You either die a hero or live long enough to be the villain

So this intrepid blogger is on vacation and this post and perhaps one other this week will have been pre-written and scheduled for publication.  So here’s hoping nothing has transpired in the world to make this seem tone-deaf.

Samson Habte, an excellent reporter with the ABA/BNA Lawyers’ Manual on Professional Conduct, was kind enough to speak with me and use a few quotes of mine in a well-done piece he wrote last week on the latest appellate court ruling evaluating the validity of the in-firm privilege.  This ruling is particularly important because it comes out of the New York, which was where the original case that created the fiduciary duty exception to the privilege (outside of the context of law firms) arose which then influenced that In re Sunrise case.

You can read the full article here at this link.  (The fine folks over at The Law for Lawyers Today have also written a good blogpost recently on the NY ruling here.)

I have been following this issue for many years, including dating back to when I was fortunate enough to be one of the original co-chairs of the ABA Firm Counsel Project.  One of the very first roundtable sessions that now-defunct group organized focused on the state of play of the privilege for designated in-house counsel in law firms.  Back then, in the late years of the first decade of the 2000s, we were still in the midst of a trend of bad rulings on the issue.

One of the topics of discussion that the reporter and I covered and that didn’t quite make it into the article is what we discussed right after my “wrongheaded” quote.  I am, generally speaking, a huge fan of the Association of Corporate Counsel.  That organization, the ACC, has played a very significant role in protecting the attorney-client privilege from erosion in the context of government investigations and the minefield that has been created over the years by the Department of Justice and a series of memoranda over the years that would be used as an attack on the privilege in the corporate context by laying the groundwork for a position that corporate entities in investigations needed to roll over and agree to waive the attorney-client privilege if they wanted to get any credit for cooperation.

So, to a large extent that is the context of my remarks both as to “wrongheaded”-ness and the statement about how “disappointing” it would be for the ACC to start pushing for its in-house counsel to demand in engagement agreements that law firms agree in advance to waive their right to an in-firm privilege if they want to be retained.

If the ACC follows through with that course of action, we will find ourselves in a world where one of the biggest champions of the attorney-client privilege and a stalwart defender against the powerful Justice Department over the years has now become that what it used to fight against — a powerful entity applying coercive pressure for a purpose that would only undermine the privilege.

Ironic, yes, but also a truly disappointing turn of events.

Two updates – one persuasive, one not so much

An important development for labor lawyers that I delved into a bit recently here has now been put on hold.  I managed to point out that there would be significant efforts aimed through litigation at stopping the rule from ever going into effect.  Yesterday, a Texas federal district court has stayed the Department of Labor’s new “Persuader” rule from going into effect on July 1, 2016.  You can read the full 90-page order here or, if you’d prefer the cliffnotes, this ABA Journal online piece does a fine job as always.  Beyond the substantial concerns that exist about how the rule would impact the giving of legal advice and the seeking of legal counsel by employers in connection with union organizing efforts, the crux of things boils down to whether the Department of Labor exceeded its rule-making authority.

Speaking of people who are union members, some of you will recall that I’ve managed to write twice before, using Johnny Manziel as an example, about how much better off professional athletes can be if they would retain the services of an actual lawyer to represent them because of the benefits they would obtain from the obligations lawyers have to treat all information related to the representation of their clients as confidential.  Well, that didn’t work out so well.  We learned this week that Manziel’s lawyer handling his criminal matter managed to send a rather lengthy text to the Associated Press rather than to the prosecutor with whom he was intending to communicate.  On the upside, this time the lawyer quit rather than firing Manziel as his past agents did, but I’m starting to think that Manziel is just cursed at this point.

Unfortunately, this act of preventable negligence on the part of Manziel’s lawyer will, of course, spur some folks to argue that this is further proof that lawyers should never use text messaging to talk to a client or someone else involved in a matter about a client’s matter.  Do not count me among those folks as I think such advice is entirely unrealistic in 2016.  The only lesson to be learned is the old-fashioned, but harder to swallow, advice about being careful, cautious, and deliberate in all of your communications.


The Department of Labor’s Final “Persuader” Rule – Part 2 of 2

So, yesterday, I started writing about the potential ramifications for lawyers of the adoption by the Department of Labor of its final “persuader” rule which will become effective on April 25, 2016, but will only be applicable to agreements entered into on and after July 1, 2016.  You can catch up on part 1 here.

