ETHICS TOOLKIT FOR IN-HOUSE COUNSEL MANAGING LITIGATION APRIL 3, 2014

Transcription

1 ETHICS TOOLKIT FOR IN-HOUSE COUNSEL MANAGING LITIGATION APRIL 3, 2014 Kenneth L. Racowski Chair, Philadelphia Commercial Litigation Wilson Elser LLP Daniel E. McGuire Commercial & Employment Litigation Counsel Hewlett-Packard Company 1

2 Agenda 1. Insourcing : Bringing Work In-House 2. Litigation Hold & Preservation 3. Pre-Suit Investigation & Preparation 4. Identification of Client 5. Outsourcing 2

3 Governing law and helpful guidance ABA Model Rules of Professional Conduct State Bar Rules of Professional Conduct Court opinions Ethics opinions of bar associations or committees lity/publications/ethics_opinions.html

4 Jurisdictional Differences California, Maine and New York only states where rules of professional conduct do not follow ABA Model Rules Common law interpretations and applications of ethical obligations may vary within different jurisdictions Be an issue spotter! Short of researching jurisdictional nuances: o be aware of the general principals of your ethical obligations o know when you need to dig further into a specific ethical dilemma 4

5 No Question The Same Ethical Rules Apply (c) "Firm" or "law firm" denotes a lawyer or lawyers in a law partnership, professional corporation, sole proprietorship or other association authorized to practice law; or lawyers employed in a legal services organization or the legal department of a corporation or other organization. ABA Model Rule 1.0(c) 5

6 No Question The Same Ethical Rules Apply [3] With respect to the law department of an organization, including the government, there is ordinarily no question that the members of the department constitute a firm within the meaning of the Rules of Professional Conduct. ABA Model Rule 1.0, Comment 3 6

7 Model Rule Competence A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. ABA Model Rule 1.1 Model Rule and Comments make no distinction between in-house and outside lawyers 7

8 Model Rule Competence Retaining experienced outside counsel is helpful, but it doesn t absolve in-house counsel of their duty of competence. Since in-house counsel even when managing outside counsel are still subject to ethical rules, in-house attorneys must be aware of, and spot, ethical issues before problems arise. In the event that a legal department handles litigation internally, rather than retaining outside counsel, in-house must maintain a heightened awareness of their ethical obligations. 8

9 9 1. Insourcing : Bringing Work In-House

10 Insourcing : Bringing Work In-House The Traditional Model Very experienced litigation managers years experience Hired as proven subject matter experts Entry Level = comfortable managing high risk / high exposure Replace attrition from law firms or in-house Expand to match change in needs 10

11 Insourcing : Bringing Work In-House Challenges of Traditional Model Not consistent with aspirations to become a talent factory Does not address shrinking budgets and increasing dockets Missing opportunity to develop best possible litigation managers Very few opportunities to manage and mentor more junior lawyers 11

12 Insourcing : Bringing Work In-House The New Model Fill Virtually All Positions with Internally Developed Candidates Initiatives to Create the New Model Junior Attorney Program Hire new lawyers, and create an organization including 1 st through 4 th year lawyers as new associates Provide feedback, training and mentoring, including goals for each year of practice, that will train lawyers Bring Work In-House Provide meaningful work for junior associates by bringing the right work inhouse, without losing the support of outside counsel 12

13 13 2. Litigation Hold & Preservation

14 When does in-house counsel s involvement in litigation begin? Often, long before any Complaint is filed or litigation is even threatened Escalation of customer disputes, business relationships souring, employee issues and other situations can simmer with or without in-house involvement for extended periods Can be difficult to determine when preservation obligations attach 14

15 When is a legal hold required? Whenever an organization has a duty to preserve documents and ESI Events giving rise to the duty to preserve are trigger events 15

16 Zubulake IV Litigation Hold [O]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents Zubulake v. UBS Warburg LLC ( Zubulake IV ), 220 F.R.D. 212, 218 (S.D.N.Y. 2003) 16

17 What can trigger duty to preserve? An unequivocal threat of litigation is made as opposed to a customer-service complaint A specific demand to preserve ESI has been made by a potential plaintiff Lawsuit has been initiated Notice that litigation is reasonably foreseeable Triggers can also be more subtle: A group of supervisors discussing an instance of harassment Doe v. Norwalk Community College, 248 F.R.D. 372 (D. Conn. 2007) 17

18 Zubulake IV Duty to Preserve The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. Zubulake IV, 220 F.R.D. at 216 (quoting Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir. 2001)) 18

