Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel

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IA ACC Drake CLE. May 30, 2014. Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel. Matt Carstens – ITC Holdings Corp., Senior Counsel. Practice Group Leader for Capital Projects and Maintenance Group. ID: 681815 Download Presentation

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Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel

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Presentations text content in Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel


Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel


May 30, 2014


Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel

Matt Carstens – ITC Holdings Corp., Senior CounselPractice Group Leader for Capital Projects and Maintenance GroupTim Hill, Bradley & Riley, PC

Chair, Litigation Practice Group


Ethics – Attorney-Client Privilege, Other Considerations for In-House Counsel

Attorney-Client Privilege Recent IssuesConfidences When Claims by (In-house) Counsel

When Elevator Talk = Conflict /


Litigating in the Court of Public Opinion

Iowa’s New “Relationship” Opinions + Computer Security


Attorney-Client Privilege Review

Limits of attorney-client and work product doctrines in corporate internal investigationAttorney-client privilegeIowa Code 622.10“Control Group” test – extends to those in control

Rejected by

Upjohn v. US

(S. Ct. 1981)

Iowa Supreme Court, in

Keefe v. Bernard et al.

, 774


663 (Iowa 2009)

adopted subject matter test


Attorney-Client Privilege Review

“Subject Matter” test:If employee discusses her own actions relating to potential liability of corp. (with corp. counsel), then those protectedEmployee to corp. counsel re: legal advice

on behalf of corp. = protected

If employee is interviewed as “witness” to actions of others, then communication

not protected A-C


Facts and circumstances analysis –

need to be clear



Work Product Doctrine Review

Work-product privilegeIowa R. Civ. P. 1.503(3)Protects “materials prepared in anticipation of litigation”


Internal Fraud Investigation

Issue: motion to compel documents re: internal “code of business conduct” (COBC) investigationInvestigation conducted by non-lawyers, reported to corp.’s lawyers after investigation concluded


: protected by A-C, WP?


Protecting A-C and WP in Internal Investigation

Motion to compel granted, internal investigation documents not protected A-C, WP.

United State ex rel.


v. Halliburton Co.

, 2014 WL 1016784 (



Investigation conducted by corp. non-lawyers, per


, before (and

without) involvement of legal dept.

Cf., Upjohn



– investigation done aft. consult with legal dept. and outside counsel)


Protecting A-C and WP in Internal Investigation

Also, no WP protectionUse of non-lawyers made it hard to argue documents were prepared in anticipation of litigationInvestigation conducted 2004-06

Complaint not filed until 2009


Protecting A-C and WP in Internal Investigation

Best Practices:COBC investigations, other internal investigations – use in-house and outside counsel as early as possible



letters – formally document initiation of internal investigation –

legal advice for the corp.



warning to employees interviewed – investigation done per corp. legal, for corp.

Mark documents A-C, WP

Involve outside legal where feasible – in-house sometimes perform tasks in business capacity


Protecting A-C and WP in Internal Investigation

Issue: same facts (and follow best practices above) – but instead of non-lawyer employees, corp. uses outside consultantsCompany shares confidential information with outside consultants

Such as public relations firm, re: Penn State scandal


: A-C, WP waiver?


Protecting A-C and WP in Internal Investigation

Answer: it dependsIn re Bristol-Myers Squibb Securities Litigation (D.N.J.

2003) – communications with PR, marketing firms were not privileged,

because not hired for litigation purposes

But see In re




Cir. 1994) – “inappropriate to distinguish between those on client’s payroll and those who are instead, and for whatever reason, employed as independent contractors.”


Protecting A-C and WP in Internal Investigation

Best Practices:When using consultants, use confidentiality and retention agreementsLimit disclosure of communications

to between consultant and corporate counsel

Define which employees of consulting firm have access to confidential info

Consultant must agree decision to waive/disclose rests with company


Attorney-Client Privilege in Corporate Merger

Issue: merger of companies; then “buyer’s remorse”Buyer sues SH, officers of Seller – fraud in inducement

Buyer notifies


. – will use communications between Seller and legal counsel establishing fraud (obtained after merger)


. object, arguing pre-merger privilege survived transaction

Question: Privileged?


Attorney-Client Privilege in Corporate Merger

Answer: absent merger agreement terms providing otherwise, privileged communications of Seller

does not survive

, in dispute between merging companies

Great Hill Equity Partners IV v. SIG Growth Equity Fund I

, 80


155 (Del. Ch. 2013)

Court based decision on reading of DE Stat.


259: following merger, all rights,


shall be the

property of the surviving or resulting corporation


Attorney-Client Privilege in Corporate Merger

Best practices:Negotiate and draft aroundClarify in sale documents that privileged communications not transferred

Clean files to be transferred (get IT involved!)

