Source: https://fkks.com/news/tinker-tailor-lawyer-p.i.-are-your-workplace-investigations-complying-with
Timestamp: 2020-05-25 05:09:41
Document Index: 175357428

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Tinker, Tailor, Lawyer, P.I.: Are Your Workplace Investigations Complying with the Law? — Frankfurt Kurnit Klein & Selz
The recent high-profile trial in Ellen Pao vs. Kleiner Perkins [No. CGC-12-520719 (S.F. Cty. Super. Ct. filed 5/10/2012)], in which Pao unsuccessfully sued her employer, venture capital firm Kleiner Perkins, for gender discrimination and other claims, highlights the increasingly important role of attorneys who are retained by organizations to conduct impartial investigations of alleged workplace discrimination, retaliation, and harassment. Though not as widely covered by the mainstream media as other aspects of the case, the trial included crucial testimony from an attorney whom Kleiner Perkins had retained to independently investigate Ms. Pao’s complaints, as well as from opposing experts who testified with respect to the adequacy of that attorney’s investigation.
Many lawyers who perform such workplace investigations — in Silicon Valley and beyond —face confusion about their proper role and the ethical duties that govern them. In conducting such investigations, are they acting as attorneys? If so, how can they be impartial? And if not, in what capacity do they act? Moreover, increasingly, these questions are finding their way into court cases and judicial and administrative decisions. For example, at trial, the judge in Pao asked the employer’s expert whether the employer’s attorney investigator possessed authority under state law, absent a private investigator’s license, to conduct the type of workplace investigation he did.
Faced with such riddles, lawyers who conduct workplace investigations have taken different tacks. While some conduct investigations in their capacity “as attorneys,” many do not. Of those who do not, some structure their investigative engagements ambiguously, leaving it unclear whether they are acting as attorneys or not, while still others explicitly state in their engagement agreements that they are not acting as attorneys. Although not licensed private investigators, these attorneys insist they are not performing legal services in connection with the investigation. They contend that eschewing an attorney-client relationship and the responsibility to advocate for a particular client is the only way to ensure their investigation is truly impartial. They further contend that, since they are not acting as attorneys, the full range of attorney ethics rules do not apply to their investigative work.
In this article, we will show that this approach, when applied to workplace investigations in New York, violates New York’s statutory scheme, which allows attorneys to conduct workplace investigations without a private investigator’s license only if they are acting “in the regular practice of their profession.” Moreover, this approach misperceives the flexibility built into New York’s Rules of Professional Conduct (RPCs), particularly RPCs 1.2(c) and 2.3, which allow lawyers to limit their roles to purely impartial investigative functions. Finally, it ignores that while the RPCs do place strictures on what attorneys can do in investigations, they also provide advantages that non-attorney investigators do not have — most notably, the attorney-client privilege and work product protection.
New York Private Investigator Licensure Requirement & Attorney Exemption
New York, like most other states, requires private investigators to be licensed. Under New York General Business Law §70(2) (N.Y. GBL) [McKinney 2011], no person or entity “shall engage in the business of private investigator…without having first obtained from the department of state a license so to do.” N.Y. GBL §83, however, specifically exempts practicing attorneys from the licensure requirement, providing that “[nothing] contained in this article shall be construed to affect in any way attorneys or counselors at law in the regular practice of their profession” Similar exemptions exist in many other states.
Attorney Investigations Fall Within Scope of ‘Private Investigation’
N.Y. GBL §83 implicitly recognizes that lawyers’ activities often encompass “private investigation,” as defined by New York law. This is particularly true of attorneys who conduct workplace investigations, which typically include gathering and review of documents, interviews of witnesses, and summarizing the available facts to
determine if improper acts or omissions occurred. N.Y. GBL §71(1) defines “private investigator” broadly enough to encompass these activities, as it includes persons who investigate “the identity, habits, [and] conduct … of any person, group of persons, … firm or corporation,” “the credibility of witnesses or other persons,” and “the conduct, honesty, efficiency, loyalty or activities of employees, agents, contractors, and sub-contractors.” The definition also includes “the securing of evidence to be used before any authorized investigating committee, board of award, board of arbitration, or in the trial of civil or criminal cases.” [See Id.] In short, New York’s definition of “private investigation” encompasses the sort of factual inquiry often performed by attorneys.
