December 8, 2016 Ethical Issues Facing Corporate Counsel Best Practices Solutions Michael P. McCloskey, Partner James R. Edwards, SVP, GC, & David J. Aveni, Senior Counsel Corporate Secretary Wilson Elser Cubic Corporation Wilson Elser San Diego, CA San Diego, CA San Diego, CA michael.mccloskey@wilsonelser.com jim.edwards@cubic.com david.aveni@wilsonelser.com
2 Goal for Today Identify frequently encountered ethical issues faced by corporate counsel Identify the best practices for addressing ethical issues
3 What are the Top 5 Ethical Issues? 1. Who s Your Client? 2. e-discovery 3. Hiring Conflicts of Interest 4. Outsourcing (Avoiding Unauthorized Practice of Law) 5. Attorney Client Privilege and Attorney Work Product
4 Governing Law and Helpful Guidance State Bar Rules of Professional Conduct ABA Model Rules of Professional Conduct Court opinions Ethics opinions of bar associations/committees http://www.sdcba.org/index.cfm?pg=legalethicsopinionsindex http://njlaw.rutgers.edu/collections/ethics/ http://www.nysba.org/am/template.cfm?section=ethics_opinio ns&template=/
5 Who s Your Client? Officers/Directors Employees Subsidiaries/Affiliates Cal. Rule Prof. Conduct 3-600 (A)
6 Who s Your Client? Formation of attorney-client relationship is NOT dependent upon a written agreement Give Miranda warnings ( I represent the company and may have to report what you tell me ) Recognize situations where separate counsel may be needed Encourage employees to retain separate counsel Avoid giving advice on personal matters
7 Who s Your Client? Do you have a duty to make reasonable efforts to correct an employee s misunderstanding of your role?
Who s Your Client? Yes! You must explain who you represent and must not lead the employee into believing that he or she may confide in you in a way that will not be used in the company s interest. (Cal. Rule Prof. Conduct 3-600 (D)) 8 2015 Wilson Elser. All rights reserved.
9 Who s Your Client? Subsidiaries/ Affiliates/ Joint Ventures/ LLCs Generally no conflict where parent and 100% sub are both solvent and their interests are aligned But conflicts can occur: In transactions between companies When one becomes insolvent Where ownership varies or is partial
10 Who s Your Client? What are the consequences of an ethical conflict? Violation of state bar rules, which could lead to attorney discipline Disqualification of representation (which may also be imputed to outside counsel) Subject matter waiver of attorney-client privilege
11 e-discovery ABA Model Rules apply to the legal department of a corporation (ABA Model Rule 1.0) ABA Model Rule 1.1 requires that a lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. State Bar Formal Opinion 2015-193
12 Potential e-discovery Ethical Issues Duties of competency and protecting secrets Duty to supervise contract attorneys Protection of attorney-client privilege Accuracy of discovery certifications
13 e-discovery Competent representation means issuing timely litigation holds But it s not enough to just issue the hold notice: In house counsel are charged with taking affirmative steps to monitor compliance with litigation holds so that all sources of discovery information are identified and searched or preserved. Also includes reading the Federal Rules of Civil Procedure to ascertain what counsel s and his or her client s obligations are with regard to ESI. Swofford v. Eslinger, 671 F.Supp2d 1274 (M.D. Fla. 2009)
14 e-discovery Sanctions aren t the only concern: ABA Model Rule 1.6 prohibits an attorney from revealing information related to the representation of a client unless the client gives informed consent Gives rise to a duty to safeguard client information from inadvertent disclosure, including privileged communications Employ these best practices: Associate competent outside counsel to advise on ESI issues Use Federal Rule of Evidence 502 to protect privileged info from inadvertent disclosure or when disclosure to gov t is required (And take your IT personnel to lunch!)
15 Hiring Conflicts of Interest Ethics rules don t prevent the corporation from hiring an attorney who has been adverse to the corporation in litigation The Rule of Professional Conduct apply to lawyers, not corporations But.
16 Hiring Conflicts of Interest In most jurisdictions, a corporate law dept. is a law firm subject to same conflicts rules as outside legal counsel Requires that the law department follow the same conflict screening when hiring in house counsel The new lawyer cannot accept employment adverse to the prior client unless the former client provides informed written consent Cal. Rule of Prof. Conduct 3-310(E) Applies to attorney, not law firm Implements ethical imperative of Bus. & Prof. Code 6068(e)
17 Hiring Conflicts of Interest Must have received confidential information by reason of representation of former client Conduct a thorough review of the new hire s conflict screening memo for possible conflicts Don t assume recent relaxing of vicarious disqualification rules in some jurisdictions will suffice If challenged, you need to show ethical walls are in place to protect the attorney s former clients Kirk v. First American Title Ins. Co., 183 Cal.App.4th 776 (2010) Adams v. Aerojet-General Corp., 86 Cal.App.4th 1324 (2001)
18 Outsourcing (Avoiding the Unauthorized Practice of Law) Document review and management Tax work Legal research Patent applications (in foreign jurisdictions) ABA Formal Opinion 08-451 (2008): The decision to outsource legal services does not abrogate the lawyer s responsibilities under Model Rule 1.1 ABA Model Rules 5.1 and 5.3 also require the lawyer to make reasonable efforts to ensure the work performed is consistent with his or her professional obligations
Outsourcing (Avoiding the Unauthorized Practice of Law) 19 Best Practices Conduct proper due diligence Review the education & background of contract lawyers Review the security of the facility How will that jurisdiction treat privileged information? Obtain client consent Document your supervisory activities
20 Attorney Client Privilege and Attorney Work Product Courts often presume that in-house counsel s communications are more business than legal Heightened scrutiny of privilege claims when no outside counsel are involved
21 Attorney Client Privilege and Attorney Work Product Mark confidential communications But labeling alone won t protect Convey that your communications have a legal purpose Consider involving outside counsel
22 Attorney Client Privilege and Attorney Work Product Special Issues: M&A transactions post-closing issues? Foreign jurisdictions privilege not always available to in-house counsel
23 Ethical Issues Facing Corporate Counsel Closing Comments Questions and Answers Contact: Michael P. McCloskey, Partner Wilson Elser 655 West Broadway, Suite 900 San Diego, CA 92101 T: 619.881.3326 E: michael.mccloskey@wilsonelser.com Contact: David J. Aveni, Senior Counsel Wilson Elser 655 West Broadway, Suite 900 San Diego, CA 92101 T: 619.881.3307 E: david.aveni@wilsonelser.com