Recent press reports like this one say that IBM has a new policy banning its employees from using USB drives. The apparent purpose is to prevent the loss of IBM’s confidential information and trade secrets, whether it’s an employee intentionally taking company files to a competitor or accidentally leaving a USB drive in an airport lounge.

This policy brings to mind that workplace sign, “The floggings will continue until morale improves.”

But I understand where IBM is coming from. Transferring files to a USB drive is the most common way that employees take company files right before walking out the door. With the possible exception of emailing company files to a personal email address. And don’t forget copying files to Dropbox or Google Drive.

Employees do these things all the time, and not necessarily for nefarious reasons. When you need to work at home or on the road, you need some way to get files from Point A to Point B, especially if you use personal devices to do company work. But when a key employee jumps to a competitor, the timing, volume, and content of the copied files can raise suspicion.

A familiar scenario

Let’s consider my favorite hypothetical departing employee case: Paula Payne Windows v. Dawn Davis. As the top sales person for Paula Payne, Dawn Davis routinely emailed herself PowerPoint presentations before hitting the road to pitch to potential customers. These files would include company information on prices and customer preferences.

That was fine with Paula Payne Windows, but things went south when Dawn suddenly announced she was leaving the company—these announcements are always “sudden”—and turned in her company laptop.

Sensing something fishy, Paula Payne had its “IT guy” check Dawn’s laptop for suspicious activity. He found that the day before leaving, Dawn transferred 117 files from the company server to a USB drive connected to her laptop.

Next thing you know, Paula Payne’s lawyer, John Laurens, fires off a letter to Dawn Davis. The letter demands she cease and desist using any of Paula Payne’s confidential information, and that she immediately return all company documents as expressly required by the Non-Competition and Confidentiality Agreement she signed when she joined Paula Payne.

Dawn emails the letter to her lawyer, Maria Reynolds, and asks what she should do.

“Is it true that you transferred company files to a USB drive the day before you left?” Reynolds asks Dawn. “It’s true,” Dawn says. “I needed those documents to prove that Paula Payne owed me $26,000 in commissions,” she adds. “I knew they would stiff me as soon as they found out I went to Real Cheap Windows.”

“And I was right,” Dawn says. “When I asked the CFO about my commissions, she said ‘what commissions?’”

“Ok,” Reynolds says, “but the letter says one of those files was a complete customer list for the entire company.” “Why did you need that?”

“It doesn’t matter,” Dawn says. “The only thing I’ve done with that drive is copy the files to my personal laptop. I haven’t opened a single one of those files since leaving.”

This is a common scenario. I’ve seen multiple variations on this theme in my own cases and in opinions I’ve read.

A multiple choice test

So what should Dawn’s lawyer do in this situation?

A. Physically deliver the USB drive to opposing counsel and have Dawn delete the files from her laptop. This is the best way to comply with Dawn’s agreement.

B. Have an expert make forensic copies of the USB drive and Dawn’s hard drive, and produce copies of the company documents to opposing counsel. This is the best way to comply with both the agreement and the duty to preserve evidence.

C. Email copies of the documents to opposing counsel and tell Dawn—in writing—not to open any of the files. Even if this is a technical breach of the contractual duty to “return” the files, it is not a breach that causes any damages.

You can make a plausible case for each of these answers, but I think (B) is the safest.

It’s not an easy question, because there are several competing considerations:

– the contractual duty to “return” the company documents

– the duty to preserve relevant evidence, including relevant metadata, when litigation is reasonably anticipated

– the need to preserve evidence to prove the client’s claim to commissions

– avoiding unnecessary expense to the client

Let’s break down how each answer deals with these factors.

Go ahead and give it to me

The first part of Answer (A) is physically delivering the USB drive to opposing counsel. This has the benefit of complying with the contractual duty to return company documents.

But there’s a problem: you can’t be assured opposing counsel will properly preserve the metadata on the USB drive. It may be important later to determine when the USB drive was plugged in, what was transferred from it, etc.

The second problem raised by (A) is what to do with the files copied to the employee’s laptop. The employer may argue the employee has the same duty to return these files as if they were on paper. But “returning” copied electronic files is really a non sequitur.

So maybe you can accomplish the purpose of returning the files by deleting them?

The problem is that the employee has a duty to preserve evidence, including potentially relevant metadata. If the employee deletes the files, the employer could seek sanctions for spoliation of evidence.

The other side of the coin is that the employee may want the files to prove they were not opened. For these reasons, deleting relevant files is generally a bad idea, and (A) is not the best answer.

Answer (B) is safer because it preserves all the electronic evidence, including metadata. You may not always need the metadata, but at least this approach leaves your options open.

But is it enough to produce copies of the files to the employer’s lawyer? The agreement says the employee must return the files. If the employee keeps copies, the employer can argue that the employee breached the contract.

Are you experienced?

This came up in a case I had where an employee kept company documents needed to prove he earned a promised performance bonus. Opposing counsel told me the company was upset when they found out he had the documents. I explained that he kept the documents because he feared (correctly) the company would refuse to pay his bonus, and the documents proved he was entitled to it. “Well he could have returned the documents and then asked for them in discovery,” he said.

Yeah, right.

As this experience illustrates, sometimes you have to make a judgment call and keep copies of the documents, even if it may give the company the argument that your client breached the contract.

Ok, you say, but if you’re going to accept this risk anyway, then what’s wrong with Answer (C), just telling the client not to use the documents?

Here’s the problem. If your client has taken company documents, then opposing counsel, the judge, and the jury (if you get that far) will probably already be suspicious. You don’t want to compound that suspicion. It’s usually better if your client can say—truthfully—“as soon as I found out a lawsuit was likely, I turned everything over to my lawyer and didn’t touch it.”

But I wouldn’t say Answer (C) is always wrong. Sometimes, the expense of making forensic copies may not be justified. The former employer’s demand letter may just be a “shot across the bow” to get the employee to back off a little. In some cases a suit may never get filed.

So there is no one-size-fits-all solution to the problem of “returning” electronic files taken by a departing employee. But if you’re the lawyer representing the employee who took the documents, you should at least discuss the options.

If you’re the employee, consider not taking any documents in the first place.

And if you’re the employer? I hear IBM has some ideas.

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.