I promised that I’d lay out my thoughts based on a full dive into the actual final rule itself to try to address whether, despite the DOL’s rhetoric, the rule really will require disclosure of information that ought to be protected by the attorney-client privilege  — so, here I go.

Having read through all (or least almost all) of the final “Persuader” rule, my “executive summary” takeaway is that the DOL sure seems to be willing to go to the wall on the idea that trying to help an employer make a more persuasive argument against the formation of an union is not “legal services.”  I happen to think that’s wrong but, I guess for the most part, that’s a policy call to be made by people who win elections.  I also think it is a position that is fundamentally in contrast to lots of other areas where conclusions are drawn that when a lawyer does certain things that aren’t the practice of law when done by nonlawyers, the lawyer is still engaged in the practice of law when doing those things.  I also think, though, as wrong as it may be, it seems to be a manageable situation and that lawyers and law firms can protect against the adverse consequences through building better (or at least more redactable agreements).  What seems to be a much worse possible outcome is the issue the DOL dodges by saying it isn’t at issue in the present rulemaking — the kinds of information that would now have to be reported on Form LM-21 that the ABA warned about a a good bit in its 2011 public comment.

There are many places in the Final Rule itself (page references below are to the Federal Register Vol 81. No. 57) that leave little room for a conclusion other than that the Department adamantly contends that “persuader activities” simply aren’t legal services and, as a result, communications about “persuader activities” aren’t entitled to be treated as advice or as privileged communications.  Stated another way, it seems the Department’s view that the only thing that a lawyer exists to do in this aspect of the labor law arena is provide advice to ensure the legality of her clients’ conduct.

In fact, the Department appears to be make this interpretative position abundantly clear in multiple places:

Agreements under which a consultant exclusively provides legal services or representation in court or in collective bargaining negotiations are not to be reported.  “Advice” does not include persuader activities, i.e. actions, conduct, or communications by a consultant on behalf of an employer that are undertaken with an object, directly or indirectly, to persuade employees concerning their rights to organize or bargain collectively.  If the consultant engages in both advice and persuader activities, however, the entire agreement or arrangement must be reported. (p. 15937)

While a lawyer who exclusively counsel an employer-client may provide examples or descriptions of statements found by the National Labor Relations Board (NLRB) to be lawful, this differs from the attorney or other consultant affirmatively drafting or otherwise providing to the employer a communication tailored to the employer’s employees and intended for distribution to them.  The latter is reportable, the former is not. (p. 15938)

A lawyer or other consultant who exclusively counsels employer representatives on what they may lawfully say to employees, ensures a client’s compliance with the law, offers guidance on employer personnel policies and best practices, or provides guidance on NLRB or National Mediation Board (NMB) practice or precedent is providing “advice.” (p. 15939)

Indeed, this rule exempts from reporting agreements involving exclusively the following activities: . . . legal services (as distinct from persuader activities undertaken by a lawyer). (p. 15952)

The reporting requirements in Form LM-20 . . . are designed to identify the specific persuader activities undertaken, not the legal advice provided.  In other words, if an employer retains a law firm with the purpose to persuade, directly or indirectly, its employees not to unionize, that retention is not privileged because it is not done with a purpose of obtaining a legal opinion, legal services, or assistance in a legal proceeding. (p. 15996)

Now, at just a common sense level, it seems implausible for anyone at all familiar with what lawyers do to say that anything other than advice isn’t legal services.   If an attorney communicating to a client about how to use more persuasive language to advance its legal rights isn’t the provision of legal services, why?  It certainly seems like legal services to me.  The conversation also presents for me another reminder about the fact that RPC 2.1 is almost never discussed when it ought to be with respect to the role lawyers play, and are supposed to play, in going beyond just giving legal advice.

I will admit that, at first blush, it was difficult for me to figure out how the Department, in requiring this Section 203(c) reporting, could just disregard the fact that Section 204 indicates that “attorney-client communications” are exempt from reporting where such communications are defined as “information which was lawfully communicated to [an] attorney by any of his clients in the course of a legitimate attorney-client relationship.”  But, having digested the whole rule, I understand that there is some mixture of interpretive history and judicial decisions lurking behind the scenes on which the Department of Labor rests its positions:

[T]he Department notes that — consistent with the interpretation that section 204 has received from the courts — it always has construed section 204 as roughly equivalent to the limited attorney-client privilege under the common law.  The Department has never embraced the view that section 204 creates a broad, separate exemption for attorneys that supplants 203(c). p. 15953

