Government Lawyers Fear Ethics LawLisa I. Fried
New York Law Journal
April 15, 1999
Despite a last-ditch effort to scuttle it, a new federal law subjecting government lawyers to the same ethical standards as other attorneys appears likely to go into effect Monday.
Corporate attorneys consider the law, 28 U.S.C. 530B, a necessary tool to keep in check overzealous prosecutors who contact employees outside the presence of counsel. They hope the new law, which requires government attorneys to follow state ethics rules and local federal court rules, will protect corporations from unnecessary liability in civil and criminal matters.
Yet officials at the U.S. Department of Justice, along with Senator Orrin Hatch, R-Utah, who have been pushing to delay or modify 530B, fear the law will impede the government's ability to investigate corporate wrongdoing, crime and fraud. They claim that by limiting the government's ex parte communications with employees, a corporation can throw up an unduly wide protective barrier that will inhibit cooperation from employees.
Meanwhile, ethics scholars and critics of the law said 530B may be challenged on constitutional grounds and prompt federal courts to re-evaluate the rules they adopt governing attorney regulation. As written, 530B requires government lawyers to follow both state ethics rules and the local rules of the federal court, but does not indicate which laws should take precedence if they conflict.
BILL DELAYED Section 503B was originally scheduled to go into effect in Oct. 19, 1998, but was delayed until April 19 to give the U.S. Senate more time to evalute it. On Jan. 19, Senator Hatch introduced an alternative law in the Senate Judiciary Committee that would require government lawyers to follow state ethics rules, except when they are inconsistent with federal rules or federal policy. It also would empower the Attorney General to set specific standards for federal prosecutorial conduct.
On March 24, the Senate subcommittee on criminal justice oversight held hearings. The next day, Senator Hatch introduced another bill that would delay implementation of 503B for another six months. To date, neither the Senate Judiciary Committe nor the full Senate had acted on either of Senator Hatch's bills. However, at press time, the senator remained hopeful that the full Senate might vote on delaying 530B, and had spoken to Senate Majority Leader Trent Lott about it, according to Jeanne Lopatto, a spokesman for the Senate Judiciary Committee.
LONGTIME OPPOSITION Corporate attorneys have long resisted attempts by government lawyers to hold ex parte conversations with employees in an effort to ferret out whistleblowers and corporate wrongdoing. Although state bar rules and the ABA's Model Rule 4.2 prohibit or restrict ex parte communications with employees, Department of Justice attorneys have argued that a federal regulation, 28 CFR 77.10., permits them to ignore such restrictions and gives them broad authority to conduct such communications.
Section 503B would invalidate this regulation, which has already been rejected by the U.S. Court of Appeals for the Eighth Circuit and many state courts. The Justice Department had hoped to codify this regulation or something resembling it into 503B.
NEW YORK LAW In New York, Discliplinary Rule DR-7-104 prevents opposing attorneys from having ex parte communications with individuals who influence litigation decisions, or those whose acts or ommissions are at issue in a lawsuit.
The ABA's Model Rule 4.2 prevents a lawyer from having ex parte contact with another person the lawyer knows to be represented by counsel unless the lawyer is authorized by law to do so. In terms of corporations, the rule prevents opposing lawyers from having ex parte communications with individuals whose acts or omissions may constitute an admission of wrongdoing on the part of the company. It also covers company managers and individuals who can impute liability to the company by their acts or omissions.
The Justice Department regulation, on the other hand, permits its attorneys to conduct ex parte communications with a company's former employees, lower and mid-level employees who do not influence a company's legal decisions, and higher level employees who waive their right to counsel.
By requiring government lawyers to comply with the same ethical standards governing other lawyers, corporations will finally get the protection they need, said corporate attorneys.
"The government wants to be governed by their own ethical network and exempt from state ethical laws," said Drew McKay, chairman of the American Corporate Counsel's National Litigation Committee and deputy general counsel of DSFX International. "The sanctity of the attorney-client privilege should not be wantonly or circumscribably dismissed because of what the Attorney General desires."
"This [new law] reaffirms the state rules," added Tad Decker, chairman of the committee of corporate general counsel for the American Bar Association's Business Section. "If someone is represented by counsel and you are the prosecutor on the other side, you are not supposed to have ex parte conversations with that person without speaking to their counsel."
The Justice Department contends that some corporate counsel improperly expand the group of employees considered to be represented persons, and that state ethics rules conflict on this point. This creates potential problems when federal prosecutors conduct multi-state investigations.
Some corporate attorneys claim that all employees, thousands of employees or even former employees are represented persons, according to Eric Holder Jr., Deputy Attorney General. By contrast, the Department of Justice regulation does not preclude its attorneys from talking to a corporate employee just because an attorney claims to represent all or a large number employees. Instead, a government attorney who is told this by counsel is permitted under the regulation to contact corporate employees and ask if they are being represented in the investigation or the proceeding.
State rules on contact vary. Some prevent only ex parte contacts with senior management. Others also prevent contact with former employees except during discovery. "Government attorneys might not even be able to speak to employees, such a whistleblowers, who want to speak to the government, who have no interest in being represented by corporate counsel," Mr. Holder told the Senate Criminal Justice Oversight Subcommittee on March 24.
He also predicted that corporate and other defense counsel will attempt to use 530B to restrict how the government gathers its evidence. State rules concerning electronic surveillance, subpoenas and grand jury practice vary widely and conflict with federal law. Defense counsel will argue state rules apply, he said.
Beyond that, prosecutors who practice across several state lines will face confusion about which state bar rules to apply to particular conduct, Mr. Holder said.
"Under current federal law, government attorneys generally comply with the rules of the court where the case is being litigated," Mr. Holder said. "Under 503B, a cautious Department attorney will have to consider how the rules of multiple jurisdictions might be applied to his or her conduct, with professional discipline as the consequence of a mistaken analysis."
While the Justice Department and corporate attorneys interpret the law to mean that state ethics rules, rather than federal law, will bind government attorneys, Senator Hatch and ethics scholars say the language in the statute is confusing on this point. Section 530B states that "an attorney for the government shall be subject to state laws and rules, and local federal court rules governing attorneys in each State."
Federal district courts take different approaches to ethics rules, they said, with some following the ABA rules, others following state rules, and still others adopting a combination of both.
Both Senator Hatch and Bruce Green, an ethics professor at Fordham University School of Law, believe that 530B will prompt federal courts to follow state ethics rules. "Should this provision take effect, Congress will have ceded the right to control conduct in the federal courts to more than 50 bar associations, at a devastating cost to federal sovereignty and the independence of the federal judiciary," Senator Hatch told the Senate Judiciary Committee.
"The federal courts may not think they have leeway to depart from the state rules," added Professor Green.
Section 530B might also prompt the federal courts to consider developing consistent federal ethics rules, said Lester Brickman, an ethics professor at Yeshiva University, Benjamin N. Cardozo School of Law. "I suspect that the federal courts may go more toward a uniform regulatory code for attorney regulation," he said. "As in most instances of complex litigation," he added, "the law of unintended circumstances will likely come into play."