Ethical Issues and Traps for Unwary Multijurisdictional Lawyers


C. Evan Stewart

Cohen & Gresser LLP

Every lawyer worth his or her salt has ethical issues concerning multiple-jurisdictional practice. Why? Because (as is implicit in the topic sentence) virtually every lawyer practices law beyond the boundaries of the state in which he or she is licensed. The purpose of this article is to identify some key issues about which we all should be mindful.

Client Confidentiality

ABA Model Rule 1.6 provides, among other things, that attorneys may disclose client confidences: (i) where certain death or substantial bodily injury would result from non-disclosure; (ii) where a crime or fraud will be committed, where there will be substantial financial injury, and the lawyer’s services were used; (iii) to mitigate or rectify (ii); and (iv) to establish a claim or defense in a dispute with a client. That Model Rule, however, is merely an aspirational standard promulgated by the profession’s national trade association. And while some states (e.g., Delaware) have adopted the ABA’s Rule 1.6 in toto, many important commercial states (e.g., Illinois, California) have substantially different confidentiality rules governing lawyer conduct. Two jurisdictions separated by the Hudson River highlight this disparate state of affairs.

New York’s Rule 1.6 provides that attorneys may disclose client confidences: (i) to prevent certain death or substantial bodily injury; (ii) to prevent a client crime; and (iii) to establish a defense in a controversy with a client. Interestingly (for those who favor attorney “noisy withdrawals”), lawyers may also withdraw legal opinions under limited circumstances (e.g., when they are being used to facilitate a crime or fraud). It is important to note that New York carved out financial fraud from the discretionary disclosure options; it also made no change with respect to non-disclosure of past client conduct. Finally, New York—unlike many states—has no provision for a lawyer “reporting out” of an organization if a client does not follow his or her advice (Rule 1.13).

New Jersey’s confidentiality obligations are very different. In that state, a lawyer must disclose: (i) to prevent a “criminal, illegal or fraudulent act” that will result in death or substantial bodily harm or substantial financial harm; and (ii) to prevent a “criminal, illegal or fraudulent act” that will result in a fraud on a tribunal. In addition, a lawyer may disclose (i) the foregoing categories of information to the person(s) affected by that conduct; (ii) to rectify a client’s “criminal, illegal or fraudulent act” in which the lawyer’s services were used; and (iii) to establish a claim or defense in a controversy with a client. Finally, unlike New York, “reporting out” is expressly permitted (Rule 1.13(c)).

Needless to say, given just a small sampling of these provisions, attorneys need to be aware of the varying obligations of confidentiality across the country.

Whistleblower Rights of In-House Counsel

Generally speaking, there is a three-way judicial split on the issue of lawyers bringing (and proving) wrongful discharge claims. In some states (e.g., Illinois), there is no cause of action. In other states (e.g., California), a cause of action sort of exists; the claim exists, but lawyers cannot use privileged communications to prove them. And in some courts, lawyers have been allowed to bring these claims and to violate the attorney-client privilege to prove them.

This third door/option stems from Willy v. Admin. Review Bd., 423 F. 3d 483 (5th Cir. 2005). In that case, the court ruled that one of the ABA’s 2003 changes to Rule 1.6—allowing a client to breach confidentiality not only to mount a defense in a controversy with a client, but also to bring a “claim”—permitted the whistleblowing attorney to use privileged communications to prove his claim(s). There are, at the very least, two problems with that ruling: the first is that the 5th Circuit determined that the ABA Model Rules constitute federal common law—that is clearly wrong; and the second is that the court equated the ethical duty of confidentiality with the attorney-client privilege (an evidentiary privilege owned by the client).

Notwithstanding those not insignificant problems, a few more recent states and courts (e.g., N.D. Cal., Kansas, Tennessee, Florida) have followed the Willy approach (and, of course, some states like New Jersey have added the “claim or” language to their Rule 1.6). Other jurisdictions (e.g., Kentucky, Utah, Minnesota, New York) have not allowed these claims to go forward. Obviously, the viability of attorneys seeking to bring these claims very much depends upon where you can get a jurisdictional toehold.

Corporate Miranda Warnings

Lawyers have an ethical obligation to tell individual constituents of their corporate clients that they represent the corporation, not the individual, and that what the employee discloses to the lawyer will be covered by the corporate attorney-client privilege—which means that the corporation may at some point disclose to third parties (e.g., the SEC, the DOJ) what the employee tells them. This ethical obligation is often (wrongly) described as an “Upjohn Warning” (after the leading Supreme Court case on the corporate attorney-client privilege, Upjohn v. U.S., 449 U.S. 383 (1981)); wrongly described because (i) it is an ethical obligation, not something derived from the attorney-client privilege (an evidentiary privilege owned exclusively by the client); and (ii) it is the antithesis of the Upjohn decision—there, the Court ruled that everyone in the corporation is covered by the company’s privilege; by the ethical warning, you are telling an employee that he or she may not be covered by that privilege (if the company so decides at some point).

