For The Defense, October 2010 - DRI Today

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G O V E R N M E N T E N F O R C E M E N T A N D C O R P O R AT E C O M P L I A N C Ein upper- level management. You have notonly spent work time with this person, youhosted him on social events for the past20 years. You consider him a friend anda client. Your client’s business is a highlyregulated one. An accident has occurredat your client’s plant and will require aninvestigation of the alleged regulatory violationsand the cause of the accident. It is aCourts will look tosee whether or not areasonable person wouldbelieve that an attorney-client relationship existed.standard case: you have seen similar factsmany times. This particular accident willinvolve safety issues and policies that havebeen put in place by the company, someof which your client contact has had thesupervisory responsibility for implementing.Moreover, you know many of the linesupervisors from your past work.Your firm is retained to represent thecompany in dealing with this matter andsome type of internal investigation willneed to be conducted to determine what ledup to the accident, what caused it, and whois responsible. You have not been retainedto represent individuals, but your first contactis your client contact of more than 20years, who has asked you to get involved onbehalf of the company. You will also havethe line supervisors on the witness interviewlist. The following guidelines mayassist you in conducting the investigation.The PrivilegeThe attorney- client privilege is the oldestof privileges for confidential communications.It must be protected by attorneyson behalf of their clients. United StatesAttorneys’ Manual, Principles of FederalProsecution of Business Organizations,§9-28.000, §9-28.710 (2010).The warnings commonly given during acorporate internal investigation are colloquiallyreferred to as “Corporate Miranda,”66 n For The Defense n October 2010and stem from the Supreme Court’s decisionin Upjohn v. United States, 449 U.S.383 (1981). Upjohn is the foundation ofthe explanation of the corporate attorneyclientprivilege. Prior to Upjohn, somecourts extended the privilege of communicationsbetween an attorney and themembers of the so-called “control group”of the corporation. General Electric Companyv. Kirkpatrick, 312 F.2d 742 (3d Cir.1962). Other courts used the “subject matter”test, which examined the nature of theinformation rather than the identity of thesource. Harper & Row Publishers, Inc. v.Decker, 423 F.2d 487 (7th Cir. 1971).In Upjohn the Supreme Court rejectedthese tests and extended the privilege tolower level employees. The Court foundvalid attorney- client privilege where:(a) communications were made byUpjohn employees;(b) the counsel for Upjohn acting assuch;(c) at the direction of the corporatesuperiors;(d) in order to secure legal advice fromcounsel;(e) concerning matters within the scopeof the employee’s duties; and(f) the employees “were sufficientlyaware that they were being questionedin order that the corporationshould obtain or could obtain legaladvice.”Upjohn, 449 U.S. at 394.Courts will look to see whether or nota reasonable person would believe that anattorney- client relationship existed. In InRe Grand Jury Subpoena: Sealed, 415 F.3d333 (4th Cir. 2005) the court needed todetermine whether or not an employee’sclaim of attorney- client relationship withAmerica Online’s (AOL) corporate counselexisted and if the Upjohn warnings wereadequate. One of the warnings: “We representthe company. These conversationsare privileged, but the privilege belongsto the company and the company decideswhether to waive it. If there is a conflict,the attorney- client privilege belongs to thecompany.” 415 F.3d at 336.The court noted that outside counsel,who conducted the interviews, also mentionedthat counsel “could” represent theemployees as well, as long as no conflictappeared. Though finding that the instructionswere “watered down,” it rejected theemployee’s argument that he could havereasonably believed that an attorney- clientrelationship existed.Ethical ConsiderationsThe ABA Model Rules of Professional Conductwere rendered after Upjohn, andappear to contain language from theUpjohn decision. The Rules provide ethicalguidelines for attorneys dealing with individualswho work for their client’s company.In particular, ABA Rules 1.7, 1.13(f),4.2, and 4.3 directly address this matter.Rule 1.7 prohibits a corporation’s attorneyfrom representing any other clientwhose representation would create a concurrentconflict of interest. Such conflict occurswhen, “the representation of one clientwill be directly adverse to another client; orthere is a significant risk that the representationof one or more clients will be materiallylimited by the lawyer’s responsibilitiesto another client, a former client or a