how ethics rules prevent compliance with rule 11, …

HOW ETHICS RULES PREVENT COMPLIANCE WITH RULE 11, RULE 9(B), AND IQBAL

PROFESSOR DAVID HRICIK, Macon, GA Mercer University School of Law

State Bar of Texas 23RD ANNUAL ADVANCED

INTELLECTUAL PROPERTY LAW COURSE March 4-5, 2010

Austin

CHAPTER 16

Professor David Hricik, B.A., J.D. Professor of Law, Mercer University School of Law, Macon, GA (2002-). B.A., 1984, University of Arizona, magna cum laude; Phi Beta Kappa; J.D., 1988, Northwestern University School of Law cum laude. Professor Hricik teaches Patent Law & Litigation, Professional Responsibility, and Civil Procedure. He has authored books on civil procedure and also on ethical issues in patent practice and patent litigation by Oxford University Press. He was selected as the Chair of the Professionalism & Ethics Committees of both the AIPLA and the IP section of the ABA. Prior to becoming a full-time professor of law, Professor Hricik practiced law, principally in patent and complex commercial litigation. He currently consults with insurers, law firms, and the Patent Office on ethical matters in patent practice.

How Ethics Rules Prevent Compliance with Rule 11, Rule 9(B), and Iqbal Chapter 16

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TABLE OF CONTENTS

1. THE REQUIRED PRE‐PLEADING INVESTIGATIONS .................................................................................... 1

A. Introduction to the Potential Sources of Liability and Sanctions .................................................................... 1 1. Federal Rule of Civil Procedure 11 ......................................................................................................... 2 2. Exceptional Case Attorney Fee Shifting Under 35 U.S.C. § 285............................................................ 3 3. Liability under the Federal Antitrust Laws.............................................................................................. 5 4. Liability under State Law and Other Federal Statutes............................................................................. 7 5. Primacy of Rule 11 .................................................................................................................................. 8 6. The Impact of Iqbal and Exergen ............................................................................................................ 8

2. FAILURES IN INVESTIGATION THAT CAN LEAD TO FINDINGS OF UNPROFESSIONALISM ............. 9 A. Patentee’s Pre-Suit Investigation into Charges of Infringement ..................................................................... 9

1. Is the Plaintiff a “Patentee ..................................................................................................................... 10 2. Is the Patent in Force ............................................................................................................................. 11 3. Is the Defendant the Proper Defendant.................................................................................................. 11 4. Is there an objective basis, based upon reasonable investigation, to allege infringement ..................... 11

A. Interpretation of Claims ................................................................................................................. 12 B. Application of Claims to Accused Product or Process .................................................................. 14

B. Invalidity of the Patent .................................................................................................................................. 17 C. Unenforceability ............................................................................................................................................ 18

3. CONDUCT DURING INVESTIGATIONS THAT CAN LEAD TO UNPROFESSIONALISM....................... 19

A. Using Undercover Investigators to Gather Evidence is Also Limited .......................................................... 19 1. Does Rule 4.2 Apply to the Contact ...................................................................................................... 22

A. Is there a “Matter?”........................................................................................................................ 22 B. Does Counsel “Know” the Person is “Represented by Counsel” in terms of Rule 4.2 ................. 25

1. Federal Choice of Law Rules................................................................................................. 26 2. Current Employees of An Opposing Party ............................................................................ 28 3. Former Employees of an Opposing Party .............................................................................. 32 4. In-House Counsel’s Inability to Alter Rule 4.2 ..................................................................... 36 5. Other Forms of Liability and Problems ................................................................................. 37

C. Does Model Rule 4.2 Apply to Undercover Investigations ........................................................... 37 2. Does Model Rule 4.3 Apply to Undercover Investigations................................................................... 44 3. Is the Use of an Undercover Investigator “Dishonest” Under Rule 8.4 or Rule 4.1? ........................... 49

A. Authority Holding White Lies are Acceptable .............................................................................. 52 B. Authorities Finding White Lies to Be Deceitful ............................................................................ 54

1. The Required Pre-Pleading Investigations

Along with other law, Federal Rule of Civil Procedure 11 requires adequate

pre‐suit investigation. It is often invoked in patent suits by accused infringers to

challenge the propriety of filing suit. At the same time, however, other rules limit a

lawyer’s ability to conduct adequate pre‐suit investigation, in part to protect

opposing parties from unfair litigation tactics, but also to protect the innocent public

from unnecessary costs. The rules also serve to protect the reputation of the

profession from charges of deceit and dishonesty.

