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    A Year of Living Ethically: Lessons in Professional Responsibility Brought to You By Corporate Counsel in the News (2012-2013) A Year of Living Ethically: Lessons in Professional Responsibility Brought to You By Corporate Counsel in the News (2012-2013) Presentation Transcript

    • A Year of Living Ethically: Lessons in Professional Responsibility Brought to You By Corporate Counsel in the News (2012-2013) CLE Seminar for In-House Counsel May 20, 2014 Kansas City, MO John C. Koski Partner, Chicago Dentons +1 312 876 3161 john.koski@dentons.com
    • Agenda May 20, 2014 2 • Inside Counsel Under Scrutiny • Relationships with Bar and Client • Conflicts • Duties to Organizations • Whistleblowers and Confidences • Litigation Support • Privilege and Waiver • Advising Boards and Committees • Outside Counsel and Former Clients
    • Ethics Rules at Issue May 20, 2014 3 • 1.5 • 1.6 • 1.7 • 1.8 • 1.9 • 1.13 • 3.3 • 3.4 • 5.5 • 8.1 • 8.4
    • Ethics Rules at Issue May 20, 2014 4 • 1.5, Fees • 1.6, Confidentiality of Information • 1.7, Conflict of Interest: Current Clients • 1.8, Conflict of Interest: Current Clients: Specific Rules • 1.9, Duties to Former Clients • 1.13, Organization as Client • 3.3, Candor toward the Tribunal • 3.4, Fairness to Opposing Party and Counsel • 5.5, Unauthorized Practice of Law • 8.1, Bar Admission and Disciplinary Matters • 8.4, Misconduct
    • Caveats May 20, 2014 5
    • Caveats May 20, 2014 6
    • Caveats May 20, 2014 7
    • Inside Counsel Under Scrutiny May 20, 2014 8
    • Inside Counsel's Relationship with the Bar May 20, 2014 9 Rule 5.5(a): A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so. Rule 8.1: [A] lawyer in connection with a … disciplinary matter, shall not … knowingly fail to respond to a lawful demand for information from an admissions or disciplinary authority . . . .
    • Inside Counsel's Relationship with the Bar May 20, 2014 10 • In re Gustafson, 464 Mass. 1021 (4/16/13) • Counsel changed jobs, but failed to notify Bar. • For perhaps related reasons, counsel failed to pay fees. • Administratively suspended, but did not comply with reinstatement rules. • Counsel got a new job, requested reinstatement, wrote check. • Bar returned check as insufficient, and took view she was still suspended. • Counsel continued to work, but failed to respond to complaint and subpoena. • She attended hearing, but then failed to return paperwork. • Initial Hearing: Suspended for six months • Mass. Supreme Court: Affirmed.
    • Inside Counsel's Relationship with the Bar May 20, 2014 11 • Disciplinary Counsel v. Troller, 2014-Ohio-60 (1/14/14) • David Troller admitted to practice in 1984 • Goes to work for Clopay as Senior Corporate Counsel in 1999 • From 2002 to 2012, Troller is CLR and Secretary of Clopay • Failure to register for 2005-07 period • Suspended from providing legal advice by order of December 2005 • Second suspension for failure to meet CLE requirements in May 2006 • Since then, by admission, Troller engaged in the practice of law: • Working with outside counsel on litigation matters; • Negotiating and drafting contracts; • Advising HR regarding termination of employees • He cooperated with investigation. • Result: Suspended for two years from practice, with six months stayed on conditions
    • Inside Counsel's Relationship with the Client May 20, 2014 12 Rule 1.8(a): A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless …. Rule 1.5(b): The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate.
    • Inside Counsel's Relationship with the Client May 20, 2014 13 • Gurvey v. Legend Films, Inc., 2012 WL 4061773 (S.D. Cal. 9/14/12) • Lawyer sought to enforce employment agreement to become company GC, claiming salary, benefits, and ownership interest • Written contract claim rejected on several grounds, including lack of signed agreement, failure of meeting of minds, and statute of limitations • Moreover: "The Rules of Professional Conduct in California, New Jersey and New York all require Plaintiff to advise Legend to seek independent counsel before entering into a business transaction with them whereby she would acquire an ownership interest in the company. Plaintiff was also required to obtain Legend's written consent to any arrangement resulting in her having an ownership interest in the company." • No signed writing between parties; no written advice to seek counsel. Rule 1.8. • Also, no written disclosure of the basis, rate and fees. Rule 1.5.
    • Inside Counsel Conflicts May 20, 2014 14 Rule 1.7(a): [A] lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. Rule 1.13(g): A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. Rule 1.13, Comment [10]: There are times when the organization's interest may be or become adverse to those of one or more of its constituents. In such circumstances the lawyer should advise any constituent, whose interest the lawyer finds adverse to that of the organization of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent, and that such person may wish to obtain independent representation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged.
