Wednesday's United States Supreme Court opinion in Kiobel v. Royal Dutch Petroleum Co. et al., 569 U.S. ___ (2013), has confirmed that the Alien Tort Statute (ATS) has a limited scope and cannot open the doors of United States courts to lawsuits based on ordinary torts committed by companies outside the territorial confines of the United States.  Although the Court did not meaningfully address the issue of corporate liability, its narrow holding all but guarantees that ATS will not become an issue in lawsuits against corporate clients in products cases.

At first blush, Kiobel does not appear to be the type of case that would interest product liability lawyers.  It involved Nigerian nationals who had obtained asylum in the United States suing foreign corporations that has allegedly aided and abetted the government of Nigeria in committing abuses against its citizens including, among others, extrajudicial killings, crimes against humanity, and torture.  It goes without saying that "crimes against humanity" are topics that are generally outside the pale of the average civil defense attorney's resume.
Representing clients in a global marketplace, however, often necessarily means representing clients who have potential exposure to liability abroad.  Although your client may not be accused of crimes against humanity, the prospect of a German client with an American office being sued in America for building a product in Guatemala that injured someone in Japan is still daunting.  Because ATS has a somewhat broad purpose:  to permit federal courts to recognize "certain causes of action based on sufficiently definite norms of international law,"  569 U.S. ___ (2013), it is conceivable that a clever plaintiffs' attorney would argue that principles of negligence or product liability were "sufficiently definite norms" of international law to warrant jurisdiction.

Whether that argument would be successful is doubtful.  But the Second Circuit, whose opinion the Supreme Court reviewed, had a simple, comforting answer for corporate clients:  ATS does not apply to corporations.  The hypothetical Japanese plaintiff simply could not sue a corporate defendant in America to recover for her injuries.  There would be no need to litigate if the lawsuit involved "sufficiently definite norms of international law." 

Wednesday, the Supreme Court skirted the issue of corporate liability, but announced a rule that should provide a similar degree of certainty to corporate clients.  Its decision did not turn on the corporate status of the defendant, but whether ATS applies extraterritorially.  The Court concluded that it does not. 

Writing for the majority, Chief Justice Roberts concluded that ATS was not intended to bring into the United States Courts claims involving torts committed against foreign subjects outside the territorial confines of the United States.  The majority noted that, historically, ATS had been used only rarely since its 18th century enactment, and historically used only to address claims that a person had violated the law of nations:  violating safe conduct, infringing on the rights of ambassadors, and piracy.  Therefore, it held that to warrant jurisdiction under ATS, a plaintiff's claim must "touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application." 

No justice dissented from the majority opinion, and even the most critical concurrence—by Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan—tended to confirm that corporate clients will not, in the ordinary course of litigation, be faced with jurisdiction based on ATS.  The concurrence advocated reading ATS as permitting jurisdiction over extraterritorial torts when "the defendant's conduct substantially and adversely affects an important American national interest," emphasizing the importance of the United States not becoming a safe harbor for "a torturer or other common enemy of mankind."

In short, although the "easy" ATS answer is now gone, the average corporate client has little to fear from ATS.  Negligence and products liability—while serious allegations—are hardly the stuff from which allegations of being a "common enemy of mankind" are made.     

William F. Auther is the managing partner of the Phoenix, Arizona office of Bowman and Brooke, LLP, where he has an active trial practice in product liability and business litigation.  Amanda Heitz is an associate at Bowman and Brooke.

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Ethics 20/20: The Impact of Technology

Posted on August 30, 2012 03:19 by J. Logan Murphy

Every day, we see the impact of technology on the practice of law. Blogs, social networking, electronically stored information, and other legal resources create enormous economies and unprecedented depth in our field. But with these advantages come unrecognized perils. The transparency and mobility of electronic information creates significant risks to clients, unless properly controlled. As part of the project to rein in technology in the practice of law, the American Bar Association launched an ambitious multi-year project called Ethics 20/20. One of the major goals of Ethics 20/20 was to modernize the rules of ethics and bring them into congruence with the state of technology.

At its most recent meeting, the ABA passed multiple resolutions amending the Model Rules of Professional Responsibility to reflect the evolution of technology in the practice of law. This article provides a brief overview of those amendments. Those who are more interested in the details of the amendments can click here to read the reports online.

