In-House Lawyer’s Professional Duties vs. Rights as an Employee
Joseph J. Ortego
New York, NY / Long Island, NY
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Failure to Speak Up and Report
Mintz, Accounting and Auditing Enforcement Act Release No. 2925, 2009 WL 167022 (January 26, 2009).
- Jordan Mintz – Former VP/General Counsel, Enron
- Rex Ryan, Former VP/Associate General Counsel, Enron
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Failure to Report Leads to Punishment
Lubben, Exchange Act Release No. 2939, 2009 WL 413558 (February 19, 2009).
- David Lubben – General Counsel, United Healthcare Group
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Lawyer – Gate Keeper Must Speak Up
Stephen M. Cutler, Former Director of SECDivision of Enforcement [2001-2005]
“[T]oo many examples of lawyers who twisted themselves into pretzels to accommodate the
wishes of company management . . .”
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Lawyers Owe a Duty to Speak Up for Others
Former SEC Chairman Christopher Cox March 8, 2007 [2005-2009]
“. . . [I]n the securities realm, lawyers are what today we call crucial gatekeepers responsible for safeguarding
shareholders’ interests…”
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Lawyers Owe a Duty to Speak Up for Others, cont’d
Former SEC Chairman Christopher Cox March 8, 2007 [2005-2009]
“…The misconduct in these cases, which requires certain access to records, as well as authority to
grant options, raises the question – where were the lawyers?...”
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Tell All, or Put Up and Shut Up?A Lawyer’s Code
• Former Code of Professional Responsibility Rules:
› DR 4-101: Preservation of Confidences and Secrets of a Client.
› DR 5-108: Conflict of Interest - Former Client.
› DR 5-109: Organization as a Client
• New Rules of Professional Conduct:
› Rule 1.6: Confidentiality of Information
› Rule 1.9: Duties to Former Clients
› Rule 1.13: Organization as a Client
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The Client’s Confidentiality
Old DR 4-101Preservation of Confidences
and Secrets of a Client
New RULE 1.6Confidentiality of Information
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Duties to Former Clients
Old DR 5-108
Conflict of Interest - Former Client
New RULE 1.9
Duties to Former Clients
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Who is the Client?
Old DR. 5- 109Organization as a Client
New RULE 1.13 Organization as a Client
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Cashing In….
US ex rel. FLPA v. Quest Diagnostics, 2011 U.S. Dist. LEXIS 37014 (S.D.N.Y. Mar. 24, 2011) (Robert P. Patterson, U.S.D.J.)
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The Facts
• The Court first stated that the FCA does not preempt state ethical rules and held that DR 5-108(A) precluded Bibi’s participation as a relator.
• After analyzing Bibi’s conduct under DR 4-101 (“future crime” exception), the Court concluded that while Bibi may have reasonably believed in 2005 that Defendants had this intention, his disclosure went beyond the scope of the exception.
• Accordingly, the district court held that: – dismissing against Bibi alone was insufficient; and
– dismissing Unilab as a defendant was insufficient.
US ex rel. FLPA v. Quest Diagnostics, cont’d
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Where is the Line?
• NY Rules of Professional Conduct permit in-house counsel to disclose client confidences in very few circumstances.
• Given Rule 1.6’s stringent restriction on disclosure of client confidences, think long and very hard before attempting to cash in on client misconduct.
• If an attorney strays too far, his/her conduct could be punishable.
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Can Ms. GC Reveal Confidences When She Personally Benefits?
Hypothetical
• Former General Counsel (Ms. GC) commences an action against her former employer (ABC), asserting three causes of action:
1. violation of an internal whistleblower policy;
2. claim of sex discrimination; and
3. claim for an ERISA violation based upon ABC’s alleged imprudent treatment of investments.
• All of these claims were only asserted well after Ms. GC’s termination.