The Department’s interpretation in that respect does find support in a Sixth Circuit case, Humphreys, Hutcheson and Moseley v. Donovan, 755 F.2d 1211 (6th Cir. 1985).  Humphreys determined that Section 204 was intended to provide the same scope of protection against disclosure of information as is provided for under federal common law attorney-client privilege.  That case, and another even older case from the Fourth Circuit (Douglas v. Wirtz, 353 F.2d 30 (4th Cir. 1965)), are things the Department points to for their claim that “Congress recognized that the ordinary practice of labor law does not encompass persuader activities.” (p. 15996)

What I’m also very troubled by, and not just intellectually, but practically, is the DOL’s position that language in an attorney-client engagement agreement about the scope and nature of services provided is not protected by the attorney-client privilege.  The Department uses this position to brush aside concerns expressed in a variety of the comments it received during the public comment period about requiring the law firm’s engagement agreement with the employer client to be made public and to have to provide information through checking boxes about what activities were performed.   The Department maintains that the same Humphreys decision out of my circuit, the Sixth Circuit, supports that conclusion as well.  I’m not entirely certain that the Department isn’t stretching the language of Humphreys too far especially when it also is willing to contend, with respect to an engagement agreement that: “information that may reveal client motives regarding exclusively legal advice or representation sought would generally be redactable, but information concerning client motives related to the persuasion of employees is not privileged and would remain reportable.”  (p. 15995)

The one aspect of attorney-client confidential communications that the DOL does seem to get right is the non-absolute nature of confidentiality protection under the ethics rules where states have adopted rules similar to ABA Model Rule 1.6.  So, if the “persuader” rule adopted by the DOL ends up being treated as within its powers so as to be recognized as “other law,” then nothing about RPC 1.6 will serve to prevent reporting of the required items.  The privilege dilemma, however, will remain.

Thus, the practical takeaway for law firms worried about this issue — i.e. practicing in this sphere — would seem to be to get accustomed to either entering into two separate engagement agreements with their clients, one that would be bare-bones to cover anything that would be done that might stray into “persuader activities,” so that one is the only one that has to be attached to the Form LM-20 or (2) get very accustomed to crafting engagement letters that can be readily redacted to protect privileged communications within the text.  The final “persuader” rule, for its flaws, at least does acknowledge the ability of lawyers and law firms to redact the agreements it submits; though even on that front, there is troubling language in the rule that would appear to set up points of skirmish over the details of when that is done as well.

Given the effective dates of this, there is certainly time between now and July 1 to figure out how to do so.

Of course,  given the fact that it would appear litigation to challenge the rule is in the offing, who knows if it will ever come to pass.

“Other law” is always changing – the DOL’s new Final “Persuader” Rule – Part 1 of 2

The scope of confidentiality lawyers owe to their clients has long been a subject that I find fascinating.  Over the last few years, I’ve mulled how its broad scope will continue to play out with current and future generations of both lawyers and clients who routinely, almost even instinctively, share seemingly every detail of their lives on one online platform or another.  That general topic though of what confidentiality under the ethics rules might look like in 10 years is a discussion for another day, if ever.  The fact remains, though, that in jurisdictions pattered after the ABA Model Rules, there exists a version of Model Rule 1.6 — like Tennessee’s RPC 1.6 — that establishes an obligation of confidential treatment as to all information related to representation of a client.

The rule contemplates that anything can be disclosed provided you have the client’s express consent to do so or, alternatively, if disclosure is impliedly authorized to carry out the representation.  Beyond that, jurisdictions that hew to the ABA approach, then offer a list of circumstances in which a lawyer has discretion to make a disclosure, but isn’t obligated to do so.  Among those circumstances are instances where the lawyer reasonably believes the disclosure is necessary “to comply with other law.”  Model Rule 1.6(b)(6).

In Tennessee, we have carved out a further category of topics where a lawyer is obligated to disclose information, despite it otherwise being confidential.  For Tennessee lawyers, the comply with “other law,” exception to the duty of confidentiality is housed in that provision and, thus, is a mandatory duty of disclosure.  RPC 1.6(c)(3).

Keeping up with the vast array of ways that “other law” might appear to require lawyers to disclose information about their representation of clients can be a difficult enough task when your reason for interest is only about the exercise of a discretionary right of disclosure.  It can get significantly more stressful to keep up with developments in other law if the stakes are ratcheted up by a mandatory ethical obligation.

