Selected Ethical Issues in Crisis Management Presented by Dennis P. Duffy 2013 Who is the Organizational "Client“? • ABA Model Rule 1.13 – A lawyer employed by or retained by an organization represents the organization acting through its duly authorized constituents. Who is the Organizational "Client"? • Handling misconduct/wrongdoing by staff and other governmental constituents – ABA Model Rule 1.13 • Move "up the ladder" • In extreme cases, break confidentiality – Public Company--SOX reporting obligations Who is the Organizational "Client"? • Interviews with Individual Corporate Employees/Officers – Explain that the client is the agency (unless a joint representation situation) – Give warnings regarding confidentiality and privilege – Dispel any misunderstanding about separate attorney-client relationship Who is the Organizational "Client"? • Talking to Individual Employees/Officers: ABA Model Rule 1.13(f): – In dealing with an organization's directors, officers, employees or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing. Conflicts Involving "Virtual" Clients • Former HR Managers/Employer Representatives as Plaintiffs – – – Unless law firm individually represented corporate constituent, there is no express attorney-client relationship/disqualification (See Cole v. Ruidoso Municipal Schools, 43 F.3d 1373 (10th CIr. 1994) However, attorney-client relationship can be implied by conduct, especially where lawyer is not sufficiently clear with constituent as to whom firm represents (See Home Care Industries v. Murray, 154 F. Supp. 2d 869 (D. N.J. 2001) Note: Former corporate constituents may carry with them "property" of the employer (attorney-client privilege information, trade secrets, etc.) Basic Privilege Issues Choice of Law Always be sure to check the rules that apply to your specific jurisdiction! • Don't assume that the local law of the jurisdiction provides the substantive privilege rule in litigation. • Majority of U.S. states will look to the law of the state with the most significant relationship to the communication. Ford Motor Co. v. Leggat, 904 S.W.2d 643 (Tex. 1995). • Federal courts sitting in diversity look to the choice-of-law analysis of the forum state. Attorney Client Privilege: General Rules A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client . . . Lawyer-Client Privilege: General Rules • Holder of the privilege is, or sought to become, a client, and • Communicated with a member of the bar of a court, or his/her representative, • Who, in connection with the communication, was acting as an attorney, and • The communication was for the purpose of securing legal advice. "Representatives" of client and lawyer • Client representative: – person with client's authority to get or act on legal advice, or – employee of client, acting in scope of employment, who is effectuating legal representation (paralegals) – Note: some jurisdictions apply a different, "control group" standard for determining who qualifies as the "client" in the corporate context • Lawyer representative: – employee of lawyer assisting rendition of legal services, or – accountant reasonably necessary to provide legal services Attorney-Client Privilege • Applies to communications made by the client – Attorneys’ communications may also be protected if an attorney’s communication reveal the substance of a client communication – Some courts impose “necessary and inevitable” standard instead of “based on” standard for determining whether a lawyer’s communications to a client are privileged • Client cannot protect a document unless such document prepared for purpose of communication with lawyers • Redaction may be an option if document has both privileged and non-privileged material Communications between non-lawyer employees may be privileged if made for purpose of facilitating attorney's advice to the corporate client. • • In re JDN Real Estate-McKinney, L.P. (Tex. App.--Dallas 2006) Single email from CEO & president of corporation protected by privilege, as part of string of privileged emails; although email itself did not reveal confidential information, it was part of the context and subject of the privileged string of communications. Clover Staffing Inc. v. Johnson Controls World Services, Inc. (S.D. Tex. 2006) Emails from corporate official to other corporate officials were protected by the attorney-client privilege; although none of the officials were attorneys, emails were sent at the suggestion of the corporate legal department to gather information that could be used by attorneys in negotiating with subcontractor to resolve contract issues. Involving a lawyer in the communication doesn't necessarily make it privileged • Baran v. Walsh Construction Co. (N.D. Ill. 2007) Emails between officials of defendant construction company and its vice president in charge of insurance department were not protected by the attorney-client privilege; although vice president also worked in the legal department of the company, he was acting in his capacity as the head of the insurance department, not in his capacity as company’s legal counsel. • SmithKline Beecham Corp. v. Teva Pharmaceuticals USA, Inc. (E.D. Pa. 2005) “What would otherwise be routine, non-privileged communications between corporate officers or employees transacting general business of the company do not attain privileged status solely because in-house or outside counsel is ‘copied in’ on correspondence or memoranda.” Some Exceptions to LawyerClient Privilege 1. Furtherance of crime or fraud. 