What does Rocky Mariciano, one of the greatest heavyweight boxers of all time, have to do with evidentiary privileges? Plenty, as it turns out, for it was a libel case arising from Mariciano’s comments following his famous 1952 fight against Jersey Joe Walcott that solidified the then-evolving theory that the government-information privilege applies in civil actions.


The Government-Informant Privilege

The government-informant privilege protects from compelled disclosure the identity of persons, or informers, who supply information about legal violations to the appropriate law-enforcement personnel. Despite the name’s implication, the privilege belongs to the government, not the informer, but protects informers from retaliation or retribution and encourages citizens to communicate their knowledge of violations of law to government officials.

The privilege is qualified, meaning that it may be overcome upon a sufficient showing of need by the defendant. In a landmark decision, the Supreme Court in Roviaro v. United States, 353 U.S. 53 (1957), explained that the privilege must “give way” when disclosure of the informer’s identity is relevant and helpful to the defense or is essential to a fair determination of the cause. And to determine whether either of these standards is met, courts must balance the public’s interest in keeping the informer’s identity confidential against the defendant’s right to prepare a defense.

There is no fixed rule on when disclosure is required; courts must make the assessment on a case-by-case basis,and have sole discretion to determine whether the evidence justifies disclosure.  The court must consider several factors when balancing the competing interests, such as the crime charged, the possible defenses, significance of the informer’s testimony, and danger to the informant if his identity is revealed.

Does the Privilege Apply in Civil Actions?

The government-informant privilege is routinely asserted in criminal cases, with the typical situation involving a criminally accused seeking to discover the identity of the informer who provided police with the tip that led to the accused’s arrest.  But the question arises whether this privilege may be applied in civil actions and, if so, whether the same standard governs the privilege.

The situation can arise in two situations.  First, a plaintiff may seek disclosure of an informer’s identity during a civil action against the government, such as a civil rights action under 42 U.S.C § 1983.  Similarly, a party involved in a civil action against another private party may seek third-party discovery from a law-enforcement agency.  Second, the question arises whether private entities may assert the government-informant privilege to preclude disclosure of a whistleblower, or one who reported misconduct up the corporate chain of command in addition to a regulatory enforcement agency.

In the latter situation, most courts hold that the privilege does not apply where the whistleblower’s identity is sought from the private entity, but in the former situation, most courts hold that the privilege applies where the informer’s identity is sought from a governmental agency.  And a case involving one of the greatest fights–and knockout punches–of Rocky Marciano’s career illustrates the point.

Rocky Marciano & the Greatest Punch of All-Time

With a record of 49-0, Rocky Marciano is the only boxer to retire as heavyweight champion with an undefeated record and is recognized as one of the greatest boxers of all time.  Marciano won his title on September 23, 1952 when he defeated reigning champion Jersey Joe Walcott by a Round 13 knockout.  Marciano later described the knockout punch as “the best punch I ever landed,” and boxing historians generally agree that Marciano’s punch was one of the greatest punches in all of boxing history. 

As originally posted on November 27 on Presnell on Privileges
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On June 25, 2012, the California Supreme Court set forth new rules regarding the discoverability of witness statements in Coito v. Superior Court of Stanislaus County, No. S181712 (Cal. 2012).  The issue before the court was what work product protection, if any, should be accorded two items: (1) recordings of witness interviews conducted by investigators employed by defendant’s counsel, and (2) information concerning the identity of witnesses from whom the defendant’s counsel obtained statements.        

The California Supreme Court concluded that witness statements procured by an attorney are entitled, as a matter of law, to at least qualified work product protection.  Regarding the level of work product protection, the court held that the witness statements may be entitled to absolute protection if the attorney resisting discovery of the statements makes a preliminary showing that disclosure would reveal his or her impressions, conclusions, opinions, or legal research or theories.  The opposing party can overcome this privilege only by demonstrating that denying discovery will unfairly prejudice her in preparing her claim or will result in an injustice. 

