Ls for Corporations and Other Organizations. 83 questions, answered

Q: In Brief - 1.13(f). Corporate Miranda Warnings (Upjohn).

Requires L to 'clearly identify' the organization as his client in dealing with constituents in cases where the organization's interests are adverse to the constituent's.

Q: Step 2) Permissive uprooting Out. RLE?

If the BoD refuses to act on L's 1.13(b) report-up, then 1.13(c) permits, but does not require, L to disclose confidential information [whether or not a 1.6(b) exception applies] to the extent reasonably necessary to avoid substantial injury to the organization [L must not over-disclose confidential information of entity-C in reporting out]. Before reporting out, L must report the information up the ladder to give the entity's highest authority a chance to act. 1.13, CMT 6.

Example: Constituent "Wrongdoing" (relevant to 1.13(b) and (c)).

Constituents who are (a) breaching the fiduciary duties that they owe to the corporation and its shareholders, or (b) defrauding some 3rd party investor, such as a bank

1.13(b) Mandatory Reporting-Up Obligation is triggered when...?

Mandatory reporting up duty is triggered if a corporate constituent (1) acts in a manner related to that is a violation of law. The illegal conduct (2) must be likely to result in substantial injury to the organization and (3) could reasonably be imputed to the organization for liability purposes.

Constituent engaged in conduct that violates law
The violation is likely to result in substantial injury to the entity
The illegal conduct could be imputed to the entity for liability purposes

In brief - 1.13(c).Permissive Reporting Out (Disclosure).

Triggered: If [1] the highest authority within the organization--i.e., the BoD--fails to take appropriate remedial action after a 1.13(b) report up, AND [2] the violation is likely to result in substantial injury to the organization.

RLE: L is permitted to reveal confidential information of entity-C, even if not permitted by 1.6, if and to the extent necessary to protect the organizations' best interest.

In brief - 1.13(d). Limits on Permissive Reporting Out (Disclosure).

Essentially limits permissive disclosure to situations in which L is counseling the organizational C or representing it in a transactional matter. L does not have permission to disclose confidential C information if: (1) L was retained to conduct an internal investigation of alleged wrongdoing, or [2] L is defending the organization or a constituent against an allegation of wrongdoing.

In Brief - 1.13(e). Whistle-blowing L is terminated or withdraws.

IF L is fired for complying with 1.13(b) or (c), or withdraws under circumstances when compliance with 1.13(b) would be required, then L must take steps to inform the "highest authority" of the organization.

In Brief - 1.13(f). Corporate Miranda Warnings (Upjohn).

Requires L to "clearly identify" the organization as his client in dealing with constituents in cases where the organization's interests are adverse to the constituent's.

In brief - 1.13(g). Multiple Representation of Entity + a Constituent.

Multiple représentation of the organization itself and a constituent is permissible only if 1.7 is satisfied (governing concurrent conflicts of interest). NOTE: The organization's consent to waive what would otherwise be a conflict of interests must be given by a constituent who (1) has authority to act on behalf of the organization AND (2) is not represented by L as an individual

Corporate Wrong Doing - How can L vindicate his obligations to the corporation when a constituent is engaged in wrongdoing? Two steps.

First, mandatory reporting-up under 1.13(b). Second, permissive reporting out under 1.13(c).

Be cautious in reporting up. CMT 4 to 1.13?

CMT 4 cautions Ls to not be too hasty in running every concern up the chain of command. Staes that L should consider factors such as: (1) the seriousness of the violation; (2) the apparent motivation of the constituent involved; and (3) the organization's policies and practices on violations of this type.

Step 2) Permissive uprooting Out. RLE?

If the BoD refuses to act on L's 1.13(b) report-up, then 1.13(c) permits, but does not require, L to disclose confidential information [whether or not a 1.6(b) exception applies] to the extent reasonably necessary to avoid substantial injury to the organization [L must not over-disclose confidential information of entity-C in reporting out].

Before reporting out, L must report the information up the ladder to give the entity's highest authority a chance to act. 1.13, CMT 6.

Meyerhofer (2nd Cir 1974) - Acceptable Reporting Out

If L reasonably believes that the corporation is proceeding with a securities offering without making required disclosures, then L would be justified in informing the SEC to prevent subsequent injury to the corp in the form of expensive investor lawsuits

Key distinction: 1.6(b) [permissive disclosures of confidential info] V. 1.13(c)

The key distinction is that 1.13(c) does not require that L's services have been used in furtherance of the wrongdoing. The relevant 1.6(b) exceptions [(2) and (3)] require that L's services were used in furtherance of the financial fraud.