Confidentiality When Using Computers
Resolution 105A makes changes to help lawyers understand how to protect client confidences when using new technology, including cloud computing, tablets, and smartphones. Though small, one of the most significant changes is included in Comment 6 to Rule 1.1 (Competence). The Rule now includes a requirement that “a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology.” No longer can attorneys simply ignore developments in favor of staid methods of practice. To be competent, an attorney must work effectively with technology and keep alert to technological improvements and changes.

The amendment to Rule 1.6 (Confidentiality of Information) is probably the largest and most impactful rule change related to confidentiality. Now, Rule 1.6(c) requires attorneys to “make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating the representation of a client.” The comments make it clear that attorneys are required to utilize reasonable safeguards to protect confidential information. These changes are geared toward the protection of electronic data, especially given the innumerable bits of sensitive information flying around every day.

Using Technology for Marketing
Resolution 105B was designed to help lawyers understand how the principles of attorney advertising already incorporated into the Rules are affected by the growth of Internet-based marketing and social networking. This particular resolution accomplishes three main goals. First, changes to Rule 1.18 offer guidance on how to market online without inadvertently forming an attorney-client relationship. Recent cases have demonstrated confusion on behalf of the general public regarding whether an attorney-client relationship is formed when the potential client emails the attorney or fills out a communication form on the attorney’s website. The amendments to Comment 2 of Rule 1.18 address the concern by stating that a person becomes a prospective client by “consulting” with a lawyer. While the existence of a consultation depends on the circumstances, the Comment eliminates potential passive liability to prospective clients. A consultation “does not occur if a person provides information to a lawyer in response to advertising that merely describes the lawyer’s education, experience, areas of practice, and contact information, or provides legal information of general interest.” But, if the lawyer actively invites information about a possible representation, the lawyer is probably stuck with a prospective client.

Second, the Rules contain a prohibition against paying others for a “recommendation,” and this Resolution modifies that prohibition to account for online lead generation services through chances to Comment 5 of Rule 7.2. Lawyers may now pay others for generating client leads, as long as the Internet-based lead generator does not “recommend” the lawyer. The lawyer is also responsible for the representations of the lead generator, with Comment 5 placing the onus on attorneys to ensure that the lead generator is not making statements that are inconsistent with the rules.

Finally, amendments to Rule 7.3 assist attorneys in determining when communications on the Internet, particularly through social networking sites, may constitute a “solicitation.” Only a “target communication initiated by the lawyer” directed to a “specific person” that “offers to provide” legal services is a solicitation. Communications to the general public, including Internet banners, are not solicitations, so feel free to jump on that Facebook advertising spot.

Lawyers have been slow to adopt the economies of scale that outsourcing can provide, in part because of the perceived ethical dilemmas presented in outsourcing. Outsourcing can endanger confidential client information and presents a quandary over legal work being performed by attorneys not licensed in the United States. Resolution 105C encourages attorneys to ensure the efficiency, competence, and ethics of any outsourcing process. An entirely new comment is added to Rule 1.1, requiring the informed consent of the client to contract with any lawyer outside of the lawyer’s own firm. And, lest we forget, lawyers are always charged with supervising non-lawyers; that requirement does not abate simply because work is being outsourced to a foreign country. Comments 1 and 3 to Rule 5.3 incorporate this concept and apply the general rule to all non-lawyers outside of the lawyer’s own firm. The basic gist of the changes in Rule 105C is to encourage lawyers to keep a sharp eye on professionals hired from outside their own firm, and to work closely with clients in determining the proper scope of outside contracting and supervision. No surprise there—constant communication with the client is a harbinger of a durable and responsible attorney-client relationship.

Mobile Lawyers
A prevalent by-product of an informationally small, but geographically large, practice is the tendency of lawyers to move their practice. The world does indeed get smaller every year. No longer do lawyers move down the street; more and more, attorneys are moving their practice to different jurisdictions, and virtual law offices are sprouting in all states. The remaining resolutions that passed enable attorneys to establish a practice in another jurisdiction—subject to stringent information protection requirements—while pursuing admission in that jurisdiction. Resolutions 105D and 105E address the ABA Model Rule of Practice Pending Admission and the ABA Model Rule on Admission by Motion, respectively. With a few states signaling their intent to adopt a uniform bar exam, these model rules and their amendments continue the progress toward a more uniform practice of law. In case you have never encountered these model rules, or their state versions, their purpose is to allow experienced lawyers who have moved into a different jurisdiction to continue to practice while awaiting an expedited admission to the Bar. 