In part, this is a draft excerpt from the forthcoming book, Ethical Issues in

Patent Litigation by David Hricik (Oxford University Press 2010).

A. Introduction to the Potential Sources of Liability and Sanctions

Various rules, federal statutes, and state substantive law (in the form of claims for

malicious prosecution and the like) require that lawyers not invoke the power of any

court without good reason. This section addresses four principal sources of obligations of

inquiry and investigation commonly raised in patent suits.

The purposes behind requiring pre-suit investigation are many, and include

weeding out frivolous claims and defenses, reducing the scope of what is in controversy,

and eliminating unnecessary disputes over facts. But, pre-suit and pre-answer

investigation would no doubt occur even without legal requirement, since litigation itself

is expensive, and counsel for both parties are generally interested in prevailing, and

asserting meritless claims or defenses is generally perceived to indicate weakness, not

strength, and so can diminish the value of strong claims or defenses.1

1 See Robert B. Fitzpatrick, Plaintiff’s Pre-Trial Strategies, ALI-ABA (July 8, 1996).


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1. Federal Rule of Civil Procedure 11

Federal Rule of Civil Procedure 11 provides in part:

(a) Signature. Every pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney's name — or by a party personally if the party is unrepresented. The paper must state the signer's address, e-mail address, and telephone number. Unless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit. The court must strike an unsigned paper unless the omission is promptly corrected after being called to the attorney's or party's attention.

(b) Representations to the Court. By presenting to the court a

pleading, written motion, or other paper — whether by signing, filing, submitting, or later advocating it — an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such

as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are

warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if

specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the

evidence or, if specifically so identified, are reasonably based on belief or a lack of information.2

As with all suits filed in federal court, before a patent suit can be filed a lawyer

must comply with Federal Rule of Civil Procedure 11 by conducting an adequate pre-suit

investigation as to the law and facts underlying the allegations of infringement that will

2 Fed. R. Civ. P. 11.


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be made in the complaint.3 So, too, a defendant must investigate in compliance with

Rule 11 before filing a motion or pleading in response to a patent infringement suit.4

Because of the stakes often involved, as well as the complexity often associated with

patent suits, however, it often takes significant effort to comply.

The Federal Circuit applies regional circuit law to motions for sanction under

Rule 11, since they are not unique to patent law.5 Fortunately, in the main Rule 11 has

been interpreted relatively consistently across the circuits, at least at a high level.

Although at the margins there are significant differences that could be outcome

determinative in a particular case, generally the courts hold that a frivolous claim or

pleading for Rule 11 purposes is one that is “legally or factually ‘baseless' from an

objective perspective” and made without “a reasonable and competent inquiry.”6 Thus,

if the pleading or other paper was not objectively baseless, then the amount of inquiry is

irrelevant; it is only if the pleading or paper is objectively baseless that the

reasonableness of the factual and legal investigation matters.7 Of course, some courts do

take different positions, and so specific research is obviously a necessary step in close

cases.

2. Exceptional Case Attorney Fee Shifting Under 35 U.S.C. § 285

3 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004); View Eng’g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000). See Eon-Net, L.P. v. Flagstar Bancorp, Inc., 239 F.R.D. 609 (W.D. Wash. 2006) (“Rule 11 is not about “after-the-fact invstigation,” and consulting with experts after fling to craft “colorable” arguments does not cure a Rule 11 violation.”) (quoting Judin, 110 F.3d at 785. 4 Rule 11 applies to all pleadings and signed documents, not just those of the plaintiff. See Fed. R. Civ. P. 11. 5 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004). 6 Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002). 7 See, e.g., Eon-Net, L.P. v. Flagstar Bancorp, Inc., 239 F.R.D. 609 (W.D. Wash. 2006) (imposing sanctions under Rule 11 for inadequate pre-suit investigation).