19 Sanctions for failure to preserve In-house counsel s failure to issue a timely litigation hold resulted in adverse inference as sanction. In-house counsel had received a letter that (i) openly threatened litigation and (ii) requested a copy of title insurance policy on relevant property; however, inhouse did not issue litigation hold. Surowiec v. Capital Title Agency, Inc., 790 F. Supp. 2d 997 (D. Ariz. 2011) 19

20 What must be preserved? Documents and ESI in all forms (including metadata) from company sources individuals, databases and other sources Documents and ESI from current employees as well as employees that depart after the duty to preserve has been triggered Back-up media Other devices / media (instant messaging, text messages, chat transcripts, etc.) 20

21 Model Rule 3.4 Fairness to Opposing Party and Counsel A lawyer shall not: (a) unlawfully obstruct another party' s access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value. (d) fail to make reasonably diligent effort to comply with a legally proper discovery request by an opposing party ABA Model Rule 3.4(a) & (d) 21

22 Best Practices Legal Hold & Preservation Determine which business units, locations or departments likely to have relevant information Identify key custodians likely to have relevant information Take a generally expansive view of which custodians should receive legal hold notice Deliver legal hold notice to key custodians keep records of distribution list and hold communications Require written certification that custodian has received, read and understands notice Escalate failure to certify to custodian manager Issue periodic (e.g., quarterly) reminders 22

23 Affirmative steps required Sanctions imposed against in-house counsel for failing to ensure that all items were preserved It is not sufficient to notify employees of a litigation hold and expect that the [employee] will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched [and in this case, preserved.] Swofford v. Eslinger, 671 F. Supp. 2d 1274 (M.D. Fla. 2009) 23

24 Possession, custody & control Preservation and production obligations may extend to third-parties within Rule 34(a) definition Legal right or ability to obtain documents upon demand Contractual provisions granting control. Haskins v. First Am. Title Ins. Co., No , 2012 WL (D.N.J. Oct. 18, 2012) (finding duty to issue litigation hold to independent agents based on control provision in agency contracts) 24

25 Possession, custody & control, cont d. Parent and subsidiary corporations, directors and officers, former employees requesting party bears burden to demonstrate opposing party s control over related entity. E.g., Kickapoo Tribe v. Nemaha Brown Watershed Joint Dist. No. 7, 294 F.R.D. 610 (D. Kan. 2013) Personal Puerto Rico Tel. Co., Inc. v. San Juan Cable LLC, No , 2013 WL (D.P.R. Oct. 7, 2013) (private electronic media used to conduct company business may need to be preserved) 25

26 Model Rule 1.1 Competence (Counsel s duty to understand technology) Counsel have an ethical obligation to understand technology that may critically impact their client. [8] To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology. ABA Model Rule 1.1, Comment 8 Ellis v. Toshiba Am. Info. Sys., Inc., 160 Cal. Rptr. 3d 557 (Cal. Ct. App. 2013) (denying class counsel s fee request and imposing $165,000 sanction for, inter alia, ignorance of technology and failure to produce critical documents in native format) 26

27 Best practices for identification and collection - Confer with IT Confer with IT to determine what ESI company generates, where it is stored, and how to preserve it in-house counsel must understand operating systems, databases and IT structure relevant to generating, storing and preserving ESI Prepare data map, diagram, summary or any other documentation necessary Retain outside forensic IT expert, if necessary, to develop and implement preservation, identification and collection plan. Turn off any auto delete functions; suspend any deletion or destruction policies. 27

28 Day v. LSI Corp., No , 2012 U.S. Dist. LEXIS (D. Ariz. Dec. 20, 2012) Court determined that in-house counsel s efforts in supervising discovery responses were so inadequate he had a culpable mind and acted willfully. Three errors by in-house counsel led to harsh result: 1. Judgment call to exclude former supervisor in a discrimination action from hold notice 2. Failure to maintain a reliable record of precise instruction to IT department 3. Allowed document retention policy re: former employees to be ignored or forgotten 28

29 Coquina Investments v. Rothstein, No , 2012 WL (S.D. Fla. Aug. 3, 2012) TD Bank found to have acted willfully in failing to comply with its discovery obligations and assist outside counsel to properly litigate the case Imposes a high and potentially burdensome standard on in-house counsel In-house counsel misrepresentation to court re: third-party vendor s involvement in production Legal department failed to alert court and/or outside counsel of existence of additional responsive documents specifically referenced by consultant hired by different outside counsel in another matter In-house counsel remained silent throughout trial featuring key document that had been altered 29