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As reported by InsideCounsel, the American Bar Association House of Delegates (“ABAHD”) recently approved an amended model rule stating that it is ethical for lawyers to disclose client information when trying to move from one firm to another.

Specifically, the rule states that it is ethical for an attorney in negotiations for a different job, as well as attorneys in merging firms, to disclose the identities of clients and the amount of business they generate because the information can help point out any conflicts of interest that might exist.  However, the model rule states that lawyers still should not reveal clients' financial information.

Although the model rule has been approved by the ABAHD, the rule is simply an advisory rule.  In addition, the rule provides little guidance for attorneys faced with the question of how much client information can be ethically revealed in states whose bar associations do not have rules covering this topic.  Thus, prior to revealing any information, lawyers should carefully consider and weigh this model rule against Model Rules of Professional Conduct 1.6 and 1.9.

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According to a recent survey published by the Minority Corporate Counsel Association (MCCA), more women serve as general counsel at Fortune 500 companies in 2011 than ever before.  Women now hold the top legal spot at 21 % of Fortune 500 companies and approximately 16% of these female general counsels identified themselves as minorities.  MCCA President, Joe West, says “The real impact of this news, hopefully, is that it will illustrate to law firms that corporate law departments are serious about inclusion both in word and in deed, and that the time is coming when law firms need to get serious about it as well.”

The numbers of female and minority lawyers are increasing in corporate legal departments because of the transparency requirements put on them by government and the accountability required by consumers and shareholders, says Dr. Arin Reeves, an expert on diversity in the legal field.  While the information in the MCCA report shows positive change, Reeves says it’s dangerous to allow short-term positive change to slow long-term momentum.  “We should be very vigilant that we have a long way to go.  We’re nowhere near represented yet, nowhere near full or unfettered opportunity for women or minorities.”

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The Supreme Court heard oral argument on February 28, 2012 in Kiobel v. Royal Dutch Petroleum Co., a case raising the controversial issue of corporate liability for alleged violations of international law.

Kiobel is a putative class action in which the plaintiffs, current and former residents of Nigeria, allege that three oil companies aided and abetted the Nigerian government in committing human rights violations in connection with oil exploration activities in Nigeria.  Plaintiffs invoked the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, as the jurisdictional basis for their U.S. lawsuit against foreign companies for alleged human rights abuses occurring in Africa.  The ATS, although passed by the first Congress in 1789, was first utilized in 1980 by an alien plaintiff seeking a civil remedy for alleged human rights abuses.  The ATS provides as follows: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”    

The Second Circuit dismissed the plaintiffs’ suit, holding that the district court lacked jurisdiction over plaintiffs’ claims against corporations.  The court started with the uncontroversial proposition that the ATS is a jurisdictional statute and does not create any cause of action.  Citing an earlier Supreme Court ATS case, Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), the Second Circuit stated that it must look to “customary international law to determine both whether certain conduct leads to ATS liability and whether the scope of liability under the ATS extends to the defendant being sued.”  After an extensive review of international law, the court could not identify a single instance in which a corporation had ever been subject to any form of liability under the customary international law of human rights.  Thus, the court concluded that imposing liability on corporations for violations of customary international law had not attained a “discernible”, much less the required “universal”, level of acceptance among the nations of the world in their relations with each other.  Therefore, the court held that it lacked subject matter jurisdiction over the plaintiffs’ claims against the oil companies and dismissed the complaint.       

The Supreme Court docket has been extremely active since plaintiffs’ petition was granted in October 2011.  In addition to denying defendant Shell’s conditional cross-petition for writ of certiorari, the Court has seen over 35 amici briefs filed in Kiobel, including a brief by the United States government in support of petitioners-plaintiffs and briefs by the governments of Germany, Great Britain, and the Netherlands in support of respondents. 

The outside interest generated by Kiobel underscores the important ramifications of the Court’s decision on corporate liability, both for U.S. companies with foreign operations, as well as foreign and multinational firms.  But the outcome of the case pivots on a relatively narrow slate of legal issues.  In their merits brief, the petitioners first take the position that the Second Circuit incorrectly characterized the issue of corporate civil liability as an issue of subject matter jurisdiction.  Petitioners go on to argue that under the ATS, analysis of customary international law is necessary to determine whether a particular act constitutes a violation of a substantive international law norm, but that domestic law (which undoubtedly recognizes corporate civil liability) supplies the remedy.  The respondents of course disagree, pointing to the above-quoted excerpt from Sosa as clearly establishing that international law must recognize corporate liability before ATS liability can be imposed. 

