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E-Discovery Ethical Conundrums (In-House Counsel Edition)

image of inhouse counsel ediscovery ethics

Although most rules of professional conduct are geared toward lawyers in private practice, they also apply to in-house counsel. This is true even when corporate counsel is acting in a non-legal role. See, e.g. Kaye v. Rosefielde, 75 A. 3d 1168 (N.J. App. 2013).


As with other aspects of a corporate counsel’s job, electronic discovery may present unique ethical challenges. As Sterling Miller, (a former GC for Sabre and Travelocity) points out in his blog Ten Things You Need to Know As In-House Counsel, “more and more, in-house counsel are under the microscope and regulators are expecting [them] to act as ‘gatekeepers’ to prevent fraud and bad acts by the company. ”


Not that e-discovery projects are rife with fraud and bad acts, but more than a few arise from government investigations and if a company is faulted for lost evidence or insufficient legal hold and collection procedures, you can bet the company attorney will have some questions to answer.


Below we take a look at a few rules of professional conduct that might apply when in-house counsel is confronted with a legal matter involving electronically stored information (ESI). The list is not exhaustive, but includes a few ethical rules that might come into play during an e-discovery or document review project. (All rules referenced in this article refer to the Model Rules of Professional Conduct).


“It Ain’t Hip to Be Square” (Rule 1.1)

Attorneys need look no further than Rule 1.1 (Attorney Competence) to find an ethical guideline implicated by the use of technology in the practice of law.


In 2012 the American Bar Association amended Comment 8 to Model Rule of Professional Conduct 1.1 to address changes in technology. The Comment now reads: “To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject.” (Emphasis added).


More than twenty-five states adopted the amended comment or otherwise require attorneys to stay abreast of changes in technology relating to law practice. As with any other rule of professional conduct, the obligation of keeping up with technology applies to in-house attorneys too.



 “This Job Would Be Great if it Weren’t for the Clients” (Rule 1.13)

One ethical concept familiar to every in-house attorney is that under Rule 1.13 (Organization as Client) an in-house attorney’s client is the organization itself. In-house attorneys know all too well that Rule 1.13 often presents tricky ethical situations, such as when an employee of the company approaches in-house counsel for legal advice.


Because the client is the company, under Rule 1.13(f), in-house attorneys are obligated to explain to employees that the attorney represents the company and not the employee if the attorney believes the company’s interest is adverse to the employee.


“Upjohn Warnings” (sometimes called “corporate Miranda warnings”) are a direct result of the concept of organization as client. Named after Upjohn Co. v. United States, 449 US 383 (1981), an Upjohn Warning is given by in-house counsel when interviewing employees during internal investigations. The warning is intended to make clear that the attorney represents the company, not the employee and the employee is free to seek his or her own counsel. Upjohn warnings are also intended to make clear to the employee that any privilege in the communications between the employee and attorney may be waived because the attorney represents the company and not the employee.


How Upjohn warnings may relate to e-discovery is through the use of data custodian interviews. Although the vast majority of custodian interviews should not implicate conflicting interests between employee and employer, custodian interviews are a form of internal investigation–an investigation into the knowledge and material an employee possesses about a legal matter.




If an employee purposely destroyed documents or ESI relating to the legal matter, a conflict between employer and employee could arise. As a result, if spoliation is suspected, it is probably best to make clear that counsel represents the company, not individual employees. In-house counsel might also need to advise the employee that the attorney cannot advise the employee about the legal ramifications to the employee arising from the evidence destruction.


In fact, even if corporate counsel does not believe that an employee’s loss of evidence places the employee’s interest adverse to the company and continues to advise the employee, counsel must proceed with caution keeping Rule 1.7 in mind. That rule prohibits lawyers from representing multiple clients with adverse interests.


A California case, Yanez v. Plummer, 221 Cal. App. 4th 180 (2013), highlights the risk of representing conflicting interests when in-house counsel tries to help both employee and employer. In that case, in-house counsel prepared and presented an employee for a deposition taken in a lawsuit over a workplace injury. The employee was the only witness to the injury and during deposition preparation, told in-house counsel that his testimony may not be favorable to the company and wondered if his (the employee’s) interest would be protected during the deposition.


At the deposition, the employee testified he did not actually see the accident causing the injury and contradicted a witness statement he gave shortly after the accident. After a disciplinary hearing over the issue, the company fired the employee who in turn sued the in-house attorney for legal malpractice. The dispute ultimately ended up before an appellate court that concluded by representing both the employee and company, the in-house attorney may have violated California’s equivalent of Rule 1.7 which could be evidence supporting a malpractice claim.



“Parents Just Don’t Understand” (Rules 1.7 and 1.13)

Another area where a conflict might arise during an e-discovery project involves parent and subsidiary companies.


Imagine a situation in which corporate counsel is an employee of the parent company but also weighs in on legal matters involving the subsidiary because it does not have its own in-house attorney. Working with both companies is permitted by Rule 1.13(g), but that rule specifically states that in-house counsel may represent companies and their “constituents” subject to conflict of interest rules.


Imagine further both parent and subsidiary are hit with a document subpoena. Management for the parent believes certain documents and ESI should be produced in response to the subpoena, but management for the subsidiary does not. This might present a conflict of interest for in-house counsel that warrants independent counsel for the subsidiary.



“He Who Represents Himself Has a Fool for a Client” Rule 4.3

Assume another subpoena situation: A company and one of its vendors are subpoenaed. The vendor has no attorney and reaches out to company’s corporate counsel to discuss the subpoena. It is clear that the vendor does not understand the legal obligations of a subpoena and counsel believes the vendor and company may become adverse based on information revealed in response to the subpoena.


