Professor Stewart's professional responsibility outline

Day 1.

I. August 26th Ethics, Corporate Lawyers, and the Real World
S. Rifkind, “The Lawyer’s Role and Responsibility in Modern Society,” (1975)

Subversive of the central tenet – Lloyd Cutler who was counsel to GM when Claybort wanted to put in new safety regulations. The regulations were bad, Cutler represented GM. Young law students picketed him. Rifkind says this is very bad. Subversive of the central tenet of the law which is lawyers stand up for clients.
Inequality of resources – Is a fact of life. One is money, other is talent. Benefits outweigh costs and overall has been good because life of the law is not logic, but experience. OJ Simpson trial.
Johnson & Boswell – B. Represent people that you do know is bad.
J. He doesn’t struggle because you don’t judge the client, someone else does. It is liberating.
Public Interest/ “unctuous” – How do you tell what is public interest. They seek out their own interest and pretend to work for public good. Serving an invisible client. How do you tell what is reform vs. what is anti reform.
Confidentiality – goes along with attorney client privilege and access to atty client is indispensable to independence of the bar. Law and order depends on system where ppl. Disclose problems to lawyers. Central to our society justice and government.
Courtroom truth – The object of a trial is not the metaphysical truth. We need filters because otherwise it’d be a mess. So with filters it is courtroom truth.

J. Teeter, “Into the Thicket: Pursuing Moral and Political Visions in Labor Law,”
– what kind of lawyer do you want to be?
Lawyer as Agnostic: (answer by Johnson) The judge is the one who knows what is rt.
Lawyer as Friend: He assists others in understanding and realizing their legal rights. Trust and
personal care: Good balm for lawyers who do things for clients that they find repugnant.
Feminist “Ethic of Care”: Involving all the parties to a dispute rather jut formal plaintiffs. Client
participation in decision making. Start caring for the other side. More trust and altruism. How do you do this when other side wants your head on a spike.
You are what you do – separate your lawyer and who you are as a person. One’s soul is a fawcet you can turn on and off.
Lawyer as Statesman – Offers advice about ends and helps them choose which is worthy
Lawyer as rebel from principle – don’t defend the polluter, or company to fight union.
Rebellious lawyering – helping people to self lawyer.
Visionless Vision: Career must proceed in harmony with ones spiritual development.
M. L. King, Jr., "Letter from a Birmingham City Jail" (1963)
1. Majority inflicts on minority that it doesn’t impose on itself
2. Segregation is against eternal or natural law. – higher law,
3. Minorities have no right to vote on laws imposed on them so can’t be just.
Break the law openly and lovingly. Break the law but accept the consequences.

Geoffrey Hazzard, “Tobacco Lawyers Shame the Entire Profession,”
Lawyers never said they are preserving the confidence but were really manufacturing data that would be clothed in mantle of science. They assisted in fraud on the public. They used the idea of hiring the scientists to create a privilege.

Confidentiality:Past conduct: “I may have just violated insider trading laws. Told Aunt Betty, about new deal and she went in and bought a ton of shares.”
THE LAW SAYS KEEP THAT CONFIDENTIAL
Future Conduct: “I’m going to out and commit a crime”
NY HAS DISCRETION.
Difference between crime and non criminal fraud under NY Confidentiality.
Doesn’t matter, past act so don’t talk.


ATTORNEY-CLIENT PRIVILEGE
5 C’s Gotta have them all at once.
1. C: client: gotta have a client.
2. C: Communication, some thing back and forth. Writing, oral, email, some other, but must be one.
3. C: confidentiality, if you say stuff in front of a 3rd person then not confidential.
4. C: counsel, has to be one of us part of that discussion.
5. C: counsel, have to be giving counsel. Talking about the weather with a client in a room that is sealed doesn’t render that communication confidential.

Privilege is owned by the client. Client can come in and say I want you to tell the US atty all this. Their information, they own it. ETHICS RULES. Atty client privilege is a really strong rule. Nobody can get info so long as the client keeps it confidential.

WORK PRODUCT

comes from FRCP Rule 26(b)(3) and is procedural rule. It is weaker. Somebody can get the stuff if they meet some standard. Broader in application because this protects lawyers. Only for writings. Only applies to litigation.

Day 2: II. September 9th Attorney-Client Privilege & Work Product

There are two kinds of work product.
Opinion: is all those sorts of things that go on in the thinking part. Theories of the case, etc thoughts about witnesses, where you want to try it. Tactics and strategy go there.
Ordinary: everything else. Transcripts prepared by lawyers.

26(b)(3) Litigation means anything of adversarial nature. SEC enforcement proceeding is not filed in court but is adversarial, IRS, Grand jury, patent infringement.
Anticipation of litigation doesn’t mean you have to be 90% sure it is coming, or anything. Just in some fashion that you are clearly are looking at litigation. You talk about anticipated litigation, parties, and theories.


Upjohn Co. v. U.S., (1981) --- privilege covers all employees privilege applies to all level of employees. Rational— SC said that in order to give this advice the lawyer has to know the facts and he gets them from various people w/in the company, not just those on the top.

Facts--Questionnaires given to the employees and notes. Sent around the world and answers that came back. Yes I bribed etc. and lawyers went out and did follow up interviews. Why did the IRS want this? This is the most damning evidence out there and the company has it and all we have to do is get it from them.
SCt rejects control group test applied by 6th circuit (only top employees get protection). Holds—uncertain privilege is no privilege at all. . If you want to promote corporate compliance then it has to be very clear that this all is going to be wrapped up and that they are all part of the privilege for these purposes.

Can’t protect facts though??? You can’t protect the facts but you can protect the communication of the facts. No one is stopping the government from finding out the facts. They can go do it but they gotta do it themselves. They are not entitled to get from you your understanding of the facts or what the client told you what the facts are. Do not allow them to ask what did you tell your lawyer. Can ask about the facts but not the communication between client and lawyer about the facts.

EX EMPLOYEES are not covered. Depends on the timing of communication.
Dead employees are covered.

States Courts --they apply their own rules. Ill and Az still applies control group test. Thus say you some general counsel some brilliant advice about this privilege. There is no preemption since attorney-client privilege comes from the federal rules of evidence. Rule 501. and FRE do not apply in state courts.


The Attorney Client Privilege between a Corporation and its counsel extends to communications between counsel and Non control level employees.

Questionnaires sent around to employees around the world. Answers came back. Yes I bribed etc and then lawyers did follow up interviews. The IRS wanted to get this all from them. 6th Circuit said bad to protect this, zone of silence. The officers and directors on the 65th floor.
Clients are also employees because
If you don’t, you prevent gathering information. For attorneys to do the most through job possible they have to talk to people on every level to get information.
Those on the 65th floor don’t know any of the facts. People talk to lawyers because think confidential. So no two way communication really.
Clients are everyone, those who act on lawyers advice and provide information.
Purpose of privilege is to encourage full communication between lawyer and client.
Legal compliance. Full and frank communication promotes compliance with law.

Prior to this case: Only advice was protected to the 65th floor. But Upjohn didn’t give advice.
Lawyer had to know facts. Facts are not protected. IRS could go after the facts. The communication of the facts is protected. They can’t get your understanding of the facts. No one is stopping the IRS from going to talk to the employees.

EX EMPLOYEES are not covered. Depends on the timing of communication.

States don’t have to accept Upjohn. This is Federal. Illinois and Arizona think Control Group applies. Even if Dead.. As Vince Foster (the white house counsels office) still applies.

U.S. v. Ackert, (2d Cir 1999) ATTORNY CLIENT PRIVILEGE communication between taxpayer’s counsel and investment broker held not privileged. Rational—investment broker was not being relied on to translate/interpret info given by client. Broker was relied on to give more information client did not have about the proposed transaction. Significant assistance of communication to counsel in rendering legal advice to client is not enough. Remedy for the future—attorney not client must employ 3d party, on behalf of client in anticipation of litigation.
Facts— Meyers (tax attorney w/ Paramount) contacted Ackert—broker from GS seeking information about the details of the proposed investment for the sole purpose of providing legal advice to Paramount. broker—approaches Paramount’s Tax General Counsel and suggests a way to create capital loss to offset capital gains after recent merger. IRS wants broker to reveal facts about conversation. broker claims attorney-client privilege. IRS says broker was not Paramount’s client.
Communications between taxpayer's counsel and investment banker who had advised taxpayer on proposed investment were not protected by taxpayer's attorney-client privilege, even if communications significantly assisted counsel in rendering legal advice to taxpayer.
broker argues 3d person’s communication w/ client’s attorney should also be covered; cites Kovel (recognized that an accountant can play a role analogous to an interpreter in helping the attorney understand financial information passed to the attorney by the client).
Ackert claims it is like an accountant. Meyers (tax attorney w/ Paramount) contacted Ackert seeking information about the details of the proposed investment for the sole purpose of providing legal advice to Paramount. It asserts that "it was impossible for Mr. Meyers to advise Paramount without these further contacts with Mr. Ackert, because he could not otherwise fully define the factual, and therefore legal, nature of the proposal." COURT DRAWS A FINE LINE
lawyer was not relying on BROKER to translate or interpret information given to lawyer by his client. Rather, lawyer sought out banker for information client did not have about the proposed transaction and its tax *140 consequences. Because Ackert's role was not as a translator or interpreter of client communications, the principle of Kovel does not shield his discussions with Meyers.
Cites Kovel case for narrow proposition that att-client privilege is not waived upon disclosure to 3d parties if the purpose of communication is to improve the comprehension of the communications between attorney and client (translator notion)
Facts--There is one judge in the 2nd circuit that understands this stuff. Involved Paramount and Goldman Sacks—investment bank. GS proposed a deal to Paramount because would reduce fed income tax, and paramount asked myers senior advisor contacted Ackert to get more info. Paramount decided to go through the deal and they hired Merrill Lynch and paid GS a fee. IRS conducted an audit and requested to question ackert about communication between him and myers.
IRS tried to enforce the summons in District court.

Rational-- The purpose of the privilege is "to encourage clients to make full disclosure to their attorneys." Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). To that end, the privilege protects communications between a client and an attorney, not communications that prove important to an attorney's legal advice to a client. Thus, a communication between an attorney and client may be privileged even if it turns out to be unimportant to the legal services provided..



In re Murphy, (1977) --- Murphy is the Devil – Opinion Work Product Protection.
Murphy had at clients request done a devils advocate piece that gave all their weak spots and what could come down the road and how to respond. What’s the best case against our client. These were kept in the law firms files. NOT AT THE CLIENTS.
hold that (1) the work product privilege extends to documents prepared in anticipation of terminated, unrelated litigation; (2) opinion work product enjoys a nearly absolute immunity and only in rare situations can it be discovered; and (3) if there is a crime or fraud exception to the work product privilege, the Government has failed to establish that it is entitled to discovery of these documents under that exception.
Government Lazy lawyer. Just because unequal resources doesn’t mean you get the benefit of them doing all the work for you. Also this was a piece about anti trust issues. The government 8 years later is going after them for fraud on the patent office. No nexus to issue at all. And the lawyers didn’t do any fraud on the patent office. Just because client is scumbag you can’t go after the firm. The lawyers own the privilege.
Broadening standard of work product and work privilege extends to documents prepared in anticipation of previous terminated litigation even if work product discusses issues that were not closely related to issues in pending litigation.
Opinion work product enjoys nearly absolute immunity and can be discovered in only rare and extraordinary circumstances.

