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Ethics and Professionalism Issues in Employment Law
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Ethics and Professionalism Issues in Employment Law

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  1. Ethics and Professionalism Issues in Employment Law Practicing Law Institute Litigating Employment Discrimination Claims Conference, June 2007 Dennis P. Duffy Baker Botts LLP Houston, Texas

  2. Conflicts of Interest

  3. Conflicts Involving Insurance • Lawyer retained by insurer to defend insured owes duty to insured and may not settle at the direction of the insurer without the insurer's informed consent • Exception: "Monitoring counsel" may owe duty only to insurer • Lawyer should communicate "early in the litigation" about the conflict issues raised by the insurance policy • Insured consent needed before lawyer can consent to insurer-imposed litigation "guidelines"

  4. Conflicts Involving Insurance Insurer requests for billing information • need informed consent of insured (client) before sending • even with consent, be careful that client confidences are not revealed in the billing information--possible waiver of privilege • exercise "billing judgment" before sending billings to insured

  5. Attorney-Client Privilege Issues

  6. Attorney-Client Privilege • Applies to communications made by the client • Attorneys’ communications may also be protected if an attorney’s communication reveal the substance of a client communication • Some courts impose “necessary and inevitable” standard instead of “based on” standard for determining whether a lawyer’s communications to a client are privileged • Client cannot protect a document unless such document prepared for purpose of communication with lawyers • Redaction may be an option if document has both privileged and non-privileged material

  7. Communications Between Non-Lawyer Employees May be Privileged If Made for Purpose of Facilitating Attorney's Advice to the Corporate Client • In re JDN Real Estate-McKinney, L.P. (Tex. App.--Dallas 2006) - Single email from CEO & president of corporation protected by privilege, as part of string of privileged emails; although email itself did not reveal confidential information, it was part of the context and subject of the privileged string of communications • Clover Staffing Inc. v. Johnson Controls World Services, Inc. (S.D. Tex. 2006) - Emails from corporate official to other corporate officials were protected by the attorney-client privilege; although none of the officials were attorneys, emails were sent at the suggestion of the corporate legal department to gather information that could be used by attorneys in negotiating with subcontractor to resolve contract issues.

  8. Involving a Lawyer in the Communication Doesn't Necessarily Make it Privileged • Baran v. Walsh Construction Co. (N.D. Ill. 2007) Emails between officials of defendant construction company and its vice president in charge of insurance department were not protected by the attorney-client privilege; although vice president also worked in the legal department of the company, he was acting in his capacity as the head of the insurance department, not in his capacity as company’s legal counsel. • SmithKline Beecham Corp. v. Teva Pharmaceuticals USA, Inc. (E.D. Pa. 2005) “What would otherwise be routine, non-privileged communications between corporate officers or employees transacting general business of the company do not attain privileged status solely because in-house or outside counsel is ‘copied in’ on correspondence or memoranda.”

  9. Waiver--Disclosure to Third Parties Voluntary Disclosure – • To any party not necessary to facilitate confidential communication between attorney and client Compelled Disclosure – • Few courts recognize exception

  10. Waiver--Implied Waiver Putting confidential communication "at issue" • Cox v. Administrator U.S. Steel & Carnegie (11th Cir. 1994) “Having gone beyond mere denial, affirmatively to assert its good faith [in an FLSA case], [the defendant] injected the issue of its knowledge of the law into the case and thereby waived the attorney-client privilege.”

  11. Waiver--Attorney Investigative Materials • Investigative report generally not privileged where defendant raises adequacy of investigation as affirmative defense to sexual harassment claim (Harding v. Dana Transp. Co. (D.N.J. 1999)) • Only limited waiver if privileged materials can be reasonably segregated from the "investigation" report • No privilege if attorney acting solely as investigator rather than as an attorney • In re Texas Farmers Ins. Exchange (Tex. App. 1999) • Compare Harlandale Indep. School Dist. v. Cornyn (Tex. App. 2000)

  12. "Business Advice" Not Privileged • Baran v. Walsh Construction Co. (N.D. Ill. 2007) - Emails between various officials of construction company and its vice president in charge of insurance department were not protected by the attorney-client privilege, even though the vice president also worked in the legal department of the company, where the vice president was acting in his capacity as the head of the insurance department, not in his capacity as the company’s legal counsel. • In re Sealed Case (D.C. Cir. 1984) - Must be clear showing that attorney gave advice acting in professional legal capacity

  13. Attorney-Client Privilege--In-House Issues • Privilege usually exists for full time in-house counsel/in-house business person. Upjohn Co. v. U.S., 449 U.S. 383 (1981). • Applies even if in-house lawyer is not full time in legal department, so long as communication made by the lawyer acting in capacity as lawyer for company • Privilege applies to any corporate employee, regardless of position, when the communications relate to matters within the scope of the employee’s duties and the employee is aware that the purpose of the information is to enable the attorney to provide legal advice.

  14. Ex Parte Communications

  15. Ex Parte Communications--Rule 4.2 In representing a client, a lawyer may not communicate about the subject matter of the representation with a person whom the lawyer KNOWS is REPRESENTED by another lawyer without the consent of that lawyer • "Knows"--Actual or constructive knowledge (most states). Some states (Alabama, Kentucky, California)--actual knowledge only. • "Represented"--Pre-filing contact allowed in some states.