2 more distinctions between 1.6(b) and 1.13(c)

1.13(c) requires that L first have reported-up the information about wrongdoing and given the highest authority (BoD) an opportunity to respond. 1.6(b) contains no such requirement.

1.13(c) requires that the wrongdoing be reasonably certain to result in substantial injury to the organization. 1.6(b) requires that the wrongdoing be reasonably certain to result in injury to the financial interests of another.

Sarbanes-Oxley Act (SOX) of 2002: Who does it cover?

Sox and regs issued thereunder apply only to Ls representing issuers of publicly traded securities.

Sox Reporting-Up: Summary of the 4 Steps (R-W-A-R)

1) Report (to the GC or to a superior L)
2) Wait (for a response)
3) Assess (the Response)
4) Report again (if necessary, to a higher authority)

Mandatory Reporting Up under Sox is Triggered when...?

The reporting up obligation si triggered when L "becomes aware of evidence" of a material breach of F.D. or material violation of securities Law - that is, L must report up if he becomes aware of credible evidence that would lead a reasonable L to believe that a violation is occurring.

Mandatory Reporting Up under Sox - Safe Harbor for Subordinate Ls

Subordinate Ls can satisfy their reporting obligations by going to their their bosses (supervising L)

Subordinate L is defined as Ls who practice under the supervision and direction of another L.

SoX Mandatory Reporting UP: Chief Legal Officer's [General Counsel] Responsibility

After report, GC has a duty to investigate the allegations of wrongdoing. GC must then either [1] take corrective action (adopt an appropriate response) or [2] conclude that no material breach/violation has occurred AND notify the reporting L of that conclusion and the grounds for reaching it

SOX - Permissive Reporting Out

Reporting out is the last option, only after reporting-up has been tried and failed. Reporting out is permissive, not mandatory.

RLE: A L representing an issuer of publicly traded securities is permitted to report confidential information relating to the representation to the SEC without the C's consent to the extent the L reasonably believes necessary to prevent, rectify, or mitigate the consequences of a material violation by the client.

1.7, CMT 34 - Corporate Families: Stands for what proposition?

Presumption of non-identity

1.7, CMT 34: Presumption of Non-Identity. In Brief:

Representing one member of a corporate family ordinarily does not create an A-C R with all other affiliated entities. There is a "presumption of nonidentity" of affiliated entities.

Rebutting the Presumption of Non-Identity (1.7, CMT 34)

Presumption may be rebutted if the affiliated entities have "substantial operational overlap" (share office space, have the same Ls, share confidential information, work together on projects, etc).

Dealing with Agents of the Entity: 2 General rules

1) Everywhere, it is the law that a L may not assist a constituent in breaching a duty owed to the entity. See Murphy + Demory (Va Cir Ct 1994). If a constituent is engaged in self-dealing detrimental to the organization, L may not assist or counsel the constituent's actions, but instead must take steps to prevent the self-dealing.

2) In some jurisdictions, if one constituent owes a fiduciary duty to another constituent, L may not assist a breach of that duty.

ACP and Entity Representation: Which Corporate Constituents (directors, officers, lower-level managerial employees, non-managerial employees) should be deemed to speak for the entity for purposes of the ACP? Three Tests.

1) Control Group Test
2) Subject Matter Test.
3) Vicarious Liability Test.

Upjohn (US 1981) on ACP and organizational-clients

SCOTUS rejects the control group test. REA: In order to give legal advice, an entity-L must now information that is very likely to be held by employees outside the control group.

Note that this decision is binding on federal courts, but not state courts, which have their own rules of evidence.

Distinguish: (1) Anti-Contact Rule and (2) ACP

The anti-contact R does not entirely shut down discovery of information (ACP does), but instead merely requires the adversary L to employ formal discovery methods (interrogatories, depositions), instead of informal ex parte questioning of witnesses

Analysis: When a corporate officer tries to an assert an "individual" attorney-client privilege with the corporation's L

1.13(a). Generally, an L representing an organization represents the organization itself, acting through its duly authorized constituents.
1.13(g). L can represent both the individual constituent and the organization simultaneously, so long as the simultaneous representation does not violate the current-client conflicts rule (1.9).
Bevill Test.
Last, even where the L can represent the individual officer, the officer's communications may not be privileged in his "individual capacity," if the communications relate to a matter within his duties to the entity.