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Second, Section 285 provides that a “court in exceptional cases may award

reasonable attorney fees to the prevailing party.”8 The statute authorizes fee shifting –

awarding the accused infringer its attorneys fees, for example – where the prevailing

party establishes that the suit was “objectively baseless.”9 In its most common form,

“exceptional case” liability arises if the patentee loses the suit,10 although it also operates

where the patentee wins the suit. A patentee who files an infringement suit can be liable

for “exceptional case” damages if it acts “manifestly unreasonable in assessing

infringement.”11 Significantly, liability can be imposed if the patentee files suit, but then

voluntarily dismisses.12

The Federal Circuit applies its own law to issues in applying Section 285, since

they are clearly unique to patent law.13 Exceptional cases include those involving

“‘inequitable conduct before the [Patent and Trademark Office]; litigation misconduct;

vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful

infringement.’”14

Even if one of these types of conduct is present in a particular case, the district

court must still “weigh intangible as well as tangible factors: the degree of culpability of

8 35 U.S.C. § 285 (2000). 9 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004). 10 See generally Digeo, Inc. v. Audible, Inc., 505 F.3d 1362 (Fed. Cir. 2007) (examining exceptional case liability in contest of purchase of “as is” patents); Brooks Furn. Mfr’g, Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005). 11 Eltech Sys. Corp. v. PPG Indus., Inc., 903 F.2d 805, 809-10 (Fed. Cir. 1990). See Taurus IP, LLC v. DaimlerChrysler Corp., 559 F. Supp.2d 947 (W.D. Wis. 2008) (finding case exceptional). 12 Micromesh Technology Corp. v. American Recreation Products, Inc., (N.D. Cal. 2007). 13 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004); Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358, 1377 (Fed. Cir. 2001). 14 Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358, 1377 (Fed. Cir. 2001); see Brooks Furn. Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005) (describing additional forms of conduct that can violate Section 285).


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the infringer, the closeness of the question, litigation behavior, and any other factors

whereby fee shifting may serve as an instrument of justice.”15

3. Liability under the Federal Antitrust Laws.

Third, antitrust liability can arise, and in rare circumstances a patentee can be

found liable for bad faith litigation or bad faith enforcement or publicity of a patent.16

Likewise, in some circumstances an affirmative claim for relief, under state law or

federal antitrust laws, can arise through enforcement of an invalid or unenforceable

patent, for other forms of litigation involving patents.17

The Federal Circuit applies regional circuit law to antitrust claims, since they are

not unique to patent law.18 Although a full discussion of the federal antitrust laws is

beyond the scope of this book, some general principles relate directly to the issue of pre-

suit inquiry.

A suit for infringement, without more, is generally exempt from the antitrust laws

even if the patent provides some market power; however, a patentee is subject to antitrust

liability for the anticompetitive effects of that suit if the accused infringer proves either of

two things.19

First, the accused infringer may prove that the asserted patent was obtained

through “Walker Process” fraud – that is, knowing and willful fraud.20 Walker Process

15 Nat’l Presto Indus., Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed. Cir. 1996). Accord Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358, 1377 (Fed. Cir. 2001); see Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990) (similar test). 16 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 295 (Fed. Cir. 2004). 17 See, e.g., Abbott Lbs. v. Brennan, 952 F.2d 1356 (Fed. Cir. 1992) (state law and antitrust counterclaims filed arising out of disputed result in interference proceeding). 18 Filmtec Corp. v. Hydranautics, 67 F.3d 931 (Fed. Cir. 1996). 19 In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1326 (Fed.Cir.2000); Nobelpharma, 141 F.3d at 1068. 20 Nobelpharma, 141 F.3d at 1068 (citing Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965)).


