November 11 th , 2016 Iowa Association of Corporate Counsel

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3. rd. Annual Corporate Counsel Forum. November 11, 2016. CLE Ethics Approved 1.0. . Emerging Ethics Topics for. In-House Counsel. Timothy J. Hill and Ryan Fisher. Bradley & Riley PC. Agenda. ID: 745407 Download Presentation

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November 11 th , 2016 Iowa Association of Corporate Counsel

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Presentations text content in November 11 th , 2016 Iowa Association of Corporate Counsel


November 11th, 2016

Iowa Association of Corporate Counsel 3rd Annual Corporate Counsel Forum

November 11, 2016

CLE Ethics Approved 1.0


Emerging Ethics Topics forIn-House Counsel

Timothy J. Hill and Ryan FisherBradley & Riley PC



Emerging Topics for In-House Counsel Failed Business Deals, Litigation and Attorney-Client PrivilegeCommunications with Former Employees and Attorney-Client Privilege

Issue Re: Former In-House Counsel Becomes General Counsel of Competitor

Executives: How to Avoid Testifying in Corp. Litigation

Contracts Management and the Unauthorized Practice of Law

Topics and Practice Tips for In-House Counsel Advising on


and Data Breaches


Failed Business Deals and Attorney-Client Privilege

The issue:Most business deals are never litigated.When transactions are litigated, it is important to be able to assert privilege over confidential legal advice in connection with the transaction.


Failed Business Deals and Attorney-Client Privilege

Privilege applies where legal advice is sought from, and/or provided by, a professional legal advisor in that capacity;Confidential communications seeking or conveying legal advice or developing the facts necessary for the rendition of legal advice can be protected from discovery;

In-house notes not privileged if not comm

unicated (D. Ariz. 9/8/16) (note: work product not briefed)


Failed Business Deals and Attorney-Client Privilege

Do not disclose privileged information to adversaries or third-parties. Privileged matter may not lose its protected nature if confidentially shared among parties with a common interest.Question: communications with carrier – common interest in IA? (D. Iowa 2014, J. Strand)

Privilege attaches whether the lawyer involved is an outside law firm or in-house counsel.


but see

: in the European Union, in-house counsel communications are not subject to privilege


Failed Business Deals and Attorney-Client Privilege

Where in-house counsel serves in a dual “legal” and “business” role, privilege only applies to communications with the in-house counsel if and to the extent she is performing the “legal” role. Be careful about sharing privileged information with outside advisors (bankers, accountants)

. It does not necessarily destroy privilege to the extent they are part of the communication, if they have an obligation of confidentiality. But closely scrutinize such communications pre-communication

, as likely no privilege.


Failed Business Deals and Attorney-Client Privilege

Use deal documentation to help protect the seller’s right to its confidential privileged communications. Include a specific “carve-out” provision in a transaction agreement to preserve seller’s privileged communications with their in-house counsel. Mark documents and emails which are arguably subject to the attorney-client privilege as “confidential” or “privileged” to help establish privilege.

If litigation is reasonably anticipated, the work-product doctrine can offer additional protections over communications.


Former Employees and Attorney-Client Privilege

In Newman v. Highland School District No. 203 (Oct. 2016), Washington State Supreme Court held that the attorney-client privilege does not shield post-employment communications between corporate counsel and the corporation’s former employees.

Facts: Plaintiff sued school district for negligence because employee coaches allowed Plaintiff to play in a game after exhibiting signs of a concussion.

Plaintiff sought discovery concerning communications between school district’s counsel and former employee coaches


Former Employees and Attorney-Client Privilege

Court emphasized the principal-agent relationship between employers and employees: When employment ends, so does the agency relationshipFormer employees can no longer bind the corporation and no longer has any duty of loyalty, obedience or confidentiality to employerFormer employees “no different from other third-party fact witnesses”


Former Employees and Attorney-Client Privilege

Court also thought expanding the privilege to former employees was unjustified:Purpose of the privilege is to foster full and frank discussion; purpose preserved when limited to duration of employmentLimitation also preserves predictability that communication between attorney and client will be protectedCourt reiterated that communications before employment ended remains privileged


Former Employees and Attorney-Client Privilege

Best Practices:Establish privilege by representing former employee?Vet conflicts with Corp. client;Vet relationship between Corp. client and employeeConsider “appearance” issue;Is former client executive / within control group?