2. Breach of duty by a lawyer or client. [Inhouse counsel claims may qualify] 3. Document attested by a lawyer. 4. Joint clients. Joint Defense Agreements/Common Interest Privilege • May preserve privilege for communications between multiple parties with common interests. But: • Communications prior to entry of joint defense agreement might NOT be privileged (Strong v. State (Tex. Crim. App. 1989)) • Some jurisdictions (TX, AK, KY, OK, S.D.) do not recognize common interest privilege without pending litigation Joint Defense Agreements • Such agreements may create potential for disqualification in later action against the codefendant – National Med. Enterprises v. Godbey (Tex. 1998) • • • Firm represented employee of corporation in connection with criminal investigation; did not represent corporation but had JDA with it Firm later sought to represent plaintiffs in suit against corporation Court: JDA did not create attorney-client relationship between firm and corporation, BUT law firm disqualified because the JDA created a duty to maintain co-defendant corporation's confidences to the same extent as the firm's own client. Waiver • Generally, disclosure to third parties constitutes waiver as to the subject matter. • Offensive use of some privileged communications can waive the privilege generally (sword/shield doctrine). • Limited waiver may be possible in the context of cooperation with a government investigation. • Disclosures to auditors are often held to be waivers. • Inadvertent production – "Snap Back" rules (Texas) – Fed. R. Evid. 502 Waiver — Disclosure to Third Parties • Voluntary Disclosure – – To any party not necessary to facilitate confidential communication between attorney and client – Public Relations Specialists--Split Decisions Waiver — Disclosure to Third Parties • Compelled Disclosure/”Selective” Waiver– “Voluntary” Disclosure to the Government • • Few courts recognize exception McKesson HBOC, Inc. v. Superior Court (Cal. App. 2004); In re Columbia/HCA Healthcare Corp. (6th Cir. 2002) Waiver — Implied Waiver • Putting confidential communication "at issue" – Cox v. Administrator U.S. Steel & Carnegie (11th Cir. 1994) “Having gone beyond mere denial, affirmatively to assert its good faith [in an FLSA case], [the defendant] injected the issue of its knowledge of the law into the case and thereby waived the attorney-client privilege.” Waiver — Attorney Investigative Materials • Investigative report generally not privileged where defendant raises adequacy of investigation as affirmative defense (Harding v. Dana Transp. Co. (D.N.J. 1999)) • Only limited waiver if privileged materials can be reasonably segregated from the "investigation" report • No privilege if attorney acting solely as investigator rather than as an attorney – In re Texas Farmers Ins. Exchange (Tex. App. 1999) – Compare Harlandale Indep. School Dist. v. Cornyn (Tex. App. 2000) Boundaries of the Privilege in the Corporate Context • Attorney-Client Privilege and Interviews of Non-Client Corporate Constituents • Attorney-Client Privilege and Deposition Preparation of Non-Client Corporate Constituents • Attorney-Client Privilege and Communications with Former Corporate Constituents No Privilege if the Lawyer is Not Wearing the “Lawyer” Hat • Baran v. Walsh Construction Co. (N.D. Ill. 2007) – Emails between various officials of construction company and its vice president in charge of insurance department were not protected by the attorney-client privilege, even though the vice president also worked in the legal department of the company, where the vice president was acting in his capacity as the head of the insurance department, not in his capacity as the company’s legal counsel. • In re Sealed Case (D.C. Cir. 1984) - Must be clear showing that attorney gave advice acting in professional legal capacity No Privilege if the Lawyer is Not Wearing the “Lawyer” Hat • Neuder v. Battelle Pacific (D.D.C. 2000) 194 F.R.D. 289 The decision to fire an employee is primarily a business decision, not legal advice; presence of attorney at a meeting where decision is made does not render documents or discussions privileged: “Where business and legal advice are intertwined, the legal advice must predominate for the communication to be protected.” Attorney-Client Privilege — InHouse • Privilege usually exists for full time in-house counsel/in-house business person. Upjohn Co. v. U.S., 449 U.S. 383 (1981). • Applies even if in-house lawyer is not full time in legal department, so long as communication made by the lawyer acting in capacity as lawyer for company • Privilege applies to any corporate employee, regardless