Good lawyer tip: Do not give clients the stuff. This then becomes their property and is subject to normal discovery request.

Hickman v. Taylor, (1947) --- Put down your thoughts – ZONE OF PRIVACY -
Theory little bit of privacy for attorney would allow greater research and truth on their behalf. If you didn’t have privacy you wouldn’t put down as much and thoughts and put as much effort.
Notes taken by attorney of witnesses not discoverable. In that they were mental impressions. 26b3 intent to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy with an eye toward litigation free from unnecessary intrusion by its adversaries.

Federal Rules of Civil Procedure 26(b)(3) – Work product belongs to attorney

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 or the disclosure is permitted by paragraph (b).
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:
(1) to prevent reasonably certain death or substantial bodily harm;
(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(correct) 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;
(4) to secure legal advice about the lawyer's compliance with these Rules;
(5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client; or [THAT IS WHY YOU ALWAYS WANT TO PAY YOUR LAWYER]
(6) to comply with other law or a court order.

U.S. v. Adlman, 1: (1995) – 2nd Cir. Leval J. attorney-client privilege (disclosure to 3d party) no attorney client privilege because Adlman failed to carry out the burden of showing it came w/in principle of Kovel (lawyer engaging accountant was ok since necessary for attorney to better represent the client). The evidence in many respects supports the conclusion that Sequa and not attorney consulted an accounting firm for tax advice.

U.S. v. Adlman, 2: (1998) - 2nd Cir. Attorney work product. CT REJECTS PRIMARY PURPOSE STANDARD; ADOPTS WHETHER the documents were prepared "because of" existing or expected litigation-
Document created because of anticipated litigation, which tends to reveal mental impressions, conclusions, opinions or theories concerning the litigation, does not lose work-product protection merely because it is intended to assist in making business decision influenced by likely outcome of anticipated litigation; where document was created because of anticipated litigation, and would not have been prepared in substantially similar form but for prospect of that litigation, it falls within work-product protection
Rational-- Framing the inquiry as whether the primary or exclusive purpose of the document was to assist in litigation threatens to deny protection to documents that implicate key concerns underlying the work-product doctrine.


III. September 17th Other Privileges (And Related Imbroglios)

In re Salomon brothers (SDNY 1992) internal audit control—privilege of self critical analysis does not apply since docs not of the type the disclosure of which would curtail free flow of info.
FACTS--Defendants withheld the documents pursuant to the "privilege of self-critical analysis."
The requested documents pertained to the nature, extent, and adequacy of the company's internal audit controls as they existed between January 1989 to Augusts 3, 1991
The requested documents were within the scope of Fed R. Civ. P. 26(b)(1).
HOLDING-- Under the privilege, all management control studies and internal audits constituted self-critical analysis and there was a public interest in preserving the free flow of such studies in the interest of business and the free flow for a capitalist economy. However, the documents at issue were not the type, which would have curtailed the free flow of information. There was no overwhelming public interest in protecting the documents. Moreover, the company failed to sustain its burden of establishing the necessary elements to claim the privilege. There were no individual privacy issues at stake nor was there a claim that the government required the company to prepare the documents.
RULE--The grounds for honoring such a "privilege of self-critical analysis" are as follows:
(I), the information must result from a self-critical analysis undertaken by the party seeking protection;
(II), the public must have a strong interest in preserving the free flow of the type of information sought; and,
(III), the information must be of the type whose flow would be curtailed if discovery were allowed.
The Ninth Circuit has indicated that a (IV) should be added, namely, that the document was prepared with the expectation it would be kept confidential and has, in fact, been kept confidential.

Flynn v. Goldman Sacks (SDNY 1993) – info given to nonprofit org studying barriers to equal/fair employment—info protected by self critical analysis
profit organization studied the barriers to the equal and fair employment of women. The organization worked with businesses to identify and eliminate those barriers. Through her subpoena, plaintiff sought documents pertaining to the organization's work for the employer. The organization's basic objection was that its documents were protected by a qualified, self-critical analysis privilege. The court granted the motions of the organization and the employer. The court found that the communications between the organization and the interviewed employees were made with the understanding that (I) any comments would have been kept confidential and anonymous. The court determined that (II) dissemination of the organization's interview notes would have had a chilling effect on the future willingness of employees to speak candidly about sensitive topics. The court explained that the (III) reports had not been circulated beyond senior management at the employer and had been treated as confidential by the employer. The court noted that (IV) plaintiff's need for the interview notes and the reports did not outweigh the serious harm that disclosure would have caused to the future of self-critical analysis.


U.S. v. Arthur Young, – No Privilege/work product protection for accountant’s work. Transparency.
Accountants want an accountant client privilege and then berger said no. They are not advocates as lawyers are. 1) Accountants let the sun shine in, they open things up and see everything. Transparency. 2) Securities would fail if we thought that they didn’t have open books about the company. It is in the interest of a publicly held company to make this info available. 3) Qualified opinion is kiss of death. Unqualified is better.

Samuels v. Mitchell, disclosing info to accountants attorney-client=waived; work product=not
The court found that the company had waived its attorney-client privilege as to some documents by disclosing them to an accounting firm to keep the accounting firm up-to-date on arbitration that the company was engaged in, and not to obtain assistance in rendering legal advice. The accounting firm had not acted as a testifying expert for purposes of Fed. R. Civ. P. 26 during the arbitration because the company and the other party to the arbitration had not intended to follow all the typical procedures governing federal civil litigation and because the accounting firm appeared at the arbitration to respond to the neutral arbitrator's questions, and was not subject to cross-examination by an adversary.
The company had not waived the work-product privilege as to some documents by disclosing them to the accounting firm because the disclosure could not have been said to have posed a substantial danger that the documents would have been disclosed to an adversary and the company intended at all times to keep the documents confidential.




N.Y. C.P.L.R. § 4548 – Email communications are not waived just because they go through a server.
Issue for the future litigation: encrypted/unencrypted email. One is more secure than the other. Issue—why did the party failed to protect his info by sending it through less secure network.

In re Lindsey—white house counsel is not attorney for the Prez. Not entitled to government attorney-client privilege
the deputy counsel's duty was not similar to that of a private counsel to defend his client against criminal charges, but his duty was to expose wrongdoing and to uphold the public trust. As such, the deputy counsel could not rely on the government attorney-client privilege to shield the disclosure of wrong doing from a grand jury.
The deputy counsel contended he was entitled to the government attorney-client privilege on his communications with the president as a white house in-house counsel
The deputy counsel failed to show the communications concerned the seeking of legal advice that were between him and the president while in his professional capacity as an attorney



IV. September 23rd Loss of Privilege/Work Product (Part I)

Redvanly v. NYNEX Corp. seeking access to documents in Discrimination case
The disputed notes were made by the employer's in-house attorney during a meeting at which the employee was terminated
HOLDING—WORK PRODUCT CLAIM--the employer failed to prove that the notes were made in anticipation of litigation, or that they were the "mental impressions and thoughts" of the attorney, as required for protection under Fed. R. Civ. P. 26(b)(3).(I) The notes were simply a running transcript of the meeting. [accordingly no heightened protection applied and stuff was disclosable if party shoed substantial need for it]
RATIONAL—(A) The notes were prepared in the ordinary course of business, and there was no anticipation of litigation when the meeting was held. In addition, (B) the employee had a "substantial need" for them and was unable to obtain their equivalent by other means. Even if the notes were privileged, the employee was entitled to them under Fed. R. Evid. 612

Discrimination. In house counsel took notes during meeting that she got fired. Company said it is covered by work product. Mental impressions, thoughts in notes. But courts said this was a transcript of what she said. No mental impressions. Said attorney was lying.

Number of lesson from this:
NY TIMES TEST – when write down anything think whether will look pretty on the front page of New York Times. Everything you write down will at least be looked at by judge, for in camera review.

No ABSOLUTES—Murphy said opinion work product was nearly absolutely immune. There is material conflict in testimony of the witnesses. Both testified about what took place. Lawyer and business colleague. Both had two different stories. So now where there is that sort of conflict in the testimony then we have to look at the verbatim transcript of the exit interview.
That is enough to put this document into the litigation. Where an attorney puts his work product directly into litigation, then there is a waiver. So though opinion work product gets a higher standard, 1. it’s not opinion work product, and 2. there is a waiver. NYNEX thought there was an absolute privilege, there is not.

HORSE SHED—when prepare a witness never joggle their memory by showing them a document—will waive privilege. Instead read it to them.

LITIGATION STUPID—doc’s on their face did not mention they were made in anticipation of the litigation. And accordingly judge ruled out work product.

DON’T LIE TO THE COURT— Candor to the tribunal. They lied 4 different ways.--
1. absolute work product (no)
2. opinion work product (no).
3. magistrate handles discovery for district court. They told judge Prescott that judge rubin had already decided it was in anticipation of litigation.
4. Stein lies that this is anticipation to the judge.


AN ATTORNEY IS NOT ALWAYS AN ATTORNEY—make sure you are introduced as an attorney; make sure everyone knows you are present in att capacity.
Rubin in a footnote points to some devastating evidence that says not only was he the scribbler but these people were never even thinking of themselves in a legal capacity. In the pre trial order in note 3, he saw that they called themselves executives and senior managers. You didn’t even see yourself as participating as a lawyer. Why are you arguing privilege or attorney work product.

GRACIE ALLEN RULE—everything you show to witness is discoverable; nothing you say to witness is discoverable (Objection your Honor, speculation, relevance, etc)




Georgia Pacific Corp. -- In house lawyer negotiating K, not acting as lawyer.
Case was decided poorly.
Rational-- In Rossi, the Court of Appeals observed that staff attorneys may serve as company officers with mixed business-legal responsibility; whether or not officers, their day-to-day involvement may blur the line between legal and nonlegal communications; and their advice may originate not in response to the client's consultation about a [*10] particular problem but with them, as part of an on-going, permanent relationship with the organization. In that the privilege obstructs the truth-finding process and its scope is limited to that which is necessary to achieve its purpose the need to apply PRIVILEGE cautiously and narrowly is heightened in the case of corporate staff counsel, lest the mere participation of an attorney be used to seal off disclosure
, it is clear that Mr. Scott was not "exercising a lawyer's traditional function. Rossi, 542 N.Y.S.2d at 511. The record indicates that Mr. Scott was asked to review GP's proposed agreement with respect to the environmental provisions. He then negotiated the environmental provisions of the agreement, and after execution of the agreement, he served as negotiator of the matters to be [*12] included in Schedule 1. As a negotiator on behalf of management, Mr. Scott was acting in a business capacity.