Regardless of nomenclature, there is an important multi-jurisdictional aspect to this ethical obligation: when must the warning be given to employees? ABA Model Rule 1.13 says it must be given “When the lawyer knows...the organization’s interests are adverse…[to the employee’s].” Many states (e.g., Delaware) follow the ABA standard. But not all. New Jersey’s Rule 1.13, for example, says it must be given when the lawyer “believes” that such an explanation is “necessary to avoid misunderstanding [on the individual’s] part.” New York’s Rule 1.13, on the other hand, says it must be given “when it appears that the organization’s interests may differ…[from the employee’s].”

Obviously, there is a huge temporal gap between the ABA standard and that of New York. And how to intelligently apply New Jersey’s standard is beyond me. Defaulting to the most conservative standard (New York’s) would seem to be the safest bet by far. At the same time, lawyers need to be aware that this ethical warning tends, at a minimum, to discourage a forthcoming experience with the corporate individual being interviewed!

Document Retention/Destruction

Whether documents are retained or destroyed and how they are maintained is a minefield awaiting unwary lawyers. The number of high-profile screwups in this space (e.g., Enron/Arthur Anderson, Qualcomm’s patent dispute with Broadcom) has made this point over and over. There is also a multi-jurisdictional aspect to this.

ABA Model Rule 3.4(a) says that a lawyer should not “unlawfully alter” something that has “potential evidentiary value.” Many states (e.g., Delaware) follow the ABA standard. But not all. New York’s Rule 3.4(a), for example, says that a lawyer may not tamper with anything he or she has a “legal obligation to reveal.” And the District of Columbia’s Rule 3.4(a) says that a lawyer may not tamper with anything he or she “reasonably should know” will be relevant “in any pending or imminent proceeding.”

Of these three standards, I find the ABA/Delaware standard a bit oblique (or worse)—i.e., just what do “unlawfully” and “potential” actually mean; those words seem filled with likely pitfalls. New York’s standard seems to provide the most “wiggle room” for attorneys to exercise discretion—which may or may not be such a good thing. In my view, the D.C. standard seems like the better practice to follow, and thus most likely to protect lawyers from getting into hot water in this area.

United States v. Europe

And it is not just the differences between the various jurisdictions within the United States we need to consider. Taking well-established modes of conduct outside the country can be problematic as well. Let me highlight just two.

In America, witness preparation for testimony (“horse shedding”) is like apple pie and Mom; stated differently, to not “horse shed” a witness would (to any American lawyer worth his or her salt) be malpractice. But in England (not to mention Germany, France, Italy, etc.) “mock cross-examination or rehearsal of particular lines of question that counsel proposes to follow are not permitted,” See, e.g., R. v. Momodou and Limani [2005] EWCA Crim 177; Ultraframe (UK) Ltd. v. Fielding & Others [2005] EWHC 1638 (Ch.).

A second area where the law is very different across the Atlantic Ocean is in the protections afforded the attorney-client privilege and work product doctrines, especially in the context of corporate investigations. American lawyers familiar with the teachings of Upjohn (and who carefully follow the protocols established thereby) can expect U.S. courts in subsequent litigation to shield sensitive, confidential materials from discovery. In England, however, following such protocols has not been afforded protection under the “legal advice privilege” or the “work papers privilege.” See, e.g., RBS Rights Issue Litigation [2016] EWHC 3161 (Ch.); The Director of the Serious Fraud Office v. Evasion Natural Resources Corporation [2017] EWAC 1017 (QB). Lawyers conducting international/cross-border investigations thus need to be very careful at the outset to anticipate the disparate national treatment of their client communications and their work product.

Conclusion

The foregoing does not pretend to be an exhaustive list of multi-jurisdictional ethics issues confronting lawyers with busy and broad geographical practices. But hopefully readers get the point that it is a complex minefield out there which needs to be navigated very carefully!

For more information, check out the author’s Ethics for Corporate Lawyers: Multijurisdictional Practice and Other Current Issues 2021 program, available from PLI Programs On Demand.


C. Evan Stewart is a Partner at Cohen & Gresser LLP. His practice focuses principally on the financial services industry, where he handles litigation matters for domestic and international clients. He advises clients on a range of complex commercial matters, including antitrust, bankruptcy, class action defense, ethics, intellectual property, internal investigations, securities litigation, and tax controversies.


Also available from PLI Programs:

Ethics and Conflicts of Interest in Law Practice 2021

Active Listening is a Critical Skill for Attorneys to Ethics Game Show 2021: A Review of Ethical Issues

Professionalism in a Pandemic: Examples and Issues


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