Establish privilege by making consulting / testifying expert?If none, counsel former employee under no duty to voluntarily talk to adversary -- ?


In-House Counsel Going to a Competitor

In The Gillette Company v. Craig Provost, et al., 2015 WL 10382572 (Dec. 23, 2015), the Massachusetts Superior Court ruled against Gillette’s attempt to enjoin its former in-house counsel from serving as General Counsel at a competitor, Shavelogic. The court found it unlikely that the former employee would have inevitably disclosed Gillette’s trade secrets to Shavelogic or that he breached his fiduciary duty to Gillette.The former employee had

left Gillette 10 years earlier and did not join Shavelogic until six years ago. Gillette did not bring its suit

until 3 years after the employee

joined Shavelogic


The former employee had a non-compete agreement with Gillette, but it had long expired and was otherwise unenforceable under Massachusetts law.


In-House Counsel Going to a Competitor

Gillette’s Arguments:Former employee had an ethical duty to not represent his new “client” in matters “substantially related” to those he worked on at Gillette, especially on matters related to technology development of a wet shaver. (Similar to Iowa Rule 32:1.9 Duties to Former Clients)Former employee would inevitably draw upon and disclose confidential information to his new employer that he obtained during his tenure at Gillette.


In-House Counsel Going to a Competitor

Court’s Reasoning:Insufficient evidence that the employee worked on or gave advice relating to Gillette’s patents. Many of the patents and the 10-year old wet shaver technology were outdated and already publicly available. Court did not embrace the “inevitable disclosure of trade secrets” doctrine as it could severely limit a lawyer’s employment opportunities.


In-House Counsel Going to a Competitor

Takeaway: Time is of the essence to protect trade secrets and enforce non-compete agreements. Delay can be fatal. The court in Gillette relied heavily on:the employee had left Gillette a decade agothe employee had started at Shavelogic six years agoGillette did not bring an action until three years after he became General Counsel at Shavelogic.


When Executives have to Testify

When can top executives avoid testifying in litigation?New case law out of the Western District of Wisconsin: Company must establish that the executive lacks unique knowledge of the pertinent facts sought through his/her testimony.


When Executives have to Testify

Epic Systems Corp. v. Tata Consultancy Services, Ltd., 2016 WL 297750 (W.D. Wis. Jan. 22, 2016)Epic Systems alleged Tata employees improperly accessed Epic’s computer network and downloaded thousands of proprietary files to bolster Tata’s competing healthcare software business.

Epic sought to compel the deposition of Tata’s CEO, alleging the CEO knew of the alleged trade secret theft, personally recommended Tata hire one of the employees involved in the theft and was involved in the marketing of Tata’s competing software in the U.S.


When Executives have to Testify

Tata countered, arguingThe CEO at-issue was a busy executiveLimited involvement in the facts of the caseUnreasonably burdensomeInformation sought was readily available from other sources/employees. Filed a declaration that the CEO at-issue had no memory of discussing marketing strategy or being involved in Tata’s internal investigation of employees alleged to have accessed Epic’s network.


When Executives have to Testify

Court allowed the deposition, but narrowly limited its scope and duration.CEO’s declaration did not specifically disclaim personal knowledge of the alleged theft, his role in the hiring of employees involved in the alleged theft nor of his involvement in the marketing of the Tata software at issue.

CEO had potentially unique knowledge relevant to the case

Court placed the burden on Tata to show that the CEO adequately disclaimed personal knowledge, which Tata failed to do.


When Executives have to Testify

Take-aways to consider when top executive receives notice to testify:Identify all topics on which the opposing attorney wishes to depose the executive -- from the Complaint, Initial Disclosures, Notice of Deposition or subsequent meet-and-confer.Identify all employees who could provide the same (or better) information, but whose deposition would be less intrusive or burdensome for the Corp.


When Executives have to Testify

Pay careful attention to the limits of the executive’s knowledge, and then ensure that those limits are affirmatively stated in any declarations (or consider stating in Brief / other employee Decl. without CEO declaration)CEO declaration increases likelihood of additional testimonyCarefully document the burden posed by the deposition, and ensure that the burden is clearly stated in a motion to quash/protective order.