    • Inside Counsel Conflicts May 20, 2014 15 • Yanez v. Plummer, 221 Cal. App. 4th 180 (3d Dist. 11/5/13) • UP employees Michael Yanez and Robert Garcia were working together, when Garcia was injured. • Yanez gives two sworn statements, and is later deposed in Garcia's claim. • At Yanez's deposition, UP Inside Counsel Brian Plummer represents both UP and Yanez. • Garcia's counsel "elicited from Yanez that Yanez had not 'witness[ed] Garcia's accident,' but was aware of it shortly after it happened."
    • Inside Counsel Conflicts May 20, 2014 16 • Yanez v. Plummer, 221 Cal. App. 4th 180 (3d Dist. 11/5/13) • "Plummer then questioned Yanez. After highlighting Union Pacific's 'total safety culture' and trying to distance Union Pacific management from allegedly unsafe conditions, Plummer confirmed it was Yanez's 'testimony today . . . that [he] didn't see [Garcia] slip,' that '[i]t wasn't within [Yanez's] line of sight.' Then Plummer turned to Yanez's written witness statements. Plummer, however, at the deposition, only marked as an exhibit, and emphasized, Yanez's second statement ('I saw Boby slip & fall down on oil soaked floor' [italics added]). In passing and without any followup from Plummer, Yanez mentioned he “had worded [his second statement] wrong.” • Yanez later investigated by UP. At disciplinary hearing, Yanez claimed he wrote second statement in haste and should have said: "I saw that Bobby had slipped and fell down…." • Yanez terminated.
    • Inside Counsel Conflicts May 20, 2014 17 • Yanez v. Plummer, 221 Cal. App. 4th 180 (3d Dist. 11/5/13) • Yanez sued UP for wrongful discharge, and sued Plummer for legal malpractice, breach of fiduciary duty, and fraud. • Appellate court reversed summary judgment in Plummer's favor, finding triable issues of fact. • Appellate court started with the fact that there was a conflict in the underlying Garcia matter: "Yanez—working with Garcia when Garcia was injured, and the only percipient witness to Garcia's accident—was aware of several unsafe work conditions that may have contributed to Garcia‟s injury." • "Prior to being deposed, Yanez expressed to Plummer his concern about how this state of affairs would affect his job, and Yanez asked Plummer who would 'protect' him at the deposition."
    • Inside Counsel Conflicts May 20, 2014 18 • Yanez v. Plummer, 221 Cal. App. 4th 180 (3d Dist. 11/5/13) • Plummer's conduct at the deposition came in for even more criticism: "it was Plummer who highlighted Yanez's deposition testimony that he did not 'see' Garcia slip; it was Plummer who presented the second statement at the deposition; it was Plummer who got Yanez, under oath at the deposition, to effectively admit that his deposition testimony conflicted with the second statement; it was Plummer who did not offer Yanez a chance to explain this discrepancy; and it was Plummer who failed to present the first statement as an exhibit at Yanez's deposition."
    • Duties to Organizations May 20, 2014 19 Rule 1.13: (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. (b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the organization as determined by applicable law.
    • Duties to Organizations May 20, 2014 20 • D'Andrea v. Epstein, Becker et al., 2013 WL 5861506 (Tex. App. 14th Dist. 10/31/13) • Inside GC Kirk Kennedy retains Epstein, Becker law firm on behalf of Gulf Coast entities. • Requests a memo "to apprise the … President and Board … as to Gulf Coast's potential exposure … arising from Dr. D'Andrea's alleged misconduct." • Outside counsel dealt exclusively with Kennedy, and performed no independent investigation. "As work on the memo progressed, the firm received indications that Kennedy would use the memo in memo in litigation against Gulf Coast. For example, Kennedy specifically asked that the firm's memo inform Gulf Coast's president about a statute making it illegal to fire whistleblowers. Notwithstanding the indications that Kennedy was adverse to its actual client, Gulf Coast, the firm emailed the memo to Kennedy. It also sent a copy to the president of Gulf Coast. Kennedy received the memo the day after Gulf Coast fired him for theft."
    • Duties to Organizations May 20, 2014 21 • D'Andrea v. Epstein, Becker et al., 2013 WL 5861506 (Tex. App. 14th Dist. 10/31/13) • Gulf Coast and D'Andrea sued firm for negligence, breach of fiduciary duty, intentional tort, and fraud. • Trial court granted firm's motion for summary judgment. Rev'd on appeal. • As to D'Andrea, appellate court found that the firm represented him individually in a separate matter, and there was a question of fact as to whether work on the memo breached a fiduciary duty. • As to Gulf Coast, the appellate court found "evidence that a reasonably prudent attorney would carefully consider not opinion in writing upon allegations like Kennedy's because the writing could later be used against the attorney's client" and that the GC's "own actions raise a fact issue regarding whether his use of the memo against Gulf Coast was foreseeable."
    • Whistleblowers and Confidences May 20, 2014 22 Rule 1.6(b): A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary … (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services ….