As to the identity of witnesses from whom defendant’s counsel obtained statements, the court held that such information is not automatically entitled to absolute or qualified work product protection.  To invoke the privilege, the party resisting discovery must persuade the trial court that disclosure would reveal the attorney’s tactics, impressions, or evaluation of the case.  If defendant could do so, such information should be afforded absolute protection.  If, on the other hand, the defendant persuades the trial court that disclosure would result in opposing counsel taking undue advantage of the attorney’s industry or efforts, the information should be afforded qualified protection. 

 

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Bad lawyers’ jokes aside, most of us do not encounter blatantly unethical and/or unprofessional attorneys in the course of our practice and are fortunately left wondering where the basis for these jokes resides.  But then there are reports like the one in the Atlanta Journal Constitution last week.

According to the article, a Sandy Springs attorney was booked into the Cobb County jail on Thursday April 26, for criminal charges stemming from “attorney-client” meetings he had with inmates.   
The attorney had allegedly met with inmates in private attorney-client rooms at the Cobb County jail on numerous occasions.  On one occasion, he allegedly exposed himself to a female inmate, and another time, asked to see the inmate’s breasts.  In exchange, the attorney offered to bring the inmates drugs or tobacco, which are prohibited in jail.

The attorney was arrested and booked into Cobb County jail on eight felony charges stemming from his alleged offering of prohibited items in exchange for sexual favors, and then was released on a $10,000 bond.  But right after his release from Cobb County, he was booked into Fulton County jail on drug charges, and is being held there without bond for allegedly possessing amphetamines and for having prescription drugs in the incorrect container.  

The newspaper also reported that the attorney’s license to practice law had been temporarily suspended by the State Bar of Georgia in 2010, which raises some questions (or perhaps not) about the purpose of his meetings with inmates in the attorney-client room in jail in the first place.   

M. Amy Carlin is a partner with Morgan, Brown, & Joy, LLP, in Boston, Massachusetts, New England’s oldest and largest management employment law firm.  Ms. Carlin’s practice primarily consists of employment litigation and counseling.  She has been a Steering Committee member of DRI’s Lawyers’ Professionalism & Ethics Committee since 2007, and currently serves as its webinar chair.  She can be reached at acarlin@morganbrown.com or 617.523.6666.
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Three law firms based in Austin, Texas recently filed suit on behalf of 13 people claiming that almost 20 apps, including Facebook, Foursquare, Yelp and Twitter, violate policies put in place by distributers such as Apple’s App Store, Amazon’s App Store and Google Play.  The American Statesmen reports that the violations are a result of mobile apps “stealing” address book data, such as names, phone numbers, email addresses and even birthdays.  The lawsuit seeks to stop app developers from harvesting data without permission.  The complaint cites an industry publication that claims the information collected could be worth 60 cents to several dollars per contact. 

A New York Times article investigating contact mining recently noted that “the address book in smartphones — where some of the user’s most personal data is carried — is free for app developers to take at will, often without the phone owner’s knowledge.”  The app developers use the data in an effort to expand the number of people using their program.  Developers use email addresses to target potential new customers and to target advertisements.  Several companies, including Path, a social networking site, have issued apologies regarding “how [their] application used your phone contacts.” 

Attorney Richard Newman, an Internet law attorney and managing partner of the Hinch Newman firm, with offices in both California and New York, thinks that the lawsuits are starting to have an impact.  Mr. Newman stated “the mobile communications industry is finding that failing to properly inform consumers of what is happening to their information is increasingly grabbing the attention of regulatory authorities, including the Federal Trade Commission.”  Until a regulatory framework is hammered out to govern emerging data privacy issues, litigation may be one of the only things keeping pace with technology development.  

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Is Google Googling You?

Posted on March 9, 2012 01:40 by Chad Godwin

If you use the Google search engine (and I’m guessing that includes pretty much everyone) you may have noticed a text box appearing on the screen during the past couple weeks, imploring you to read Google’s new privacy disclosures, along with the caveat “this stuff matters.”  That text box stopped appearing on March 1, when Google introduced its new privacy policy.  According to Reuters, at the beginning of the year, Google began reporting that it was simplifying its privacy policy, consolidating 60 guidelines into a single policy that applies to all its services, including YouTube, Gmail and the social network Google+. 

