In-House Lawyers Facing Attacks From All Sides

Every year I look forward to the return of baseball – perhaps because baseball is such a hallowed national tradition or perhaps because it’s a harbinger of spring.

But I think I like it most because it’s one of the few remaining places where if you bat a lifetime average of .333 you will likely go to the Hall of Fame.

In law, and in particular, in today’s hyper-prosecutorial legal environment, if you bat .333, you aren’t going to the Hall of Fame . . . you’re going to jail.

Corporate counsel and their conduct are in the cross-hairs of the Securities and Exchange Commission, the Department of Justice, and state prosecutors conducting investigations. Increasingly, we are no longer just the legal advisors and counselors for our clients, but the shoulders on which many constituencies wish to rest responsibility for everything – from corporate compliance to board governance to a more ethical workplace. (For more insight on what is expected, see Stephen Cutler’s – Director of Enforcement for the SEC – comments in a speech made late last year at http://www.sec.gov/ news/speech/spch092004smc.htm.)

In order to fulfill these expectations (and avoid personal liability for corporate misconduct), in-house counsel need to pay closer “20/20 hindsight” attention to the daily details of their non-legal managers’ work responsibilities. But they also need to stay on top of and respond to the changing tides of corporate legal practice issues that are re-shaping the future provision of corporate legal services.

When corporate lawyers ignore their collective responsibility to insure that the legal system and the profession’s rules continue to operate on a playing field that is at least somewhat level, they are not serving their clients well.

We all know that some in-house lawyers seem to be able to see around corners – or in the terms of my analogy above, to bat .999. Since I work closely with so many corporate counsel, I make it a habit to collect the insights of the top practitioners whenever possible.

Here are a few of the trends I hear some of the current and future “hall of famers” regularly identify as important for those who want to think ahead to understand, and, when possible, impact the future provision of legal services in the in-house context.

Eroding Attorney-Client Privilege

Some say the attorney-client privilege is already dead. This view is especially prevalent amongst those who work in the financial services industries since they’re used to “waiving” to regulators and examiners. Those who share that perspective suggest that others at the bar who are worried should relax because many clients already have no realistic expectation of the privilege’s protections, and it’s been no big deal.

But the vast majority of corporate counsel working in other industries (and certainly some segment of the financial services community) are very concerned about what they perceive as increasing attacks on the application of the privilege in the corporate context, and the resulting impact that may have on corporate compliance initiatives.

Attacks on the privilege take place in the criminal investigation context (both from the DOJ and state prosecutors), from federal agency regulators (such as the SEC, IRS, DOL, etc.), and probably in largest part from the other side in civil litigation.

In the criminal context, the Thompson Memo (and its predecessor, the Holder Memo) is particularly heinous. These memos outline the DOJ’s policy determination of the factors prosecutors should consider when charging corporations. They suggest that prosecutors can demand that companies waive the privilege if they wish to be accorded the benefits offered those who “cooperate” with the government.

To complete the double-punch, companies charged criminally have the waiver provisions of the amended Federal Sentencing Guidelines to contend which, which also put into prosecutors’ hands the power to demand that companies waive their privileges if they wish to be considered for a “downward departure” in sentencing (and thus, at the time of plea negotiation).

The Thompson Memo is online at: http:// www.usdoj.gov/dag/cftf/corporate _guidelines.htm. The ACC recently developed an overview of the issues raised by the Sentencing Guidelines at: http://www.acca.com /protected/article/attyclient/sentencing.pdf.

It is outrageous and totally contrary to the rules of our criminal justice system that the privilege has become a bargaining chip prosecutors have the power to play.

The privilege and work product protections are the cornerstone of client relationships and serve an important role in both our adversarial system (affording defendants the right to consult with a lawyer confidentially) and also in encouraging clients in their daily work to feel free to bring sensitive matters to the attention and consultation of a lawyer’s counsel.

If you would like to read more about what the DOJ thinks about the merits of protecting (or not) the privilege in the corporate context, I highly recommend that you read an article by DOJ lawyer Mary Beth Buchanan which appeared recently in the Wake Forest Law Review. You can find the article at http://www.law.wfu.edu/prebuilt/Buchanan-final.pdf.

Ms. Buchanan is the director of the Executive Office of US Attorneys, a position to which she was appointed by then-Attorney General John Ashcroft.

