[Kevin Michels sends along this piece on internal corporate investigations.]
Thanks
for the invitation to guest blog at the Legal Ethics Forum. I am a regular reader and fan of the
Forum. I am honored that the Forum
featured my article “Internal
Corporate Investigations and the Truth,” which is slated for publication in the Seton
Hall Law Review in January 2010.
Today, I thought I would offer a few comments on the investigation
article, and why it might be of interest to those of us who think about legal
ethics. In the next couple of
weeks, I will offer some thoughts on my article
in the first issue of the current volume of the Georgetown Journal of Legal
Ethics, which uses the legal-ethics rules as part of two-prong test to
determine when to recognize or reject third-party claims against counsel.
If
history is any guide, nearly half of all American public companies will
commission an internal corporate investigation this year. Internal investigations are triggered
by allegations that the company or its employees engaged in material
wrongdoing. The corporation hires
investigative counsel, who conducts the investigation and reports her factual
and legal findings to the corporation and potentially to the public, the
government, shareholders, courts and other third parties. Much of the scholarly commentary to date
has addressed issues related to privilege and work-product protections, when
and whether to conduct an internal investigation and how to deal with employee
and other witnesses. My
efforts are directed at a more fundamental question: does investigative counsel
have an obligation to “get it right” in her investigation and report, and how does
this relate to her client obligations?
The investigator is asked to develop an investigative report assessing
the validity of material charges against her
client – a scenario rife with potential conflict. The article seeks to develop a
principled account of when investigative counsel are subject to special truth
obligations, what those obligations are, how they can be understood in a client
setting, and what these obligations entail for the structure and conduct of an
internal corporate investigation and for disclosure of the results.
I
contend that the attorney-ethics rules as well as corporation law and other
statutory provisions effectively impose a duty on investigative counsel to
develop an accurate account of the law and facts in an investigative report
delivered to the client or to a third party. It is tempting, however, to dismiss imposition of a truth or
accuracy obligation on investigative counsel as more illusory than real. Judges often disagree in their
assessment of legal matters, and thus some might see the role of investigative
counsel as simply to provide her “take” on the facts and law. In his article, “Professionalism
as Interpretation,” W. Bradley Wendel persuasively argues (in the
counseling context) that while there may be room for disagreement, counsel’s
interpretation of legal matters is bounded by (to oversimplify) the principles,
standards and norms of the professional community. Others (the so-called “conventionalists,” for example)
have offered a similar account of the constraints on judging. By analogy, I argue that it is
fair to demand accuracy of investigative counsel, provided that we understand
accuracy as a bounded range rather than a single, correct outcome.
Important
implications flow from the demand of accuracy. Under RPC 2.3, investigative counsel must not undertake an
evaluation of the client for a third party unless the evaluation is
“compatible” with the attorney’s other obligations to the client. Clients, of course, have a great
deal at stake in the outcome of the investigation, since their own alleged
wrongdoing is at issue. RPC 2.3, therefore, requires vigilance on the part of
investigative counsel to ensure that the investigator’s commitment to the truth
is “compatible” with the investigator’s client obligations. Counsel must guard against client
attempts to intrude on her truth-seeking function at every phase of the
investigation, including: retention -- when the scope and depth of the
investigation are established; throughout the investigation -- in considering
questions of investigation expense, witness-and-document availability, efforts
to protect the client’s privilege, and changes to the investigation’s scope and
depth; and in reporting on the investigation -- where attempts to summarize or
issue selective accounts can undermine the accuracy of the report. Although
courts and statutes often consider “independence” the sole test of whether an
investigation is trustworthy, in fact counsel must satisfy an array of other
“truth standards” as well, including attention to the sufficiency of the
inquiry, the reliability of the evidence, and questions of selection and
emphasis in reporting.
Curiously,
RPC 2.3 is regularly cited in connection with the obligations of counsel in
delivering legal opinions. The Rule, however, is rarely cited by
courts or commentators in the investigation context, although it unquestionably
applies there as well. In fact,
the internal investigation poses greater concerns about accuracy and client
influence. The legal opinion
typically deals with precise representations that can often be “cured” prior to
delivery of an opinion. Moreover,
opinion counsel has an overwhelming liability incentive to be accurate
notwithstanding any client directive.
The internal investigation, by contrast, offers few if any of these
protections, and the stakes for the client are often much higher. We need to think more about the ethical
implications of investigative counsel’s truth commitment. RPC 2.3 and other ethics rules can
anchor that inquiry.
The
article also considers whether investigative counsel can deliver a report when
she has failed to satisfy one or more of the truth standards, and whether and
how “reliability qualifications” might be used in the report. It also explains why report recipients
should resist reliance on report summaries. Our accuracy standard acknowledges that different
investigators can reach different outcomes when confronted with the same facts
and legal standards, and both interpretations can be within the legitimate
boundaries of professional interpretation. Thus, the report recipient should rely on investigative
conclusions only if he is persuaded by the underlying analysis.
The
SSRN posting is a working draft, and any and all input is welcome.