Prof. Negotiating is a function of lawyers. But here they said in house lawyer was not acting as a lawyer when negotiating contract so can’t assert the privilege. Courts don’t recognize privilege if attorney acting as a business advisor. Whatever he gave as advice is fair game because it was his specialty, environmental conditions. That’s sort of what they do though.

Prior case that they rely on was Rossi: * Prior case: court held that an individual who held two handwritten memos prepared by an individual who was both in-house counsel and corporate secretary to one of the defendants, was not shielded by the privilege. The memos dealt with both legal and business matters, therefore they were not primarily legal in nature. Similarly, Mr. Scott acted as both negotiator to the matter and in-house counsel to the defendant. He knew too much.

Precedent set by Rossi in NY Ct. of Appeals. Says no imminent litigation here. This distinguishes binding precedent. But is irrelevant because imminence is not required.

Rossi (State case from Ct of Appeals 1989)
General Rule: internal memos from a corporate staff attorney to a corporate officer communicating advice regarding a company form that was the subject of an imminent defamation action is protected from disclosure in that action by the Attorney-client privilege.
* Mixed Responsibilities: Complications that arise in this case is due to dual role of staff attorneys--relationship between staff attorney and corporate agents and the duties that staff attorneys have the in the corporation: may serve as company officers, with mixed business-legal responsibilities.
* There Is No Certain Test, Yet There Are Certain *Guide Posts*: must have been clearly confidential, there should be no dispute as to author’s role (clearly attorney) and they must be made for the purpose of facilitating the rendition of legal advice or services. * Must stay legal.

In re von Bulow [von Bulow II] – Euro Trash – Subject Matter, Extra Judicial exposure
Von Bulow is a guy who killed his wife, he went to trial and was convicted. Overwhelming evidence and so he went out and hired Dershowitz was a Harvard Law Professor. They litigated it and got Von Bulow off. RI Excludes all. He wrote a book relating to strategdy and tactics (famous quote is Huptza) Von Bulow kids read it.
Judge Walker says can’t use book as sword and then litigation as privilege. Once you waive it, it’s gone. Somehow gets to Court of Appeals. (SUBJECT MATTER WAIVER)
Allows the attacking party to reach all privileged conversations regarding a particular subject once one privileged conversation on that topic has been disclosed.
Ct: No subject matter waiver. Actual words in quotation marks are waived but then you can’t ask about other stuff that isn’t in the book. This is EXTRAJUDICIAL DISCLOSURE.
An extrajudical disclosure under the attorney-client communication (one not subsequently used by client in a judicial proceeding to his adversary*s prejudice) does not waive the privilege as to the undisclosed portions of the communication.

Euro Trash: This is what we now call the Dershowitz exception. Extra-judicial exposure. Exception to the 5 C’s.
Absent client's consent or waiver, publication of confidential communications by attorney does not constitute relinquishment of privilege by client
(1) client who acquiesced in attorney's publication of book regarding details of prior representation, and who subsequently joined with attorney in actively promoting sales of book, was deemed to have waived attorney-client privilege as to any confidential communications disclosed in book; but
(2) attorney's publication of book did not result in waiver of attorney-client privilege as to any undisclosed portions of such communications or as to any other related communications on same subject matter.


Summary from Kidder--sthe scope of any waiver by virtue of disclosure was to be defined by the so-called "fairness doctrine", which "aim [s] to prevent prejudice to a party and distortion of the judicial process that may be caused by the privilege-holder's selective disclosure during litigation of otherwise privileged information." Id. at 101. Thus, the extent of any waiver by implication turns on the circumstances of the disclosure. Since the disclosure in von Bulow had occurred in an "extrajudicial" setting--by publication of a book--the court there held that the unfairness to which the waiver doctrine was addressed was not implicated. As a result, the publication waived the privilege only with respect to the particular communications or portions of communications actually disclosed. Id. at 103 (holding that matters actually disclosed in public lose their privileged status because the "cat is let out of the bag.")Both dictum in von Bulow and a substantial body of other case law support the obverse conclusion, that disclosure in a "judicial" setting does trigger a waiver by implication for related and otherwise privileged materials. The waiver may include both the entirety of communications that a party has disclosed only in part and all other privileged communications insofar as they touch upon subjects voluntarily disclosed by the privilege holder

In re Kidder Peabody (SDNY 1996)—
FACTS--S/h suit. a quantity of attorney notes and memoranda reflecting numerous interviews conducted for Kidder by outside law firm.
HOLDING: The court determined that the corporate defendant's materials were not protected by the work-product rule in Fed R. Civ. P. 23(b)(3) because the corporate defendant failed to sustain its burden of demonstrating that the documents were created principally to assist in contemplated or ongoing litigation. The individual defendant's attorneys' summaries and notes from his appearances before the Securities and Exchange Commission and the United States Attorney's Office were protected by the work-product rule, since his counsel prepared the notes solely in anticipation of litigation
ARGUMENTS—
ATTORNEY-CLIENT PRIVILEGE
Ps-- First, they argue that Kidder has waived the protection of the privilege by both the public disclosure of the Lynch report, which appears to embody or rely upon many of the witness statements, and Kidder's affirmative use of the report in this litigation and in other related proceedings. Ct—(i) finds it extrajudicial disclosure like in Von Bulow and holds that only that material in the publication is waived. (ii) no sward and shield use is allowed—general waiver--affirmative use of the Lynch report and, by implication, of the underlying interview documents, triggers a waiver of the privilege for those portions of the documents that embody the substance of any statements by Kidder employees interviewed by the Lynch team prior to the issuance of its report. In the exercise of our discretion, see, e.g., In re Leslie Fay Cos. Sec. Litig., 161 F.R.D. at 284, we limit the piercing of the privilege to purely factual summaries of witness statements, and thus avoid any danger that the waiver might encompass core attorney mental processes, for which we are required to demonstrate particular solicitude
Second, Jett argues that he has a compelling need for the interview documents.
Third, plaintiffs assert that the so-called fiduciary exception to the attorney-client privilege precludes Kidder from withholding the documents from the shareholders of its parent.
Fourth, plaintiffs argue that Kidder waived the privilege by producing some of the documents in discovery and by turning over a draft of the report to the SEC. Ct—cites In Re Steinhard--If the privilege was effectively waived vis-a-vis the SEC, it was waived as well for the parties in this litigation. Limited waiver.
Conclusion--Kidder had no expectation of confidentiality in the interview summaries.The fairness doctrine is still more explicitly triggered by Kidder's use of the Lynch report in the pending lawsuits and arbitrations. As noted, Kidder has repeatedly proffered the Lynch report not merely as a signal of its own good faith, but as a reliable, if not authoritative, source of data on which the court should rely in reaching whatever conclusion would favor the company
.
Federal Rules of Evidence 612—writing used to refresh memory—mean waiver of attorney-client/work product privilege
if a witness uses a writing to refresh memory for the purpose of testifying, either--
(1) while testifying, or (2) before testifying, if the court in its discretion determines it is necessary in the interests of justice, an adverse party is entitled to have the writing produced at the hearing,




V. September 30th Loss of Privilege/Work Product (Part II)

In re Sealed Case, (1998) – CRIME FRAUD. LEWINSKY
Crime fraud exception when lawyer services used in the commission of crime or fraud. They can pierce (prosecutor can) the attorney communications. It doesn’t matter if he didn’t know she was lying is irrelevant. Objective is to further crime or fraud. Didn’t have to be accomplished. Might be ethically protected.
1. Not material. – but affadavit was. She might not have to be deposed.
2. Has amount to a crime or fraud. – perjury is a crime
3. Ev has to be legally obtained. – they met their burden.


Boone. (2001) INSURANCE COMPANY – BAD FAITH TO HAVE LAWYER THERE
permitting discovery of in-house lawyers. In Boone, the Ohio Supreme Court ruled that the mere allegation of bad faith in the denial of insurance coverage meant that the insured plaintiff could discover internal company communications covered by the attorney-client privilege

Diversified Industries v. Meredith, (1977) STANDARD OF WORK PRODUCT/ATTORNEY CLIENT PRIVILEGE
memorandum and a written report prepared by counsel as well as corporate minutes referencing the report
HOLDING: The court held that neither the attorney-client privilege nor the work product doctrine under Fed. R. Civ. P. 26(b)(3) protected disclosure of the memorandum because it contained no confidential information. RATIONAL:
REPORT--The court held that the attorney-client privilege did not apply to the report because counsel was not hired by petitioner to provide legal services or advice, but rather was employed for the purpose of making an investigation of facts and to make business recommendations with respect to petitioner's future conduct. Further, the report was not work product because it was not done in preparation for any trial or in anticipation of litigation.
CORPORATE MINUTES--Additionally, the court held that neither the attorney-client privilege or work product doctrine extended to the corporate minutes because the minutes were not privileged in themselves, and the memorandum and report were not privileged.
DICTA--A voluntary surrender of privileged material to a governmental agency in obedience to an agency subpoena does not constitutes a waiver of the privilege for all purposes, including its use in subsequent private litigation in which the material is sought to be used against the party which yielded it to the agency
ADOPTED STANDARD--Thus the test for "work product" should be whether, in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.

(x) In re Subpoena Duces Tecum, (DC Cir. 1984) DISCLOSURE TO SEC, W/OUT CONFIDENTIALITY AGREEMENT, IS WAIVER OF ATTORNEY-CLIENT PRIVILEGE & WAIVER OF THE ATTORNEY WORK PRODUCT
the work product privilege does not exist to protect a confidential relationship, but rather to promote the adversary system by safeguarding the fruits of an attorney's trial preparation from the discovery attempts of an opponent.... A disclosure made in the pursuit of such trial preparation, and not inconsistent with maintaining secrecy against opponents, should be allowed without waiver of the privilege."
"[t]he doctrine of implied waiver allows courts to retain some discretion to ensure that specific assertions of privilege are reasonably consistent with the purposes for which a privilege was created
ADOPTS FACTOR TEST)
(1) "the party claiming the privilege seeks to use it in a way that is not consistent with the purpose of the privilege," Sealed Case, 676 F.2d at 818;
(2) appellants had no reasonable basis for believing that the disclosed materials would be kept confidential by the SEC; and
waiver of the privilege in these circumstances would not trench on any policy elements now inherent in this privilege
Rational--Fairness and consistency require that appellants not be allowed to gain the substantial advantages accruing to voluntary disclosure of work product to one adversary--the SEC--while being able to maintain another advantage inherent in protecting that same work product from other adversaries.


In re Steinhardt Partners, (2d Cir. 1993) Once SEC has documents no privilege. 2nd circuit it is case by case basis and they require a very explicit agreement to keep it confidential between SEC and company.