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claims are a form of antitrust claim that are seldom made and even more rarely

established. To succeed, on a claim for Walker Process fraud, the antitrust claimant – the

accused infringer in the earlier suit – must show:

1. That the asserted patent was obtained by knowingly and willfully

misrepresenting the facts to the PTO during prosecution;

2. That the party enforcing the patent – the plaintiff in the prior antitrust suit

– was aware of the fraud when bringing the suit;

3. Independent and clear evidence of deception;

4. A clear showing that the patent would not have issued but for the

misrepresentation or omission; and

5. The necessary additional elements to establish a violation of the antitrust

laws.21

Second, the accused infringer may prove the earlier suit was “‘a mere sham to

cover what is actually nothing more than an attempt to interfere directly with the business

relationships of a competitor.’”22 There is both an objective and subjective element to

this substantive legal claim.

First, the accused infringer must prove that the lawsuit was objectively baseless --

in the sense that no reasonable litigant could realistically expect success on the merits. If

an objective litigant could conclude that the suit was reasonably calculated to lead to a

favorable outcome, an antitrust claim based on the sham exception fail.

21 See In re Netflix Antitrust Litig., 506 F. Supp.2d 308 (N.D. Cal. 2007) (granting defendant’s motion to dismiss Walker Process claim). 22 Id. (quoting E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961)).


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Only if challenged litigation is objectively meritless may a court examine the

litigant's subjective motivation. An improper subjective motivation exists when the

baseless lawsuit conceals “an attempt to interfere directly with the business relationships

of a competitor,”23 through the “use [of] the governmental process-as opposed to the

outcome of that process-as an anticompetitive weapon.”24

4. Liability under State Law and Other Federal Statutes

Fourth, actions in federal court can give rise to state law claims for malicious

prosecution and the like.25 Obviously, the existence and scope of these torts varies by

state, and a particularized discussion is beyond the scope of this book. In addition to Rule

11, other law inspired by tort reform efforts can require pre-suit investigation as well.26

Likewise, other federal statutes in rare circumstances can apply to patent suits.

For example, 28 U.S.C. § 1927 provides that any person “admitted to conduct cases in

any court of the United States … who so multiplies the proceedings in any case

unreasonably and vexatiously may be required by the court to satisfy personally the

excess costs, expenses and attorneys’ fees reasonably incurred because of such

23 Id. 24 City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 380, 111 S.Ct. 1344 (1991) (emphasis in original). 25 See Dominant Semiconductors SDN. BHD. v Osram GMBH, 524 F.3d 1254 (Fed. Cir. 2008) (discussing liability for bad faith litigation and bad faith publicity of patent rights); Taurus IP, LLC v. DaimlerChrysler Corp., 559 F. Supp.2d 947 (W.D. Wis. 2008) (analyzing award of attorneys’ fees for breach of contract action related to patent infringement suit); Verve, LLC v. Hypercom Corp., 2006 WL 2390505 (D. Ariz. Aug. 16, 2006) (discussing claims for malicious prosecution and abuse of process for filing patent suit under Arizona state law); PSN Ill., Inc. v. Ivoclar Vivadent, Inc., 2005 WL 2347209 (N.D. Ill. Sept. 21, 2005) (analyzing counterclaims to infringement suit under state and federal law). The assertion of state law claims can implicate preemption and related doctrines. See Zenith Elec. Corp. v. Exzec, Inc., 182 F.3d 1340, 1349 (Fed. Cir. 1999); Pro-Mold and Tool Co. v. Great Lakes Plastics, INc., 75 F.3d 1568, 1575 (Fed. Cir. 1996). 26 See, e.g., Hinchman v. Gillette, 618 S.E.2d 387 (W.V. 2005) (contrasting statutory pre-suit certificate with state version of Rule 11 in separation of powers challenge).