    • Whistleblowers and Confidences May 20, 2014 23 • US v. Quest Diagnostics, Inc., 734 F.3d 154 (2d Cir. 10/25/13) • From 1992-2000, Mark Bibi was the sole inhouse lawyer GC to Unliab (later acquired by Quest Diagnostics). • Between 1993 and 1996, concerns were raised about whether the company's pricing practices violated the Anti-Kickback Statute ("AKS"). • In 1999, more concerns raised, and Bibi obtained opinion letter from outside firm. • FLPA was formed in 2005, by Bibi and two other former Unilab executives to pursue qui tam litigation. • FLPA's qui tam suit alleged that Unilab and Quest violated the Anti-Kickback Statute "[f]rom at least 1996 through at least 2005." • Suite filed in 2005; some discovery allowed re Bibi's conduct; complaint dismissed in 2011.
    • Whistleblowers and Confidences May 20, 2014 24 • US v. Quest Diagnostics, Inc., 734 F.3d 154 (2d Cir. 10/25/13) • The False Claims Act does not preempt state ethics rules. • Bibi violated Rule 1.9(c) by disclosing client confidential information • Bibi disclosed more information than "Necessary" under Rule 1.6(b) • It was not an abuse of discretion to dismiss the complaint, disqualifying the plaintiff and plaintiff's counsel. • New York County Lawyers Ass's Commission on Professional Ethics Opinion No. 746 (10/7/13)
    • Inside Counsel Litigation Support May 20, 2014 25 Rule 3.3(a): A lawyer shall not knowingly … make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer. Rule 3.4(a): A lawyer shall not … unlawfully obstruct another party' s access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act. Rule 8.4(d): It is professional misconduct for a lawyer to … engage in conduct that is prejudicial to the administration of justice.
    • Inside Counsel Litigation Support May 20, 2014 26 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • 2002: Frisby and others leave Eaton to form Frisby Aeronautics • November 2002: Eaton learns from Milan Georgeff that Frisby has Eaton material. • January 2003: Eaton and Georgeff enter into a "consulting agreement." • Jan. 2004: Following Eaton's report, FBI raids Frisby's offices, finding 16,000 pages of "technical data" taken from Eaton. • July 2004: Eaton sues Frisby and former employees, claiming theft of trade secrets. • February 2005: Eaton responds to discovery requesting information about an agreement between Eaton and Georgeff. Eaton responds that there is "no employment, consulting or other agreement with Mr. Georgeff." Frisby demands for the agreement follow.
    • Inside Counsel Litigation Support May 20, 2014 27 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • November 2005: Frisby gets a copy of the Georgeff-Eaton agreement in another lawsuit (this one, a dispute between Georgeff and Frisby). • January 2006: Frisby moves to dismiss and for sanctions based on Eaton's compensation of fact-witness Georgeff. Court refers motion to Special Master Jack Dubar. • March 2006: Special Master rejects Eaton's joint-defense argument. • June 2006: Special Master finds that Eaton "did not fairly or adequately identify the existence of the consulting agreement and other documents." • December 2006: Special Master issues supplement report, finding Eaton's answers were "truly false" and an "intentional effort to mislead."
    • Inside Counsel Litigation Support May 20, 2014 28 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • December 2006: Eaton hires attorney Edward Peters, described in an email from outside counsel as "the one person who is the closest possible associate of Judge DeLaughter." Peters begins work, but never enters an appearance. • April 2007: Judge DeLaughter denies motion to dismiss, but assesses discovery sanctions. • October 2007: Judge DeLaughter removes Special Master Dunbar, appointing Larry Latham. • December 2007: FBI investigating Richard Scruggs, evidence suggests Scruggs used Peters to influence DeLaughter in another case. • January 2008: Judge DeLaughter recuses himself. New Special Master Latham reports that Peters may have had ex parte communications with DeLaughter.
    • Inside Counsel Litigation Support May 20, 2014 29 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • April 2008: With Judge DeLaughter's rulings stayed, new Judge Yerger appoints another Special Master, David Dogan. • May 2008: Special Master Dogan issues new report, finding Judge DeLaughter was wrong to reject prior Special Master Dunbar's factual findings, and recommending sanctions. • August 2008 to January 2010: Hearings and Reports, with Special Master recommending and Judge Yerger ordering Eaton and counsel being jointly and severally liable to Frisby in the amount of $1,560,642.83. • June 2008 to November 2009: Discovery on ex parte communications. • November 2009: Frisby files renewed motion to dismiss. • December 2010: Judge Yerger grants motion. • Appeals follow.
    • Inside Counsel Litigation Support May 20, 2014 30 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • Discovery rulings are reviewed on abuse of discretion. • "[W]e reject Eaton's contention that it should not be held responsible for facts that were in outside counsel's hands and for trusting counsel to decide the necessity and manner of disclosure. To say that Eaton was a hapless client in this instance foes beyond the realm of logic and credulity. According to the record, the consulting agreement was executed on January 28, 2003, with the knowledge and approval of Leo and a number of other Eaton in-house lawyers. As Dunbar found, Eaton had made payments to Georgeoff …. Eaton inhouse counsel Sharon O'Flaherty approved these payments. And the record is replete with revelations that these same individuals knew (or most certainly should have known) about "Interrogatory No. 3" and [outside counsel's] response to it, long before Frisby obtained a copy …."