VI. October 7th International Investigations

In re Subpoena Duces Tecum (Willkie Farr and Gallagher), (SDNY 1997)
S/h suit. The attorney firm conducted a comprehensive investigation at the request of the company including interviewing employees and reviewing the company's accounting practices. An accounting firm hired by the company informed the company that it could not provide an unqualified audit opinion unless it had unrestricted access to the results of the attorney firm's investigation. The attorney firm disclosed limited information concerning employee interviews and identified which employees it found to be credible and why.
CLAIMS— They want report by EY w/r/t investigation and found some accounting irregularities. It has all the good stuff in it, bad witnesses, documents, timeline, story. HOLDING--The court determined that the documents in the attorney firm's control were not protected as work product.
RATIONAL--Although the issue investigated by the attorney firm might have led to litigation, the company's motivation in hiring the attorney firm was not litigation. The court held that the documents were protected by the attorney-client privilege, but that the company waived the privilege as to those documents that were turned over to the accountants in order to get an unqualified audit opinion. The attorney-client privilege protected all other legal advice or analysis. Protecting the privilege with respect to other legal analysis did not visit any unfairness on shareholders.
1. Work product argument. Business problem not litigation.
Today he would say something different because this would be in anticipation of litigation. These were oral discussions with the experts. Talking about it is not the same as giving your work product. They were right but got nailed
2. Attorney client … was only to extent of what they had to show the accountant.

Motivation for this was they used the audit report in FL to say we’re innocent and didn’t do it. In NY they say privileged and you can’t use this stuff. So courts says we’re gonna let you look at the stuff to the extent it relates to findings and as it relates to creditability of employees. Which is substantial stuff. In the end Willie good for work product, wrong for attorney client but got nailed.

In re Kidder Peabody, (1996) Judge Dollenger
WORK PRODUCT--Specifically, Kidder has failed to sustain its burden to demonstrate that the documents at issue were created principally or exclusively to assist in contemplated or ongoing litigation. CT does not address waiver arguments.
ATT-CLIENT PRIVILEGE—adopts Von Bulou view—extra judicial waiver—limited waiver; judicial waiver (SEC)=waiver.
Davis Bulke hired to look into trading irregularities that Joe Jett had and help him through it all. GE owned Kidder Peabody at the time. Jack Welch ran it and for damage control he said we have this person and want to disclose whatever we got. He tried to keep the stock from going down. GE bought it to be a cash cow and turned out the person had provided fictitious profits of $350M and there was an article week before that company was good. Not good for stock.
They get sued by shareholders. Jett P’s lawyers want to get the attorney notes. They said in arbitrations that Jett alone did this and no one else so FIRM is innocent. They use their own report for this. Don’t wear two hats. Two versions in forums, FL and here.
1. Dolleginger is wrong on work product
2. No exclusively or other adjective test in front of FRCP 26 for anticipation
3. He is right in saying there is a waiver because of sword and shield analysis.
4. He is wrong when he talks about a selective partial waiver where they put in their core work product at issue. Got lucky that dollinger said I’m just going to give fact summaries.

While both lynch and bulke were not ethically wrong in a conflict standpoint they made the mistake of doing the report and then representing the client especially when their own work product was at issue. Conclusion was Jett was alone and no one else knew, witnesses summaries didn’t support this 100%, so didn’t add up right.




Model rule 1.13 (f)--Corporate Miranda Warning
In dealing w/ an org’s directors officers, employees, members, s/h’s or other constituents, a lawyer shall explain the identify of the client when the lawyer knows or reasonably should know that the org’s interests are adverse to those of the constituents w/ whom the lawyer is dealing.

NY RULE IS DIFFERENT: --when interests may differ.


NEW YORK IS MORE PROTECTIVE OF THE INDIVIDUAL. NY is more likely to be invoked. Under Model rule, you can wait longer until you have to give one.

Policy: If you don’t get this right, then the person gets the idea that you are representing them. Disqualification, you get thrown out for misleading corporate employees.

This is discussed in Meehan and Keplinger.

This thing comes up in Internal Investigations (when something goes wrong) Bring in someone and try to find out what the facts are. They all know the facts and also know they are at risk of being criticized, fired, or other bad things can happen. So they are at risk and therefore have a different interest than the company. So kinda odd to find out what the facts are and telling them you aren’t protected by the privilege when this comes out. One min. they are your clients, and then the next they aren’t.

VII. October 14th Conflict of Interest/Multiple Representation/Lawyer as Director

RIGHT WRONG WHY

Meehan v. Hopps, (1956)



E. F. Hutton & Co. (1969)



Keplinger, (7th Cir. 1985)




Model Rule 1.7 Conflicts of Interest

A) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
1. The lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
2. each client consents after consultation.

Someone will look at you after the fact and saying is that reasonable or not.
How often can you represent a client when directly adverse to one another?

B) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a 3rd party …. Unless:
1. the lawyer reasonably believes the representation will not be adversely affected; an
2. the client consents after consultation.

Standard in NY is not subjective, it is objective. Which is helpful for lawyers.
This is looking in the lawyers mind. I can’t be zealous for X or Y for some reason.

Lawyer for the situation
Brandis was nominated by Woodrow Wilson but he was opposed because of his religion. He represented every potential client in a transaction or dispute. He was being the lawyer for the situation. If you try to do that then you have to sit down with them all and explain implications, advantages and risks involved. At the end of the day if you can do that then you may be albe to get away with it but don’t count on it.

Type of Consent – MODEL RULE SAYS WRITING, NY DOES NOT
Don’t want a written consent because more papers you put under a clients nose, less he will agree. The NY Bar opposed changing this rule to be required in writing. But clearly you’re much better off to have it in writing.
NY bar opposed having it in writing.
Model Rule just this year changed it so that it’s in writing.

Advance waivers: ---- Gave us a Sample Advance Conflicts Waiver Form --------
“something may happen in the future, someday, somehow and even if conflict somewhere in the future, I waive it.”
Large multinational firms are in favor of this where they can represent lots of corporations. If they represent IBM today and in 3 years retained by Microsoft, don’t want it so that they can’t take Microsoft just because some nitwit lawyer was retained by IBM with a $50,000 retainer. Large corporate law firms you have thse advance waivers.
These are very controversial. Why should you waive something in advance when you don’t know what you are waiving. The ABA has been on both sides of this.
ABA said you can’t have an open ended advance waiver. Unless you go out and have the client retain a separate lawyer to advice him about this.
Most advance waivers that have been upheld have been fairly high degree of specificity of what is going on out there, what likely issues might come up and who might the opposing people be, and those that are 5-6 years old have been struck down as being too old.

ABA Formal Opinion 95-390: Corporate Affiliates:
Similar to advance waivers. Can you represent one corporate entity adverse to its affiliates?
You represent the parent and then the child wants to hire you. You have to talk to general counsel ONLY if DIRECTLY diverse. It was written this way to benefit large law firms so they can represent as many corporate entities or clients as possible.

Dissent: They think this is insane. It is then up to the client to protect themselves against the lawyer. Ford, Jaguar is an affiliate. Basically they are trying to say that consent and all that relates to how you set up the corporate structure. Affiliate gets one treatment, Subsidiary gets another.

The fallacy of this decision wholly apart from the dissents scathing skewering of the majority, the practical downside or blind spot of this … my parents are going to get mad and they will get sued and offend… Sue an affiliate of a long standing client without even picking up the phone. This is an example of to allow ridiculous results to gain economic advantage. This is inane. Any client that finds out about this is going to fire the law firm.

Other issues we will be responsible for.

VIII. October 21st Client Fraud
S. Taylor, “Ethics … “ O.P.M. – Other People’s Money

Lawyers, all male. Evil incarnate: Myron Goodman
Good
Bad
Other
Davis -- Clifton’s (account, letter) lawyer. Told C to just send letter to SH and quit. Should have gone to the prosecutors with info instead.
3
1
27
Fishbein – w/ Kaye-Schroler, Asked H anything wrong? H: No.
3
0
31
Hunter – got he visit from Goodman. Letter. Main guy
0
20
15
Jacobs – found some mistakes, OPM said typo, he believed them.
1
2
32
Lawler – Goodmans new lawyer. Old friend of McL. Knew nothing.
4
5
27
Maitioli – young lawyer who attended meeting between davis and hunter. (mclaughlin was his professor)
8
4
24
McLaughlin – sought advice, dean of Fordham, now a judge. Authority on atty-client privilege.
1
8
27
Putzel – legal ethics prof. Brick wall guy
0
12
24
Reinhard – Main Lawyer. Harvard, started w/firm in 69
0
13
23
Rubino – lawyer w/ SH that went to meeting with mclaughlin. Gave report on what they know.
3
0
33
Simon – in-house lawyer. – going to take over after SH left, they gave him a fraud checklist which Goodman then edited down to nothing.
6
5
24

7 things he wants us to get from this case:

1. Knowledge of Fraud means: Actual knowledge. Not should have known
Actual knowledge: You reasonably believe your client so then you get off from liability, punishment.
ABA wants to go should have known standard for knowledge which means that in something like OPM case there were enough red flags.
The advice Putzel gives isn’t wrong in our rules. But is wrong in that Putzel went on facts as given to him by hunter who got them from Goodman. G said no ongoing fraud.

2. Duty to Disclose Fraud: Putzel talked about a brick wall.
ABA wants to take and change the brick wall partly in response to OPM. ABA wants to say you have to disclose fraud to stop it and there is a duty to disclose fraud if it is in the past to rectify wrongdoing. Never in past, ABA could change it

3. Responsibility to 3rd parties: No responsibility to tell. Technically Right.
Putzel said no responsibility to tell anybody (lehman bros. Rockwell) nobody who would rely on the SH opinions.

4. Responsibility to correct past opinions: No responsibility to correct the past.
The problem is that what you write now is based on the past. ABA some controversy with this.

5. Structural impediment. Don’t bite the hand that feeds you
Anytime you have a client that is 60% of revenues or 100% if in house. Problem.

6. Passing the Torch. Can’t tell, but other ways to find out
Fishbein couldn’t find out from Hunter, but he should question why Hunter was giving him a multi million dollar client who is 60% of his revenue. He should have gone to Goodman, asked G to release Hunter from confidentiality so we can probe. If G said no, but be my lawyer, then Fishbein knows something is fishy.

7. Withdrawal Can’t have a noisy withdrawal.
When you see something wrong. Either Acquiesces it, or quietly resign. Have a permissible right to withdraw. Rule 1.6. ABA wants to change it but defeated 3 times. If you withdraw you have to do it in a way least likely to cause injury to the client.

ABA Formal Op. 92-366 (1992)
Stupid opinion. Majority says when your work product is being used, can have noisy withdrawl
Dissent: a. A comment is absolutely no authority whatsoever in practice, procedure, history, ABA rules, lawyers put in comments that which they can’t get into rules. Can’t get in rules because it’s been up before ABA 3 times and rejected.