of position, when the communications relate to matters within the scope of the employee’s duties and the employee is aware that the purpose of the information is to enable the attorney to provide legal advice • But...some courts erect a higher standard given the concerns about the lawyer wearing both the "business" and "law" hat. Practice Pointer: Establish fixed “counsel” role on team at inception of crisis. Attorney-Client Privilege — Cell Phones and Emails • Privilege applies to communications by email, cell phones if requirements of privilege otherwise met. • Beware of inadvertent disclosure: – Client discussions on cell phone or pay phone at the airport – Leaving voicemails and (i) leaving message on the wrong number (ii) forgetting to hang up • Note: Emails, like diamonds, are forever: email is rarely deleted – "Emails that can be used by the Government,or an Opponent: It's Not A Good Thing." Attorney-Client Privilege — Practical Tips — General • The attorney-client privilege can become an attorney-conflict problem • Be discreet • Our clients also need to be careful • Label appropriate emails and memoranda as privileged • Existence of a conversation/communication and contents of a conversation/communication are two different things • In communicating with employees, document all Upjohn factors and give the Upjohn "Miranda" warnings Practical Tips — In-House Counsel • Clearly separate legal from business advice, if possible • Treat privileged documents carefully. Counsel can waive privilege with a bad distribution list. • Consider starting with "I am addressing the following legal issue(s)" in communications • Direct any meeting that has a "legal" purpose • Keep legal and business documents separate • Three Words: Remember Admiral Stockdale (Oops!) Inadvertent (and not so Inadvertent) Disclosure Issues Inadvertent Disclosure • Ethical duty if attorney receives confidential information from opposing party that he/she knows was sent inadvertently – – – – – ABA Formal Op. No. 05-437 - Duty to notify sender Some Jurisdictions (including Texas): Duty to notify sender and adhere to his/her request Some Jurisdictions (Md., Mass.): No duty to notify. In re Meador (Tex. 1998) (trial court did not abuse discretion in refusing to disqualify attorney in sexual harassment action based on receipt of privileged materials from defendant through no fault of his own, instead ordering return of the purloined documents and agreement not to use them in the litigation). By the way: You are obligated to tell your client that you inadvertently disclosed a privileged document. Inadvertent Disclosure: Waiver Issues Three approaches to Inadvertent Disclosure: – Rarely/never waives: Texas – Always waives: D.C. – Balancing Test: Majority of jurisdictions • FR Evidence 502 Fed. R. Evid. Rule 502 (a) Disclosure Made in a Federal Proceeding or to a Federal Office or Agency; Scope of a WaiverWhen the disclosure is made in a Federal proceeding or to a Federal office or agency and waives the attorney-client privilege or workproduct protection, the waiver extends to an undisclosed communication or information in a Federal or State proceeding only if (1) the waiver is intentional; (2) the disclosed and undisclosed communications or information concern the same subject matter; and (3) they ought in fairness to be considered together. Fed. R. Evid. Rule 502 (b) Inadvertent Disclosure - When made in a Federal proceeding or to a Federal office or agency, the disclosure does not operate as a waiver in a Federal or State proceeding if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B). Self Help: Former Employees Removing Documents Upon Termination • Pillsbury Madison & Sutro v. Schectman (Cal. App. 1997) - preliminary injunction ordering employees' attorney to return internal documents removed from employer law firm • In re Marketing Investors Corp. (Tex. App. 1998) - trial court abused discretion in not ordering former president of defendant corporation to return documents taken from corporation following his firing and in not disqualifying his counsel who refused to return the documents Self Help: Former Employees Removing Documents Upon Termination • But See: Quinlan v. Curtis-Wright Corp. (N.J. 2010) - copying and dissemination of employer's confidential documents might be "protected activity" under N.J. Law Against Discrimination; multi-factor test including – – – – – how the employee obtained the document what he did with it nature and content of documents the circumstances of disclosure and disruption to employer the employee's reasons for copying document rather than requesting through discovery Ex Parte Communication Rules in Cyberspace To what extent may a lawyer monitor/access a represented party's website, Twitter accounts and social media postings? Or. Ethics Op. No. 2005-164 (2005) - lawyer may access Website of represented opposing party as long as the access is passive or the communication from the lawyer is equivalent to ordering products from a catalog. • NY City Ethics Op. No. 2010-2 (2010) - lawyer may not "friend" represented