Policy argument in favor of broad ACP for entity-clients

As noted in Upjohn, the ACP encourages full and frank communications between LS and Cs, which permits L to give legal advice to C based on full and accurate information. In many scenarios, lower-level employees have the information that the L needs, so it is important not to draw the boundaries of the aCP too narrowly around employees.

2 Policy arguments against a broad ACP for entity-Cs

It is important not to draw ACP's boundaries too broadly, or the effect will be to convert ordinary fact witness into persons whose statements are swept within the entity-ACP.

Crime-Fraud Exception to ACP

If the communications were made by C for the purpose of obtaining L's assistance to commit a criminal or fraudulent act, the ACP does not apply.

Turns on whether C has used L's services "in connection with the wrongdoing."
L does not have to share in C's criminal or fraudulent purpose
This exception may apply where C's conduct does not fall within the technical definition of a crime or fraud in the jurisdiction. cases have applied the exception to acts of deception, misconduct, also suggestion, and suppression of truth (a pattern of discovery abuse).

Temporal Limitation on Crime-Fraud Exception to ACP

The ACP is waived only when a C uses L's services to conceal a crime/fraud that is ongoing or contemplated for the future. If the wrong is wholly past, the exception does not apply.

Proving the Crime-Fraud Exception

The party (prosecutor or civil adversary) seeking to invoke the crime-fraud exception and to discover privileged communications must show a "Reasonable basis" to believe that C's objective in seeking the legal advice was to commit a crime or fraudulent act.

Waiver of ACP - General RLES

The ACP is "owned" by the c in the sense that C has the right to assert or waive it.
As C's agent, L has power to assert or waive it too.
If either L or C deliberately disclose information protected by the ACP to unprivileged persons, the privilege is waived because the information is no longer confidential.

ISSUE SPOT: Selective Waiver of ACP

Where L is required to disclose privileged materials to unprivileged persons either as a condition of a business transaction or pursuant to a government regulatory scheme.

The issue is whether these "selective disclosures" waive the aCP with respect to subsequent litigation brought by 3rd parties.

FORK: ACP Selective Waiver - 2 Views

V1. Strong Trend in this Direction. Intentional revelation of privileged communications to a unprivileged person waives the ACP in all subsequent litigation.

V2. 8th Circuit. A party may disclose privileged information to government investigators and still subsequently assert the ACP in that information.

N., the precise rules vary. A few jurisdictions permit selective waiver generally, a few others permit selective disclosure only to government investigators and only if the government agrees to a confidentiality order.

Policy Argument in favor of allowing selective waiver

Barring selective waiver could significantly increase the cost to entity's of cooperating with the government, thereby increasing the cost of enforcing the law.

Private parties whoa re denied access to the privileged documents under selective waiver are no worse off than they would have been had the entity never disclosed the information to the government

Consequences for a L who inadvertently discloses confidential information and waives the ACP?

The professional duty of confidentiality requires L to use reasonable care to protect client confidences. Inadvertent disclosure may be a breach of PDC and subject L to malpractice liability.

ACP Waiver - Inadvertent Disclosure. Key analysis

Was there an expectation of privacy [confidence] when the communication was inadvertently disclosed?

Inadvertant ACP Waiver - Failure to Object

Failure to object to a discovery request based on the ACP can waive the privilege.

See FRCP 26(b)(5): If L objects to a discovery request that calls for privileged documents, he must set forth the basis for the objection with particularity. Typically, this is done via a "privilege log" (describes the document without revealing privileged matters.

Courts may hold that a L's failure to prepare an adequate privilege log waives the ACP that would otherwise cover the documents.

ABA 4.4(B) - Obligations of a L who inadvertently receives confidential information

A L who receives a document and knows/reasonably should know that the document was inadvertently sent, must notify the sender. As to the further steps that L should take, ABA 4.4(b) punts the question to generally applicable law of ACP.

What should the sending L do when confidential information is inadvertently disclosed during discovery?

Sending L should be prepared to assert the ACP and will have burden of demonstrating that all the elements of the privilege (including proving FRE 502) are satisfied.