NY there is NO right to noisy withdrawal. 2 choices when client does naughty things in past.
be quiet, go to office, call rabbi and have a good cry, and could still represent them. Then arguably being a conduit and participant in the fraud.
you can resign. Can’t make a noisy withdrawal. ABA wants to change it to make explicit obligation for you to go back and rectify client wrongdoing where financially injury resulted and someone used your services. It was voted down 3 times now in the ABA. Even if ABA passes it then it’s not law until NY adopts it.

Model Rule 1.16
1.16(a)(1) says mandatory withdrawal only if future ongoing representational services will result in violation of professional conduct. (1.2—lawyer shall not counsel a client to engage or assist in conduct lawyer knows is fraudulent or criminal) When client intends to engage another lawyer and not tell him anything then noisy withdrawal may be necessary to avoid being in conflict w/ rule 1.2 and accordingly q/ 1.16. ABA Opinion.
-- Just because a client suggests it, lawyer doesn’t have to withdraw. Only when he demands it. Might suggest just to test whether the lawyer will do it or not.
-- Option withdrawal but don’t harm the client. When believes client will continue to commit a crime even if the lawyer doesn’t have to be in it, misuse services in past, or where clients goal is repugnant or imprudent.

NYCRR § 1200.15 Withdrawal from Employment
B) Mandatory withdrawal: 1. Client is just suing to harass or maliciously injure someone
2. violation of disciplinary rule
3. Lawyer has gone mental
4. Lawyer discharged by client
C) Permissive withdrawal 1. Client wants to claim something not good law.
2. persists in course of action that lawyer thinks is criminal
3. Pursue course or conduct that is illegal
4. Other conduct by client that makes work hard.
5. Insists to do something the lawyer really doesn’t advice.
6. Doesn’t pay the fee
7. Has used lawyer to perpetrate a crime or fraud

NYCRR § 1200.19 Lawyer should preserve the confidences and secrets of a client.
(b) shall not knowingly 1. Reveal a confidence or secret of a client
2. Use the secret to the disadvantage of the client
3. Use the secret of a client for advantage of the lawyer or 3rd person.
(c) Can reveal 1. When client gives permission too.
2. Required by law or court order
3. The intention of client to commit a crime and the information necessary to prevent the crime. (MAY)
4. Necessary to establish tor collect the fee, defend him or employees etc against action of wrongful conduct
5. Confidences or secrets to the extent implicit in withdrawing a written or oral opinion or representation previously given by lawyer and believed by him that it’ll still be relied upon by a 3rd party when the lawyer knows that the paper is not accurate. (MAY)

NYCRR § 1200.33 Representing a client within the bounds of the law
In the representation of a client, a lawyer shall not:
(b) A lawyer who receives info clearly establishing that (1) the client has in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon the client to rectify the same, and if the client refuses or is unable to do so, the lawyer shall reveal the fraud to the affected person or tribunal except when the information is protected by a confidnce or secret.



IX. October 28th Securities & Regulatory Issues/Attorney Obligations (Part I)

Ziemba (11 Cir)CA—NO PRIMARY LIABILITY—bec. otherwise would revive aider abettor liability under different name.
FACTS--A public company's financial performance began to be questioned by Wall Street analysts. The company, which ultimately went belly-up, retained an outside law firm to assist it in responding to this "attack." The firm undertook to do (or not do) a number of things, including: (i) advising the company to correct any inaccuracies in its financial disclosure documents; (ii) not advising the company to issue press releases to correct misleading, earlier press releases; (iii) preparing a memorandum for the company's president "without appropriate investigation or inquiry" that was used to respond to one analyst's public critique; (iv) preparing an opinion letter that enabled the company to separate itself from a subsidiary for financial disclosure purposes; (v) meeting with analysts in an attempt to stop their "attacks" on the company; (vi) approving a press release drafted by another law firm that threatened a law suit against one analyst (notwithstanding knowing that any such suit would have "substantial difficulties" based upon the law and the facts); and (vii) writing a letter to a local paper that an anticipated article on the company was unjustified.
HOLDING--The federal district court dismissed the plaintiffs' Section 10(b) claim against the law firm on the ground that it had no duty to disclose negative information to the plaintiffs (or any other third party). ARGUMENT REJECTED THAT regardless of any duty to third parties, the firm had a general duty of disclosure once it made material, misleading statements of fact; in support thereof, the plaintiffs pointed to the firm's "significant role in drafting, creating, reviewing or editing allegedly fraudulent letters or press releases." RATIONAL—(I) no reliance on D’s misstatements/omission to recover under 10b-5. At bottom, the Eleventh Circuit was unwilling to hold the law firm accountable as a primary violator under these circumstances because, to do so, would "run afoul" of Central Bank by reviving "aiding and abetting liability under a different name." (II) The Court also noted that Congress, in legislation enacted after Central Bank, had authorized the SEC to bring enforcement actions against anyone who "knowingly provides substantial assistance to another person" in violating the federal securities laws, but had not authorized an accompanying private cause of action.1
With respect to the alleged omissions, the Eleventh Circuit ruled that fraud liability based upon a material omission is prescribed "only when the defendant has a duty to disclose." And for four reasons the Eleventh Circuit found that the law firm had no such duty.
First, because there was no attorney-client relationship, the firm had no fiduciary obligation to the plaintiffs; in support of this determination the court cited Schatz v. Rosenberg, 943 F.2d 485 (4th Cir. 1991) (a law firm was held not primarily liable for preparing papers reflecting deal previously agreed upon by parties, even where attorneys knew that the client, in a separate document not prepared by them, had made a material misrepresentation).
Second, the firm's fiduciary relationship with its client did not permit it to disclose; in support of this determination the court cited Barker v. Henderson, Franklin, Starnes & Holt, 797 F.2d 490, 497 (7th Cir. 1986) ("Neither lawyers nor accountants are required to tattle on their clients in the absence of some duty to disclose. ... To the contrary, attorneys have privileges not to disclose. ... Liability depends upon an existing duty to disclose. The securities law therefore must lag behind changes in ethical and fiduciary standards.")2
Third, because no statements were made by the firm to the plaintiffs, the plaintiffs could have had no reliance on any statements.
And fourth, the firm was in no way involved in the purchase or solicitation of securities (nor did it prepare any solicitation documents).


Schatz (1991) NOT LIABLE 4th Cir.—NO PRIMARY LIABILITY, even when law firm knew client in a separate doc not prepared by firm made material misstatement.
4th Cir. 1991) (a law firm was held not primarily liable for preparing papers reflecting deal previously agreed upon by parties, even where attorneys knew that the client, in a separate document not prepared by them, had made a material misrepresentation).
P relied on some papers the lawyers handed over to close on transaction. The paper said nothing changed from 6 months ago. It was in group of material that was passed over. 4 of the 5 papers had their name on it, the last one which was this, did not. Rosenberg went from good financially to bad in 6mths. Rosenburg wrote the document.
POINT: Not accountable. They take a walk. You don’t disclose to 3rd parties. There is no fiduciary relationship to trigger this disclosure obligation. No independent affirmative statements. For lawyer liability to attach have to have something affirmative. You have to own it and it be yours. There has to be some reliance. Said NOTHING. SILENCE IS GOLDEN. Doesn’t give rise to liability.
With respect to future criminal conduct that is to maim or kill someone, that’s ok.
But if want to cook the books under new proposals Yes, but right now NO.

FDIC v. O’Melveny & Meyers, YES LIABLE (1995) 9th Cir.
The government is receiver of a company that went bankrupt and is suing the law firm. As a receiver they have the advantage of sitting in the shoes of the company and so they have access to attorney client privilege. They sue for malpractice. Big surprise to the law firm.
1. No duty to investors. They are 3rd parties.
2. Attorneys in rendering opinions with securities laws are not justified in assuming facts represented to them by their clients. They have to go out and find this stuff out for themselves. Can’t rely on anybody else to do it for you.
FDIC Have obligations. Barker and Schatz say you don’t.


Finally, it is important to note that the ABA's House of Delegates in August of 2001 defeated a proposal that could well have imposed an affirmative disclosure duty on lawyers in precisely these types of circumstances


Central Bank of Denver. (1994) NO DISCLOSURE
The Supreme Court's decision did, in fact, bar aider and abettor liability for secondary actors, such as lawyers and accountants. Plaintiffs' lawyers in the securities field, however, did not throw in the towel and concede defeat thereafter. Instead, they began to litigate the issue of whether lawyers (and/or accountants) should be held to the same standard of accountability for fraud as their clients (i.e., as primary violators of Section 10(b)), based upon the same type of "secondary" conduct as before


Klein v. Boyd. (3d Cir. 1998) – Professor doesn’t agree with holding
Attorneys have duty to investors. Thus, were held primarily liable.
Third Circuit panel agreed, that a law firm could be held liable as a primary violator of securities fraud, even where the lawyer did not sign the document(s) at issue and where the investor was never aware of the lawyer's role in the creation of the document(s). In the Third Circuit's view, the law firm was a primary violator because it "elect[ed] to speak" by its authoring or co-authoring of document(s) with alleged material misrepresentations and/or material omissions; while the firm did not have an obligation to blow the whistle on its client, it did have a duty to correct its "statements
On en banc review by the Third Circuit, the SEC made its position even clearer: a law firm should be held accountable for fraud where it helps to "create" a misrepresentation. Prior to a ruling by the entire court of appeals, the case was settled; but the original precedent is still there, and the SEC has continued to espouse such theories of liability.

Court said that once a law firm has chosen to speak, it may not omit facts material to its non confidential opinions. This duty arises from the fact that they take an affirmative act of communicating with the investors.

Duty is that if they significantly participate in creating their clients misrepresentation to such a degree as to deem them authors or co-authors, then the plaintiffs have to prove that she relied on the misleading statement of the defendant and suffered an economic loss as a result.

SEC amics brief (diff. standard. Primary liability where a attorney creates or helps to create a misrepresentation.)

Under Klein you can be held accountable under securities laws but you are okay you won’t be disbarred. Every dime to your name and your house will go to the settlement fund.