    • Inside Counsel Litigation Support May 20, 2014 31 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • "Even after [an associate at Eaton's outside counsel] made it clear in email s to the other Eaton lawyers the consulting lawyers the consulting agreement and related documents had not been identified or produced, Eaton's lawyer's took no corrective action. As Dunbar concluded: 'If these failures of document production and/or identification has been the result of inadvertence or oversight, upon receipt of this … we would expect [the other Eaton lawyers, including inhouse lawyers] to immediately drop everything, contact the defendants, acknowledge the oversight, and apologize with assurances of an immediate supplemental response to the flawed discovery responses. But they did nothing."
    • Inside Counsel Litigation Support May 20, 2014 32 • Eaton Corp. v. Frisby, 2013 WL 6115803 (Miss. 11/21/13) • The Mississippi Supreme Court also affirmed the dismissal with prejudice, noting trial court's findings that: • Eaton and its counsel were aware of and, in fact, sanctioned Peters' clandestine actions; • Red flags were flying throughout Peters' surreptitious and improper involvement; • Eaton and its counsel were aware of and in fact sanctioned Peters' clandestine actions for Eaton's benefit; • Eaton, through its counsel, basically turned Peters loose, without an appearance by Peters in the case, to play a fast and loose rule, initiating ex parte contacts for the benefit of Eaton; • Eaton and its counsel knew of serious improprieties occurring on its behalf and stood by with blind eyes. • Eaton improperly kept Peters hidden to avoid disqualification fight. • Eaton's internal counsel knew Peters was working the court • Eaton's counsel agreed to a contingency fee arrangement, w/o time records, which was itself was never reduced to writing. • Peters admitted improper contacts.
    • Inside Counsel Litigation Support May 20, 2014 33 • O'Flaherty v. Eaton Corp., CV 13 812107 (Cuyahoga County, Ohio) • May 2012: Eaton fires O'Flaherty, claiming "to help restore the integrity of Eaton's processes and commitment to excellence." • O'Flaherty claims that she, "unlike others in the Eaton legal department, has preserved damaging evidence and attempted to comply with the orders of the Mississippi Court." • O'Flaherty details her efforts to gather documents, what others did in the law department, the subsequent investigation by outside counsel, and her termination. • Also asserts claims against Eaton individuals and Latham & Watkins, on theories of civil conspiracy, tortious interference, false light invasion of privacy,
    • Inside Counsel Privilege and Waiver May 20, 2014 34 Rule 1.6, Comment [3]: The principle of client-lawyer confidentiality is given effect by related bodies of law: the attorney-client privilege, the work product doctrine and the rule of confidentiality established in professional ethics. The attorney-client privilege and work product doctrine apply in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client. The rule of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law.
    • Inside Counsel Privilege and Waiver May 20, 2014 35 • Hedden v. Kean University, 2013 WL 5745201 (N.J. App. Div. 10/24/13) • Coach Sharp sends email to University GC Michael Tripodi, attaching fund-raising letter. • Coach Sharp later discloses letter in connection with NCAA investigation. • Athletic Director Glenn Hedden terminated, and demands production of letter. • GC Tripodi says "employees at the direction of those in the management ranks often come to me for the purpose of obtaining legal advice on various matters concerning the University." • Appellate Court agrees that Sharp intended to seek legal advice; but found that Sharp's disclosure was unauthorized and should not constitute a waiver. • "Sharp does not fit within this category as she was neither a director nor an officer of the University, nor did she serve in a management capacity. Moreover, Sharp was not acting under the direction of the University when she released the document to the NCAA…. Thus, Sharp was not the holder of the attorney-client privilege, it was not hers to waive." • "The fact that the University did not voice an objection at the time or take affirmative steps to reverse Sharp's unilateral action does not defeat assertion of the privilege by its true holder."
    • Inside Counsel Privilege and Waiver May 20, 2014 36 • Center Partners v. Growth Head GP, LLP, 2012 IL 113107 (11/29/12) • In 2002, defendants Westfield, Rouse, and Simon bought real estate assets from Rodamco. • "During the course of negotiations leading up to the purchase of Rodamco, defendants discussed legal issues in negotiating the transaction's terms. They also disclose to each other some of their attorneys' views about the legal implications of the transactions, the legal importance of the documents under negotiation, and the rights and obligations of the parties to the transaction. Defendants also shared with one another some documents that concerned the legal and financial terms of the transaction." • In 2004, plaintiffs filed suit alleged breach of contractual and fiduciary duties. • In April 2010, plaintiffs moved to compel production of documents relating to the legal advice at issue in the 2002 negotiations. • "[S]ubject matter waiver does not apply to disclosures made in an extrajudiial context when those disclosures are not thereafter used by the client to gain a tactical advantage in litigation."
