In a recent Corporate Counsel article, the authors describe a Federal Trade Commission ruling about the disclosure of connections between corporate advertisers and those who shill, directly or indirectly, the advertisers’ wares. 

The U.S. Supreme Court in Shute v. Carnival Cruise Lines, 499 U.S. 585 (1991) held the Shutes, who were injured on a Carnival Cruise ship in waters off Mexico, must file suit in Florida pursuant to the forum selection provision printed on the back of their ticket.   The Shutes filed suit in their home state of Washington.  The cruise ship departed from California.  Shute is still one of the most far reaching holdings enforcing adhesion-like forum selection provisions.  The Shutes also had a strong argument that they lacked notice of the forum selection/choice of law provisions.  

Over the past few years, we have all heard about and possibly participated in alternative fee agreements.  According the legal analysts, these agreements are “here to stay” and in response  DRI appointed an  Alternative Fee and Billing Task Force which recently authored a comprehensive white paper on 10 of the most popular alternative fee agreements.  This paper, now available on the DRI web site, exclusively for DRI members, details the most popular features of and potential ethical issues raised by each type of alternative fee agreements. The paper outlines the considerations that each party should consider before entering any type of arrangement.   

On August 4, 2001, the American Bar Association's standing committee on ethics and professional responsibility issued formal opinion 11-461 entitled, "Advising Clients Regarding Direct Contacts with Represented Persons."  As a general rule under ABA model rule 4.2, a lawyer cannot communicate with a person that a lawyer knows is represented by counsel without the opposing counsel's consent to the communication.  This rule extends to the use of an intermediary as an agent to communicate with the represented person.  However, it is also sometimes useful for litigants or parties to a transaction to be able to communicate with each other even though they have their own counsel.  In such instances, the parties maintain the right to communicate directly.  Sometimes these communications may require a lawyer's assistance.

Advising your clients on this point is considered proper.  The primary question addressed in the newly issued opinion is whether a lawyer can advise and assist a client in communicating directly with a represented party without violating Rule 4.2.  The ABA Committee felt that there was tension regarding the lawyer's ability to assist the client and effectuating direct client to client contact. 

The ABA Committee had previously stated in formal opinion 92-362 that a lawyer can ethically advise a client to communicate directly with a represented adversary to determine if the adverse party's lawyer had informed them of a settlement offer.   In the new opinion, the committee states directly that "the decision to communicate directly with a representative person may be the client's idea or the lawyer's.  Some decisions and opinions suggest the counsel may be violating the rules prohibiting communication with a representative party by encouraging or failing to discourage a client speaking directly to the other party."  A concern remained under existing rules that a lawyer might run afoul of Rule 4.2 by "scripting" or "masterminding" a client's communication with a represented person.   The Committee stated that "what constitutes 'scripting' or 'masterminding' the communication is not clear, but such a standard, if too stringently applied, would unduly inhibit permissible and proper advice to the client regarding the content of the communication, greatly restricting the assistance the lawyer may appropriately give to a client."  The Committee concluded that without violating Rules 4.2 or 8.4, a lawyer can give assistance to a client regarding substantive communications with a represented party that could include what subjects are to be addressed regardless of whether the lawyer or the client proposes that the communication take place.  The lawyer may review, redraft and approve a letter or an outline for a conversation that the client wishes to use in the communications with the adversary.  The client may also request that the lawyer draft the basic terms and an agreement that he or she wishes to discuss with an adversary.   Nonetheless, some examples of overreaching do remain. 

The committee references several of them in its opinion stating that they include "assisting the client and securing from the represented person an enforceable obligation, disclosure of confidential information, or admissions against interest without the opportunity to seek the advice of counsel.  To prevent such overreaching, a lawyer must, at a minimum advise her client to encourage the other party to consult with counsel before entering into allegations, making admissions or disclosing confidential information.  If counsel has drafted a proposed agreement for the client to deliver to her represented adversary for execution, counsel should include in such agreement conspicuous language on the signature page that warns the other party to consult with his lawyer before signing the agreement."  

Corporate officers may assert their personal attorney-client privilege over matters discussed with corporate counsel not related to their role as officers of the corporation.  In some instances, however, the personal legal problems of employees are inextricably intertwined with those of the corporation.  The case of United States v. Norris, 722 F. Supp. 2d 632, 637 (E.D. Pa. 2010), affirmed, 2011 WL 1035723 (3rd Cir. Mar. 23, 2011) is the latest example of the importance of knowing who counsel actually represents and the consequences of getting it wrong.