Disclosure – YES
Disclosure NO
O’Melveny – receiver in shoes of corp sues law firm. Should review the facts on your own; duty to client;
Barker – foundation, no draft, no sign, no review
Klein v. Boyd –s/h’s sue; primary liability for secondary actors; you start talking, keep talking truthfully. (professor doesn’t agree with Klein). Mistake, nailed; duty to investors
Schatz – 3d parties sue for primary 10b—made no affirmative statements; and secondary 10b5 liability—no duty to 3d parties; handed blank paper, no duty to 3rd party
National Student Marketing—SEC—suit for injunction; duty to investors – aiding and abetting liability; NSM the lawyer should have said don’t do the deal;; once know of material misstatements can’t just go along; must set it straight; disclose to s/h’s.
Central Bank (indenture T’ee which learned about decline in collateral for bonds; postponed review till bonds were sold)– no private action for aiding/abetting liability under 10b since 10b prohibits primary material actions
In re Gutfriend—SEC; head of legal dept failed to follow through w/ violations he observed in corp. while reminded management on numerous times to do something, did nothing more. SEC issued report on his behavior where it criticized him; duty to investors; must have taken affirmative steps to remedy situation: go the the board, resign from firm, disclose to regulators=heightened prof standard.
In Re Carter – SEC level. Not held liable because no knowledge about client’s wrongdoing.
Ziemba—s/h’s sue. No primary liability for 2ndary actors, since it would revive aider/abettor liability for 2ndary actors. No facts that show reliance; or that firm made misstatements to P’s




X. November 4th Securities and Regulatory Issues/Attorney Obligations (Part II)

SEC v. National Student Marketing Corp., (1978) Warm Champagne – Wrong Advice
They had warm champagne. NSM go-go company, merging with Interstate in a 2 for 1 stock deal. Closing day needed 2 things. The comfort letter from accounting and the opinion letter from the lawyers. Opinion letter is easy. Friday, 2pm, waiting for comfort letter from accounting so they can close the deal, go to SEC, place order and sell shares. Comfort letter in DC. Epley calls has it dictated to him. They add some major stuff. He takes it to the room, puts it on the desk (unsigned, undated) and he leaves for his office to crawl into fetal position.

Letter starts a discussion. Everyone asks everyone questions. NSM tells Interstate all ok.
Advice your client on what do you do. They say we have three options:

a. Delay the merger, while make further disclosures – would mean complete abandonment or negeotiate terms less favorable. Might get sued.
b. Abandon it entirely, - Can still get sued.
c. Go ahead with some additional comfort. – Letter has all you need to know, if need more then add some.

NSM bottomed out and after that the SEC came in and so did lawyers. And they discovered that at the closing some of these issues had been raised.

Judge said that the third option wasn’t good.

What’s being talked about is the people who were lied to by mr. Epley. Give us assurances that this is accurate and they were lied by NSM and their lawyer. Why are they in this case? What did they do wrong? aren’t they victims. And why are they ducking it out 9 years later.

The major problem arising with regard to the Commission's contention that the attorneys failed to interfere in the closing of the merger is whether inaction or silence constitutes substantial assistance. Should interfere because their job to the corporate client and should take steps to disclose info to shareholders. Didn’t take steps and didn’t speak out.

They didn’t really stand silent because they gave the client 3 choices to make a business decision. Lawyers don’t make business decisions. Basically judge says if you make a mistake and give wrong answer, committing something that causes liability.

That’s what this case stands for except for one thing they were asking in way of a remedy was an injunction. SEC failed to show that they really needed one. This was a reputable firm and won’t do it again. Couple of years later the firm settled for $24M on a similar proceeding.

This is very important so parker puts this as a duty to speak case. What he really means is duty to give correct legal advice and if you fail to do that then you’ll be in trouble. This leads directly to carter and Johnson case. This should be similar factually to klein v boyd case.

In re Carter & Johnson, (1981) Cowed into submission. – No duty to speak. – have to act
Attorneys dealing w/ aggressive and uncooperative client which continues to materially mislead investors and public even though firm tells them they need to disclose.

Two things to really focus on when you think of this case and the NSM case.

1. Page 84167: It is axiomatic that a lawyer will not be liable as an aider and abettor merely because his advice, followed by the client is ultimately determined to be wrong. What is missing is the wrongful intent on the part of the lawyer.
This standard can’t stand in same sentence with Judge Parker in NSM. NSM says give wrong advice, even if in good faith, liable.
74 they say they had no intent. 75 they say they were cowed into submission. Didn’t know what to do, so they did nothing.

2. Page 84172: When a lawyer with a responsibility is aware security fraud is gong on with respect to compliance with disclosure requirements, his continued participation violates professional standards unless he takes prompt steps to end the clients non compliance.
You have to do something about it. Don’t talk about what you are supposed to do though.

Future acts the securities lawyer has to do something, but this case we’d put it under No duty to speak. Can’t Square with Klein v. Boyd. In Klein there wasn’t even names or anything but still liable. Here before in 74 they had names on them, but here not even for aider and abettor.

In re John Gutfreund, (1992) SEC Proceeding for deficient supervision resulting in delay in reporting matter to gvt.
PARTIES—Salomon Broths (brokerage firm); Gutfreund—CEO; Feuerstein was the chief legal officer; head of Salomon's Compliance Department reported directly to Feuerstein
Treasury Bond scandal with SOLOMON BROTHERS. Mozer head of the firm's Government Trading Desk, had submitted a false bid in the amount of $ 3.15 billion in an auction of U.S. Treasury securities on February 21, 1991. He got 10-20M bonuses. The executives were also informed by Donald Feuerstein, the firm's chief legal officer, that the submission of the false bid appeared to be a criminal act and, although not legally required, should be reported to the government. Gutfreund and Strauss agreed to report the matter to the Federal Reserve Bank of New York. Mozer was told that his actions might threaten his future with the firm and would be reported to the government. However, for a period of months, none of the executives took action to investigate the matter or to discipline or impose limitations on Mozer. The information was also not reported to the government for a period of months. During that same period, Mozer committed additional violations of the federal securities laws in connection with two subsequent auctions of U.S. Treasury securities.CLAIMS--The Respondents in this proceeding are not being charged with any participation in the underlying violations.
However, as set forth [*5] herein, the Commission believes that the Respondents' supervision was deficient and that this failure was compounded by the delay in reporting the matter to the government. Then 1. Nothing happened
3. He was allowed to go back to his job and no disciplinary action and he did it again.

Feds find out and Firm will be blown out of the water. Soloman pays a lot and all ok.

21A REPORT: They are settling the three administrative proceedings against the 3 executives. Those three are gone. Gutfreund never top dog again. Showed up on Wall St. after 10 years.
Floirstein he was excluded from the proceedings because he wasn’t an executive. They take a pass on him. they spend almost all the 21A report talking about him. and you wonder if this is all about Floirstein.
Key footnote about why they are not going after floristein. 23. He won’t go in securities industry anymore. He spent his whole career as a securities lawyer. This was the deal. We wont go after you but we will issue a 21A report. And we go easy on you because you never ever be employed again in this industry again.

But Florenstein is just a lawyer and No lawyer has any say about compensation and stuff to other people. No one reports to a lawyer. This is nuts because it says he was in a position to supervise him. that’s nuts. That part of this 21A advisory report as a matter of reality makes no sense at all.


Model rule 1.13 MUST KNOW FOR THE EXAM RULE
(a) a lawyer employed or retained by an organization represents the org acting through its duly authorized constituets.
(b) IN RE GUTFRIEND RULE—go to the leader rule--If a lawyer for an org knows that an officer, employee or other person associated w/ org 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 org, or a violation of law tha reasonably might be imputed to the org, and that is likely to result in substantial injury to the org then the lawyer shall proceed as is reasonably necessary in the best interest of the org. unless the lawyer reasonably believes that it is not necessary in the best interest of the org to do so, the lawyer shall refer the matter to higher authority in the org, including, if warranted by the circumstances to the highest authority that can act on behalf of the org as determined by applicable law.
(c) Except as provided in (d) if
1. despite the lawyers efforts in accordance w/ (b) the highest authority that can act on behalf of the org insists upon or fails to address in a timely and appropiate manner an action, or a refusal to act, that is clearly a violation of law, and
2. the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the org, then the layer may reveal info relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent necessary to prevent substantial injury to the org.
d. c shall not apply w/r/t info relating to a lawyer’s representation of an org to investigate an alleged violation of law, or to defend the org or an officer, employee or other constituent associated w/ the org against a claim arising out of an alleged violation of law
e. a lawyer who reasonably believes that he or she has been discharged bec of the lawyer’s actions taken pursuant to (b) or (c) or who withdraws under circumstances that require or permit the lawyer to take action under either of those paragraphs, shall proceed as the lawyer reasonably believes necessary to assure that the org’s highest authority is informed of the lawyer’s discharge or withdrawal.
f. CORPORATE MIRANDA WARNING--In dealing w/ org’s officers, employees, members, s/h’s or other constituents, a lawyer shall explain the identity of the client when the lawyer knows/reasonably should know that the org’s interests are adverse to those of the constituents w/ whom the lawyer is dealing.
g. Lawyer representing org may also represent any of its directors, officers, employees, members, sh/ or other constituents, subject to Rule 1.7. If the org’s consent to the dual representation is required by Rule 1.7 the consent shall be given by an appropriate official of the org other than the individual who is to be represented or by the shs.

When there is a problem you go to the audit committee (not board because board is a bunch of CEO friends).

Model rule 1.13 and analogue of that and we know that

Mr. F “Mr. G I found some really terrible things you do with treasury bonds”
Mr. G “Well you’re not my supervisor but thank you for noticing.
Can’t criticize Mr. F under security law unless he was a supervisor so they make up a reason to get him.
Mr. F “You are correct I’m not your supervisor but nor are you my client. My client is the company, the entity of Solomon Brothers. I will not forget my client. I won’t take this crime at face value and I’ll make sure you do the right thing”
Reason is that he forgot his client was the entity.
Mr. G “ And how will you do that?”
Mr. F “ The commission gives guidance on how to handle this. I will go up the chain of command. To the Board of Directors”
Mr. G “Go ahead. The entire board is made up of my friends”
Mr. F “Fine then I will make sure you do it. I know you did this on purpose. And as in In Re Carter I’m obligated to do something about this if you’ll do it again, which I think you will”
Mr. G “Fine, I’ll call”
Mr. F “I don’t believe you … well, I’m waiting, call them”
Principal screw-up was he didn’t just follow up on the promise.
Mr. G “I don’t think so, I’ll continue to do what I do”
Mr. F “Then under Model Rule 1.16 I have the right to an optional withdrawal from here if you refuse.”

Carter and Johnson say do something. Remember that Gutfruend is not your client.





XI. November 11th Attorney as Whistle Blower (and related practical issues)

Balla v. Gambro, Inc., 584 N.E.2d 104 (Ill. 1991)[Gambro]
ISSUE--whether in-house counsel should be allowed the remedy of an action for retaliatory discharge
Attorney is required to follow ethical rules and cannot seek cover from employer. Being fired is the price attorneys have to pay in order to maintain the integrity of the profession.
HOLDING--our appellate court held that the plaintiff, an employee and chief legal counsel for the defendant company, did not have a claim for retaliatory discharge against the company due to the presence of the attorney-client relationship

General Dynamics Corp. v. Rose, 1994 Cal. LEXIS 3522 (Sup. Ct. July 18, 1994)
Fact: When Rose’s P employment as in house counsel with GD was terminated he contended he could only be fired for just cause. While GD had fired him because he spearheaded an investigation into employee drug use and had displeased company officials with certain legal advice he gave to them.
RULE: In house counsel is not barred from pursuing a just cause contractual claim for wrongful discharge nor from pursuing a retaliatory discharge claim
PROVIDED that the claim be established without violating the attorney client privilege or the professional relationship.