Add to merger checklist – disposition of privileged communications?


Corp. Confidences When Claims by In-house Counsel

Facts: Former in-house counsel, acting as relator in qui tam action under Fed. False Claims Act

Gone from corp. for 5+ ye

ars before suit

Discloses confidential corp. info

– his corp. provided below-cost services to health care providers to induce referrals of


-paid services


: duty of confidentiality v. encouraging




Corp. Confidences When Claims by In-house Counsel

Held: violation of Rule 1.9(c) of Rules of Prof. Conduct by using confidential client information against former companyFair Laboratory Practices v. Quest Diagnostics Incorp


, 734


154 (


Cir. 2013)

Court: False Claim Act

does not authorize person to violate state laws

in order to assert claim


: if attorney had issue, should have first gone to board to stop fraud; if board does not act, then o.k. to disclose.


Claims by In-House Lawyers

Issue: when can in-house attorney, as Pl. in wrongful discharge action, disclose client (employer) confidences?Iowa Rule 1.6(b)(5) – lawyer shall not reveal client confidences, except “to establish a claim or defense” for lawyer in lawyer-client disputeSo here, in-house can

offensively use client confidences

to establish claim against client


Claims by In-House Lawyers

But see D.C. Rules and Ethics Committee:Rule 1.6(e)(3): D.C. Bar members may only reveal client confidences and secrets as a defense to an employer claim

, not offensively to establish a claim

Ethics Committee: in-house lawyer can’t use when filing claim,

but can if employer puts confidences at issue

, such as with affirmative defense or counterclaim


Claims by In-House Lawyers

D.C. Ethics Cmt.: lawyer knowing confidences might be put at issue does not preclude asserting claimAssoc. Corp. Counsel Legal Strategist: “difficult to navigate”, as chief desire is to protect client confidence

Strategy for Employer


Check ethics rules in this situation

Determine if you can protect confidential info, by not putting at issue


When Elevator Talk = Conflict/DQ

Issue: when does consulting attorney’s informal chat with another lawyer, not associated to matter, become an ethical violation and/or



In Re


v. Boston Enterprises

, 2013 WL 453912 (Colo. 2013): CO S. Ct. affirms lower court’s order disqualifying Pl.’s pro


vice motion, where Def. counsel previously consulted out-of-state counsel

at same firm, on same case


When Elevator Talk = Conflict/DQ

Facts -- Pl. child, ill from E. coli in salad, sues Def.CO Def. counsel called Seattle lawyer in small firm specializing in food-borne illnessesHad one call, several emails

Def. counsel did not ask consulted lawyer to keep confidential

Def. counsel had no bad intent – not done to


Discussed case theories, trial expert, adding another Def.

Months later, Pl. counsel tries to add another from same Seattle firm to case

(potential conflict imputed)


When Elevator Talk = Conflict/DQ

CO S. Ct. Ruling:Abuse of discretion standard of review (had lower court allowed, unclear if there would have been reversal)Consulted lawyer subject to


(unclear if consulting attorney subject to ethics violation)

Rule 1.7(a)(2)

– conflict of interest = risk that representation of one client (Pl.) here limited by lawyer’s responsibility to . . . “

a third person

” (Def., from the consultation)


When Elevator Talk = Conflict/DQ

Dissent: majority deprived Pl. child of “fundamental tenet” of choice of counselAnd, elevator talk, “vital to profession,” won’t happenBest Practices




Do not disclose privileged, confidential information

Consulted attorney

should ask if confidential

Ask for waiver of confidentiality and right to




Litigating in Court of Public Opinion

Constitution protects right of lawyer to speak in defense of clients, and right of public to learn about caseBut, Rule of Prof. Conduct 3.6 sets limits:Lawyer in matter “shall not make extrajudicial statement

” that lawyer knows/should know will be publicly distributed and is likely to prejudice the proceeding


Litigating in Court of Public Opinion

Criminal trials most sensitiveCivil jury trials also sensitiveNon-jury, arbitration proceedings less soStandard may govern distribution of court pleadings, transcripts without comment

(PA Op. 96-45)


if information is likely inadmissible


Litigating in Court of Public Opinion

Timing of disclosure a factor – eve of trial disclosure more likely to prejudice proceedingFor sanctions, proof of actual prejudice not required (just “likelihood”)Applies only to lawyers “participating or has participated” in proceeding –



Does not apply to clients

(but GC subject to R. Prof. Conduct)

Rule 3.6(d) – applies to lawyers associated in firm handling matter


Litigating in Court of Public Opinion

Protected Conduct:Does not apply to in-court statementsExcept where confidential (settlement, court order), can state claim, defense involved, ID peopleInformation contained in public record (court-filings)