This conclusion is confirmed by Megibow 397-DOS-13 (2011), a recent New York Department of State decision granting a former attorney’s application for a private investigator’s license. Under N.Y. GBL §72 there are certain experience requirements which private investigator applicants must meet in order to obtain a license:
Every such applicant for a license as private investigator shall establish to the satisfaction of the secretary of state…[that s/he] has been regularly employed, for a period of not less than three years, undertaking such investigations as those described as performed by a private investigator in N.Y. Gen. Bus. Law §71(1) (McKinney 2011), as a sheriff, police officer in a city or county police department, or the division of state police, investigator in an agency of the state, county, or United States government, or employee of a licensed private investigator, or has had an equivalent position and experience.” (Emphasis added.)
A regulation, 19 NYCRR §172.1, sets forth what constitutes “an equivalent position and experience” for purpose of N.Y. GBL §72 listing investigations largely corresponding to those found in N.Y. GBL §71(1), and requiring that “such investigations were conducted on a full-time basis in a position the primary duties of which were to conduct investigations.”
In 2011, Steven Megibow, an attorney licensed to practice in New York, applied for a private investigator’s license on the basis of his experience working in a non-legal capacity at two private investigation firms. His application was denied because he had only 30 months of creditable investigation experience at those firms, rather than the required 36 months. [507-DOS-11 at 1.] Megibow argued that he should also be credited for one year of “full-time investigations experience” from his previous employment as an associate at the law firm Kramer Levin Naftalis & Frankel LLP (Kramer Levin). At a hearing, testimony was presented that Kramer Levin had been retained by a publicly traded company’s Audit Committee to conduct an internal investigation into potential financial and accounting misfeasance at the company. Megibow worked full-time as a junior associate on the matter, with duties including “reviewing and analyzing documents acquired from the subject; evaluating evidence; preparing investigative outlines and issues to be discussed; interviews of witnesses; identifying witnesses to be interviewed; [and] conducting interviews.” [Id. at 7.] Kramer Levin’s role was purely investigatory; the company had separate litigation and general corporate counsel. [Id.at 8.] Relying on these facts, the Administrative Law Judge held that Megibow’s time at Kramer Levin constituted “creditable experience to be granted a license as a private investigator,” such that his six-month experience deficiency was cured. [397-DOS-13 at 2.]
The definition of “private investigator” in N.Y. GBL §71(1) and Megibow thus demonstrate the overlap between the work of an attorney and work that constitutes “private investigation” under New York law. N.Y. GBL §83 thus serves the important function of exempting “attorneys or counselors at law in the regular practice of their profession” from the need to obtain a separate private investigator’s license.
‘Factual’ Investigations By Attorneys Constitute ‘Regular Practice of Their Profession’
Still, the question remains whether workplace investigations by attorneys constitute “the regular practice of the [legal] profession” under N.Y. GBL §83. While no New York court has squarely addressed that question, the Court of Appeals has held that materials generated by a law firm during its conduct of an internal investigation are protected by the attorney-client privilege. In Spectrum Systems Intern. Corp. v. Chemical Bank [78 N.Y.2d 371 (1991)], the Court held that the privilege applied to the report of plaintiff’s outside counsel of an internal investigation into possible fraud involving the defendant. The Court acknowledged the “conceded investigative function” of outside counsel and that their final report “did not focus on any imminent litigation,” “reflected no legal research,” and “was inconclusive, looking toward further discussion.” [See id. at 378–81.] Nevertheless, it held that the material was “primarily and predominantly of a legal character” because it “relate[d] and integrate[d] the facts with the law firm’s assessment of the client’s legal position.” [Id. at 380.]