Contract Management Professionals and the Unauthorized Practice of Law

Unauthorized Practice of Law for Lawyers Who are Contract Management Professionals (“CMPs”)Other Emerging Topics in the Unauthorized Practice of Law and the Impact on In-House Counsel


The IssueWhether contract professionals who are lawyers and members of the Iowa Bar engage in the practice of law when they engage in contracts management?


Why is This an Issue?

Iowa Office of Professional Regulation (OPR) has recently taken the position that admitted lawyers doing contract management engage in the practice of law

Determined “case by case” -- ?Client Security Commission Rule 39.7 provides that a

“member of the bar of the supreme court who is

not engaged in the practice of law

in the state of Iowa may be granted a certificate of exemption by the [Client Security Commission], and thereafter no fee or assessment shall be required from such member unless the member thereafter engages in the practice of law in the state of Iowa . . .” (emphasis added)


Why is This an Issue?OPR’s

position: since admitted lawyers are practicing law through contract management, they are not eligible for the exemption provided by Rule 39.7. Thus, admitted lawyers who receive exemption under 39.7 and are doing contract management are engaging in the unauthorized practice of law according to the OPR.


What is a “Contract Management Professional”?

Found in nearly every industry, e.g., healthcare, government, defense, insurance, etc. Involved in all phases of contract performance from proposal to negotiation to management and closeout.

Requires knowledge of contract structures and industry regulations

Does not require a law degree or bar membership.


What is the “Practice of Law”?

Iowa has not codified the practice of law Iowa Supreme Court makes the determination, as set out in Rule 39.7(3).The practice of law includes, but is not limited to:Examining abstractsReal estate transactions/closings

Preparation of legal briefs, deeds, buy and sell agreements, contracts, wills, and tax returns

Representation of others in any Iowa court and the right to do the same

Prepare legal instruments, secure legal rights, advise others of legal rights or effect of actions on their legal rights

or hold out oneself to do so, or to be one who instructs others in legal rights

Services requiring the professional judgment of a lawyer

Activities that lawyers normally do, but do not necessarily require a law license that may nevertheless give the impression of the lawyer is practicing law (i.e. tax returns, abstractor, real estate)



Licensed lawyers who are “Contract Management Professionals” seeking or have received an exemption under Rule 39.7.


Individual ImpactLicensed lawyers who are CMPs who have a Rule 39.7 exemption risk the following

:Ethical violations and proceedings from the Iowa Office of Professional RegulationBack payment of feesMake-up of CLE credits Suspension/disbarment Loss of any attorney-client, work product privileges


Statewide ImpactThe OPR’s determination has not been widely broadcast

Non-uniform enforcementUncertainty for corporations and their general counsel


Other Considerations for In-House Counsel

In Iowa, in-house counsel must register if they are not admitted to the Iowa Bar, but are located (officed) or do regular business in the State. Rule 32:5.5(d)(1), cmt. 16 and 17, and Rule 31.16.

Failure to register may be grounds for Unauthorized Practice of Law violations, resulting in disciplinary proceedings.Failure to register as in-house counsel may also be a basis for not allowing attorney-privilege between in-house counsel and their employer. 

In some states (NY), in-house counsel cannot practice law in the state without state licensure.



Other Considerations for In-House Counsel

Increasing scrutiny for unauthorized practice of law has led to greater risk for In-House Counsel.The rise of registration requirements has led to in-house counsel being caught in “gotcha” moments (i.e., unwittingly violating state ethics rules).

Leads to unnecessary disciplinary admonishments (nothing serious yet, but usually embarrassing)


Other Considerations for In-House Counsel

Attorney-Client Privilege and In-house Counsel’s failure to follow registration requirements.Failure to comply with new rules regarding CMP not-exempt / registration may expose counsel to attorney-client / work-product privilege waiver, since they are not technically a lawyer in a jurisdiction.


Other Considerations for In-House Counsel

Holding oneself out as a lawyer when not licensed/registered may lead to trouble.Example: Lawyer licensed in State A, but does work in State B.  Real life: In-house Minnesota attorney doing work in North Dakota was

admonished in North Dakota because the company press release did not properly disclaim the attorney was not licensed in North Dakota. Gerber v. Disciplinary Bd.

