Investigation Corporate Employee's Actions

You are at the Acme Manufacturing Company because their insurer has hired you to defend a suit against the company, plus three named officers, alleging that copmpany products are sold even though the officers know the product is causing fires and loss of life.

Or --you are an in-house attorney and your boss in the legal department wants you to "check with the HR Department, because there was a newspaper story this morning that we deliberately are not hiring Mexicans."

When you are making an internal investigation, the first thing you need to remember is

RULE 1.18, MODEL RULES OF PROFESSIONAL CONDUCT

The second thing to remember is is the employee's reasonable expectation that the company attorney will help protect him/her is important -- not your expectation. That is the controlling issue on whether the employee will be treated by the courts as a "prospective client" entitled to protection. There is a common important point in cases of employees seeking to disqualify corporate counsel (and corporations) from taking action against the employee That question is: Did the employee think that counsel was his/her attorney as well as corporate counsel. It bear repeating: the employee's reasonable understanding of his relation with the (corporate) attorneys is the controlling factor in determining whether to disqualify attorneys from representing the company in litigation that involves the employee as a party with an adverse interest. You as an attorney may be barred from proceeding for the company because you did not adequately tell the employee you were not their attorney. ⁽²⁾

Employees will frequently regard corporate counsel as "my attorney too" . There are a couple of common scenarios. The most usual scenario involves the employee with the attitude that he/she is a company person and did what they did because it helped the company; and now the "Outside" is against "Us"; and therefore the attorney is supposed to help the employee because that helps the company defend against the "Outside." The second most usual scenario arises because in the past, the employee being interviewed has had some small personal problem (e.g., "My car was totaled, do I have to wait for both my insurer and also the other insurer to see it before I trade it in on a new car.?") You gave some quick free advice.⁽³⁾ The employee now seems to regard you as his/her attorney on anything they tell you.

A quick example of the consequences of the employee regarding corporate counsel as "my attorney too": she may attempt to invoke the attorney-client privilege to protect information she may have already divulged to corporate counsel. She may be successful, leaving the company without evidence on a suit against the employee. ⁽⁴⁾ The other quick example of problems if the employee believes that counsel is representing him -- he may seek to disqualify counsel from doing any work for the corporation that impacts him adversely.

The plain fact is that you as an attorney for the company may find yourself taking the information the employee gives you and then using the information against the employee. The fact that internal corporate discipline may be used against the employee is obvious to you. In addition, there are other possible ways you may be using the employee's own words against himself.

For example, in some specific instances, the company (including an attorney) may be required by law to disclose information gathered from the employee. For example, it is absolutely an unqualified requirement that Department of Defense contractors must disclose information regarding kickbacks.⁽⁵⁾ There is nothing in the statute that says you as a company employee are not supposed to have the company tell the government because you learned about the kickback from someone who thought you were his/her attorney.⁽⁶⁾

There is some nasty conspiracy law you might have to start learning if you forget statutes requiring company disclosure to the government.

In other specific instances, companies face demands from prosecutors to turn over the internal investigation to the government for its use in investigating and prosecuting others, both third parties and also the corporation's own officers and employees. First, the government may say it will consider the corporation's willingness to turn over its internal investigation in determining whether to prosecute the entity at all. Second, after prosecution has begun the government may pressure the corporation to waive the privilege in return for negotiated benefits in resolution of the matter⁽⁷⁾. These benefits may be of critical importance to the corporate client. For example, in return for waiver, the government may agree to refrain from charging a particular offense or to intercede directly with administrative agencies to avoid debarment from government contracting. The decision to waive is easy for a corporation offered a benefit to itself if it offers up an employee or former employee.

The corporate officer that told you something is probably thinking -- that because e.g., he/she is a corporate officer in the control group that tells you what to do -- what he/she tells you is subject to an attorney-client privilege. Not so, as far as the officer is concerned. Communications to the company's investigating attorney are the subject of a privilege that belongs to the corporation, not to the corporate officer. It is not a joint privilege that the employee can raise concerning his communication. See, e.g., In re Grand Jury Subpoena,.⁽⁸⁾ In that case, a corporation and two former officers had been represented by the corporation's attorney in a criminal tax investigation The former officers sought to bar the corporation (now under new management and willing to go after the former officers) from disclosing the attorney's records. Although the involved lawyer supported the officers' position that he acted jointly for them and the corporation, the court ruled that the privilege was that of the corporation only, not of the co-client corporate officers represented by the corporate attorney . The default assumption is that the attorney only represents the corporate entity when a conflict in asserting privilege arises, not the individuals within the corporate sphere, and only the corporation has the privilege. The employees who give information to the corporate attorney can not raise the attorney-client privilege that the corporation could raise to bar the evidence, even if the corporate attorney was also their personal attorney on the same matter.

What all this leads to -- the lawyers always should inform the employees that they are representing the corporation. Employees should understand that the lawyers are not their personal attorneys. There are three good reasons for you as an attorney giving clear information:

The above three reasons for disclosure items illustrate the neoethics ⁽⁹⁾ of the 21^st Century. Item A above (disqualification) is matter of ethics in terms of the Model Rules of Professional Responsibility. Item B above (disputes) is a matter of practical business to avoid expense, delay and uncertainty -- to put it another way, it is an ethical matter involving the financial interests of the stockholders.⁽¹⁰⁾ Item C above (unfairness) is a matter of ethics in terms of the morally preferable action to take.