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conduct.”27 Where multiple suits are filed without basis, violations of Section 1927 have

been found, but the cases are not common.28

5. Primacy of Rule 11.

Each basis for sanctions and liability has its particular elements and requirements.

What follows focuses principally on Rule 11, since it is the more common basis for

imposition of sanctions for inadequate pre-suit inquiry. Although they do vary in their

elements and requirements, often if Rule 11 has not been violated during pre-suit

investigation, then the courts tend to also hold that liability under the other bases is not

established.29

6. The Impact of Iqbal and Exergen.

All federal practitioners are now familiar with the unusual approach to pleading

taken by the Supreme Court in Ashcroft v. Iqubal.30 In that case, the Court, in a 5-4

decision, apparently abandoned both the principle that, when a court is deciding a motion

to dismiss it must take all inferences in favor of the plaintiff, and the principle that all

facts must be accepted as true. Instead, it injected a complicated process of filtering out

“legal conclusions” from “factual allegations,” and then of determining “plausibility.”

The net effect of Iqbal so far as is pertinent here will be to increase the detail that must be

pled, thus increasing the need for pre-suit investigation.

27 28 U.S.C. § 1927 28 Verve, LLC v. Hypercom Corp., 2006 WL 2390505 (D. Ariz. Aug. 16, 2006) (concluding that attorney violated Section 1927 in patent suit). 29 E.g., Prism Technologies LLC v. Verisign, Inc., 2008 WL 4426135 (D. Del. Sept. 30, 2008) (basing denial of finding exceptional case in part on denial of finding Rule 11 violation). 30 556 U.S. __ (2009).


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So, too, the Federal Circuit’s decision in Exergen Corp. v. Wal-Mart Stores Inc.,31

radically increased the level of detail that a party asserting inequitable conduct must

plead to satisfy Rule 9(b). Again, the net result, particularly when coupled with Iqbal is a

dramatic increase in the level of detail that must be pled, thus increasing the need for pre-

suit investigation, or at least pre-pleading investigation.

2. Failures in Investigation that Can Lead to Findings of Unprofessionalism

A. Patentee’s Pre-Suit Investigation into Charges of Infringement

Once a suit is filed in federal court, various additional sources of liability and

responsibility arise. Foremost, the Federal Circuit has warned that a patent holder must

“be prepared to demonstrate to both the court and the alleged infringer exactly why it

believed before filing the claim exactly why it believed that it had a reasonable chance of

proving infringement.”32 If the patent owner cannot show that it had objectively

reasonable basis for filing the suit, then the court must examine the adequacy of the

lawyer’s investigation into the suit.33 If the plaintiff can show neither sufficient objective

evidence to file suit nor an adequate investigation, then “ordinarily” this should “result in

the district court expressing its broad discretion in favor of Rule 11 sanctions, at least in

the absence of a sound excuse or considerable mitigating circumstances.”34 State law

claims, such as malicious prosecution, have also been based upon faulty pre-suit

investigations, whether or not Rule 11 is satisfied.35

31 575 F.3d 1312, 1328 (Fed. Cir. 2009). I personally do not believe that Rule 9(b) even applies to inequitable conduct. See David Hricik, Wrong About Everything: The Application by the District Courts of Rule 9(b) to Inequitable Conduct, 86 Marq. L. Rev. 895 (2003). 32 View Eng’g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000). 33 Dome Patent LP v. Permeable Tech., Inc., 190 F.R.D. 88, 91 (W.D.N.Y. 1999). 34 Id. See Pellegrini v. Analog Devices, Inc., 2008 WL 2329403 (Fed. Cir. July 2, 2008) (finding no abuse of discretion in district court’s finding of Rule 11 violation and award of sanctions). 35 Verve, LLC v. Hypercom Corp., 2006 WL 2390505 (D. Ariz. Aug. 16, 2006) (addressing motions for sanctions and for claims under state law).