    • Inside Counsel Privilege and Waiver May 20, 2014 37 • Center Partners v. Growth Head GP, LLP, 2012 IL 113107 (11/29/12) • Motion to compel granted; defendants refused; "friendly contempt"; appeal. • Appellate Court affirmed: "we find no reason to distinguish between a waiver occurring during the course of litigating or during a business negotiation." • Illinois Supreme Court reversed: "[S]ubject matter waiver does not apply to disclosures made in an extrajudicial context when those disclosures are not thereafter used by the client to gain a tactical advantage in litigation." • General Rules: • Attorney-Client communications are privileged, unless waived. • Client disclosure is inconsistent with policy of facilitating a confidential relationship. • Client's offer of his or the attorney's testimony about a specific communication is waiver as to all other communications to the attorney on the same subject matter; Client's offer of a part of any communication is waiver of the whole of the communication. • Subject matter waiver rule prevents selective disclosure of favorable material while sequestering the unfavorable; the sword and the shield. • No party found any Illinois case where subject matter waiver doctrine was applied in an "extrajudicial setting."
    • Inside Counsel Privilege and Waiver May 20, 2014 38 • Center Partners v. Growth Head GP, LLP, 2012 IL 113107 (11/29/12) • No Illinois case where subject matter waiver doctrine was applied in an "extrajudicial setting." • Court found other cases: In re Von Bulow, 828 F.2d 94 (2d Cir. 1987) (Dershowitz's disclosures in "Reversal of Fortune" did not waive privilege as to undisclosed portions of communications not used by client in litigation) and In re Keeper of Records, 348 F.3d 16 (1st Cir. 2003) (corporate counsel gave advice to client in presence of joint-venturer during conference call about what to do on product recall; but such communication did not waive subject matter privilege as to all other advice on same subject). • Court also noted impact of a broader waiver rules on business transactions, favorably citing Hewlett Packard Co. v. Bausch & Lomb Inc., 115 F.R.D. 308 (N.D. Cal 1987) (common interest doctrine applied to sharing of legal opinion; "This policy lubricates business deals and encourages more openness in transactions of this nature.").
    • The "E" in Email Stands for . . . May 20, 2014 39
    • The "E" in Email Stands for . . . May 20, 2014 40
    • The "E" in Email Stands for . . . May 20, 2014 41
    • The "E" in Email Stands for . . . May 20, 2014 42
    • The "E" in Email Stands for . . . May 20, 2014 43
    • The "E" in Email Stands for . . . May 20, 2014 44
    • The "E" in Email Stands for . . . May 20, 2014 45
    • The "E" in Email Stands for . . . May 20, 2014 46
    • The "E" in Email Stands for . . . May 20, 2014 47 • RPC 1.2(d) Minimum • The Dick Cheney Test • The Angry Prosecutor Test • Ending the Death Spiral: C'mon guys . . . . • Email, Culture, and Site-Selection Reports
    • The "E" in Email Stands for . . . May 20, 2014 48
    • The "E" in Email Stands for . . . May 20, 2014 49
    • The "E" in Email Stands for . . . May 20, 2014 50
    • The "E" in Email Stands for . . . May 20, 2014 51
    • The "E" in Email Stands for . . . May 20, 2014 52
    • The "E" in Email Stands for . . . May 20, 2014 53
    • Advising Boards and Committees May 20, 2014 54 • How is representing a Board or a Committee of a Board different than representing the Company? • To whom are duties owed? • Who holds the privilege? • How can privilege be waived? • Who can pierce privilege?
    • Advising Boards and Committees May 20, 2014 55 • Kirshchner v. K&L Gates LLP, 46 A.3d 737 (Pa. Super. 5/14/12) • August 13, 2003: E&Y conducting audit; met with senior financial types • August 14, 2003: CFO and others resign • August 22, 2003: E&Y requested company hire "independent legal counsel" • August 26, 2003: Full Board appointed Special Committee "to conduct an investigation into the reasons underlying the resignations of the Senior Financial Managers" and authorized Committee to "provide findings and recommendations to the Board of Directors as a result of such investigations" • August 28, 2003: Three-Member Special Committee met, retained firm • August 28, 2003: Firm Engagement Letter: "You have asked us to represent the Special Committee …."