  16. Ex Parte Communications--Rule 4.2 Former Employees • Fair game in most states. . . even if former employee was manager or supervisor • Should give "warnings" to former managers re attorney's role and caution regarding disclosure of attorney client privileges of company

  17. Ex Parte Communications--Rule 4.2 Current Employees • Blanket prohibition on contact-a few states • Most states--cannot contact: • employees with managerial authority regarding the subject matter • employees whose acts/omissions may make the corporate party vicariously liable • [employees whose statements may constitute an admission by the corporate party] • "Blanket" assertion that lawyer represents corporation and all employees--generally prohibited (and may present "unintended consequences")

  18. Inadvertent Disclosure Issues

  19. Inadvertent Disclosure • Ethical duty if attorney receives confidential information from opposing party that he/she knows was sent inadvertently: • ABA Formal Op. No. 05-437 - Duty to notify sender • Some Jurisdictions: Duty to notify sender and adhere to his/her request • Some Jurisdictions: No duty to notify. • In re Meador (Tex. 1998) (trial court did not abuse discretion in refusing to disqualify attorney in sexual harassment action based on receipt of privileged materials from defendant through no fault of his own, instead ordering return of the purloined documents and agreement not to use them in the litigation).

  20. Inadvertent Disclosure: Waiver Issues Three approaches to Inadvertent Disclosure: • Rarely/never waives: Texas • Always waives: D.C. • Balancing Test: Majority of jurisdictions

  21. Improper Acquisition Courts generally discourage party's resort to self-help evidence gathering: • Pillsbury Madison & Sutro v. Schectman (Cal. App. 1997) - preliminary injunction ordering employees' attorney to return internal documents removed from employer law firm • In re Marketing Investors Corp. (Tex. App. 1998) - trial court abused discretion in not ordering former president of defendant corporation to return documents taken from corporation following his firing and in not disqualifying his counsel who refused to return the documents

  22. Improper Acquisition • Lipin v. Bender, 597 N.Y.S.2d 340, 343 (App. Div. 1993): • Former manager surreptitiously read her employer’s counsel’s internal memoranda during a court hearing; trial court dismissed complaint as a sanction for her “highly improper” evidence-gathering).

  23. Employee's Privileged Information on Employer-Owned Computers/Laptops Curto v. Medical World Communications, Inc., (E.D. N.Y. 2006) - • Former employee did not waive privilege concerning documents allegedly retrieved from employer-owned laptops used by the employee during her employment as a home office: • employee took reasonable precaution to prevent inadvertent disclosure by sending the emails through her personal AOL account which did not go through the company’s servers and • she attempted to delete the material before turning in the laptop, the volume of material was relatively limited, and the employee promptly requested return of the emails upon notification.

  24. Destruction/Spoliation Issues Leon v. IDX Systems Corp., (9th Cir. 2006) • Employee intentionally deleted over 2200 employment-related files (some of which were likely at the heart of employer's defense) and then wrote a program to write over deleted documents, after he filed his discrimination lawsuit • Ninth Circuit (!) affirmed dismissal and $65,000 sanctions against employee • Reversed order refusing to enjoin DOL investigation and adjudication of employee's SOX whistleblowing complaint since it was barred under res judicata principles by trial court's dismissal of employee's lawsuit; DOL investigation was based on common nucleus of facts and DOL was suing for employee-specific rights of precisely the type that employee had already pursued

  25. Examination of "Meta Data" • N.Y. State Ethics Op. No. 749 (2001) and Fla. Ethics Op. No. 06-2 (2006) - Treat confidential information in meta data like "inadvertently" disclosed information--unethical to examine without consent of opposing counsel • ABA Formal Op. No. 06-442 (2006) - Meta data can ethically be viewed by opposing counsel; scrub your data if you don't want it read by opponent • See also N.Y. State Ethics Op. No. 782 (2004) - duty to scrub meta data especially where lawyer knows document is being sent to a tech-savvy opponent.

  26. Settlement Issues

  27. Settlement Issues • Settlement Conditioned on Lawyer Agreement to Refrain from Future Lawsuits Against the Same Defendant • A lawyer may not offer, nor may opposing counsel accept, a settlement agreement which would obligate the attorney to limit the representation of future claimants. • ABA Formal Ethics Op. No. 95-394 • Tex. Ethics Op. No. 505

  28. Settlement Issues • Confidentiality Clauses • Attorneys may ethically agree to confidentiality clauses as part of a settlement agreement • Clause cannot prohibit the disclosure of publicly available information and filings. • State/local open records laws may limit ability of public entities to enter into such clauses.

  29. Settlement Issues Duty of Candor in Settlement • Duty of Candor regarding objectively verifiable "facts" • "Puffing" Statements in Settlement Discussions--Generally permitted. • ABA Formal Ethics Op. No. 06-439 (statements regarding a party's negotiating goals or its willingness to compromise are ordinarily considered negotiation "puffing" and not "false statements of material fact" prohibited by the ethics rules).

  30. Duty to Report Opponent's Ethical Violation Rule 8.3 of the Model Rules: • A lawyer with knowledge that another lawyer's conduct has violated the ethics rules in a way that raises a "substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects" must inform the appropriate professional authority • "Knowledge"--Actual knowledge, which can be inferred from the circumstances. • Not all violations trigger obligation, only those that raise a "substantial question" as to the lawyer's honesty, trustworthiness or fitness" in other respects.

  31. Duty to Report Opponent's Ethical Violation • If information relating to the representation of one's own client would be disclosed in the course of making the report to the appropriate authority, that client's informed consent to the disclosure is required. • See ABA Formal Op. No. 03-431 (2003).

  32. Dennis P. Duffy 713.229.1799 dennis.duffy@bakerbotts.com

  33. MOSCOW LONDON NEW YORK WASHINGTON DALLAS AUSTIN HOUSTON RIYADH DUBAI HONG KONG June 2007