From the outset of petitioners’ oral argument, it was apparent that the Court was concerned about the notion of U.S. courts imposing civil liability on foreign companies for foreign conduct.   Counsel for petitioners, Paul Hoffman, uttered two sentences before Justice Kennedy interjected with two statements he challenged Mr. Hoffman to rebut: (1) “International law does not recognize corporate responsibility for the alleged offenses here,” and (2) “No other nation in the world permits its court to exercise universal civil jurisdiction over alleged extraterritorial human rights abuses to which the nation has no connection”.  Justice Alito followed in the same vein shortly thereafter with the observation that “there’s no particular connection between the events here and the United States,” which fed into his later questioning “what business” a case like this one has in the courts of the United States.   Justice Roberts appeared equally concerned about U.S. courts adjudicating the instant dispute, and he questioned whether the Kiobel suit itself contravened international law insofar as it could not have been brought in any other nation.

While the Court kept Mr. Hoffman occupied with the issue of the extraterritorial scope of the ATS, Deputy Solicitor General Edwin S. Kneedler, arguing for the United States, was permitted to address several other arguments in support of petitioners’ position.  Nevertheless, the argument turned back toward broader policy issues, as Justice Kennedy posed a hypothetical to illustrate what he perceived to be the United States’ position:

Suppose an American corporation commits human trafficking with U.S. citizens in the United States. Under your view, the U.S. corporation could be sued in any country in the world, and it would -- and that would have no international consequences. We don't look to the international consequences at all. That's -- that's the view of the Government of the United States, as I understand.

Kathleen M. Sullivan, although peppered with wide-ranging questions from an active bench, was able to consistently return focus to respondents’ position that corporate liability was simply not recognized by customary international law.   Respondents’ argument was summarized succinctly by Ms. Sullivan toward the end of her oral argument:

[T]he ATS has language that says the tort must be committed in violation of the law of nations. So although, Justice Ginsburg, it doesn't specify who may be the defendants, it does point us to the law of nations to figure out what the law of nations thinks about who may be the defendants, and the law of nations is uniform. It rejects corporate liability. It rejects corporate liability.

Counsel for respondents finished her argument by clarifying that respondents did not seek a rule of “corporate impunity”, noting that corporate officers could be liable for human rights violations and that there were other avenues for suits redressing human rights violations, such as under state law or the domestic laws of nations.   

In rebuttal, Mr. Hoffman argued that “international law places no restriction on the way domestic jurisdictions enforce international law”.  However, despite his effort to focus the Court’s attention on domestic law as supplying the remedy for a violation of international law, he found himself answering the same line of questioning that began the argument – why should the courts of the United States entertain a “suit by an . . . alien against another alien for conduct that takes place overseas”?  This fundamental question emerged as perhaps the primary theme of the oral argument.  Whether the justices received a satisfactory answer will likely determine the outcome of the case. Keep an eye on the DRI Court Reporter for a summary of the Court’s decision when it is released.

The entire oral argument transcript can be downloaded from the Supreme Court website here.

Joshua D. Shaw practices law at Turner Padget Graham & Laney P.A. in Columbia, South Carolina.  

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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. 

In this particular case, a media firm working for Hyundai Motor America had given certain bloggers gift certificates as an incentive to include links to Hyundai advertising videos in their blogs and/or to comment, in advance, on Hyundai’s 2011 Super Bowl advertisements.  Some of the bloggers had not disclosed to their readers that the media firm had provided these (admittedly minimal) incentives for the bloggers to drop Hyundai’s name into their blogs.

Problem was, Section 5 of the Federal Trade Communications Act requires the disclosure of a material connection between an advertiser and an endorser, when such a relationship is not otherwise apparent from the communications containing the endorsement.  See 15 U.S.C. §45.  The FTC has explained this requirement in some detail in its aptly named “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” found at 16 C.F.R. Part 255.

Fortunately for Hyundai, the FTC decided not to punish it for the conduct of the outside media firm, because (1) Hyundai had a robust corporate compliance program in place that barred such conduct, and (2) neither Hyundai nor the media firm had intended to deceive consumers.  The authors then use this little tale to point up the need for corporate compliance programs, particularly in the areas of antitrust and consumer protection (noting, ominously, that federal criminal antitrust fines exceeded $1 biiiillllion dollars in 2011).