According to the title of a Washington Post article, the “New privacy policy lets Google watch you – everywhere.”  More specifically, the new policy allows Google to track users’ activities by consolidating information it gathers on them across all of the company’s platforms.  Users cannot opt out of the new policy if they want to continue using Google’s services.  A company representative, Alma Whitten, noted that until now, the company has been restricted in their ability to combine YouTube search histories, for example, with other information on a user’s account (email activity).  Although the company claims that it does not sell or trade personally identifiable user information, it now shares usage habits and historical data across all platforms and uses the information to match ads to your online behavior .  Moreover, the fact that Google is gathering so much user specific information on individuals creates the potential for additional privacy implications in the future.  

The National Association of Attorneys General sent a letter to Google signed by 36 members expressing concern about the new policy.  In part, the letter noted:

Consumers have diverse interests and concerns, and may want the information in their Web history to be kept separate from the information they exchange via Gmail. Likewise, consumers may be comfortable with Google knowing their search queries but not with it knowing their whereabouts, yet the new privacy policy appears to give them no choice in the matter, further invading their privacy.

EU Justice Commissioner Viviane Reding stated that data protection agencies in European countries have concluded that Google’s new privacy policy is in breach of European law.  Given the amount of attention the new privacy policy has generated, it appears as though it’s only a matter of time before the company faces its first significant legal challenge to the policy.  Until then, the digital footprint of all internet users will undoubtedly continue to grow.

Chad Godwin

Attorney

Carr Allison


 


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In these uncertain economic times, people are looking closely at all aspects of their finances, including the management of their retirement plans.  Not only are plan participants concerned with their account balances, they and plaintiffs’ counsel are examining the underlying management and administrative practices of the plans themselves.  Occasionally, this examination leads to litigation and the accompanying discovery process, as participants seek to obtain recovery for perceived wrongs. It is here that the so-called “fiduciary exception” to the attorney-client privilege may come into play. 

Background

Communications between clients and attorneys are generally confidential, and cannot be divulged to outside parties without the client’s consent. Thanks to this protection, clients are encouraged to speak freely with their attorneys, knowing that the discussion is protected from discovery by one of the strongest privileges allowed under United States law. Attorney-client privilege is not without exception, however, and there are times when the client may have unknowingly waived privilege, or when the privilege simply does not apply. In the benefit plan world, an understanding of how the fiduciary exception to the attorney-client privilege works is essential.  ERISA plan fiduciaries and their counsel need to know what types of communications qualify for the privilege and which ones they can expect to be shared with plan participants and beneficiaries.  Accordingly, this article examines who is an ERISA fiduciary, what the fiduciary exception is, and when the exception may apply.

Who Is A Fiduciary?

The fiduciary exception to the attorney-client privilege affects those who act in a fiduciary capacity.  A fiduciary under ERISA is a person who 1) exercises discretionary authority or discretionary control over an employee benefit plan or over the management and disposition of a plan’s assets, 2) provides investment advice for a fee or other compensation, or has the authority or responsibility to do so, or 3) has discretionary administrative authority or responsibility over the plan.  A fiduciary’s primary responsibility is to act in the best interests of the plan and the plan’s beneficiaries.  The fiduciary is not to make decisions that are based on what would be best for the business, or for the fiduciary personally, while acting in a fiduciary capacity.  This requirement to act for the plan and the plan’s beneficiaries provides the underpinning for the fiduciary exception.

The Fiduciary Exception Defined

The fiduciary exception prevents communications between a plan fiduciary and counsel “in the execution of fiduciary duties” from being privileged against plan participants and beneficiaries.  Wachtel v. Health Net, 482 F.3d 225, 226 (2d Cir. 2007) (contains a good brief history of the development of the fiduciary exception).  The theory for the exception is that counsel is, in fact, representing plan participants when advising a fiduciary in the exercise of its duties.