, 868 N.W.2d 861 (N.D. 2015).


Best Practices for In-House Counsel

Example Scenarios:CMP with a JD, licensed in Iowa: no exemptionCMP with a JD, licensed in another state: no exemption; must register

CMP with a JD, lapsed Iowa Bar: no exemption

CMP with a JD, no license

: do not get licensed, as CMP with JD treated the same as non-JD CMP – not engaged in the practice of law per Rule 39.7 (per OPR)

Corporate Employee with a JD (


, accountant, HR

): do not get licensed, not engaged in the practice of law.

But See –

if licensed, not able to get Rule 39.7 exemption, as may be engaged in the practice of law


Best PracticesInclude Disclaimers that CMPs:

Cannot bind the corporation to contractsDo not have authority to act without approval of Office of General CounselPrevent CMPs from putting “Esq.” or “J.D.” in correspondence or title.

Have CMPs report to the Office of General CounselAttempt to protect privilege

Identify all organization employees that are or were licensed attorneys, even if no longer in a “legal role”

Assess need to maintain license, registration

Assess whether engaged in the practice of law


Best PracticesGet an advice letter from the Office of Professional Regulation

Petition (Jointly?) OPR / Client Security Commission / Ethics and Practice Guidelines Cmt. of ISBA to address the issue


Cybersecurity and Data BreachesThe issue:

Today, companies face various threats to their confidential and sensitive data.Hackers are becoming more sophisticated, organized and financially-motivated.

Cyber attacks put valuable information at risk and can adversely impact competitive positioning, stock price, good will and shareholder value.


Cybersecurity and Data Breaches

A Company’s board of directors has duty to oversee the Company’s risk management.Company’s legal department can help advise the Board on its oversight obligations.


Cybersecurity and Data Breaches

Best Practices to Advise Your Corporation:Don’t Assume your Company is immune.Size doesn’t matter. Mid-size Companies may be at greater risk.

Make sure the Board is structured to address cybersecurity issues. Designate board member/decision-maker to handle cybersecurity, including in-house counsel charged with cyber-risk management and IT department

Connect board member with liaisons at the Company.


Cybersecurity and Data Breaches

Educate the Board about the Company’s vulnerabilities.Board cannot address the problem without knowing the risks.Identify Company information others may want -- what information is most valuable; where it is located; how it is accessed; and how it is vulnerable?

Involve the Board with the Company’s written policy regarding cybersecurityAddress how information is protected and response to a breach

Tailored to Company’s data, operations, industry and any relevant legal and regulatory requirements.


Cybersecurity and Data Breaches

Provide resources about applicable industry standardsHelps provide measuring stick to the Board and CompanyImplement same – will help defend against litigation in the event of a data breach. Help the Board maintain regular involvement, and document its efforts

Make cybersecurity a regular agenda item at meetings

Conduct regular risk assessments

Document efforts evidence fulfilling oversight duty


Cybersecurity and Data Breaches

Encourage the Board to be focused, but flexibleCyber attacks constantly evolving. Defense methods must evolve too. Keep Board aware of developments and the need to update practices.


Cybersecurity and Data BreachesAdvise whether the Board should purchase cyber insurance

CGL policies typically don’t cover data breaches (but see 4th Cir. 2016 case – medical records “published” by breach; see also 8th Cir. 2010

case – third-party damage resulting from a spyware infection caused by the insured’s website


Types of Losses that may or may not be covered by CGL policy

Personal and Advertising Injury Coverage – Courts are mixed; Ex. NY State trial court -- no coverage for hackers “publishing” info

Business Interruption – likely no coverage because data loss is not a “physical” loss, but AZ Fed. Ct. held that insured’s computer network was physically damaged when power outage caused loss of all programming information

Fidelity/Crime Policies – 6


and 8


Cir. have found coverage for the insured

Directors and Officers Coverage – may provide coverage for failure to implement cybersecurity measures, but no court has ruled yes/no

Cyber policies may cover some, but not all risks from data breaches

. Many businesses have not purchased cyber policies.


Follow up questions can be directed to

Tim J. Hill


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