One of the greatest problems in privilege protection is that those whose privilege rights are attacked usually find themselves faced with a Hobson’s Choice: they are placed in what’s referred to as the prisoner’s dilemma (meaning it’s hard to fight for larger principles when the immediate result would entail your client’s likely demise – you’ll always buckle to the prosecutor – and plead out, rollover, and waive). ACC and a number of other organizations are taking on the Department of Justice, the Sentencing Commission and others who would challenge corporate clients’ privilege rights. Watch our homepage at acca.com for updates, and feel free to weigh in my contacting me with your interest.

e-Discovery And Related Reforms Of The Federal Rules

It seems that a number of evidentiary and civil procedure reforms are underway by federal courts study commissions. You should be watching them and raising your voice to demand reforms where necessary and decry changes that will adversely impact your clients.

It’s far too rare that the in-house bar is heard in these comment processes, and that’s a shame since so many clients are very concerned by what they find as the norm when they get to court.

The ACC recently adopted a policy on proposed reforms to the rules of e-discovery, and we delivered testimony before the federal courts’ committee hearing comments in March. Our comments are online at http://www.acca.com/public/accapolicy/ediscovery.pdf. Our testimony is online at http://www.acca.com/public/comments/testimony.pdf.

References for contact information on the courts are available if you wish to submit comments as well. Most corporate counsel and clients agree, regardless of whether they are plaintiff or defendant in civil litigation, that the rules of e-discovery need fixing and are a primary problem plaguing clients and the efficient and fair administration of the civil justice system.

Cross-Border Practice Issues

Who can (or more aptly, who cannot) represent the company as its business expands to include operations and customers and suppliers in hundreds of jurisdictions? While the states have been slowly working their way through multijurisdictional practice (MJP) reforms that the ACC has fought for years to implement, and while these reforms are welcome, they are only the tip of the “cross-border practice” iceberg.

Yes, we need to figure out how lawyers from Pennsylvania and New Jersey can work as needed in each other’s jurisdictions, but it’s amazing that such accommodations are deemed so difficult to make in a country in which the practice of law is relatively uniform, the laws are relatively similar from state to state, and we are all part of a relatively homogenous legal system.

This inter-state tempest of reform angst ignores the larger issues looming, namely, the increasingly international focus and global practice concerns of corporate and even individual clients.

Today’s businessperson assumes that their lawyers can easily figure out how to advise them on both Pennsylvania and New Jersey law. It’s how their company can navigate the business and legal challenges of doing business in the Czech Republic or Vietnam that concerns them.

And yet, we’re allowing bar authorities in the states to make it hard for our clients to hire a national expert in employment law or the internationally renowned IP specialist in their field of work. For more information on MJP, you can visit ACC’s website at http://www.acca.com/practice/mjp.php, or the American Bar Association’s site on its MJP Commission at http://www.abanet.org/cpr/mjphome.html.

The Future Regulation Of Lawyer Conduct?

Who will dictate future standards for appropriate attorney conduct? Congress? States? Governmental agencies? Bars? Courts? Shareholders? Institutional investors?

Who is the master of the in-house lawyer’s conduct and who controls where that lawyer’s loyalties must lie? The standard lines uttered in every in-house ethics CLE course – “Who is the client? Why the entity, of course!” – are completely unhelpful in providing any real guidance.

Since the entity doesn’t really exist except as a legal fiction, virtually any faction of stakeholders can fashion an argument that suggests that their interests are indeed the entity’s. And probably the most astute and experienced guides on this difficult path of identifying the client’s real interests are in-house lawyers themselves. Accordingly, we plan to make sure that we step up to the plate on behalf of the profession to make your voices heard as important decisions are made about whom you represent, usually with 20/20 hindsight.

Given that the issues surrounding this professional quicksand will not soon disappear from the radar of regulators, corporate lawyers need to be diligent as watchdogs in participating in the development of the legal environment in which we all work.

Without your input and your voices guiding the issues, corporate clients will not be well served. Indeed, it should not be for others to make crucial decisions about the function, role, responsibilities and professional status of corporate counsel.

If you have questions or concerns that I can address as the ACC pursues these and other issues on your behalf, please feel free to contact me at [email protected].