Subject Matter Waiver - RLE

If a party introduces part of a communication protected by the ACP, then the privilege is waived for any related communication (communications regarding the "same subject matter")

General Requirements for Application of Subjective Matter Waiver

Seemingly, the waiver must be intentional. For, in order for the doctrine to apply, the selective reliance on otherwise privileged communications must create some sort of unfairness to the adversary. The underlying rationale for the doctrine is avoiding unfairness to the other party: it would be unfair to allow to the other party in litigation to allow the privilege holder to introduce helpful privileged material, while holding back harmful privileged material.

To identify what counts as the "same subject matter," courts will see if L's advice can be differentiated into separate topics or assignments.

Issue Spot - Subject Matter Waiver (AKA "putting in issue")

Where a party uses legal advice as part of claim or defense (i.e., defense of "advice of counsel")

When are a L's notes covered by the ACP?

Notes are privileged only to the extent that they summarize a conversation between L + C for the purpose of obtaining legal advice.

What provision largely controls the application of the WPD?

FRCP 26(b)(3).

WPD FRCP 26(b)(3).

WPD protects documents or tangible things (photos, charts, data, other bearers of information) that were prepared in anticipation of litigation.

Must a L prepare the document in order for the WPD to apply?

No. FRCP 26(b)(3) extends WPD protection to the parties and their representatives, so the document need not have been prepared by a L. However, if it is not prepared by a L, then it is "ordinary" work product.

WPD - "in anticipation of litigation" requirement.

For WPD to apply, there must be anticipation of imminent, specific litigation, not a generalized threat. It is a strict requirement. Courts generally require a showing that litigation is on the immediate horizon, not just possible at some point in the future. A lawsuit need not have been filed, but there must be a "substantial probability" of "imminent litigation." There must be a specific threat involving specific parties.

When are courts more likely to conclude that a document was prepared "in anticipation of litigation."

When a L, or someone acting at the direction of a L, prepares the document.

Under the WPD, what is the significance of the distinction between: (a) Opinion Work Product v. (b) Ordinary Work Product

The scope of discovery protection

Opinion Work Product - Defined

Consists of the mental impressions, conclusions, opinions, or legal theories of a L.

Is Opinion Work Product Discoverable?

Hardly ever. Only in "extraordinary circumstances." Most common situation: a party puts "advice of counsel" at issue in litigation.

Ordinary Work Product - Defined

Everything that is not opinion work product that was prepared in anticipation of litigation. Any document that is not prepared by a L is "ordinary" work product.

When is ORDINARY work product discoverable?

Ordinary work product is discoverable on a showing of [1] substantial need and [2] inability to obtain the information by other means.

Are a lawyer's handwritten notes covered by WPD?

Yes, if prepared in anticipation of litigation.

2 Policy Bases for WPD

Incentives in the Adversary System. A strength of the adversary system is that Ls can make distinctive contributions to Cs' cases. L should not have to share the fruits of his labor with his adversaries, minimize shirking by Ls.

Fiduciary Nature of C-L Relationship. L's loyalty is supposed to lie primarily with his client, not the court or the justice system as a whole. C should be the one to benefit from L's hard work and diligent preparation.

Work Product Waiver?

The policies underlying the WPD inform the conditions under which it can be waived. Some cases hold that disclosure of a work product document by a client waives the WPD only if it increases the likelihood that his adversary will obtain the document.

Does WPD cover underlying facts?

No. Like the ACP, WPD does not protect "facts" learned by L in the course of preparing for litigation.

ABA Rule on PDC and Prospective Clients?

1.18(b).

PDC and Former Clients

The PDC survives termination of the AC-R. 1.6, Cmt 20 + 1.9(c). The L's ongoing duty to not disclose or make adverse use of former C confidential information (1.9(c)) limits L's ability to represent new clients whose interests are adverse to the former client.

1.6(c) - factors. Where can they be found?

1.6, CMT 19.

ABA 1.6, CMT 5 - intra-firm communications and the PDC

Lawyers in a firm may, int he course of the firm's practice, disclose information to each other concerning a client of the firm, unless C has instructed that particular information be confined to specific lawyers.

1.6(c) factors. [See 1.6, CMT 9.

Sets out factors that should be considered in determining whether L used reasonable care to protect confidential client information: (1) the sensitivity of the information, (2) the difficulty of implementing additional security precautions, etc

Identify the ABA R - Qualified permissive disclosure (Disclosure permitted, but only to the extent that L reasonably believes necessary to accomplish the purposes of disclosure).

