For The Defense, October 2010 - DRI Today

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 EAttorneys must be carefulto check their own states’rules before dealing withtheir clients’ employees.ing attorney has the authority to make amotion for disqualification of counsel orfor sanctions when he or she believes thathis or her opponent has committed ethicalviolations. If a court finds an ethical violation,it may disqualify the attorney (and hisor her firm) from participating in the case,exclude the improperly obtained information,or prohibit any further ex parte contact.Many courts have been cautious todisqualify a party’s counsel for minor violationsdue to the delay and unfairness tothe attorney’s client that it would cause. Bycontrast, motions to suppress evidence andprohibit contact have been freely granted.Id. at 113. McCallum v. CSX Transp. Inc.,149 F.R.D. 104, 113 (M.D. N.C. 1993).It is important to note that these rulesdo not cover all situations in which a judgemight deem an attorney’s actions in relationto attorney- client privilege unethical.Also, some states have their own ethicsrules. Therefore, attorneys must be carefulto check their own states’ rules before dealingwith their clients’ employees.Applications to Real WorldToday’s legal environment is highly regulated.The current administration has madeclear that health care, energy, environmental,financial and other industries will beunder increased scrutiny. It is thereforelikely that internal investigations by lawyerswill become more common. The disclosureof internal investigation results,including witness statements and the identificationof “culprits” will likely be consideredbecause these actions are part of thegovernment’s cooperation analysis. SeeMemorandum from Deputy Attorney PaulJ. McNulty, Re: Principles of Federal Prosecutionof Business Organizations (December12, 2006); United States Attorneys’Manual, Principles of Federal Prosecution68 n For The Defense n October 2010of Business Organizations §9-28.720 (2010).While the Department of Justice’s positionis that the waiver of an attorney- client privilegeis not a prerequisite to cooperation,it would be foolish to believe that it wouldnot become at least a discussion issue inevery serious internal investigation involvingpotential criminal charges. When oneconsiders that individuals, and not corporations,go to jail, the interest of the individualin keeping information provided tocompany lawyers confidential is obvious.A scenario similar to the one identifiedin the beginning of this article playedout quite poorly in U.S. v. Henry T. Nicholas,et al., 606 F. Supp. 2d 1109 (C.D. Cal.2009), rev’d on other grounds, sub. nom.U.S. v. Ruehle, 583 F.3d 600 (9th Cir. 2009).In Nicholas, outside counsel for Broadcominvestigated allegations of illegal stockoptions and back- dating. Counsel interviewedthe company’s chief financial officer,Ruehle. Information obtained duringthe interview process was later disclosedto the government. The CFO objected onthe grounds of attorney- client privilegeand that the disclosure was unauthorizedand should be suppressed. The districtcourt found in favor of the CFO andordered the suppression of the statements,in part because the court found that theCFO had been represented by the same lawfirm in his personal capacity. The districtcourt further found the oral Upjohn warningsto be insufficient. The court noted thatthe warnings were not part of the lawyer’snotes and no written records of the warningsexisted. Nicholas, 606 F. Supp. 2d at1116. The Ninth Circuit reversed the districtcourt, but left in place the factual findingsthat the Upjohn warnings had not beengiven. The Ninth Circuit, notwithstandingits refusal to disturb the Upjohn warningfinding, found that the CFO understoodthat the communication with the law firmwas not confidential. Ruehle, 583 F.3d at612.Given the guidelines, what do you dowith your client contact who has hired youto investigate the accident? First, your contactmust understand that you will be representingthe company and not him. Theissue over the scope of one’s representationoften arises among even the most sophisticatedbusiness people. See United States v.Stein, 463 F. Supp. 2d 459 (S.D.N.Y. 2006).There is a reasonable potential for conflictbecause his actions are arguably at issue.Second, you interview him as you wouldthe others, and in a manner that protectsthe privilege for your client and complieswith your professional rules of conduct.A failure to follow the proper game planin employee interviews leads to very practicalproblems. Perhaps the most problematicis that an attorney may unknowinglycreate an attorney- client relationship withtheir client’s employees. If that relationshipis adverse to the one with the corporationhe or she represents, it creates aconflict of interest, and the attorney wouldbe required to withdraw his or her representationof both parties. See In re GrandJury Subpoena: Under Seal, 415 F.3d 333,340 (4th Cir. 2005).In civil trials, a conflict of interest cansometimes be waived, even if it appears tobe against a party’s best interest. In criminaltrials, however, a judge will strictlyscrutinize a defendant’s decision to waivethe conflict before granting the waiver,due to the special interests at stake. Wheatv. United States, 486 U.S. 153, 160 (1988).In making this determination the courtwill first determine whether the conflictwill prevent the defendant from having aneffective advocate and then decide whetherthe public interest would be served betterby the attorney’s dismissal. If the conflictappears too great, counsel may be dismissedand recommended for sanctions.In addition to breach of confidentiality andconflict of interest issues, the newly createdattorney- client relationship could meanthat disclosures made by an employee constituteadmissions on the part of a corporation.McCallum, 149 F.R.D. 104 at 111.Practical GuidelinesWhether or not a criminal investigationis the primary purpose of questioningthe employees of your client, care shouldalways be taken to make sure that everyoneknows exactly where the attorney- clientprivilege stands and who is the client. Thereare many instances in which a seeminglystraightforward civil matter regarding aviolation of some regulations turns intosomething much more serious down theroad. If the investigation did not includeappropriate warnings to those being inter-Miranda, continued on page 82