I suggest that anyone of the above three items, A, B, or C, is sufficient reason for an investigating attorney always to make the status of the investigator clear. Eliminate later problems of "I wasn't told" coming at a later date, from the lips of the employee. My personal suggestion is that a card be read or handed to the employee at the start of the interview.⁽¹¹⁾ Granted, a "Miranda" style solution may startle employees and disconcert top management. While these warnings may make the gathering of information more difficult for the attorney, a failure to give these advisories can cause the problems we talked about above.

Balancing the need for information against the problems that arise from failing to disabuse the employee of the idea that the corporate attorney is also the employee' attorney -- usually winds up with the conclusion that there should be appropriate disclosures. There are ways to help create more cooperation and retain the attorney-client privilege, such as the use of separate counsel with joint defense agreements being used in the interview, but that is a separate subject. What we are concerned with here is the need for initial disclosure to the employee.

Appropriate disclosures may include a number of things. As an investigating defense attorney in products case, I kept a card on my desk and refer to it during investigations, using it as a checklist. Sometimes it took me five minutes of conversation to make those points, not necessarily using the exact words of the following card. You are a lawyer. You know how to talk to people. But you may need a checklist, and you may want to make a practice of having some form available if you are doing several interviews. Investigating attorneys ethically may want to begin every employee interview with a corporate Miranda style warning card.

"The company is my client. You are not my client. You do not have an attorney-client privilege with me.

You do not have to tell me any personal information you want only your own attorney to know. If you refuse to talk to me, I will tell the company you refused. I may tell the company anything you say. The company may tell the government anything they know. Anything you say may be used against you in a court of law"

There is a problem in being that clear and blunt. The above card is both clear and extremely blunt. A clear and blunt explanation of the pitfalls to the employee in talking to the investigating attorney may not square with the attorney's duty to his corporate client to find out everything available.

Remember being clear does not necessarily mean also being blunt. "Blunt" means being short, abrupt and disconcerting. The law does not require you to be short or abrupt or disconcerting. So you should feel free to adapt the language of the above corporate Miranda style warning card to your own situation and needs.

Summary. When talking to a corporate employee, disclose clearly that you are not his/her attorney, that what they tell you is not subject to the attorney - client privilege, and that what they say might be told to others. Disclosure is good ethics -- and it will keep you and your client out of trouble.

* Neoethics Note: If you notice that this page is like one at eDicta, it is because: Bucklin is the author of this page and holds the copyright on this material; but, the ABA's eDicta is authorized by Bucklin to take and use the content from various pages of this site, such as this one. "Neoethics" is a term which was protected for the use of Bucklin and the ABA by registration as a trademark of Bliss McKnight Properties, Inc. The term "Neoethics" is used with permission by Bucklin, who originated the term, and by the ABA. The ABA's eDicta is published as an Internet Zine by the Tort Trial & Insurance Practice Section of the American Bar Association

1. Escape clause (d) does not really help a corporate attorney too much, that is why I put it down here, in a footnote. (d) says " (d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is only permissible if:(1) both the affected client and the prospective client have given informed consent, confirmed in writing, or: (2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and (i) the disqualified lawyer is timely screened from any participation in the matter. ..." In most situations the prospective client who is an employee of the employer client is unlikely to give uncoerced informed consent to have his information used against him by the employer in a termination proceeding; and except in large law departments, it is difficult for the corporate attorney effectively to be "screened from any participation in the matter".

2. E.g., see E.F. Hutton & Co. v. Brown, 305 F. Supp. 371, 387 to 290 (S.D. Tex. 1969). Company vice-president Brown cooperated gave information to company attorney to assist with internal investigation and protection of company. Company terminated employment of Brown and sued Brown for actions. Held law firm disqualified from proceeding against Brown. Even though "Brown admits that he cannot recall conversing with [law firm]...about representing him personally, or paying [law firm] ... a fee.... Brown's reasonable understanding of his relation with the attorney is the controlling factor here...it would seem reasonable and natural for Brown to have assumed that [law firm]... represented him as well as [the company]..." This case is a good one for pointing out that the burden is on the investigating attorney to make adequate disclosures and giving a checklist of minimum statements that must be given to prevent a presumption by the company employee

3. All company attorneys want to be "a good buddy" and hate to give offense by not being helpful. In most cases it is a bad practice to give free advice to company employees. But that is a subject that is worth a whole another article another day!

4. Cf., E. F. Hutton, supra.at 400-401 But "since [emphasis supplied] Brown gave the information to counsel knowing that counsel in turn would convey it to the company" the court held the attorney - client privilege did not apply to bar use of the information in the company's case against Brown. If factually it had not appeared that Brown expected the information to go to the company, the company could have been without evidence!

6. Model Rule 1.6 specifically provides" " A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:...(4) to comply with other law or a court order." 41 U.S.C.A. 57 in "other law".

7. See, David M. Zornow and Keith D. Krakaur, On the Brink of a Brave New World: The Death of Privilege in Corporate Criminal Investigations, 37 Am. Crim. L. Rev. 147, 148 (2000).

8. 274 F.3d 563, at 571-575 (1st Cir. 2001). Of course, in the unlikely event that the communication does not concern the company (of course it does - you are billing the company for your time in talking the employee, on the theory that it worth something to the company), the communication may be privileged.

9. Neoethics is a trademark of Bliss McKnight Properties, Inc., used with permission.

10. This is an illustration of the motto "Ethics is a driver of superior business performance".

11. A card helps to avoid later problems with a fanciful rendition by a disgruntled employee of what you said. There is also much wisdom in the practice of always having two persons at the employee interview. One to ask questions, and the second to record,

INVESTIGATING YOUR CLIENT=S EMPLOYEE=S ACTIONS.