The sticking point is determining who the attorney is representing at the time the conversation occurred, and it is helpful to consider the role of the employer vis-à-vis the plan.  An employer may act as a fiduciary in matters of plan administration and management, but the employer does not act as a fiduciary when engaged in plan design activities.  Becher v. LILC, 129 F.3d 268, 268 (2d Cir. 1997).  Accordingly, if a fiduciary consults counsel on a matter of plan administration, the fiduciary may not claim privilege against participants.  The participants are the rightful clients of the attorney for purposes of that conversation. If, however, the fiduciary consults with the attorney on a matter of plan design, termination, or other business matters, the fiduciary exception would not apply. The plan and its participants are no longer the clients at that point, because the matter under discussion involves business decisions and is not related to plan management or administration.  In such a case, the business entity is the client and retains the privilege.

There is no bright-line rule for when the fiduciary exception may be applied.  That said, it is fair to say that when counsel is being properly paid from the plan—as opposed to the plan sponsor—the fiduciary exception will most likely apply.  It is otherwise a case-by-case examination, based on the content, timing, and the impetus for each communication. “It is not the terms of an engagement letter, but rather the nature of the particular attorney-client communication that is dispositive.”  United States v. Mett, 178 F.3d 1058, 1064 (9th Cir. 1999).  A key distinction should be noted: a person’s fiduciary status is not constant and unchanging. An employer may meet with counsel for the purposes of discussing the investment performance of the funds in the plan, but change the topic to the possibility of plan termination.  At which point does the employer change from discussing a fiduciary matter to discussing a settlor (business) matter? Evaluating plan investment performance is a fiduciary function.  Thus, in the first half of the conversation described above, the employer seeks advice on behalf of the plan, but for the benefit of the plan beneficiaries.  Therefore, counsel’s true clients are the plan’s participants and beneficiaries. The communication would likely fall under the fiduciary exception and would not be privileged against the participants. In contrast, the second half of the conversation involves matters of plan design.  The employer was acting on behalf of the business and likely may claim attorney-client privilege against plan participants for that portion of the conversation.

The Fiduciary Exception in Practice

As discussed above, the fiduciary exception is applicable when the true client is not the fiduciary, but the plan participants and beneficiaries.  It does not apply when the advice given falls within the settlor functions of a plan sponsor.  Further, the exception may not apply when a fiduciary is seeking advice for his or her own protection in anticipation of litigation.

A good example of how the fiduciary exception to attorney-client privilege can work to compel document production through discovery is found in Fischel v. Equitable Life Assurance, 191 F.R.D. 606 (N.D. Ca. 2000).  The plaintiffs, former employees of the defendant, sought to compel the defendant employer to disclose various documents from meetings with the company’s inside and outside counsel by invoking the fiduciary exception.   The court used a test that examined not only the advice given, but the intended recipient of the advice, as well as the underlying reasons for seeking it.  Id. at 609.  As a result, the court allowed production of memoranda examining documents that were intended to educate plan beneficiaries about changes in their plan benefits.  The court found that the documents were primarily focused on communicating information about plan changes that had already been made, as opposed to advising whether the changes were desirable.  As such, the intended beneficiaries of the advice were the plan participants, not the employer.  With the participants thus established as the actual clients, the work fell within the fiduciary exception to the attorney-client privilege and was discoverable.  Id. at 610.

The fiduciary exception does not apply when the fiduciary is engaged in settlor functions.  In Tatum v. R.J. Reynolds Tobacco Company, 247 F.R.D. 488 (M.D.N.C. 2008), the defendant employer eliminated two stocks from the company’s 401(k) plan investment lineup as part of an overall plan restructuring.  A beneficiary filed suit, claiming that the elimination of the stock constituted a breach of fiduciary duties.  In the course of discovery, the plaintiff sought to compel production—among other documents—of certain memoranda and notes that he claimed fell within the fiduciary exception.