Ill – tough state to practice CA much more lenient. Opposite on disclosure standards
People who sue their employers don’t generate good will for prospective employers.

In re Himmel, 533 N.E.2d 790 (Ill. 1988)
Illinois is scary place to practice law. There is a duty to report this and you didn’t. Ill. SC wants to lead country in attorneys ratting on other lawyers. Mr. Himmel wants to wrap himself up around the privilege and say no duty to report.
SC says no because said in front of a 3rd party so lost the privilege (he lost one of his C’s.) Signing the settlement agreement was the kiss of death of the privilege.

Wieder v. Skala, 593 N.Y.S.2d 752 (Ct. Appls. 1992)
Mr. W tells company that this co-worker ruined deal. 2 causes of action: 1. breach of employment relations (this is an at will employee) and 2 Retaliatory discharge (no matter of law) Why change to protect Weider. Exception to at will employee. Attorneys we are learned professionals regulated. This is flawed. Rule litigated on 12(b) motion.

S. Brill, “When A Lawyer Lies,” Esquire (December 19, 1979)
Mr. Fortenbury died of a broken heart at 43. He sat there while his older supervisor said a lie about discovery materials and then the older guy got caught. Mr. F was brought in too for not squealing. This was professors old law firm. Mr. F was not a jolly guy. He was an odd duck and was never going to be made partner. It is unclear what he knew if these documents existed or not. Perkins went to jail. You can’t seek out other people whose judgment you esteem and confidence you depend on. He really didn’t do anything wrong but this ruined his life literally.

XII. November 18th Talking with Other Lawyers' Clients

Niesig N.Y.S.2d 493 (1990)
Point was: An attorney may conduct ex parte interviews with a corporate adversary’s employees if the employees do not have the power to bind the corporation.
Ct rejected control group test RATIONAL-- that test gives insufficient regard to the principles motivating DR 7-104(A)(1), and wholly overlooks the fact that corporate employees other than senior management also can bind the corporation. The "control group" test all but "nullifies the benefits of the disciplinary rule to corporations
Ct rejected blanket rule test from UpJohn. RATIONAL--First, the privilege applies only to confidential communications with counsel (see, CPLR 4503), it does not immunize the underlying factual information--which is in issue here--from disclosure to an adversary. Second, the attorney-client privilege serves the societal objective of encouraging open communication between client and counsel (Rossi) a benefit not present in denying informal access to factual information. Thus, a corporate employee who may be a "client" for purposes of the attorney-client privilege is not necessarily a "party" for purposes of DR 7-104(A)(1). The problem, however, is that a expansive ban exacts a high price in terms of other values, and is unnecessary to achieve the objectives of DR 7-104(A)(1); rule closes off avenues of informal discovery of information that may serve both the litigants and the entire justice system by uncovering relevant facts, thus promoting the expeditious resolution of disputes. "A lawyer talks to a witness to ascertain what, if any, information the witness may have relevant to his theory of the case, and to explore the witness' knowledge, memory and opinion-- frequently in light of information counsel may have developed from other sources. This is part of an attorney's so-called work product." Costly formal depositions that may deter litigants with limited resources, or even somewhat less formal and costly interviews attended by adversary counsel, are no substitute for such off-the-record private efforts to learn and assemble, rather than perpetuate, information.Nor, is it necessary to shield all employees from informal interviews in order to safeguard the corporation's interest.
HOLDING--(1) for purposes of disciplinary rule prohibiting lawyer from communicating directly with "party" known to have counsel, "party" includes corporate employees whose acts or omissions in matter under inquiry are binding on corporation or imputed to corporation for purposes of its liability, or employees implementing advice of counsel, and (2) rule did not preclude worker's lawyer from conducting ex parte interviews of employees of corporate employer who witnessed accident underlying personal injury action. But even if they made an admission, in NY it wouldn’t apply because of the scope of the hearsay exception.
Niesig fell off from scaffolding while working on the train. Attorney wanted to interview some employees who were witnesses.
1. Client: Is not a client and not a party for the purpose of ex parte no contact rule.

2. Party: If employees are a party then he can’t talk to them w/out consent of atty.

Party means that since corporations act through individuals, then all employees are covered. TALK TO NO ONE
Bad because there is the fact gathering process for P lawyer. It precludes informal discovery which is an expedient way of helping to resolve disputes. Must allow for maximum information gathering while still safeguarding attorney protections for those individuals vital to a corporation. This is versus the interest of the corporate defendant in retaining the atty client thing.

The Control Group Test which holds that only controlling individuals in a corporation (usually executives) would be covered by the rule. TALK TO EVERYONE BUT TOP

This wholly overlooks the fact that corporate employees other than senior management can speak for a corporation. Control group is too narrow. The standard they say these people are too far high up they don’t realy know any of the real facts. That would of course argue for going to Upjohn BUT UPJOHN IS TOTALLY IRRELEVANT. because
Upjohn talks about privilege, this fact finding gathering thing is something different.
Niesig: This doesn’t talk about a lawyer giving advice but gathering facts.
Upjohn talks about one arrow and Niesig is two.
(bit messed up here because Upjohn was talking about getting facts too.

They go for the alter ego standard.
1. people who acting with lawyers to implement their advice.
2. those that have their interests at stake regarding the matter. People who can speak on behalf of the corporation and so they bind the company. Acts also. People through whom the company acts, speaks and who are alter egos … those are the folks that we are going to stay you can’t contact.

Can talk to people who don’t have power to bind the company.
Real life problem: How would you know who to not talk to until you talk to him. then you’re accused of ex parte communications and you get disqualified. You never know till you talk to the people whether they are alter ego or not. Sounds like a TRAP

Real life solution: Ct. of Appeals, don’t worry because of submission issues. Whose hearsay admissions can bind the company……
They say that concern arises really out of FRE with respect to hearsay. 801b2d
Don’t worry about that because NYS has a diff. rule. What was deemed admissions by employees is rarely ever going to come up.

Comes up: a. When you apply federal rules of evidence in a diversity matter in a federal court. They apply NY law but also apply FRE
b. Other courts read niesig and say that privilege and ex parte rules are totally different. They have 801b2d admission standads (broad hearsay) so that stuff comes in.

The trap exists everywhere but NY. You won’t know until the interview. In New York that admission won’t come in so protected in 90% of cases. The real answer is don’t do this.

Public Service Electric and Gas Co (D.N.J. 1990)
Curley v. Cumberland Farms, (D.N.J. 1990)
In re The Prudential Ins. Co. of … (D.N.J. 1995)
Andrews v. Goodyear Tire, (D.N.J. 2000)
Four cases in NJ. 3 ½ different standards. One judge in 2 cases updating himself.
Will go quickly, there isn’t always just one answer. There is no definitive answer here.

Policy: Fact gathering is an important policy and want to encourage it.

Niesig: alter ego standard.
1. people who acting with lawyers to implement their advice.
2. those that have their interests at stake regarding the matter. People who can speak on behalf of the corporation and so they bind the company. Acts also. People through whom the company acts, speaks and who are alter egos … those are the folks that we are going to stay you can’t contact.

Old Model rule is No contact with
1. Employee with managerial responsibility
2. employee is responsible
3. statement is deemed an admission.
New Model Rule is
1. Litigation control group (this was rejected by ct. of appeals)
1. you talk to counsel,
2. you have authority or
3. Committed an act or omission that can bind the company for liability.
MA we have a diff. test
1. Managerial responsibility And committed acts in question
2. Or member of litigation control group.

WAY TO AVOID THIS:
a. Even if you follow some procedure of asking questions before asking the real questions… still problem.

b. Go to organization first and ask for permission.

c. You go to the court and say I’d like to talk to ex employees or current of bozo company who know something about this.
Pro of doing that
You are certain you are complying with the law and that means you won’t be disqualified. No one can say you did a naughty thing under rule 4.2
Con of that:
a. You advertise you’re coming. Whole point of ex parte is to get in before the other lawyer prepares the witness. Before the wall of attorney has fallen and he’s toned down the facts or changed them. Can’t get the unvarnished truth.
b. Leads to satellite litigation which the D is happy to start. He’d rather not talk about what he did and would rather say that Jones is an alter ego.

Practical Matter:
How do you stop a P lawyer coming in and picking off employees:
Making your ability to defend the company impossible.

a. Tell your employee before you hire them that you never talk to an attorney unless you talk to your boss first. If they call, politely refer them to the general counsels office. Have a memo that goes around every now and then. Have it in their contracts of employement some notion of confidentiality and you can fire someone if they don’t follow it.

b. This policy extends to not just plaintiffs lawyers but also to people in the government. Whether SEC enforcement or NYSE division or someone else. And you deem it policy of witness cooperation. Lay out the terms under which you cooperate. If you are there with counsel then you cooperate. If not with counsel then you call counsel.

A P lawyer sniffing around your company.
c. Send a letter to opposing counsel saying everyone in marketing of sales dept. employees are represented by us on this matter and be on notice if you have ex parte communication with them we will deem it as violation of either 4.2 or NYS one.

All these policies sound tepid but so we know when that when professor once advocated them, then he got letters saying he is an advocate of corporate terrorism.

Upjohn never talked about ex employees and they didn’t’ reach that issue here either. It depends on what rule the court applies. Some say they are and some say they aren’t. Think about whether any policies promoted by extending this to ex employees or not.

The new model rule would say no.

Gidatex v. Campaniello Imports, Ltd., (S.D.N.Y. 1999)
Counsel hired someone to go in and started asking questions pretending they are customers. To see whether using a trademark to pull people in and sell own stuff. If the lawyer had gone in there and done this and had a discussion with these people, that’d be. Unethical.

And the rules say lawyer can hire someone to do something it is unethical for her to do.
They got around the unethical thing by saying it is an investigative technique and not a misrepresentation. They just asked questions and got responses and if they were lawyers would have gotten the same answers. No trickery here by unscrupulous lawyers.

The investigators come into court and say what the employees say. That’s hearsay but it is admissions that bind the company. Sales people told me XYZ. This case shows that federal judges with lifetime tenure have a lot of leeway with rules to do what they want. If they view you better than scumbag on other side they will cut you a bit of slack and hold them admissible. Don’t try this at home. Case isn’t really good authority. Not the best practice, They got lucky.
D. Cloud, “Did Starr Go Too Far Questioning Lewinsky? The Rules Are Unclear,” Wall Street Journal A1 (March 5, 1999)

Quickly, who thought she was mistreated?
She couldn’t talk to her lawyer and if she did they’d take something off the table. There was a period of time she didn’t have a lawyer. And that’s when they talked to her.
Starr says a party versus a person. This is the demarcation point and they take it really seriously. If a party then she has the right to the lawyer. If just a person then she is just a potential witness in a case. Not facing prosecution and said she wasn’t in custody, not charged with anything. They knew she had a lawyer but he was for another matter. Didn’t charge her, lawyer for other matter, so not ex parte.
Discussions go on that day that she might face charges. They specifically brought in a very handsome US attorney and … in any event reason he put this in,
.a you remember this happening
.b gov’t views this ex parte rule very differently as applying to them in civil litigation.

