMI's attorneys. This appeal followed.

II. DISCUSSION

A. Final Judgment Rule

[¶ 12] Ordinarily, the final judgment rule prevents a party from appealing a trial court's decision on a motion before a final judgment has been rendered. U.S. Dep't of Agric., Rural Hous. Serv. v. Carter, 2002 ME 103, ¶ 7, 799 A.2d 1232, 1234. A compelling rationale underlies the rule:

The final judgment rule prevents piecemeal litigation, and helps curtail interruption, delay, duplication and harassment; it minimizes interference with the trial process; it serves the goal of judicial economy; and it saves the appellate court from deciding issues which may ultimately be mooted, thus not only leaving a crisper, more comprehensible record for review in the end but also in many cases avoiding an appeal altogether.

Griswold v. Town of Denmark, 2007 ME 93, ¶ 16, 927 A.2d 410, 417 (quotation marks omitted).

[¶ 13] There are exceptions to the rule; Subilia advances three of them in support of his position that this interlocutory appeal should be heard: (1) the death knell exception, (2) the collateral order exception, and (3) the judicial economy exception. FMI asserts that no exception applies, and therefore this appeal should be dismissed.

1. Death Knell Exception

[¶ 14] The death knell exception applies "if substantial rights of a party will be irreparably lost if review is delayed until final judgment." Carter, 2002 ME 103, ¶ 12, 799 A.2d at 1235 (quotation marks omitted). A right is "irreparably lost if the appellant would not have an effective remedy if the interlocutory determination were to be vacated after a final disposition of the entire litigation." Id. "Put differently, where an interlocutory order has the practical effect of permanently foreclosing relief on a claim, that order is appealable." Lewellyn v. Bell, 635 A.2d 945, 947 (Me.1993) (quotation...