The article, and the FTC’s investigation, raise a couple of interesting issues.  First, yes, I do believe that corporate compliance programs in the “Age of Compliance” serve multiple purposes, not the least of which is to meet the Government’s expectation that your clients have them.  Indeed, I, myself, have written on this topic in the past.  (FTC:  Please note my full disclosure of the connection between Me The Blogger and Me The Author of the Article, in case that wasn’t otherwise obvious.)  Having just attended an ABA conference that included an in-house counsel panel discussion on this topic, however, one might reasonably wonder just how much good such programs do.  On the one hand, they may prevent shenanigans before said shenanigans occur.  On the other, and as some in-house counsel noted at the conference, when was the last time you heard of the Government cutting a Fortune 500 company any slack in a criminal case, just because it had an expensive compliance program in place?  Just sayin’.

Second, and I have to ask:  Is this whole FTC thing just stupid?  According to the article, the bloggers were commenting on, and including links to, Hyundai Super Bowl ads.  Does that mean they were vouching for the quality and desirability of Hyundai vehicles?  And even if they were, ask yourselves these questions:  (1) Do you trust bloggers to give you the unbiased, unvarnished truth about anything?  I mean, they’re bloggers, for goodness sake.  (2) Do you buy products based on what someone says about the company’s advertisements?  (3) Do you buy a car because one guy in the local paper writes a good review of it?  (4) Is the FTC’s investigation patronizing?  Is this the Nanny State run amok?  Are we truly too stupid to decide for ourselves whether we like a commercial and want to buy the product?  Or whether we should believe, and/or agree with, anything that Me The Blogger just wrote?  Just sayin’.

Kurt Stitcher, a trial lawyer and former federal prosecutor, is a Partner in the Chicago office of Faegre Baker Daniels LLP.  Kurt's practice encompasses white collar defense and investigations, product liability, and commercial/business litigation.  He can be reached at or at 312-212-6526.
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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.  

In the recent running aground of the Italian Costa Concordia operated by Costa Crocier, which is controlled by Carnival, the ship departed near Rome.  Approximately 120 United States citizens were on board and two may still be missing.  With respect to notice of the forum selection and choice of law provisions, information is much easier to obtain now than it was when Shute was decided.  For example, Carnival now posts its ticket contract online.  Carnival’s contract includes a mandatory arbitration provision as well as a forum selection clause, limits on liability, and restricted statute of limitations periods.   Costa Crocier also posts their ticket contract online.  The Costa contract includes forum selection, arbitration and choice of law provisions at Section 2.    

For claims involving personal injury or death, the Costa contract includes a forum selection clause for Broward County, Florida for cruises that depart from, visit or return to a U.S. port.  In contrast, U.S. port related economic loss claims are subject to an arbitration provision.  Under the Costa contract, any cruise that does not depart from, visit or return to a U.S. port, all claims must be filed in Genoa, Italy, and Italian law applies.  The Costa contract also includes a jury waiver provision.  

When a district court applies a forum selection provision, it usually does so via 28 U.S.C. § 1404, whereas a state court would dismiss the case.  Italy is not a district to which a federal case can be transferred, so dismissal is likely remedy if court enforces forum selection provisions for U.S. citizen cases filed in their home state, or even in Florida.  See e.g., Albemarle Corp. v. Astrazeneca U.K, Ltd., 628 F.3d 643, 651 (4th Cir. 2010) (applying English law / federal common law to enforce forum selection clause via dismissal).  Albemarle also suggests that Costa Concordia related claims filed in the U.S. would still be analyzed under the four factor “unreasonableness” test set forth in M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (1972) (holding forum selection clause may be found unreasonable if “(1) [its] formation was induced by fraud or over-reaching; (2) the complaining party ‘will for all practical purposes be deprived of his day in court’ because of the grave inconvenience or un-fairness of the selected forum; (3) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4) [its] enforcement would contravene a strong public policy of the forum state.”).     

Here, proponents of avoiding Costa Crocier’s forum selection clause and choice of Italian law may argue factors two, three and four.  An analysis of Italian law related to factor three is beyond the scope of this blog post!
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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.   

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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."  

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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.

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