Although Spectrum Systems involved application of the attorney-client privilege rather than N.Y. GBL §83, it suggests that investigative work by attorney’s, even if preliminary and mainly factual, constitutes the “regular practice of their profession” under N.Y. GBL §83, regardless of whether the assessment involves legal research or comes to an ultimate legal conclusion. This should come as welcome news for workplace investigators in New York, who typically provide factual findings, or findings on whether the employer’s policy was violated, but do not typically render “legal advice” as that term is commonly understood, for example, advising the employer on legal steps to take based on the investigation. (That function is usually performed by the organization’s regular outside or in-house counsel.)
Under the analysis in Spectrum Systems [78 N.Y.2d at 378–79], as well as that of a growing number of federal courts, the sort of factual investigations commonly performed by these attorneys would fall within the protection of N.Y. GBL §83. [See, e.g., Gruss v. Zwirn [276 F.R.D. 115, 122–27 (S.D.N.Y. 2011)], “[i]nterviews of a corporation’s employees by its attorneys as part of an internal investigation into wrongdoing and potentially illegal conduct have been repeatedly found to be protected by the attorney-client privilege.” (applying New York law); revd. on other grounds, 2013 WL 3481350 (S.D.N.Y. 7/10/2013); see also, Sandra T.E. v. S. Berwyn Sch. Dist. 100 [600 F.3d 612, 620 (7th Cir. 2010)], “[W]hen an attorney conducts a factual investigation in connection with the provision of legal services…communications in the course of the investigation are fully protected by the attorney-client privilege.”]
This result is consistent not only with the New York law of attorney-client privilege, but with the general principle that “the practice of law relates to the rendition of services to others that call for the professional judgment of a lawyer.” [Ethical Consideration 3–5 to the former N.Y. Code of Professional Responsibility; see also, ABA Task Force on the Model Definition of the Practice of Law (still good authority given that current RPC 5.5 is identical to former DR 3-101, governing the unauthorized practice of law); Proposed Model Definition, Sept. 18, 2002, “The ‘practice of law’ is the application of legal principles and judgment with regard to the circumstances or objectives of a person that require the knowledge and skill of a person trained in the law.”] As Spectrum Systems [78 N.Y.2d at 380], and the other cases cited show, a factual investigation often does involve “the professional judgment of a lawyer,” even if no ultimate legal conclusion is reached.
Being an Attorney Alone Is Insufficient to Guarantee Protection of GBL §83
While N.Y. GBL §83 protects attorneys acting “in the regular practice of their profession” from private investigator license requirements, an individual’s mere status as an attorney will not provide an exemption from those requirements. Megibow 397-DOS-13 (2011), is again instructive on this point. As noted above, Megibow’s application was initially denied because his creditable experience at investigative firms did not total three years, in part because one of the investigative firms at which he worked did not have a private investigator’s license for six of the months for which Megibow sought credit. [See 507-DOS-11 at 3.]
On appeal, Megibow argued that because attorneys are exempt from licensure requirements, all of his non-legal work at the investigative firm was creditable as qualifying experience, whether the firm had a private investigator license or not. This argument failed: Because the investigative firm was neither “licensed as a private investigator” nor “authorized to render professional legal services,” its business violated N.Y. GBL §70(2), and Megibow’s investigative work at the firm during that period was not creditable. [See 39-DOS-APP-12 at 5.] This aspect of Megibow makes clear that unless attorneys are acting “in the regular practice of their profession” (or are employees of a licensed private investigator), they are not exempt from N.Y. GBL §70(2) requirement of obtaining a private investigator’s license. In sum, in order to be deemed as acting “in the regular practice of their profession,” attorney investigators must possess an active law license (including authority to practice law in New York); must conduct their investigations within the context of an attorney-client relationship; and remain, in the conduct of the investigation, subject to the full panoply of legal ethical duties.