thirdperson or by a personal interest of the lawyer.”Model Rules of Prof’l Conduct R.1.7. Simply put, an attorney may not jettisona client in favor of another. In re Grand JurySubpoena, 415 F.3d 333, 340 (4th Cir. 2005).Rule 1.7 does not completely forbidattorneys from representing clients withconflicting interests. Part (b) of the ruleallows for such representation if:(1) the lawyer reasonably believes thatthe lawyer will be able to providecompetent and diligent representationto each affected client;(2) the representation is not prohibitedby law;(3) the representation does not involvethe assertion of a claim by one clientagainst another client representedby the lawyer in the same litigationor other proceeding before a tribunal;and(4) each affected client gives informedconsent, confirmed in writing.Model Rules of Prof’l Conduct R. 1.7.In comments to the rule, the ABAimplied that courts should be stringent infinding any exceptions to it. The commentsstate that “informed consent” requires thatattorneys make their clients aware of anyand all ways that the conflict could affecttheir ability to represent them. ModelRules of Prof’l Conduct R. 1.7 cmt. In
Sharp v. Next Entm’t Inc., 163 Cal. App.4th 410, 430 (Cal. Ct. App. 2008), the courtfound that this meant a client had to consent,“On the basis of adequate knowledgeof the facts and an awareness of the consequencesof the decision.” Additionally, theconsent has to be in writing and may berevoked at any time by the client.Often mentioned in conjunction withRule 1.7, Rule 1.13(f) deals with situationsin which an attorney is dealing with amember of an organization that the attorneyrepresents. The rule provides, “Indealing with an organization’s directors,officers, employees, members, shareholdersor other constituents, a lawyer shall explainthe identity of the client when the lawyerknows or reasonably should know that theorganization’s interests are adverse to thoseof the constituents with whom the lawyeris dealing.” Model Rules of Prof’l ConductR. 1.13 (f). The language of 1.13(f)illustrates the ABA belief that a corporationis a lawyer’s sole client, despite the factthat a corporation is comprised of a groupof individuals. Professional Service Industries,Inc. v. Kimbrell, 758 F. Supp. 676, 681(D. Kan. 1991).As mentioned earlier, issues often arisein ascertaining the identity of a client inthe corporate context given that a corporationis an object. Therefore, it is essentialto apply the appropriate test for determiningwhether an agent of a corporation qualifiesas a client in order to provide properwarnings to those who do not. Upjohnaddresses this issue and clearly lays outthe procedure.Rule 4.3 places restrictions on an attorney’scommunications with a corporation’sunrepresented employees. It requiresan attorney to disclose his or her role andrepresentative capacity to the unrepresentedperson and to let him or her knowthat the attorney is not disinterested. In reEnvironmental Insurance Declaratory JudgmentAction, 252 N.J. Super. 510, 600 A.2d165, 170–77 (Law Div. 1991). The purposeof the rule is to ensure that attorneys don’texploit unrepresented employees, causingthem to make ill informed admissions.Again, Upjohn and post- Upjohn decisionsmake the procedure clear. The intervieweesmust be told who you represent, thatyou do not represent them, and you cannotthen engage in legal advice once theinterviewees know that you do not representthem, except insofar as you may tellthem that they have a right to obtain theirown counsel. This is not to say that a jointrepresentation cannot take place; but if it isIs yourcoveragesomehowless than youexpected?Take a closerlook at Catlin.done, everyone must be made aware, preferablyin writing, of the ramifications ofjoint representation.Violations of the aforementioned rulescan lead to significant sanctions. An oppos-As a lawyer, you understand your clients’ needs and you work diligently on theirbehalf. You also understand that your work carries serious risks that could affectyou both personally and professionally.In response to your needs Willis Programs and Catlin are offering LawyerGuard,one of the broadest lawyers’ professional liability policy forms on the market today.This program evolved from over 20 years of experience with defense attorneys andis the only lawyers’ professional liability program offered to DRI members. Defensefirms, in particular, are eligible for special coverage enhancements and price creditsthrough this program.With LawyerGuard you can have the most comprehensive coverage available.Why take the risk with any other insurance policy?LawyerGuard Your Best DefenseInsurance products offered by Catlin Insurance Company, Inc.Have your broker request a quote from LawyerGuard today!www.lawyerguard.comFor The Defense n October 2010 n 67
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