1.6(b).

2 types of unqualified permissive disclosure under 1.6(a)

Authorized in order to carry out the representation.
informed consent from C.

1.6(b) - The Disclosure to Prevent Wrongdoing exceptions: A word of caution

Under the 1.6(b) exceptions, Ls may disclose only to the extent reasonably necessary to accomplish the objective of disclosure. 1.6(b). Over-disclosure violates 1.6 and would subject L to liability for breaching his fiduciary duty to C.

Even where an exception to the PDC applies, must L consult with C before disclosing confidential information?

Probably. Based on a combined reading of 1.4(a)(2) and 1.6, CMT 16, L is probably required to consult with C before disclosing confidential information, even where an exception applies.

1.6(b)(1) Exception to PDC?

Physical injury to others, and crimes.

1.6(b)(2)&(3) Exceptions to PDC?

Financial harms

Difference between 1.6(b)(2) and 1.6(b)(3) exceptions to PDC

1.6(b)(2) deals with disclosure before L's services have been used to commit the crime or fraud.

1.6(b)(3) applies if L later learns that his services were unwittingly used to commit the crime or fraud.

1.6(b)(4) Exception to PDC?

L securing legal advice to comply with ethical rules

1.6(b)(5) exception to PDC?

Self-Defense by L

In Brief - 1.6(b)(5). Self-Defense Exception to PDC

L may disclose confidential client information to the extent reasonably necessary to defend against a charge of wrongdoing in connection with the representation of a C.
I.e., malpractice suits by a client; actions against L brought by third parties based on work that L performed for C [transactional lawyer sued in a SH derivative action].

Under the 1.6(b)(5) Self-Defense Exception to PDC< must a formal proceeding be commenced before L can disclose confidential information

No. See 1.6, CMT 10. "[The rule] does not require L to await the commencement of an action or proceeding that charges such complicity." But L should still be careful not to disclose too early.

Which exception to the PDC relieves tension where the rules appear to prohibit disclosure at the same time that generally applicable law appears to require it?

1.6(b)(6) - Compliance with Other Law Exception.

In Brief: 1.6(b)(6) - Compliance with Other Law Exception to PDC

If L is required to disclose confidential client information in order to comply with a court order or other law, then he is permitted to do so.

1.6, CMT 15 [regarding 1.6(b)(6) - Compliance with Other Law Exception to PDC]

Before disclosing confidential information, L must assert all available non frivolous grounds for resisting disclosure (i.e., ACP + WPD) AND must consult with the client about appealing any adverse rulings issued by the court.

1.6(b)(7). Conflicts Checking Exception to PDC - In Brief

1.6(b)(7) permits disclosure of confidential client information to the extent that L reasonably believes necessary to detect and resolve conflicts of interest resulting from either the L's change of employment or the merger of law firms.

What must L ensure when exercising the 1.6(b)(7) ["Conflicts Checking"] PDC exception?

L must ensure that the revealed information will not waive any applicable attorney-client privilege (ACP) or otherwise prejudice the client. See 1.6, CMT 13

At which juncture in the interview process may a lateral reveal confidential information pursuant to the 1.6(b)(7) [Conflicts Checking] Exception to the PDC

1.6(b)(7) permissive disclosure is available only once substantive discussions about employment have begun. L cannot reveal confidential information during preliminary talks with a potential new employer. See 1.6, CMT 13

When a L brings an action to collect an outstanding fee owed by a C, may L disclose information related to the nature and value of services provided to C?

Yes. See 1.6, CMT 11. However, this does not mean that L may disclose confidential client information (facts underlying the representation).

When L wants to consult with another L concerning C's matter, what should he do?

Safest course is to obtain the C's informed consent to the consultation. 1.6(a).
However, the disclosure may be "impliedly authorized to carry out the rep" of the C under 1.6(a). ABA Formal Op. 98-411 stated that the "implied authorization" PDC exception includes L-L consultation that will further the C's interests by obtaining the benefits of the other L's expertise. Furthermore, see 1.6, CMT 4: L may disclose some confidential client information so long as he couches it in hypothetical`ical terms that do not reveal the identity of the client.

Ls for Corporations and Other Organizations

83 important questions on Ls for Corporations and Other Organizations