    • Advising Boards and Committees May 20, 2014 56 • Kirshchner v. K&L Gates LLP, 46 A.3d 737 (Pa. Super. 5/14/12) • August 28, 2003: Firm Engagement Letter: "You have asked us to represent the Special Committee …. We understand that we are being engaged to act as counsel for the special committee and for no other individual or entity, including the Company or any affiliated entity … The attorney-client relationship with respect to our work, including our work product, shall belong to the Committee. Only the Committee can waive any privilege relating to such work." • September 12, 2013: Firm retains PWC. PWC Engagement Letter provides: "P&W shall provide general consulting, financial accounting, and investigative or other advice as requested by K&L to assist it in rendering legal advice to Le- Nature's." • November 25, 2003: K&L provided draft to CEO, not a member of Committee. • December 5, 2003: K&L provided draft to Special Committee • No evidence of fraud or malfeasance with respect to any of the transactions investigated • No evidence that transactions listed by senior financial staff as being of concern
    • Advising Boards and Committees May 20, 2014 57 • Kirshchner v. K&L Gates LLP, 46 A.3d 737 (Pa. Super. 5/14/12) • 2004 to 2006: Alleged fraudulent schemes • May 2006: Minority shareholders bring injunction action in Del. Ch. • Sept. 2006: IPO Planning • October 19, 2006: New concern raised • October 27, 2006: Del. Ch. appoints custodian • November 1, 2006: Custodian files affidavit describing fraud • November 1, 2006: Creditors file involuntary BK • September 9, 2009: Trustee files complaint against K&L Gates • December 28, 2010: Trial court dismisses complaint
    • Advising Boards and Committees May 20, 2014 58 • Kirshchner v. K&L Gates LLP, 46 A.3d 737 (Pa. Super. 5/14/12) • Even though engagement letter was with Committee, PA courts recognize implied attorney-client relationship in certain circumstances • Company, acting through its Board and Board's Special Committee, ultimately sought and received K&L's advice, and "reasonably believed" firm was acting in Company's interest. • Committee had fiduciary duty to act in best interests of Company as a whole. • Resolution authorized Committee to conduct investigation "on behalf of the company." • PA Supreme Court declines review, 65 A.3d 414 (4/24/13).
    • Advising Boards and Committees May 20, 2014 59 • Washington Bancorp. v. Said, 1989 WL 946533 (D.D.C. 5/10/89) • Minority Board Members disclose intent to seek resignation of Chairman. • Board forms Special Committee to advise, which retains counsel. • Waiver by Disclosure to Board: No. "The report by [Special Committee's] counsel to the full WBC board regarding the Special Committee's activities could not constitute a waiver to the extent that factual disclosures were made to that board, since the WBC board members are sufficiently high-ranking officers of the same corporate client"). • Waiver by Disclosure to Media: No. "The information offered to the media was sparse at best, and contained pose [sic] conclusions rather than any significant factual material." • Good Cause: Applied Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970), but found no good cause shown.
    • Advising Boards and Committees May 20, 2014 60 • In re BCE West, 2000 WL 1239117 (S.D.N.Y. 8/31/00) • Boston Chicken formed Special Committee to investigate acquisition. • Resolutions allowed Committee to retain counsel. • Company later goes into BK. • Trustee subpoenaed counsel. • Law firm objected.
    • Advising Boards and Committees May 20, 2014 61 • In re BCE West, 2000 WL 1239117 (S.D.N.Y. 8/31/00) • "Here, the board resolutions expressly provided that the Special Committee could retain counsel independent form the counsel representing the Board of Directors and its management. Sherman & Sterling at no time provided counsel to the general Board of Directors and its management. It is counterintuitive to think that while the Board permitted the Special Committee to retain its own counsel, the Special Committee would not have the benefit of the attorney-client privilege inherent in that relationship or that the Board of Directors of management, instead of the Special Committee, would have control of such privilege." • Waiver by Disclosure to Board: No. "To the extent that Sherman & Sterling had communications with the Board of Directors and management, as evidenced by the exhibits attached to the parties papers, the Court finds that such communications did not destroy of waive the Special Committee's attorney-client privilege."
    • Advising Boards and Committees May 20, 2014 62 • In re OM Group Secs. Litig., 226 FRD 579 (N.D. Ohio 2005) • Shareholders filed action against OM Group, alleging accounting improprieties. • SEC Division of Corporate Finance inquiries into OM Group's Financial Statements. • Audit Committee retains counsel. • Mid-investigation, Weil Gotshal and accounting advisors brief Board, using PowerPoint. • In discovery, PowerPoint is produced, but not underlying documents.
    • Advising Boards and Committees May 20, 2014 63 • In re OM Group Secs. Litig., 226 FRD 579 (N.D. Ohio 2005) • Waiver by Disclosure to Board: Yes. "These documents were not brief or cryptic summaries; nor did they merely acknowledge the existence of an investigation. These documents contained significant disclosures…. By way of example, it described the reason for the origination of the Audit Committee's inventory review, directly quoted concerns and observations about the inventory set forth in e-mails by identified individuals, summarized the content of specific e-mails, identified more than ten persons interviewed in connection the investigation, discussed the scope of the document review and difficulties encountered in obtaining appropriate documents, set forth a number of points as to whether there was a basis for top-side adjustments to work in progress at a particular facility, discussed the results of interviews with plant personnel and conclusions resulting therefrom, and set forth investigative results."
    • Advising Boards and Committees May 20, 2014 64 • Ryan v. Gifford, 2007 WL 4259557 (Del. Ch. 11/30/07) • Special Committee formed to investigate alleged stock option backdating involving certain other members of the Board. • Committee retains counsel; Counsel briefs Board, including other directors. • Shareholders in derivative action sought disclosure of briefing and other materials relating to investigation. • "There appears to be no dispute that, absent waiver or good cause, the attorney-client privilege protects communications between Orrick and its client, the Special Committee.”
