The Tennessee Business Court, now in Phase II of the Pilot Project continues to deal with interesting and contemporary issues. In Universal Strategy Group v. Halstead, Case No. 16-15-BC, Chancellor Lyle held, after a bench trial, that the defendant/former COO of plaintiff/former employer, did not own the electronic devices (laptop, iPad, and smartphone) which he had used in his employment and that they were owned by the employer BUT that the COO owned the personal information on the electronic devices.
The COO contended that he owned the devices based on evidence that the employer routinely “gifted” electronic devices utilized by employees in their work to the employees. The Court rejected the COO’s argument that he had “gifted” the electronic devices to himself, noting the self-dealing nature of the transaction, applying principles of the Restatement (Second and Third) of Agency, and discerning the significant differences in the circumstances between the routine gifting of electronic devices to others and the circumstances of the alleged gift to the COO (by himself). When the employer “gifted” computers to . . . employees, they were first “scrubbed, overwritten and, in most cases, (were) older equipment with the purpose of “maintaining classified secrets of its clients” and “preserving . . . proprietary business practices and pricing” which had been developed over the years. The Court found that there had been no gift to the COO because he had been a high-level, management employee with access to substantial, proprietary information and his electronic devices had not been wiped, scrubbed or overwritten before he asserted ownership of the devices.
However, the employer had allowed its officers to use the electronic devices for personal, as well as business, use because “it increased the likelihood that the officers would work at home and while on vacation.” There was no evidence of a company policy (as with many other companies) that any content placed on company computers became company property. Therefore, while the employer owned the devices, the employee owned the personal content.
The Court ordered:
- The return of the electronic devices to the employer;
- No award of damages because no proof of damages for loss of use or otherwise, but reserving the claim for attorney’s fees or punitive damages for future consideration; and
- The COO’s personal content be removed from the electronic devices, through the use of a third party, and a further process for restoring the content to him and resolving disputes over what was personal content.
Authored by William R. O'Bryan, Jr.