In this situation, Rule 4.3 (“Dealing with an Unrepresented Person”) may apply. That rule makes clear that if a lawyer “reasonably should know” an unrepresented person misunderstands the lawyer’s role, and the unrepresented person may have adverse interests to the lawyer’s client, the lawyer must take reasonable steps to clear up the confusion and may not offer the vendor legal advice other than suggesting he get his own attorney.


Similarly, under Rule 4.2, if the vendor has an attorney and counsel for the company knows it, they should not communicate with the vendor about the subpoena.


“Let me Talk to a Manager.” Rule 1.13(b)(Going Up the Ladder)

Because the client is the company itself, under Rule 1.13(b), in-house counsel is obligated to go “up the ladder” to report wrongdoing to company leadership or management if it is in the best interest of the company to do so.


The obligation to go “up the ladder” brings to mind spoliation of electronic evidence. Specifically, what if an attorney becomes aware that a certain manager ordered the destruction of electronically stored information (ESI), after learning about a looming legal entanglement for the company. Would in-house counsel have an obligation to report the spoliation to higher levels?


Managerial sanctioned spoliation is not a hypothetical. In fact, Volkswagen found itself embroiled in litigation after an employee alleged he was fired because he reported mass data deletion to his superiors in the wake of a government investigation.


A related concept to the Rule 1.13(b) obligation to report wrongdoing to company management is found in the Rule 1.6(b) “crime fraud” exception to the attorney client privilege. Every attorney understands the obligation to keep client information confidential, but exceptions to this rule exist, including situations involving the use of legal services to harm the financial interests of another. In that situation, lawyers may disclose confidential information to prevent or rectify the harm caused by the client.


An example of how the “crime fraud” exception to attorney client privilege might apply in electronic discovery may be found in Micron Technology, Inc. v. Rambus Inc., 645 F. 3d 1311 (Fed. Cir. 2011), in which the court held that communications between attorney and client were unprivileged because they discussed evidence spoliation that included destruction of email messages.


“They Were Asking for it!” (or “hit ’em with a document dump”) Rule 4.4(a)

Rule 4.4, “Respect for Rights of Third Parties” may also have implications for in-house counsel responsible for e-discovery projects.


Rule 4.4(a) cautions lawyers not to “use means that have no substantial purpose other than to embarrass, delay, or burden a third person, or use methods of obtaining evidence that violate the legal rights of such a person.”


This rule may apply if a “document dump” on an adversary is considered as a litigation strategy. The language of Rule 4.4 might be interpreted to discourage the use of discovery to drive up litigation costs or burden an opponent. The spirit of Rule 4.4 goes hand in hand with the concept of e-discovery proportionality and changes to rules of civil procedure requiring discovery to not only be proportionate but actually relate to a claim or defense in a legal matter.



“How’d That Get Here?” Rule 4.4(b)

As noted, most rules of professional conduct are written with outside counsel in mind and many may not directly relate to the day-to-day work of in-house lawyers. However, Rule 4.4(b) is equally applicable in both corporate legal suites and law firms. In fact, in certain circumstances, Rule 4.4(b) may have even more significant application to corporate counsel.


Rule 4.4(b) states that a “lawyer who receives a document or electronically stored information relating to the representation of the lawyer’s client and knows or reasonably should know that [it] was inadvertently sent shall promptly notify the sender.”


Most lawyers in private practice have probably received a document from opposing counsel they should not have–like the attorney client communication that slips through the cracks in a document production. These documents may or may not be that interesting to the receiving attorney.


But consider the situation in which corporate counsel inadvertently receives confidential or privileged business information relating to a legal matter. Inadvertently sent business information may have significant commercial value or contain proprietary information apart from any legal significance. This is important because in-house counsel not only serves a legal role, they also serve business purposes too.


To protect against instances in which information is inadvertently sent to a legal foe, in-house counsel should encourage their outside law firms to utilize clawback agreements. Clawback agreements permit parties to “claw back” attorney work product or attorney-client privileged information that is produced during discovery in litigation.


“Who’s In Charge Around Here?” Rule 5.1 & 5.3

Handling electronic discovery can get complicated and expensive. As a result, corporate counsel may need the assistance of other company lawyers, paralegals and e-discovery vendors. Delegation of work implicates Rules 5.1 (Supervisory Lawyer) and 5.3 (Non-Lawyer Assistance). These rules apply to lawyers in their roles as supervisors over both lawyer and non-lawyer assistants. Under the rules, the supervising lawyer is obligated to ensure those working on their cases comply with rules of professional conduct–including making sure e-discovery tasks are handled competently (i.e. properly).


However, that does not mean counsel must supervise every minute detail of the delegated work, nor that they become legal technology experts. In fact, most interpretations of Rule 1.1 (Duty of Competence) permit lawyers to enlist and rely on the help of e-discovery practitioners and experts to assist with technical aspects of the project.


In the end, the best interests of the client (i.e. company) dictate many of the ethical obligations in-house attorneys must follow. The list of ethical rules above is not exhaustive and just a few situations in which e-discovery may implicate rules of professional conduct for in-house attorneys.


Posted on January 9, 2017 in E-Discovery, Electronically Stored Information (ESI), Ethics and Rules of Professional Conduct

About the Author

Chad Main is an attorney and the founder of Percipient. Prior to founding Percipient, Chad worked as a litigator in Los Angeles and Chicago. He is a member of the Seventh Circuit Electronic Discovery Pilot Program Committee and may be reached at cmain@percipient.co.
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