    • Advising Boards and Committees May 20, 2014 65 • Ryan v. Gifford, 2007 WL 4259557 (Del. Ch. 11/30/07) • Waiver by Disclosure to Board: Yes. Privilege waived by the Special Committee’s disclosure of report to whole board. Court held that the “partial waiver” of the presentation of counsel’s report “operates as a complete waiver for all communications regarding this subject matter.” No common interest protections, because the investigated directors lacked interest. • Good Cause: Also applied Garner v. Wolfinbarger to find that good cause exists for the production of the communications.
    • Advising Boards and Committees May 20, 2014 66 • Constant vigilance and consistency required. • Facts matter, including: • Corporate resolutions; • Engagement letter; • Conduct of investigation (including expert retentions); • Disclosures and communications; and • Context matters. • Keep in mind Garner v. Wolfinbarger risks.
    • Outside Counsel and Former Clients May 20, 2014 67 Rule 1.9(a): A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.
    • Outside Counsel and Former Clients May 20, 2014 68
    • Outside Counsel and Former Clients May 20, 2014 69 • Madison 92nd Street Associates, LLC v. Marriott Int'l, Inc., 2013 WL 5913382 (S.D.N.Y. 10/31/13) • From 2000 to 2004, Boise Schiller represented Host Hotels in various matters. • In one matter, Firm advised Host on dispute with Marriott as to whether Marriott had breached duties to Host. • Dispute settled in 2002, with Host-Marriott agreement, describing new go- forward relationship. • In 2003, Host asked Firm to represent it in responding to subpoena relating to settlement in other litigation. • Firm "devoted over 3700 hours to the representation and billed Host approximately $1,250,000 for its services."
    • Outside Counsel and Former Clients May 20, 2014 70 • Madison 92nd Street Associates, LLC v. Marriott Int'l, Inc., 2013 WL 5913382 (S.D.N.Y. 10/31/13) • Firm contacted by new client, Madison. • Firm's GC performed a conflict check. "The record does not include much information about exactly what [he] did next. It is clear enough what he did not do: he did not ask to review either the file or the billing records related to the earlier representation." • December 4, 2012: • Firm, on behalf of new client Madison, sent Marriott a proposed complaint against it, Host, and others. • Complaint alleged, inter alia, that Host-Marriott entered into a secret deal in 2002 (i.e., at the same time Firm was representing Host). • Host contacted Firm, expressing concerns.
    • Outside Counsel and Former Clients May 20, 2014 71 • Madison 92nd Street Associates, LLC v. Marriott Int'l, Inc., 2013 WL 5913382 (S.D.N.Y. 10/31/13) • December 5-12, 2012: Firm investigates further: • Consults outside ethics expert • Interviews lawyers who worked on underlying matter • Run keyword search against billing records • December 12: Proskauer asserts conflict, requests files, demands stop work. • January 4: Firm produced five boxes. • January 9: Proskauer demands completion of production. • January 13: Firm filed amended complaint, "without any prior notice to Host, and while discussions concerning the conflict were ongoing." • February 22: Proskauer outlines its motion to disqualify to Firm. • February 23: Firm acknowledges conflict, and will withdraw.
    • Outside Counsel and Former Clients May 20, 2014 72 • Madison 92nd Street Associates, LLC v. Marriott Int'l, Inc., 2013 WL 5913382 (S.D.N.Y. 10/31/13) • The Firm's "involvement in negotiating, papering and blessing a settlement that it has not painted as an unlawful racketeering and antitrust conspiracy clearly shows" substantial relationship. • "Once Host voiced its concern about the conflict, [the Firm] was under an 'obligation to investigate the facts and the law.'" The Firm "either failed to undertake an appropriate investigation despite its representations to the contrary, or did so in the most cavalier manner, stringing Host along for weeks, and causing its former client to incur significant expense in trying to secure [the Firm's] acknowledgement of what should have been obvious." • "Needless to say, all of this cost Host a pretty penny." "Host will be awarded full attorneys' fees for all expenses incurred from and after December 18, 2012."
    • Outside Counsel and Former Clients May 20, 2014 73 • State ex rel Swanson v. 3M Corp., Minn. S. Ct. (4/30/14) • 1992: Covington & Burling began representing 3M in various matters, including FDA matters concerning 3M's use of PFCs. • 1995: Firm began representing State of Minnesota in various matters. • November 2010: State sought firm's representation in natural resources damage suit adverse to 3M • 2010: Firm had done little work for 3M. • December 22, 2010: Firm sent email terminating the representation. • December 30, 2010: State appointed firm as "Special Attorney" to investigate and litigate damage claims against 3M. • January 2011: Firm attorneys admitted pro hac in State. • March 2012: Outside counsel for 3M in State suit noted Firm's name in documents 3M had produced, and demanded disclosure of all files in which Firm had represented 3M in past.