Scheduling or result of any step of litigation

My practice, without comment

But see

– protective orders, must be admissible


Litigating in Court of Public Opinion

Rule 8.2 Limits Criticism of JudgesLawyer shall not make statement she knows is false or with reckless disregard to the truth/falsity concerning qualifications, integrity of judgeApplies to public and private (letter to opposing counsel) commentsApplies even where lawyer acting as private citizen

Does not apply to true statements or statements of opinion (narrowly construed – to judicial elections)


Iowa’s New “Relationship” Opinions

5 new opinions on“Relationship” between attorneysIssued in 2013, by ISBAEthics and Practice Guidelines Committee


issues opinions on proper interpretation of Iowa R. Prof. Conduct

Advisory only, not binding (but relied upon by Grievance, Iowa S. Ct.)



Ethics opinions issued in 2 years (1 in ‘11)


13-01: Of Counsel

Of-counsel historically = transition into retirementThus, prior ISBA and ABA opinions outdatedPlus, Iowa Code Prof. Responsibility replaced with: Iowa Rules of Professional Conduct





. provides current guidance to “Of Counsel” relationship


13-01: Of Counsel

Preface: “simple guideline”:Your of-counsel lawyer is member of your firmYou are a member of the of-counsel’s firm, for all ethical purposes:Thus, of-counsel relationships create DQ

potentials re: conflicts of interest (Rule 1.7) / imputation to firm, for disqualification (Rule 1.10)


13-01: Of Counsel

Of-counsel relationship “requirement”:“Must be a close, regular, and continuous relationship”More than a business referralMore than a consultant

“Essence”: relationship must be on-going, continuous

Not whether one is retired, part-time, probationary

Economics of relationship up to the parties


13-01: Of Counsel

Fee splitting / client consentRule 1.5(e) prohibits division of fees b/t attys. not in same firmNow, parties to co-counsel relationship are in same firm for ethical reasonsMatter of compensation of attorneys left to firm

Thus, client consent re: division of fees unnecessary


13-01: Of Counsel

Multiple and simultaneous of-counsel arrangments O.K. – but see: all considered one firm under Ethics Rules (conflicts, imputation of confidences)

Of-counsel has to be admitted to Iowa Bar

to practice here – cannot be used as alternative to Bar admission by non-Iowa attorney

Close relationship requirement does not = pro


vice admission


13-01: Of Counsel

Firm-to-Firm Of Counsel – both firms must have at least one Iowa attorney, to meet “close” relationship requirementMarketing: if you meet “close” requirement, can market as any variant of “of counsel”E.g.

, “Counsel”, “Senior Counsel”, etc.


13-02: Pro Hac

Vice CounselIssue: duties of Iowa lawyers who agree to sponsor admission of non-Iowa lawyers pro hac vice

Note: practicing in Iowa without authorization by IA S. Ct. is unauthorized practice of law

Iowa attorney that facilitates this violates Rule 5.5


13-02: Pro Hac

Vice CounselNo such thing in Iowa as “local counsel”“At best, the relationship is one of co-counsel”, with Iowa attorney duties to client and Court

Iowa S. Ct. Rule 31.14: limited Bar admission to qualified non-Iowa lawyers,

sponsored by Iowa lawyer that supervises


13-02: Pro Hac

Vice CounselRule 31.14(3): “Responsibility for Conduct Rule”“heavy burden”:

Cannot limit nature and scope of representation that otherwise exists under Rule 1.2(c) – Obligation to:


in strategic planning and dialogue


the client

Cannot delegate these to pro


vice counsel


13-02: Pro Hac

Vice CounselRule 31.14(3)(b) and Iowa R. Prof. Conduct 32:5.5(c)(1): “Active Participation Rule”Iowa lawyer must “actively” participate as co-counsel of record

“One cannot fully conduct litigation unless one actively participates in it.”

“After due diligence”, Iowa lawyer may determine she need not attend deposition, if not evidentiary or used for motion



13-02: Pro Hac

Vice Counsel“Active Participation Rule”:Note Iowa courts have sanctioned Iowa lawyers for misdeeds of pro hac

vice counsel (ND IA 2007)

But see



Cir. (1995) – MN law but similar, no duty of local counsel to supervise performance of pro


vice counsel

Caution: Iowa counsel must exercise “due diligence” re: level of participation



: Iowa counsel must sign, file all ND, SD filings


13-02: Pro Hac

Vice Counsel [MSC]Best Practices:

Communicate these requirements with pro


vice counsel and client at outset

Set out duties, reference this Ethics Opinion in engagement letter


13-03: Use of Contracted Lawyers

Issue: guidance re: use of lawyers engaged as “contracted lawyers”, temporary staffing for:Special expertise not available in firmWork on specific matterDifferent from co-counsel relationship – who practice independently from each other, then join together on a case or matter