For years they said it didn’t apply to them at all.

Special bill of congress made a dent that the law would apply to them. This was an issue before the judge Johnson. He finally said no the Starr office didn’t violate anything. Judge for yourself.

Points out again how much uncertainty is out there whether criminal or civil. For our purposes you often won’t know … if you do what Starr’s office did here… you won’t know whether what you did is permissible until you litigate it after the fact… someone wants to disqualify you from the law firm.

Model Rule 4.2
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 by law to do so.

This rule applies to communications with any person, whether or not a party to a formal adjudicative proceeding, contract, or negotiation who is represented by counsel concerning the matter to which the communication relates.

Lawyer has to have actual knowledge that the person is represented. Can be inferred by circumstances.

XIII. November 25th Dealing with the Government
The point of tonight’s assignments. The government has a lot of power to negotiate settlements or making people testify. The 800 pound gorilla. Which even the former US attorney Mary Jo White who is now in private practice admits has gone too far. Is 900 lbs now.
She used to just say “too bad” Now she’s on the other side saying it’s too far.


D. L. Cromwell Investments, Inc. v. NASDR, 132 F. Supp. 2d 248 (S.D.N.Y. 2001)
No Miranda Warning, spill over effect of this proceeding to criminal doesn’t matter.
Some examples of the 800lb gorilla.
They wanted to enforce, no rights because civil investigation by a non governmental entity. The NASD was participating in the criminal investigation. There is the enforcement division made of people who say we believe in cooperating with the justice department and we will share info with them. Mild flaw that this is a self regulatory dealing with a member and has no spill over effect into the ongoing criminal investigation… this is nuts. But they could make the argument this is far from the pending criminal investigation.

Another case he didn’t assign but also decided same year, same court, different judge, court said a registered person someone who is in securities industry was being investigated and down in front of the SEC and that person was not entitled to a Miranda warning.
SEC enforcement division… not friendly environment, consequences flow from, very scary thing, can go to jail etc.
It was held by a federal judge last year that someone in that circumstance is not entitled to a Miranda warning before his or her deposition. Even when it is contemplated that this person may be subject to criminal investigation.
The argument is that that this person was not charged with anything and had the freedom and he was not incarcerated to get up and leave the deposition. In other words no one had a gun to his head. He could say he wants to go.
Flaw with that analysis … they will crush you and take away your license. You’re free to leave and you won’t work in this town again. While you could convince the judge a good faith argument of this kind. As a practical matter amazing series of these two cases.

Courts cut government agencies a lot of slack. If someone can take away your liberty or earn a living you had some rights. And these cases tell you no, not all the time.

Johnson v. S.E.C., 1996 West Law 338395 (D.C. Cir. June 21, 1996)
SEC Got kicked in knees but only in DC circuit. SOL claim

SEC took the position that SOL doesn’t apply here because this wasn’t a penalty, it was a remedial measure. So we can bring on 4 year old claim, 20 yr old.. etc because all we’re doing is not sending someone to jail. It’s just for the remedy. What did the court say in response to that… they laughed.

They weren’t focusing on present or future threat… focus on lack of supervision and by suspending her that’s a punishment and she’ll have to face not working in the industry etc. and it said that the SEC has to abide by the SOL.

Who are you kidding, of course this is a penalty to take away her ability to earn a living. Laughed SEC out. SEC said we’re special, but that didn’t cut it.

So here the 800lb gorilla got kicked in the knee caps. You can’t do everything have to play by some rules.

EXTRA: SEC responded to this… (we don’t know cuz he didn’t assign this to us) This case only applies… is only binding precedent in the DC CIRCUIT!!! If in NY, SF, … so now the SEC forum shops. Forum shopping is easier if you are the Gov.

Litigated it in 9th circuit and got favorable result so they can impose sanctions for 20 years of stuff though they only got material in for last 5 years. We wont shut them down but we want an injunction and cease and desist order. Also disgorge money from them. Not a peantly because they can still earn a living.

Also, Ruling by DC circuit doesn’t apply to what other adversarial proceedings. NESD,
NYSE, they are free to bring proceedings for the entire spectrum. Why? Because they are regulatory organizations who bring penalties against members. And so they voluntarily are subject to their rules.

Appears to be a significant setback but really isn’t as difficult after all.

Beck & Orey, "They Got What They Deserved," American Lawyer (May 1992)
Article: They weren’t victims. Except of own arrogance in its overzealous, over the bounds pursuit of a crooked clients interest. Led by Fishbein
Prof They set up a litigation structure in an adversarial proceeding against their client. Are they just supposed to sit back and let government drive a stake into them.

Lincoln as a S&L and was going through a regulatory monitoring process. OTS. Mr. Fishbein (of O.P.M, Kay Schroler) he se up a litigation structure when his client was being looked into by the government. Regulators usually want transparency. Litigation mode got OTS mad. Made them think that Kay Schroler was in on it. They are masking massive fraud. Little old ladies out on the street type of fraud. They were out for blood.

Keeynan empire which was Lincoln Savings went into receivership and the OTS took over.
OTS was created to kill people who raped and pilliaged the rest of the country during the S&L loan debacle. That was a Multi Trill dollar surprise.
Great thing about being a bankrtupcy receiver is that you are now in the shoes of Lincoln and you now own the attorney client privilege. Have all the files on communication back and forth between Fishbeing and executives. 3 were directly involved. Fishbeing, Katzman, and Fisher.

OTS finds some bad acts. OTS forced them to settle by saying, settle because of a power given by congress to FREEZE KAYE SCHOLERS ASSETS!!!! First thing Mon. Morning. Banks will be 2nd in line and behind the government. They won’t get anything.

Kay Schroler and all big firms need a revolving line of credit to function. If they froze everything the banks wouldn’t give them credit and the partners money is in the firm. Cutting credit line will kill the firm. Give us 41M or die. Not violation of due process? Aren’t you supposed to have a fighting chance, 2 sides to an issue etc. Doesn’t it sound unconstitutional?

No. SC said you have 10 days to appeal this. Get the order lifted. Problem is by that time, the firm is dead. Sounds a bit like Soviet Union.

DOJ Factors on Corporate Prosecutions (Memo on the Web. Holder.)

N. Varchaver, “Loren Schecter’s Toughest Battle,” The American Lawyer (April 1994)
Prudential Securities forceful ex general counsel has spent years fighting hard for his clients, now he must fight hard for himself.
Mr. Schrecter tried to Zealousy advocate his client. He tried to defend them against the onset of the government. What was their reaction? How dare he. This is an outrage.
They took the view because this is not an ordinary client. This is a regulated entity and those presumably aren’t entitled to zealous defenses. So schlecter goes down the tubes and what happens to client…. They pay a lot.
K. Eichenwald, Serpent on the Rock pp. 410-23 (1995)

They have to write a blank check. They agreed to it because they miscalculated the possible damages. Bean Counters said don’t worry, max is $250M. They were wrong by a few Zeros.
It was off by 1.25 billion dollars. Total that the check was 1.5 Billion.

So those are some issues when dealing with government, if you put up a defense have your career ruined or if you don’t put up one is that you’ll pay 1.5B.

XIV. December 2nd The National Practice of Law
Even if your clients have a base of operation just in NY, wouldn’t be substantial if they only did it here. They look to you to do business all over. These cases deal witht hat subject.

Birbrower, Montalbano, London & Frank, P.C. v. Superior Court, 949 P.2d 1 (Cal. 1998)

10 or so years ago no one seriously thought about this whether you can practice elsewhere if only licensed in NY. Assumed that lawyers from big fancy firms were well educated, smart people, wouldn’t do anything wrong and they could go out, fly to LA close a deal,
Admitted pro loc viche procedure. Courts permission to be admitted for just that one case. Doesn’t negate local counsel but lets you stand up and try cases.

CA burger case came down.
Lawyers can’t get paid for services rendered in CA for doing lots of things. They wanted to be paid for ADR services. So the bill came and they said we’re not paying. They brought a collection action and this went all the way up to CA SC.

You seek a bill for legal services rendered you weren’t supposed to. Under notions of federalism they can’t practice law in CA. So SC said no.

Fought & Co. v. Steel Engineering and Erection, Inc., 951 P.2d 487 (Hawaii 1998)
It was the corporations counsel in Oregon was not practicing in Hawaii.
He never came to Hawaii
Retained local counsel for court proceeding
No evidence he drafted anything used in that proceeding.
That’s it that you can use to distinguish it.
Ranta v. McCarney, 391 N.W.2d 161 (N.D. 1986)
El Gemayel v. Seaman, 536 N.Y.S.2d 406 (1988)

NY case and case out in North Dakota they seem to be the cutting line in continuum. Getting on phone vs. going into state, vs doing lots of things in another state, vs. luring people from other state into yours.

More you introduce yourself into another state physically, the more trouble you have on this. That being said, there are recent cases that say that under NY long arm jurisdiction concepts where a lawyer outside NY physically inject themselves by telephone into NY, that is for purpose of long arm, that gets them into malpractice.


ABA PROPOSAL This is not law anywhere, just a proposal.
Has tried to make this clearer and what they said is that occasionally to go into other jurisdictions to do some things. Notion would be that if you occasionally or temporarily do this you then would be subject to the disciplinary rules and sanctions of those other jurisdictions in which you are not licensed.
Basically you open yourself up to different jurisdictions. NY is a lot less dogmatic than CA. Proposal is to short-circuit all these rules and put them back prior to the Birbrower decision. Go and do whatever they want.

Maybe if you put in a choice of forum clause. Say laws of NY apply. But still not good:
“make a pig look prettier, not make it look pretty”…. Courts don’t like this usually.

The more you go into that jurisdiction… the worse it is. Went in 21 times physically in there to stir up business and give advice.

Reasons for these rules: FL makes it difficult to be waived in …
they don’t want NY lawyers retiring to FL and being competitive in. definite protect the local lawyers policy.

What can they do? “okay I’ll never go there again” So long as home state is okay with you, then who cares. So long as safe in Texas and doesn’t need Delaware then he is okay. But if you want to continue to do business there then they can’t.

These proposals would carve out a safe place for in house lawyers. But really then depositions of in house lawyers will be rampant because the people will just say that we weren’t practicing as lawyers.

These types of concepts when applied across Atlantic in western European countries. Many of those say that in house lawyers aren’t really lawyers so they don’t get the privilege at all. More we move into a in house lawyers… to outside more we fall into well maybe not independent as outside lawyers which is what European thing which led them to think no privilege. So one is very likely and one is likely. Of making life easier for in house lawyers to have rules apply differently to them.