Ian P. Norris was the one-time CEO of Morgan Crucible Company plc (“Morgan”), a British carbon and ceramic products manufacturer.  In April 1999, a United States subsidiary of Morgan, Morganite, came under investigation by the United States Department of Justice Antitrust Division (“DOJ”) for allegedly participating in a price-fixing conspiracy.  During the course of the DOJ’s investigation, Morganite was served with a federal grand jury subpoena.  Morgan retained an outside law firm to handle the response to the subpoena and to conduct an internal investigation.  The firm assigned a partner (Keany) to work on the grand jury matter.

During interviews with Norris and other Morgan executives, Keany discovered that Norris’s subordinates had drafted meeting notes concerning the alleged “price-fixing meetings” with business competitors.  Although Morgan had no duty to produce foreign-based documents, Keany recommended producing the notes to the DOJ because they supported Morgan’s position that any such meetings were convened for lawful reasons.  Norris agreed, and Keany produced the meeting summaries with Morgan’s blessing in December 2000.

Four years later, a federal grand jury indicted Norris for “concoct[ing] an elaborate scheme to mislead and obstruct [the DOJ’s] investigation.”  Following his extradition to the United States to stand trial, the government moved in limine for an order permitting Keany to testify against Norris.  The government argued that Morgan had waived its attorney-client privilege as to communications with Keany regarding his previous representation of the company.  Norris claimed that Keany had represented him individually, and that Norris therefore had a personal claim of privilege regarding his communications with Keany.

To determine whether Norris could assert the attorney-client privilege, the United States District Court for the Eastern District of Pennsylvania applied the five-part test adopted In the Matter of Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d 120 (3d Cir. 1986).  In Bevill, the Third Circuit held that

a corporate officer must satisfy the following test to assert a personal claim of attorney-client privilege as to communications with corporate counsel: First, they must show they approached [counsel] for the purpose of seeking legal advice. Second, they must demonstrate that when they approached [counsel] they made it clear that they were seeking legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the [counsel] saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with [counsel] were confidential. And, fifth, they must show that the substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the company.

 Bevill, 805 F.2d at 123.

After holding an evidentiary hearing, the court found that Norris had failed to satisfy the Bevill factors.  The court reasoned that (1) Morgan had retained Keany to represent it (not Norris) during the grand jury investigation; (2) Keany never believed he was representing Norris individually and had even advised Norris to get his own counsel; and (3) all of Keany’s communications with Norris concerned his role as Morgan’s CEO as well as Morgan’s conduct and exposure in the grand jury investigation.  Accordingly, the court granted the government’s motion and allowed Keany to testify.

After a seven-day trial, a jury convicted Norris of conspiracy to obstruct justice.  Norris appealed his conviction to the Third Circuit.  In affirming the conviction, the court of appeals swiftly rejected Norris’s privilege claim.  In one paragraph, the court concluded “that Norris failed to meet his burden in asserting his privilege pursuant to the [Bevill] test,” and that there was “no clear error in the District Court’s holding based on the facts elicited in the evidentiary hearing.”  Norris is currently serving 18 months in the CI Rivers Correctional Institution in Winton, North Carolina.

Norris may have a chilling effect on communications between executives and counsel during internal investigations.  Corporate officers are likely to become more circumspect in their discussions with counsel regarding some matters for fear that disclosure would eviscerate any individual claim of attorney-client privilege they might have as to others.  This will be problematic for companies going forward, especially where, as in Norris, we see government regulators more aggressively policing fraud and anticompetitive behavior in the private sector.

The current recession is drying up monies for diversity initiatives and creating downsizing and cutbacks that many feared would disproportionately impact diversity in the legal profession.  Recent data reported by the Minority Corporate Counsel Association (MCCA) and Vault.com substantiates fears that the effects of the recession would undo the gains seen over the past decades.  For the first time in seven years, the percentage of minority equity partners remained virtually stagnant while there was a small increase in minority non-equity partners – from 8.5% in 2008 to 9% in 2009.  The percentage of minorities hired by law firms at all levels in 2009 was 19%, compared to nearly 22% in 2008.  Meanwhile, minority attorneys left their firms at higher numbers in 2009.  Minority attorneys represented 13.4% of the attorneys at the firms surveyed, but accounted for nearly 21% of those leaving during 2009.