The “other law” aspect of the duty of confidentiality is why, for example, a client’s payment of your fee with $10,500 in cash is a development that would require a lawyer to fill out the appropriate paperwork to report that transaction to the IRS on Form 8300 because of federal law.  The fact that the fee was paid in cash on a particular date and in that amount is certainly information related to representation and, thus, confidential under RPC 1.6, but because other law requires the disclosure — the duty of confidentiality falls.  There are other existing examples, but I’ve already taken the scenic route to the actual point of today’s entry so one example will have to suffice.

Earlier this month, the U.S. Department of Labor published the final version of a long-discussed new “persuader” rule.  This issue was only on my radar screen because, at the end of an ethics seminar a few months ago, a lawyer approached me to ask if I was keeping up with the looming development and if I understood its potential for infringing on privilege and confidentiality for lawyers and law firms.  I wasn’t, and didn’t, at the time.  I am, but still not sure I do, now.

Admittedly, labor relations is not my native tongue, so a reader may lose a little something in my translation of the background leading to the adoption of the final persuader rule.  If you speak labor relations more fluently, or are interested in learning, you can read as much or as little as you’d like of the whole final rule in the Federal Register itself here.  You can also read the full versions of each of the other items I mention below if I have properly managed to include the links for each.

So, federal law, through the Labor Management Reporting and Disclosure Act of 1959 (LMRDA) has long required two sets of parallel reports that are supposed to be made in order to disclose expenditures that are made in connection, for example, with labor-organizing activities.  One report is required of labor organizations such as unions.  Another report has been required from employers when they hire a labor relations consultant to help it persuade employees about issues relating to bargaining and whether/how to organize.  Existing law provides that both direct persuader activities and indirect persuader activities are supposed to trigger such reports, but the law exempts employers from having to file a report when the purpose of hiring the consultant is just to get advice.  That exemption is set forth in Section 203 of the LMRDA.  Existing law also exempts from reporting attorney-client communications.  That exemption is set forth in Section 204 of the LMRDA.

According to the current U.S. Department of Labor, as explained in its Overview/Summary document, the Department has long been interpreting the law incorrectly to define “advice” in a fashion that extends to conduct that should be treated as “indirect persuasion,” and, thus, no reports are ever filed on the employer side other than for the hiring of consultants who have direct contact with employees.  The new persuader rule is clearly articulated by the Department of Labor as being about changing the interpretation of “advice” to limit its protective scope and cause reports to be filed regarding consultants that are helping employers craft messaging and other efforts at persuasion.

If you are following along still at this point, you will see the looming issue for lawyers and law firms retained by employers in situations involving labor organization issues.

Now, the Department of Labor, at least rhetorically, is going to great lengths to insist that the new rule it has enacted will not invade attorney-client privilege (confidentiality under the ethics rules isn’t really mentioned in the documents discussed below) and that reports won’t be required when an employer hires a lawyer or law firm just for the purpose of getting advice on complying with legal obligations.

The Department of Labor’s Overview/Summary states the Final Rule “exempts any agreement that involves only the provision of legal services” and also states that:

The Final Rule does not affect attorney-client privilege.  It only requires the disclosure of the identity of the client, the fee arrangement, and scope and nature of the persuader agreement in cases where the consultant has agreed to provide services other than legal services — specifically, to take action with intent to persuade employees regarding union representation or collective bargaining.

In the OLMS Fact Sheet regarding Employer-Consultant Agreements, discussing examples of exempt agreements, the Department explains:

As a general principle, no reporting is required for an agreement or arrangement to exclusively provide legal services.  For example, no report is required if a lawyer or other consultant revises persuasive materials, communications, or policies created by the employer in order to ensure their legality rather than enhancing persuasive effect.

In the Q&A materials put out by the Department of Labor, this point about not invading privilege is repeated:

Q.  Does this rule require disclosure of information protected by the principles of attorney-client privilege?

A.  No.  None of the information required to be reported (e.g., the identity of the parties, terms and conditions of the agreement, and specific persuader activities undertaken) is covered by the attorney-client privilege.  Privileged information is excluded from the reporting requirement by statute.

Yet, there seem to be a number of thorny interpretative questions lurking.  And, a dive into what the actual final rule says in the Federal Register leaves me pretty convinced that the DOL’s effort has blurred the issues of Section 203 and the issue of Section 204 and that its strong rhetoric about what it isn’t doing rings hollow.

I will do my best to describe my thoughts on that more fully in part 2.  So, stay tuned.