The short of it is that attorneys who perform workplace investigations while disavowing the existence of an attorney-client relationship are breaking the law. These attorneys place themselves in a double-bind: By presenting the services as non-legal, they are unlikely to be deemed as acting “in the regular practice of their profession,” and thus, unless they possess a separate private investigator’s license, are violating N.Y. GBL §70(2). At the same time, New York courts and disciplinary bodies are likely to view the services as nonetheless subject to the full panoply of legal ethics rules, because, as discussed further below, New York law generally presumes that services offered by an attorney — or even acts taken by an attorney in her non-legal capacity — are subject to the RPCs. This places the attorney between the proverbial rock and a hard place — especially if, under the misconception that the RPCs did not apply, he or she has failed to observe them in conducting the investigation. For example, the attorney may have failed to observe the so-called “no contact” rule [RPC 4.2] — a not uncommon error of attorney investigators who think they are not “acting as attorneys.” Therefore, in attempting to conduct an investigation as a “non-legal” service, such an attorney may have unwittingly violated both New York’s private investigator law, as well as the RPCs.
The potential consequences for this illegal conduct are severe. Under N.Y. GBL §70(4), a person who violates the private investigator licensing requirements is guilty of a Class B misdemeanor, punishable by up to three months in jail, a $500 fine, and possible additional financial penalties. [N.Y. Penal Law §70.15 and §80.05.] Moreover, the violator faces disciplinary consequences for committing a crime and/or misrepresenting his or her qualifications. [See RPCs 8.4(b) and (c), an attorney shall not “engage in illegal conduct that adversely reflects on the lawyer’s honesty, trustworthiness or fitness as a lawyer” or “engage in conduct involving dishonesty, fraud, deceit or misrepresentation.”] The violator also could face civil liability, or the loss of privileged status of his or her communications with the employer. An investigation that was not conducted under a proper license (i.e., under either a private investigator’s or law license) also could be challenged in litigation on the grounds that the investigation was conducted unlawfully; this has actually happened in California. [Complaint, Jolly Tech., Inc. vs. Robert Half Intl., Inc., No. CIV529256, (San Mateo Super. Ct. 6/25/2014).] Finally, out-of-state attorneys who conduct workplace investigations in New York but who are not authorized to practice law in New York could face discipline for the unauthorized practice of law, or see their investigations challenged on this ground in civil litigation.
An Attorney May Structure Relationship with Client to Ensure an Impartial Investigation
For all these reasons, unless they are prepared to apply for a private investigator’s license under N.Y. GBL §72, investigative attorneys should embrace, rather than distance themselves from, the label “attorney.” Doing so will not, as some attorneys fear, mean they cannot conduct an independent and impartial investigation. The RPCs allow investigative attorneys to structure their client-attorney relationships so that they can act independently.
In this regard, investigative attorneys may look to RPC 1.2(c). This provision, added to New York’s ethics rules when the RPCs were adopted in 2009, allows attorneys to limit the scope of their representation under certain conditions:
“A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances, the client gives informed consent, and where necessary notice is provided to the tribunal and/or opposing counsel.”
This allows the attorney, with the informed consent of the client, to adjust both the scope and objectives of the representation to suit the client’s needs. “A limited representation may be appropriate because the client has limited objectives for the representation.” [RPC 1.2, Comm. 6.] All that is required is that the limitation be reasonable, i.e., so it does not interfere with the attorney’s “duty to provide competent representation” [id. Comm. 7], and that the attorney obtain informed consent after disclosing “the reasonably foreseeable consequences of the limitation.” [Id. Comm. 6A.]