13-03: Use of Contracted Lawyers

CompetencyAttorney has duty to exercise reasonable care when delivering legal services (Rule 1.1)Thus,Due diligence in hiring contracted lawyer “no different” than in hiring associate“Contracted lawyer is still part of the law firm”


13-03: Use of Contracted Lawyers

ControlRule 5.1(c) makes supervising lawyer liable for Rule violations of subordinateSupervisory responsibility does not exist with of-counsel, co-counselBut retained attorneys must adequately supervise and control services of contracted lawyers


13-03: Use of Contracted Lawyers

ConsentClient consent unnecessary when firm hires associate or of counselBut with contracted lawyer, she may not be employee of firm, instead an independent contractorClient may not be aware of integrity of temp agency

Thus, Iowa lawyers hiring contracted attorney “should do so with consent of client”


13-03: Use of Contracted Lawyers

CompensationHere, contracted lawyer deemed part of the firm – compensation and billing rate up to firmBut charging client for temp is different:If charged as fee

, must be “reasonable” (Rule 1.5(a)) – firm can

add surcharge

, if reasonable (assumption firm has adopted work as its own)

If charged as


, firm can only charge exact cost


13-03: Use of Contracted Lawyers

ConflictsRules re: conflicts and imputed conflicts apply to contracted lawyersThus, conflict vetting must be done when hiring tempAnd at conclusion of work, temp owes duties for firm’s clients for work performed


13-03: Use of Contracted Lawyers

ConflictsBest Practices:Screen contracted lawyer from client info on all unrelated mattersFirm to maintain record of all matters on which temp worked

Temp working for several firms must avoid exposing firm to information unrelated to matter for which she is engaged

Burden on contracted lawyer to recognize direct conflicts


13-04: Mentor-Mentee Relationships

Push within ISBA to mentor, train new lawyersIssue: when mentor, mentee not in same firm, can client confidences be passed, for training purposes?

Within same firm, client confidentiality can be passed, unless client has specified otherwise (Rule 1.6 (


. 5)).


13-04: Mentor-Mentee Relationships

Absent client consent, only 4 relationships that permit disclosure of client confidences:Employer-employeeCo-counselOf-counselContracted-Retained lawyer

Also, internship within employer-employee relationship permitted (


, summer associate)


13-04: Mentor-Mentee Relationships

Need for discussion of “real life situations”, thus:“Of-counsel” is the “best” for mentor-menteeExchange of client information is permissibleClient consent not requiredMentee can form multiple relationships with mentors in different practice fields

But see

– be wary of potential for direct, imputed conflicts



13-05: Co-Counsel Relationships

Exists when 2 or more lawyers, not in same firm, represent same client on same matterEach owe independent duty of care to clientFiduciary duty between lawyers-client, but not between co-counsel

Must maintain ability to communicate freely with each other and client


13-05: Co-Counsel Relationships

Duty of Mutual Cooperation – if disagreement, Rule 1.4(b) requires communication of dispute with client, in order that it can make informed decisionLimitation of Authority: co-counsel relationship is joint ventureRule 1.2(c) allows lawyer to limit scope of representation, with client “informed consent”

Co-counsel advised to do this, define scope of work


13-05: Co-Counsel Relationships

Division of Fees:Referral fees not permittedRule 1.5(e): division of fee between lawyers not in same firm permitted ifDivision is in proportion to services performed by each lawyer

or each lawyer assumes joint responsibility

Client consents / fee is reasonable

Thus, lawyer may receive fee

without performing work

, if lawyer accepts joint responsibility

But see

: courts permit indemnification, contribution claims between co-counsel in malpractice action = joint responsibility


13-05: Co-Counsel Relationships

Best Practice: if co-counsel, limit scope of work, so as to avoid indemnification claim from co-counsel in event of malpractice claimReduce to writing, with client consentImputed Conflicts of Interest: co-counsel are independent counsel, not “associated in firm” for purpose of imputed disqualification under Rule 1.10


14-01: Computer Security

Issued by ISBA Ethics and Practic Guidelines Cmt. 3/10/14As a result of Microsoft’s announcement of

no longer providing security patches and/or support

for Windows XP

Ethic issue

: Rule 1.6 – duty to protect client confidential information


14-01: Computer Security

Rule one of “commercial reasonableness”Lawyers must “engage in due diligence process which assesses the realistic potential for risk”“Ongoing Duty”“Procedures secure 2 years agon

may not be now”

Does not require a specific result

, just “due diligence”


Follow up questions can be directed to Timothy J. Hill at


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