    • Outside Counsel and Former Clients May 20, 2014 74 • State ex rel Swanson v. 3M Corp., Minn. S. Ct. (4/30/14) • April 30, 2012: State moved to disqualify. • July 24, 2012: 3M Company v. Covington & Burling LLP, No. 0:12-cv-01800, D. Minn. (voluntarily dismissed 8/17/12). • District Court granted motion. Appellate Court affirmed. • "Although Covington's former representation of 3M in the FDA regulatory matters had a different focus than its current representation of the state in the NRD lawsuit, both matters at their heart concern the risk that PFCs pose to human health, and at least facially, the matters are 'substantially related.'" • While 3M had agreed to a consent order and made public certain documents, "the consent order excluded documents that are subject to attorney-client privilege or protected as work product. It is this type of confidential information that the conflict rules are designed to protect." • "The timing of 3M’s motion to disqualify, 15 months after the admission of Covington’s attorneys, after production of several million pages of documents and more than 50 depositions, and shortly before the discovery deadline, might well be perceived as tactical maneuvering. And 3M’s claim that it only realized at that late date that there may be a conflict is contradicted by the record. But 3M’s knowledge of the conflict, by itself, is not sufficient to avoid disqualification. Covington had the duty to avoid conflicts and to obtain the informed consent of its former client, and it failed to obtain this consent."
    • Outside Counsel and Former Clients May 20, 2014 75 • State ex rel Swanson v. 3M Corp., Minn. S. Ct. (4/30/14) • Given finding of violation of Rule 1.9, the firm has standing to appeal. • Trial Court abused its discretion by failing to consider firm's "claims that this information was no longer confidential either because the information had been disclosed to regulatory authorities and the public or because 3M waived the attorney-client privilege by initiating a separate, concurrent lawsuit against Covington for breach of fiduciary duty and breach of contract." • Trial Court failed to conduct detailed fact-finding on waiver argument. • Waiver does not preclude other remedies, including attorney discipline or suit for breach of fiduciary duty. • Remanded.
    • Outside Counsel and Former Clients May 20, 2014 76 • Headfirst Baseball LLC v. Elwood, 2013 WL 6148077 (D.D.C. 11/22/13) • Defendant Robert Elwood sought to disqualify plaintiff's counsel at Williams & Connolly under Rule 1.7 and 1.9. • As to Rule 1.7, Firm offered letter signed by Elwood saying "Williams & Connolly LLP does not serve as your counsel in connection with such Promissory Note or for any other matter." Nonetheless, Elwood argued that Firm "is the general counsel for [certain entities] and that the law firm is thus prohibited from representing the constituent members or owners of those organizations in any lawsuit against any other members or owners." Court found no support. • As to Rule 1.9, Elwood submitted declaration stating that a former Firm partner "often provided counsel to ... me on business and personal issues" and that, "[i]n addition to fatherly advice on a variety of personal issues" a current Firm partner "provided legal advice to me on my rights in [company] and on personal estate planning issues."
    • Outside Counsel and Former Clients May 20, 2014 77 • Headfirst Baseball LLC v. Elwood, 2013 WL 6148077 (D.D.C. 11/22/13) • "[T]here are no allegations of a formal agreement, payment of attorneys' fees, or conversations in which either party made explicit statements about the nature of the alleged relationship…." Firm also presented declarations from several lawyers disclaiming legal advice. Court found Elwood failed to present facts showing such a relationship, or any substantial relationship. • Nonetheless, the Court denied the disqualification motion without prejudice. "It is not inconceivable that discovery will provide defendants with evidence that would establish the existence of a prior representation, as well as whether it is substantially related to the current litigation, such that [Firm's] continued representation of the plaintiffs in this matter would constitute a violation of Rule 1.9."
    • Outside Counsel and Former Clients May 20, 2014 78 • Bowers v. The Ophthalmology Group, 733 F.3d 647 (6th Cir. 10/25/13) • 1999: Bowers joined TOG as employee. • 2002: Bowers became a partner. • 2008: Firm represented Bowers, "when she attempted to establish an additional ophthalmology practice in Louisville." • 2009: Bowers resigned. • 2010: TOG expelled her as a partner. • March 5, 2012: Bowers sued. • March 30, 2012: TOG moved to dismiss. • May 16, 2012: Bowers moved to DQ. • August 22, 2012: District court converted motion to dismiss into motion for summary judgment, and granted it, denying motion to DQ as moot. • Sixth Circuit -- 2 (with a visiting district judge) to 1 -- reversed, finding firm should be DQ'ed, and remanding.
    • Outside Counsel and Former Clients May 20, 2014 79 • Bowers v. The Ophthalmology Group, 733 F.3d 647 (6th Cir. 10/25/13) • Court sought to apply Rule 1.9 "substantial relationship" test. • "Complicating matters slightly," are comments to Rule 1.9 that provide "former client is not required to reveal the confidential information learned by the lawyer." • Further, Court said Firm couldn't disclose confidential information in its response, as a matter of "self-defense." Court read Rule 1.6(b)(3) ("A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary … to respond to allegations in any proceeding … concerning the lawyer's representation") to be limited only to the time period in which the lawyer is actively representing the client. • So, Court said applicable test was "whether there is a substantial risk that confidential information as would normally or typically have been obtained" in the prior representation would "materially advance" other client's representation.
    • The Risk Tip Blog An unstuffy miscellany of risk issues of interest to lawyers, law firms, risk managers, and corporate law departments. May 20, 2014 www.risktips.com
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