Even assuming that the investigative attorney would otherwise be required to “favor” the employer-client in conducting an investigation — a proposition we consider dubious, but which finds some support, in RPC 1.1(c)(2) (prohibiting a lawyer from “prejudic[ing] or damag[ing] the client during the course of the representation”) — compliance with RPC 1.2(c) solves the problem. If the client wants a truly independent investigation, the attorney can provide it by obtaining the necessary informed consent. Once again, Megibow 397-DOS-13 (2011), provides a perfect example. There, Kramer Levin was asked to perform a purely investigative function, reporting on facts uncovered while the corporate client had other attorneys analyze those facts and advise the Board. This allowed Kramer Levin to be fully independent and impartial in its work, knowing the client’s other lawyers would protect its interests. RPC 1.2(c) provides the vehicle for this kind of limitation.
The RPCs provide an even more specific provision for investigative attorneys. RPC 2.3 addresses investigative reports and opinion letters, particularly when written to be shown to third parties, and is intended to address the concerns stemming from RPC 1.1(c)(2)s prohibition on intentionally “prejudice[ing] or damag[ing]” a client. [See Simon’s N.Y. Rules of Prof. Conduct Annotated at 817 (West 2014).] It permits the investigative report to “provide an evaluation of a matter affecting the client for the use of someone other than the client if the lawyer reasonably believes that making the evaluation is compatible with other aspects of the lawyer’s relationship with the client.” RPC 2.3(a) allows the lawyer to reveal even confidential information if doing so “’advance[s] the best interests of the client’ (if reasonable or customary) but does not grant implied authority to harm the client.” [Simon’s N.Y. Rules at 818, citing RPC 1.6(a)(2).] But RPC 2.3 goes even further: It allows the investigative attorney to reveal in the report information which is “likely to affect the client’s interests materially and adversely” as long as the client gives “informed consent.” [RPC 2.3(b).] Absent such authorization, “information relating to the evaluation is protected by Rule 1.6.” [RPC 2.3(c).]
This Rule speaks directly to attorneys who, for example, conduct workplace investigations with the understanding that results might be disclosed to the EEOC, the SEC or the U.S. Attorney’s office. It permits them to make disclosures to these agencies and other third parties about their client — even adverse disclosures — as long as the client gives “informed consent.” [See RPC 1.0(j), defining that phrase, and requiring attorney to “adequately explain[]” to the client the “material risks of the proposed course of conduct and reasonably available alternatives.”]
But implicit in all this is that an attorney, when conducting an investigation, may ferret out all information relevant to advise the client, even if that information proves unfavorable. Indeed, a lawyer has an obligation to “promptly inform the client of…any decision or circumstance” for which the client’s informed consent is required [RPC 1.4(a)(1)(i)], and to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” [RPC 1.4(b).] Thus, the RPCs do not just allow an impartial and independent investigation: they demand it. What the client does with any adverse information uncovered is then between the client and its attorney, with the attorney obligated to obtain the client’s “informed consent” before disclosing that information to a third party. [RPCs 2.3(b) and (c).]
Protections of Attorney-Client Relationship
It is true that in some instances, attorneys offering so-called “non-legal” services may take off their “attorney hat,” and avoid the strictures of the RPCs. [See RPC 5.7(c), defining “nonlegal services” as “those services that lawyers may lawfully provide and that are not prohibited as an unauthorized practice of law when provided by a nonlawyer.”] However, doing so is difficult: RPC 5.7, which addresses an attorney’s responsibilities with respect to non-legal services, presumes that services offered by an attorney are subject to the RPCs, unless the services are “distinct” from any legal services offered to the client, and the attorney provides an appropriate written disclaimer to the client [RPC 5.7(a)(4) disclaimer]. The disclaimer must state that the services are not legal services and that the protections of the lawyer client relationship do not exist with respect to the non-legal services. [RPC 5.7(a)(4).]