Aspirations to improve diversity in the legal profession must evolve to reflect changes in our society and recognize economic constraints.  Will the current trend have a long-term impact on diversity in the legal profession?  What innovations has your law firm implemented to stretch diversity dollars to avoid suppressing the effort and momentum that has been built over the past decades?  Does your firm’s budget reflect its diversity values and priorities?

http://finance.yahoo.com/news/Survey-Shows-Law-Firms-law-825134104.html?x=0   

Eric Sieracki's defense against the SEC argues that he lacked scienter (the knowledge of the illegality of an act or conduct; the guilty knowledge). He had relied on the advice of his lawyers. (see Memorandum In Support Of Sieracki Summary Judgment Motion. http://pdfserver.amlaw.com/cc/Sieracki_Memorandum092110.pdf)

In general, an "advice-of-counsel" defense consists of three elements: 1) the defendant's good faith reliance on counsel's advice of; 2) the defendant's lack of knowledge that counsel's advice was erroneous, and 3) the defendant's full disclosure of all relevant facts to counsel, or counsel's actions as determined by the facts of his or her own investigation. (Jacqueline M. Jauregui, "Advice Of Counsel." Federal Defense and Corporate Counsel Quarterly, Summer 2000) The SEC said in its brief that an "advice-of-counsel" defense requires a party to show he requested advice about the legality of an action, received advice that was legal, and relied on it in good faith.  (See SEC's Memorandum In Opposition To Sieracki's Summary Judgment Motion.)

Sieracki cannot use both an "advice-of-counsel" defense and an assertion of attorney-client privilege. The SEC states,

when asked in deposition whether he consulted Countrywide lawyer Mike Udovic regarding credit risk disclosures, Sieracki asserted the attorney-client privilege. SF 549. It is well settled that “[t]he privilege which protects attorney-client communications may not be used both as a sword and a shield.” Bittaker v. Woodford, 331 F.3d 715, 719 (9th Cir. 2003) (quoting Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992)).  (See SEC's Memorandum In Opposition To Sieracki's Summary Judgment Motion, p. 11.)

Forced Reliance

An officer or director of a corporation cannot know all of the complexities of the corporation, including the complexity of laws that govern it. Officers and directors must rely on a wide range of advisors who provide counsel, including attorneys. Officers and directors may not have the opportunity to verify the advice they receive; they may not possess the skills or have access to the knowledge that an advisor relied upon. It seems that in light of the growing complexity of knowledge, an "advice-of-counsel" defense must be a viable option. In order to allow this defense it may be necessary for corporations to include contractual provisions for defense. (see Mark A. Kressel, "Making the Advice of Counsel Defense Available for Corporate Directors." The Yale Law Journal Online, February 7, 2007.)

This summer the Corporate Counsel Committee will celebrate its one-year anniversary. In the first year, the committee expanded from 17 die-hard founding members to over 80 members strong—and those numbers will continue to grow.

The Corporate Counsel Committee provides in-house counsel a forum within DRI to address the unique needs of corporate legal departments. Membership is limited to in-house counsel and focuses on topics that are distinctive to the in-house practice. “In-house to in-house” is the committee’s core principle.

For 2009, one of our main goals is to continue to get the word out about our new committee and to increase our membership. To achieve this goal we have a number of membership initiatives planned and we are reaching out to all DRI members for help.

Initiative #1—DRI Corporate Counsel Recruitment

DRI has close to 400 in-house counsel members who we will personally reach out to and encourage to join the committee. Being a Corporate Counsel Committee member means being able enjoy a number of benefits, including in-house-only programming at select seminars and the DRI Annual Meeting; access to a restricted section of the committee webpage, including a list serve for corporate counsel committee members to share questions and ideas; roundtable conference calls about topics unique to in-house counsel; networking opportunities with other in-house counsel in a protected environment; and the opportunity to hold counsel me tings (formerly known as panel counsel meetings) at DRI seminars and meetings. The committee also provides in-house counsel with professional development opportunities, including committee leadership positions; publishing opportunities; and speaking opportunities at DRI programs.

For in-house counsel who are DRI members and would like to become a member of the Corporate Counsel Committee, you can sign up through DRI’s website or you can contact Lynn Conneen, DRI Director of Committees,at lconneen@dri.org.

Initiative #2—Non-DRI Corporate Counsel Recruitment

Our committee’s second membership initiative is to reach out and recruit corporate counsel who are not DRI members. The membership committee will take the first step in this initiative and contact all the in-house counsel who have participated in DRI seminars and meetings in the past, and inform them of all the benefits that membership has to offer. The next step is to reach beyond those who know about DRI. This is where we could use the help of all DRI members. If you have in-house clients or contacts, we encourage you to reach out to them. This is the perfect excuse for you to reconnect with your clients or in-house contacts and to tell them about all the great benefits that DRI and, more specifically, the Corporate Counsel Committee have to offer.