The court began its analysis by reviewing the premise that attorney-client privilege may be asserted “when the communications [between the administrator and counsel] relate to plan sponsor or ‘settlor’ functions of adopting, amending, or terminating a plan.” Id.  at 493.  The court reviewed the documents in question to determine which were fiduciary in nature, and which were related to plan settlor functions, based on the “context and content” of each communication in question.  Id. at 495 (quoting United States v. Mett, 178 F.3d 1048, 1064 (9th Cir. 1999).   The court determined that the documents reflecting legal advice as to the adoption of plan amendments and legal services related to the amendments constituted settlor functions, and were therefore subject to attorney-client privilege. In contrast, a certain redaction in a draft communication to participants was determined to be advice on how plan changes should be communicated to the participants.  Communicating plan changes to participants is a fiduciary function, not a settlor function, and therefore is subject to the fiduciary exception.  Tatum, 247 F.R.D. at 496.

In United States v. Mett, the Ninth Circuit found that a plan fiduciary can properly assert attorney-client privilege when seeking advice in anticipation of litigation.   178 F.3d 1058.  In  Mett, business owners—who were also the company pension plan administrators—withdrew a significant amount of money from the plan to cover general operating expenses. The defendants solicited advice from their counsel about potential criminal and civil sanctions that could result from their actions, and received two memoranda detailing the various penalties to which they could be subjected.  The plaintiffs successfully obtained those memoranda through the pre-trial discovery process, citing the fiduciary exception as their basis.  The Ninth Circuit held that the fiduciary exception to attorney-client privilege did not apply based on the actual content of the memoranda.  “[The memoranda are] devoted entirely to advising [defendants] regarding their own personal civil and criminal exposure. . . .”  Id.  at 1064.  Therefore, the defendants were acting in their own interests, not those of the plan participants, and the fiduciary exception did not apply.

The Ninth Circuit rejected the government’s argument that the scope of the fiduciary exception should be extended to include matters broadly related to the administration of the plan.  The court stated that broadening the scope of the fiduciary exception ran the risk of effectively eliminating attorney-client privilege for all ERISA trustees and administrators; almost any conversation an administrator may have with counsel could relate to the plan’s administration in however tangential a manner.  The court also recognized that giving legal advice to an ERISA trustee about his or her own liability is not advice being sought for the benefit of the plan or its beneficiaries.  By definition, that advice could not fall under the fiduciary exception, as the individual is not acting in a fiduciary capacity at that time.  Id. at 1065.

The court provided an additional practical basis against broadening the scope of the fiduciary exception.  Trustees and administrators who need to seek legal advice for non-fiduciary matters may not do so if they fear that their conversations with counsel may no longer be privileged.  They may choose not to serve on a plan administrative or investment committee, or, if so, may only consult their attorneys when things begin to fall apart, as opposed to being proactive.  Id. The court went on to say that when there is a difficult question of privilege, the dispute should be resolved in favor of nondisclosure.  In a precedential legal system, it is often better to preserve the privilege’s integrity rather than establish a dangerous precedent that could be used to defeat the original intent of the privilege.  Id.

Conclusion

Whether a particular conversation or communication fits the fiduciary exception to the attorney-client privilege can be a complicated determination.  If the communication relates to a fiduciary function such as evaluating plan investment performance, then it fits within the fiduciary exception and is not privileged against the plan participants or beneficiaries.  If the communication relates to a settlor function such as plan or design, then it is not fiduciary in nature, the exception does not apply and the attorney-client privilege may be invoked.  If the communication is for the fiduciary’s own benefit in anticipation of potential litigation against him or her, then the fiduciary is the true client for that communication and attorney-client privilege may be asserted.  As a practical matter, in order to preserve the privilege, it is best for counsel to view his or her role as one involving service to the fiduciary or business entity in a manner related to their liability risk.  It should be noted that the application of the fiduciary exception may vary from jurisdiction to jurisdiction, and counsel is always wise to check the law of the relevant jurisdiction before acting.

Michael F. Tomasek
Ungaretti & Harris
Chicago, IL
mtomasek@uhlaw.com

 

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