party under false pretenses) • NY State Ethics Op. No. 843 (2010) (lawyer may access public pages on social media but may not "friend" party directly or indirectly • S.D. Ethics Op. No. 2011-2 (2011)--lawyer may not "friend" upper level employees of a client's former employer where the employer is represented by counsel. Ex Parte Communication Rules in Cyberspace To what extent may a lawyer monitor a represented party's website, Twitter accounts and social media postings? • Pa. Ethics Op. No. 2009-2 (2009)--lawyer may not "friend" represented party to seek information on social media sites. • NY County Ethics Op. No. 743 (2011) --lawyer can monitor juror's publicly available webpages so long as the lawyer does not "friend" the juror, attempt to connect to the juror's linkedin account, subscribe to her Twitter accounts Employee's Privileged Information on Employer-Owned Computers/Laptops Curto v. Medical World Communications, Inc., (E.D. N.Y. 2006) – Former employee did not waive privilege concerning documents allegedly retrieved from employer-owned laptops used by the employee during her employment as a home office • • Employee took reasonable precaution to prevent inadvertent disclosure by sending the emails through her personal AOL account which did not go through the company’s servers; and She attempted to delete the material before turning in the laptop, the volume of material was relatively limited, and the employee promptly requested return of the emails upon notification. Employee's Privileged Information on Employer-Owned omputers/Laptops Scott v. Beth Israel Medical Ctr., (N.Y. Sup. 2007) – Physician email communications with his attorney using hospital's email servers not made in confidence for privilege purposes: • • Hospital's email use policy prohibited personal use of hospital's email system; and Policy reserved hospital's right to monitor, access, disclose and use email communications at any time without notice. Employee's Privileged Information on Employer-Owned Computers/Laptops Employer Policy: – Should provide employees notice that it monitors (or reserves the right to monitor) its electronic equipment, including emails created or stored using company equipment and that employees have no reasonable expectation of privacy in such communications; and – Should emphasize that emails sent through third-party email services are also subject to the policy if the employee uses employer equipment. * But this may not work in New Jersey: See Stengart v. Loving Care Agency, Inc. et al., No. A-3506-08T1 (March 30, 2010). Destruction/Spoliation Issues Leon v. IDX Systems Corp., (9th Cir. 2006) – Ninth Circuit affirmed dismissal and $65,000 sanctions against employee who intentionally deleted over 2200 employment-related files (some of which were likely at the heart of employer's defense) and then wrote a program to write over deleted documents, after he filed his discrimination lawsuit – Employee's misconduct may bar parallel DOL investigation and adjudication of employee's SOX whistleblowing complaint under res judicata; DOL investigation was based on common nucleus of facts and DOL was suing for employee-specific rights of precisely the type that employee had already pursued Examination of "Meta Data" • N.Y. State Ethics Op. No. 749 (2001) and Fla. Ethics Op. No. 06-2 (2006) - Treat confidential information in meta data like "inadvertently" disclosed information-unethical to examine without consent of opposing counsel • ABA Formal Op. No. 06-442 (2006) - Meta data can ethically be viewed by opposing counsel; scrub your data if you don't want it read by opponent – See also N.Y. State Ethics Op. No. 782 (2004) - duty to scrub meta data especially where lawyer knows document is being sent to a tech-savvy opponent. Mitigating Inadvertent Disclosure Risks • • • • • Email: disable auto complete functions/confirm correct name (i.e., Think before hitting "Send") Disclaimer on telecopy and email transmissions instructing recipients in case of erroneous receipt Mark privileged documents as such, including separate pages (not just the first one) Use metadata scrubber for electronic docs; consider PDF or hard copy Document review Dealing with the Media/Public • ABA Model Rule 3.6: Lawyer who has participated in investigation/litigation cannot make extrajudicial statements that lawyer knows/should know will be disseminated to public and have “substantial likelihood of materially prejudicing and adjudicative proceeding in the matter.” Dealing with the Media/Public • Gentile v. Nev. State Bar (US 1991): – Lawyers in pending matters have “special access to information” relating to client’s matter and thus public statements could be perceived as “highly authoritative” – However, Rule 3.6 only applies to statements likely to have a materially prejudicial effect on a pending or future adjudication Response Lawyer As Witness • Is the lawyer a witness? Could they become one due to involvement response? • If so, what are the consequences? – Disqualification of the response lawyer/firm? – Waiver of privilege? Questions?