In-House Lawyer’s Professional
Duties vs. Rights as an
Employee
Joseph J. Ortego
New York, NY / Long Island, NY
Tough Times for In-House Lawyers
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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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Backdating Options
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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 SEC
Division 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
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• 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
The Client’s Confidentiality
Old DR 4-101
Preservation of Confidences
and Secrets of a Client
New RULE 1.6
Confidentiality of Information
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Duties to Former Clients
Old DR 5-108
New RULE 1.9
Conflict of Interest - Former Client
Duties to Former Clients
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Who is the Client?
Old DR. 5- 109
Organization 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.
cont’d
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US ex rel. FLPA v. Quest Diagnostics,
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.
•
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All of these claims were only asserted well after Ms. GC’s
termination.
Conclusion
Stay Ethical!
Follow your Heart and
Conscious – Never Your
Pockets
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