But we should leave no doubt: For the reasons discussed above, providing an RPC 5.7(a)(4) disclaimer in the context of workplace investigations is not a viable option (except perhaps for an attorney working directly for a private investigation firm). And even if it were, there are other reasons why it is not a good idea. For one thing, it deprives the employer of two important protections — the attorney-client privilege and the work product protection. It is axiomatic that to invoke either of those protections, the employer must be dealing with an attorney in an attorney-client relationship. [See, e.g., RPC 1.6, Comm. 3, “The attorney-client privilege and the work-product doctrine apply when compulsory process by a judicial or other governmental body seeks to compel a lawyer to testify or produce information concerning a client.” (emphasis added); N.Y. County Lawyers’ Assn. Comm. on Prof. Ethics Formal Op. 717 (1996), discussing if a lawyer/employee of an insurance company is not acting as an attorney, former DR 4-101, (the predecessor to RPC 1.6), does not apply; Weinstein, Korn & Miller, New York Civil Practice §3101.45 at 31–120, “Work product protection seeks to maintain the sanctity of the attorney’s legal work and thought while the privilege seeks to protect the client’s freedom of revelation and right of privacy”; but see, e.g., U.S. v. Kovel [296 F.2d 918 (2d Cir. 1961)], discussing communications between client and others hired by the attorney whose presence is necessary for effective consultation between client and the attorney are still covered by the privilege, even if attorney not present.]
To disclaim the attorney-client relationship is to disclaim these important protections, which could result in government investigators and others obtaining sensitive and confidential information to which they otherwise would not be privy. Nor, arguably, does the privilege merely serve the employer’s interest. Rather, by creating a protected zone within which organizations can investigate potential misconduct, as well as by promoting candor between lawyer and client, the privilege is thought to “promote broader public interests in the observance of law and the administration of justice.” [Upjohn Co. vs. United States, 449 U.S. 383, 389 (1981).]
Of course, the existence of an attorney-client relationship imposes additional obligations on the investigative attorneys. For example, attorneys have certain duties in communicating with third parties that non-lawyers do not possess, such as the duty already noted under RPC 4.2(a) not to communicate with persons known to be represented by counsel without their counsel’s consent, the duty under RPC 1.13(a) to provide adequate warnings as to the lawyer’s identity and role, and the duty under RPC 1.13(b) to make disclosures and “climb the ladder” if wrongdoing is uncovered. Nonetheless, attorneys who currently conduct workplace investigations “as attorneys” do not report that complying with these or other attorney ethics rules has impeded their ability to conduct fair and effective investigations.
And in some cases, courts have gone out of their way to protect lawyers conducting internal investigations for employers against claims that they developed a separate attorney-client relationship with the employees they interviewed. [See, e.g., U.S. v. Ruehle (583 F.3d 600 {9th Cir. 2009}), holding that a corporate officer had no reasonable expectation that interview with corporation’s lawyer was confidential even though firm did not give “corporate Miranda” warning and firm had represented officer previously on personal matter; U.S. v. Weissman (195 F.3d 96 {2d Cir. 1999}), discussing that there was no common interest privilege found at meeting between employee, employer and employer’s lawyer because existence of common interest not made explicit at meeting; Matter of Bevill, Bressler & Schulman Asset Mgmt. Co., (805 F.2d 120 {3d Cir. 1986}), imposing strict five-part test for determining that corporate employee is represented by corporation’s lawyer.]
In short, clarifying the attorney investigator’s proper role as that of an attorney arguably enhances his or her ability to conduct fair, impartial and effective workplace investigations — because the rules of the road, including the ethical duties and standards that apply, are well-established and clear to all participants.
Under N.Y. GBL §83, only attorneys engaged “in the regular practice of their profession” are permitted to conduct workplace investigations without a private investigator’s license. Just as important, the idea that investigative attorneys must eschew the attorney-client relationship in order to maintain their independence is a myth; under RPCs 1.2(c) and 2.3, investigative attorneys can craft limited scope engagements with their employer clients that afford them all the independence they need, even to the point of disclosing adverse information to third parties. Finally, the burdens an attorney-client relationship imposes on investigative attorneys are few, but the advantages, particularly from the attorney-client privilege and work product protection, are vast. Attorneys conducting work-place investigations should embrace their role as attorneys, not reject it. Doing so is better for them, better for their clients and better for the public.
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