30 Coquina Investments v. Rothstein, No , 2012 WL (S.D. Fla. Aug. 3, 2012), cont d. In-house counsel should be substantially involved and proactive in discovery: 1. Take affirmative steps to confirm non-existence of key document (particularly when it s non-existence is the subject of affidavits and testimony) 2. Be familiar with how documents are maintained so as to determine whether a problem exists with production 3. Substantively involved in preparing corporate witnesses for deposition and trial 30

31 ESI What s at Stake? Monetary sanctions Issue preclusion Adverse inference Bar disciplinary proceedings misrepresentations (even if unintentional) to the court; intentional or reckless destruction of documents DON T LET DISCOVERY DERAIL A CASE THAT IS OTHERWISE SOLID AND DEFENSIBLE ON THE MERITS!!! 31

32 32 3. Pre-Suit Investigation & Preparation

33 Investigating the substantive issues at stake in litigation 1. Secure and assemble relevant documents 2. Identify relevant witnesses 3. Prioritize witness interviews 4. Identify key legal issues and defenses 5. Identify and retain any necessary experts 33

34 Model Rule 1.6 Confidentiality of Information (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation. ABA Model Rule 1.6(a) 34

35 Model Rule 1.6 Confidentiality of Information Prohibits counsel from revealing information related to the representation without informed consent Duty to safeguard client information from inadvertent disclosure, including privileged communications 35

36 Attorney-Client Privilege in International Communications Outside the U.S., attorney-client privilege often does not attach to in-house counsel employed by the company. European Union Rule Attorney-client privilege does not attach to communications with an attorney who holds a position of employment with a client. Akzo Nobel Chemicals Ltd. & Akros Chemicals Ltd. v. EU Commission, Case C-550/07 P (29 April 2010) Best practice promptly retain outside counsel to protect privilege. 36

37 Model Rule 4.3 Dealing With Unrepresented Person 1. Must not state or imply that counsel is disinterested 2. Must make reasonable efforts to correct any misunderstanding of counsel s role 3. Shall not give legal advice to an unrepresented person, other than the advice to secure counsel Dealing with Unrepresented Consumers (e.g., customer service issue escalated to legal department) Be clear about your role representing the company No legal advice, except suggestion to secure counsel Settlement agreement language providing opportunity to confer with counsel 37

38 Model Rule 4.2 Communication With Person Represented By Counsel In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order. ABA Model Rule 4.2 Should you have direct communications with business people at other companies? What if person tells you they have a lawyer (even if it s not true)? 38

39 39 4. Identification of Client

40 Model Rule 1.13 Organization As Client (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. ABA Model Rule 1.13(a) 40

41 Who is the organizational client? Generally, a corporate client includes the corporation for which the counsel is employed, as well as parent, subsidiary and affiliate corporations. Unless: entity is not wholly-owned and conflicting interests among owners entity is insolvent and interests of creditors are divergent representation is specifically limited (e.g., outside directors) In re Teleglobe Communications, Corp., 493 F.3d 345, (3d Cir. 2007) 41

42 Who are the organization s duly authorized constituents? Traditional View the control group of senior executives Modern View all employees and agents of the organization who possess or have a business need to know information that is the subject of communications 42

43 Model Rule 1.13 Organization As Client (f) In dealing with an organization's directors, officers, employees, members, shareholders 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. ABA Model Rule 1.13(f) 43

44 Model Rule 1.13 Organization As Client [2] When one of the constituents of an organizational client communicates with the organization's lawyer in that person's organizational capacity, the communication is protected by Rule 1.6. This does not mean, however, that constituents of an organizational client are the clients of the lawyer. The lawyer may not disclose to such constituents information relating to the representation except for disclosures explicitly or impliedly authorized by the organizational client in order to carry out the representation or as otherwise permitted by Rule 1.6. ABA Model Rule 1.13, Comment 2. 44

45 Who s Your Client? Officers / Directors Employees Subsidiaries / Affiliates 45

46 Best Practices Formation of attorney-client relationship is NOT dependent upon written agreement Give Upjohn warning in both criminal and civil investigations Recognize situations where separate counsel may be needed Avoid giving advice on personal matters 46

47 Upjohn Warnings At minimum, a proper Upjohn warning informs the interviewee: 1. the attorney is there to conduct a privileged and confidential interview of the employee 2. the attorney represents the company, not the individual 3. The company, not the individual, has an attorney-client privilege with the attorney 4. The company may, as it sees fit, disclose the employee s information and statements to third parties 47

48 Model Rule 1.13 Organization As Client [10] There are times when the organization's interest may be or become adverse to those of one or more of its constituents. 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. ABA Model Rule, Comment 10 48