A great selling point is the two-tiered corporate counsel membership. In-house counsel can join for only $225 a year or they can take advantage of the group rate and receive up to four individual memberships for only $500. Each additional corporate individual membership is only $150. And all first-time corporate members listed on the initial membership application will receive a free certificate to attend a DRI seminar.

To help with your efforts, DRI developed a corporate counsel membership brochure that explains how to join, the rates and the benefits of membership. DRI can either send you the brochures to send out to your clients and contacts, or the Corporate Counsel Membership Subcommittee can reach out to them for you if you provide us their contact information. If you would like us to reach out, please contact Lynn Conneen at DRI (lconneen@dri.org) and she will coordinate that effort.

Initiative #3—Seminar/Committee Outreach

The Corporate Counsel Membership subcommittee will be contacting all program and committee chairs prior to each seminar to let them know about the committee and to ask them to make, or to allow one of our committee members in attendance to make, an announcement about the committee at the seminar and at their committee meetings.

The key with all these initiatives is to get the word out about this new and exciting committee. We appreciate all your help and look forward to a long and successful partnership with DRI and all its committees.

DRI has recently revised its Counsel Meeting Incentives as a consideration of the difficult economic times and to aid corporations that may have restrictions on discretionary travel. As long as a company has 5 registered attendees meet with it at a DRI Seminar or the DRI Annual Meeting, DRI will pay for meeting space, complimentary registration to the Annual Meeting, 2 nights’ hotel accommodations, and airfare for one corporate representative. In addition, DRI has developed a “credit” system whereby companies can earn additional credits to offset other costs associated with the meeting. The number of credits earned is based on the number of registered attendees. These credits may be used to cover the cost of additional corporate attendees, audio-visual, etc. 

DRI's Annual Meeting is currently scheduled for October 7-11, 2009 in Chicago. It presents terrific networking opportunities among business leaders and their attorneys. There are fabulous social events, top notch CLE and outstanding blockbuster speakers. DRI expects to have over 1,100 attendees. The DRI Annual Meeting might create a low-cost, high incentive way to bring a company's national counsel together for an hour or more to discuss issues important to the company. 

A counsel meeting affords the opportunity to meet with all counsel who represent the company from around the country in one central location. It is an excellent opportunity to explain company philosophy, address pressing issues, and answer questions. 

If you or a client have any questions on the new counsel program, please feel free to contact me. I encourage all DRI members to pass this information along, especially outside counsel. I have personally found that my clients are very appreciative of the information. 

Daniel W. Gerber 
Goldberg Segalla LLP 
Chair - Counsel Meeting Task Force 
Counsel Meeting Chair - Annual Meeting Steering Committee 
dgerber@goldbergsegalla.com

DRI is hosting today and tomorrow a Corporate Counsel Roundtable here in New York City. Corporate Counsel from around the country are hearing a great CLE program aimed at the most important concerns that Corporations and their legal departments face. One of the most interesting presentations so far is a panel discussion presenting on the issue of corporate conduct in litigation. A lawyer involved in prosecuting corporate misconduct stated his advice to corporations quite succinctly: Its all about attitude and knowledge. When being investigated, “don’t show up with the attitude that the investigator is stupid about corporate ways and doesn’t understand the industry that he is investigating.” “Leave that attitude at the door.” Another panelist told the story of the famous Zubulake case, an employment discrimination case which produced a $29 million verdict including $20 Million in punitives. It also produced a raft of opinions on e-discovery which are now legend. What is the lesson from that case? It is a plaintiff lawyer’s worst E-discovery problem if a corporation appears to be reasonable in its response to e-discovery requests. If a corporation is arrogant, obstinate and refuses to produce anything and tells the plaintiff “get a court order” – the plaintiff’s lawyer is confident of assistance from the court. If the defendant corporation appears reasonable, and agrees to reasonable appearing parameters to govern the production, it will make it tough for the plaintiff’s lawyer to appeal to the court for more. Again, the appearance of cover up here is worse than the crime. Corporations still struggle with e-discovery issues and many don’t have a good e-discovery plan for litigation (and pre-litigation conduct relating to document retention and retrieval). Corporations should consult with e-discovery lawyer experts to establish such a plan which will greatly assist them in litigation or corporate investigations.