10/6/2017 ETHICAL DILEMMAS FACING IN-HOUSE COUNSEL 2017 Transportation Law Institute – Norfolk, Virginia Outline ◦ Key ABA Rules for in-house counsel: ◦ 1.1 Competence ◦ 1.6 Confidentiality of Information ◦ 1.7 Conflict of Interest ◦ 1.13 Organization as Client ◦ 4.1 Truthfulness in Statements to Others ◦ 4.2 Communication with Person Represented by Counsel ◦ 4.3 Dealing with Unrepresented Person 1.1 Competence ◦ Maintain competence of developments in the law. For in-house counsel with a general practice, this can be a daunting requirement. ◦ Use CLE to your advantage. Take specific courses that will align your knowledge with the business needs of your company. ◦ Understanding e-Discovery and litigation holds, given how quickly business relationships can deteriorate. ◦ Focusing on business ethics and compliance. When was your company’s code of conduct last updated/reviewed/acknowledged by employees? ◦ Adopting legal technology and tools to aid in legal research/legal department management. ◦ Examples: matter management, document management, litigation hold, e-billing, e-discovery, compliance and ethics, contract lifecycle management. ◦ Business leadership expects in-house lawyers to know how to do everything. 1
10/6/2017 1.6 Confidentiality of Information ◦ Confidentiality is broader than attorney-client privilege. Encompasses virtually everything you learn during representation of the client. ◦ Attorney-client privilege may apply outside of the United States, so become familiar with the rules of each international jurisdiction where your company operates. ◦ Be mindful of telephone calls or conversations in public where others might be within earshot. ◦ Duty to preserve client files and documents. One method is email and hard drive backup. Check with your IT department to determine the best strategy. ◦ Password protect laptops, phones, tablets, etc. with a strong password containing letters, numbers, and symbols. 12 Most Common Passwords in 2016 1. 123456 7. 1234567 2. 123456789 8. password 3. qwerty 9. 123123 4. 12345678 10. 987654321 5. 111111 11. qwertyuiop 6. 1234567890 12. mynoob Confidentiality ◦ Confidentiality applies to social media use. General considerations: ◦ Don’t post something embarrassing to yourself or the company. ◦ Don’t comment on pending litigation or other legal matters involving the company. ◦ Don’t disparage opposing counsel or the judge in any legal matter. ◦ Don’t share confidential or privileged information. ◦ Lawyers have been sanctioned and even terminated for misuse of social media. While the majority of examples involves outside counsel, the principles apply to in-house counsel as well. ◦ In-house counsel should also be aware of social media use by employees or executives that could place the company in hot water. ◦ Get involved in developing corporate social media policies and crisis response plans, to ensure alignment with other company policies. ◦ Build confidence in the company’s plan by participating in crisis simulation trainings. ◦ Work collaboratively with existing crisis teams to update protocols, review response plans and remain vigilant. 2
10/6/2017 Scenario 1 ◦ Adam is the lead M&A attorney at Widgets “R” Us. Widgets is in the due diligence phase of its acquisition of a competitor, Doohickeys, Etc. Nothing has been publicly announced regarding this proposed transaction. ◦ Adam travels to Doohickeys’ headquarters to continue the M&A discussions. He can’t believe the incredible size of the saltwater shark tank in Doohickeys’ lobby area, so he snaps a picture and posts it on Facebook. The Doohickeys logo on the wall adjacent to the tank is visible in his picture. ◦ Has Adam breached his duty of confidentiality? ◦ What if Adam’s post is seen by an investor who promptly purchases $10,000 in Widgets stock? ◦ What if the stock skyrockets upon announcement of the acquisition and is now worth $100,000? ◦ Does it make a difference if the acquisition had already been announced before the post? ◦ Would it make a difference if his Facebook profile is private? ◦ Would it make a difference if he tweeted the photo or posted it on Instagram? ◦ What if he deletes the post? Scenario 2 Your IT department is currently developing an IT solution. Vendor 1 has a longstanding relationship with your company and the IT department uses its technology extensively. The company maintains a valid Non- Disclosure Agreement (“NDA”) with Vendor 1. However, Vendor 1 is not involved in this project. The company also has a valid NDA with Vendor 2, the company engaged in developing the IT solution. Michael, a low level IT employee, calls Vendor 1 to ask for certain technical documents. When asked why he needs them, Michael says “to provide to Vendor 2.” Vendor 1 refuses. In an effort to be helpful, Michael downloads the technical documents from Vendor 1’s customer portal and emails them to Vendor 2. As a result, Vendor 2 will be able to reverse engineer the code belonging to Vendor 1, which it would otherwise have to develop on its own. Vendor 1 sends a letter to the CIO to inquire as to why Michael asked to send documents to Vendor 2. The CIO forwards the letter to you, which is (of course) the first you’ve heard of this situation. How do you reply? Does it make a difference if one or more of the documents is marked as “Confidential?” Does it change your analysis if a valid NDA exists between Vendors 1 and 2? Rule 1.6 Confidentiality Of Information (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by paragraph (b). (b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: (1) to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services; 3
10/6/2017 1.7 Conflicts of Interest ◦ Client conflicts ◦ Hiring outside counsel ◦ Any preexisting relationship with a Director, executive, or other employee? ◦ Is waiver possible or necessary? ◦ Hiring in-house counsel: find out if a potential candidate has relationships with any current defendants in litigation and screen them from the discussions or actions related to the case. Failure to do so could result in the entire in-house department being disqualified. ◦ Joint ventures: working with multiple parties, how should information be shared? Could one party to the venture profit from information belonging to another party to the venture? Conflicts of Interest ◦ Conflicts of Interest (usually internal) ◦ Board of Directors ◦ Executives ◦ Employees ◦ Considerations: ◦ What if a Director or the CEO is the controlling shareholder of your company? How can in-house counsel ensure that the Director or CEO acts in the best interests of the company and not just in his or her personal interests? ◦ What if an employee wants to start a consulting business (while remaining employed) utilizing the skills, experiences, and methods developed while at the company? ◦ Does your company have a policy regarding conflicts? Become familiar with the policy and follow its terms if you spot a conflict. Scenario 3 ◦ Corinne, the Director of Marketing at your company, has been using numerous freelancers to complete certain graphics and advertising projects. She assigned these projects without conducting a request for proposal, which means you don’t know if your company is receiving the best quality work at a competitive price. Other stakeholders complain that Corinne is not following the procurement process. ◦ The quality of submitted freelance projects is mediocre. When stakeholders complain about the quality of the work product, Corinne hires a big gun advertising firm to redo the project with superior quality, but at a higher price. ◦ When you dig deeper into these freelancers, you discover that they are Corinne’s friends and family members. Moreover, Corinne has provided a testimonial on one freelancer website and the freelancer has provided a recommendation of Corinne on LinkedIn. ◦ Is this a conflict of interest? As counsel for the company, how do you address the situation? 4
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