49 Lessons for in-house counsel from Penn State investigation Tim Curley & Cary Schultz grand jury testimony: Good morning, my name is Tim Curley. Do you have counsel with you? Yes I do.... My counsel is Cynthia Baldwin. Schultz was asked: You are accompanied today by counsel, Cynthia Baldwin. Is that correct? That is correct. However, Baldwin did not correct the record and subsequently maintained she was NOT counsel for Curley or Schultz. 49

50 Lessons for in-house counsel from Penn State investigation, cont d. Graham Spanier grand jury testimony: The supervising judge asked: Cindy, just for the record, who do you represent? The university, she responded. The judge asked for clarification: The university solely? Yes, I represent the university solely, she said. Spanier s testimony began thereafter, and he was asked whether he had counsel with him. Spanier answered Yes. Asked to identify his lawyer, he said: Cynthia Baldwin sitting behind me. However, Baldwin did not correct the record and subsequently maintained she was NOT counsel for Spanier. 50

51 Lessons for in-house counsel from Penn State investigation, cont d. Both on the record, and in unrecorded conversations with employees, unless all parties have agreed to joint representation, in-house counsel must always be clear that they represent the organizational client and NOT the individual Observe ethical duty to correct the record and inform constituents that in-house counsel is NOT their personal lawyer Remaining silent does NOT absolve in-house counsel of ethical obligations under ABA Model Rules 1.7 and 1.13(g) 51

52 52 5. Outsourcing

53 Outsourcing The decision to outsource legal services does not abrogate the lawyer s responsibilities under ABA Model Rule 1.1. ABA Formal Opinion (2008) Regardless of where the service provider or contract attorneys are located, it is clear that ultimate responsibility for ensuring preservation, collection, processing, and production of electronically stored information rests with the party and its counsel, not with the nonparty consultant or vendor. In re Seroquel Products Liability Litig., 244 F.R.D. 650, 664 n.14 (M.D. Fla. 2007) 53

54 Outsourcing Outside / local counsel Computer forensics Document and ESI collection and harvesting Document review and production Legal research Other contract attorney services Non-attorney experts or consultants 54

55 Potential Risks Inadvertent disclosure of confidential information Unauthorized practice of law Waiver of privilege Ineffective conflict checks Inappropriate fee sharing Privacy concerns Compliance with US export control laws Data theft and misuse Difficulties of supervision off-site or internationally Differing legal systems / privilege standards 55

56 Ethical Concerns 1. Ensuring adequate supervision of all work that can be deemed the practice of law 2. Avoiding conflicts of interest 3. Preserving client confidences and sensitive information 56

57 Adequate Supervision Counsel must supervise all subordinate attorneys and non-attorneys and must oversee anything that can be deemed the practice of law to ensure competence. ABA Model Rules 5.1, 5.3 & 1.1 ABA Model 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. Counsel must take active control of project from start to finish by establishing practices and procedures for supervision of outsourced work. 57

58 Supervision of Non-Lawyers Counsel may use non-lawyers outside the firm to assist counsel in rendering legal services to the client In doing so, counsel must make reasonable efforts to ensure the work performed is consistent with his or her professional obligations. ABA Model Rule 5.3, Comment 3 58

59 Conflicts of Interest Potential conflicts of interest may arise, or be imputed, through the use of outside service providers and contract attorneys. Outsourcing attorneys should investigate service providers conflict checking procedures and satisfy themselves that no conflicts exist. Ass n of the Bar of the City of New York Comm. On Prof. and Judicial Ethics, Formal Op (2006) 59

60 Confidentiality Counsel must make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client. ABA Model Rule 1.6(c) Where the relationship is attenuated, as in a typical outsourcing relationship, no information protected by Rule 1.6 may be revealed without the client s informed consent. ABA Formal Op

61 Informed Consent Counsel may be required to provide information concerning the outsourcing relationship to the client and obtain informed consent to the engagement or outside contract attorneys or support personnel Implied authorization of Rule 1.6(a) to share confidential information within a firm does not extend to outsiders over whom the firm lacks supervision or control. ABA Formal Opinion

62 Outsourcing Best Practices Conduct proper due diligence: interviews & references review education, background & qualifications of contract attorneys, vendors, experts and consultants evaluate security of facility evaluate and request assurances on data security if international, review jurisdictional privilege rules Verify conflict checking procedures Obtain client consent Active and regular management and supervision; document supervisory activities Engagement letter with confidentiality / non-disclosure provisions 62