Client Conflict
In-house lawyers must clarify their roles as counsel to the entity, not its individual executives.
April 30, 2009 at 08:00 PM
8 minute read
The comments you've sent since I started writing this column confirm a common misperception among many senior corporate executives: that we act as their personal attorneys.
Our outside counsel brethren face the same challenge, and a recent Los Angeles Daily Journal story serves as a good illustration. According to the article, a federal judge in Santa Ana criticized California-based law firm Irell & Manella for “ethical failures” because it didn't explain to the chief financial officer of one of its corporate clients that a sensitive conversation it had with him would be reported to outside auditors.
Computer chip maker Broadcom's former CFO William Ruehle, one of two executives a federal grand jury indicted on securities fraud and conspiracy charges for backdating stock options, apparently thought he was speaking under attorney-client privilege because lawyers from Irell & Manella didn't tell him that they represented Broadcom as a corporate entity but not its individual executives. Ruehle had mistakenly believed that the company's external counsel, whose obligation was to Broadcom's corporate interests, was gathering information to defend him personally against shareholder lawsuits.
Irell & Manella's attorneys, whom prosecutors called to testify as witnesses against their former clients, argued that Ruehle was well aware that anything he said could be disclosed to outside parties at Broadcom's discretion. In the conclusion of a suppression hearing, a judge found that statements Ruehle made to the external lawyer could not be used by the FBI since the law firm failed to obtain informed written consent from clients with potentially adverse interests.
We need not stretch these facts too much to grasp from them the important lesson for in-house counsel who are placed in this predicament on a regular basis. Every time a constituent brings us a problem, there is a potential that we may find ourselves in the same situation as the Irell & Manella lawyers. If we do not carefully explain whose interests we represent, the executives with whom we work may mistakenly believe we are their personal attorneys, freely sharing with us information that they otherwise would not. This could interfere with managing the information in the best interests of the real client, the organization.
To avoid this situation, in-house counsel must take care to clarify their role when confronting situations where potential conflicts of interest may arise. One of the most basic tools is use of the so-called “Corporate Miranda” warnings. As investigations become formal, however, we would be well served to obtain written confirmations from the executives being interviewed. This may seem awkward at first, but it assures that you will steer clear of the very situation Irell & Menella faced.
The client identity issue has dogged many of you in different forms. For example, some readers have detailed how they have struggled in dealing with senior executives who try to enlist them to champion their own individual agendas to other groups or departments in their companies. This also reflects a basic misunderstanding of the role of the corporate counsel.
In dealing with this sticky issue, I have always believed that in-house counsel should leverage the support of their legal departments. The legal team is your affinity group, and it can serve as a “clearing house” for advice on handling complex and political situations. Perhaps your GC can manage this or you can adopt successful tactics employed by others. There is no need to handle this alone.
There are my thoughts. I invite you to share yours with me.
The comments you've sent since I started writing this column confirm a common misperception among many senior corporate executives: that we act as their personal attorneys.
Our outside counsel brethren face the same challenge, and a recent Los Angeles Daily Journal story serves as a good illustration. According to the article, a federal judge in Santa Ana criticized California-based law firm
Computer chip maker Broadcom's former CFO William Ruehle, one of two executives a federal grand jury indicted on securities fraud and conspiracy charges for backdating stock options, apparently thought he was speaking under attorney-client privilege because lawyers from
We need not stretch these facts too much to grasp from them the important lesson for in-house counsel who are placed in this predicament on a regular basis. Every time a constituent brings us a problem, there is a potential that we may find ourselves in the same situation as the
To avoid this situation, in-house counsel must take care to clarify their role when confronting situations where potential conflicts of interest may arise. One of the most basic tools is use of the so-called “Corporate Miranda” warnings. As investigations become formal, however, we would be well served to obtain written confirmations from the executives being interviewed. This may seem awkward at first, but it assures that you will steer clear of the very situation Irell & Menella faced.
The client identity issue has dogged many of you in different forms. For example, some readers have detailed how they have struggled in dealing with senior executives who try to enlist them to champion their own individual agendas to other groups or departments in their companies. This also reflects a basic misunderstanding of the role of the corporate counsel.
In dealing with this sticky issue, I have always believed that in-house counsel should leverage the support of their legal departments. The legal team is your affinity group, and it can serve as a “clearing house” for advice on handling complex and political situations. Perhaps your GC can manage this or you can adopt successful tactics employed by others. There is no need to handle this alone.
There are my thoughts. I invite you to share yours with me.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllGC Conference Takeaways: Picking AI Vendors 'a Bit of a Crap Shoot,' Beware of Internal Investigation 'Scope Creep'
8 minute readWhy ACLU's New Legal Director Says It's a 'Good Time to Take the Reins'
'Utterly Bewildering': GCs Struggle to Grasp Scattershot Nature of Law Firm Rate Hikes
Trending Stories
- 1Don’t Settle for the Minimum: Finding Constitutional Claims Closer to Home
- 2Federal Judge Weighs In on School's Discipline for 'Explicitly Copying AI-Generated Text' on Project
- 3Unchartered Waters: The AI Phishing Wave Is Here
- 4AI Poisoning: A Novel Cybersecurity Option
- 5The Expanding Universe of Attorney Cyber Liability
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250