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What is “reasonable” obviously varies with the facts. In addition, the Federal

Circuit has held that whether a litigant has complied with Rule 11 turns on law not unique

to patent law, and so regional circuit law controls.36 Thus, what may be proper in one

circuit may be improper in another, even though the Federal Circuit will hear any

ultimate appeal. However, there are some basic steps that competency requires, and

which may be necessary to avoid liability for attorneys’ fees or damages under both

federal or state law.

1. Is the Plaintiff a “Patentee?”

First, the lawyer representing the plaintiff must investigate whether the party

proposed to be named as plaintiff is a “patentee” under the act.37 If the patent was issued

to the named party, and there have been no subsequent transfer, assignment, or

conveyance of any rights under the patent, this is often a simple matter.

However, where the initial assignee has sold or otherwise conveyed some or all

rights represented by the patent, investigation into whether the transfer was sufficient to

give the proposed named plaintiff standing as a “patentee” is required. In some

circumstances, for example, proper pleading may require more than one plaintiff be

named. The failure to reasonably investigate this threshold question of standing has led

firms to be sanctioned under Rule 11 as well as other mechanisms, such as Section 1927

and inherent power. 38

36 Manildra Milling Corp. v. Ogilvie Mills, Inc., 76 F.3d 1187, 1183 (Fed. Cir. 1996); Centillion Data Systems, LLC v. Convergys Corp., 2006 WL 20777 (S.D. Ind. 2006). 37 See, e.g., FieldTurf, Inc. v. Southwest Recreational Labs, Inc., 235 F. Supp.2d 708 (E.D. Ky. 2002), vacated in part, FieldTurf, Inc. v. Southwest Research Recreational Indus., Inc., 357 F.3d 1266 (Fed. Cir. 2004); Verve, LLC v. Hypercom Corp., 2006 WL 2390505 (D. Ariz. Aug. 16, 2006). 38 See, e.g., FieldTurf, Inc. v. Southwest Recreational Labs, Inc., 235 F. Supp.2d 708 (E.D. Ky. 2002), vacated in part, FieldTurf, Inc. v. Southwest Research Recreational Indus., Inc., 357 F.3d 1266 (Fed. Cir. 2004); Digeo, Inc. v. Audible, Inc., 505 F.3d 1362 (Fed. Cir. 2007) (even when patents are purchased “as is” no additional inquiry is required of patentee).


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2. Is the Patent in Force?

Second, the patent must still be in force, at least if future damages or injunctive

relief is sought, or must have expired within six years of filing suit. Of course,

maintenance fees are due on patents every few years, and if they are not paid, the patent

lapses. Competent counsel can easily discern whether maintenance fees have been paid.

If they have not, there are means to revive the patent that are available under some

circumstances, and even an expired patent has value, since in most circumstances

damages accruing six years prior to its expiration may be recovered. Nonetheless, a

pleading seeking damages based upon on an expired patent probably should inform the

defendant that only past damages, and not injunctive relief, are being sought, to avoid

charges of improper conduct.

3. Is the Defendant the Proper Defendant?

Third, the plaintiff’s lawyer must ensure he is naming the proper defendant.

“Requiring parties to determine with accuracy that they are suing the correct parties… is

the most basic factual inquiry in any law suit.”39 Suing a party that as a matter of law

does not infringe – because, for example, it does not even make the accused product –

can result in sanctions. While usually this is straightforward, if the defendant is part of a

complex inter-related corporate structure, more investigation may be required.

4. Is there an objective basis, based upon reasonable investigation, to allege infringement?

Fourth, and less straightforward than the first three, there must be reasonable

factual and legal investigation of the allegation of direct infringement of at least one

39 Classen Immunotherapies, Inc. v. Biogen IDEC, 381 F. Supp. 452, 457 (D. Md. 2005), quoting Callahan v. Schoppe, 864 F.2d 44, 46-47 (5th Cir. 1989).


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claim of one patent-in-suit owned by the proposed plaintiff.40 What constitutes

“reasonable” investigation can be a fact intensive issue.

At a “bare minimum,” the plaintiff must “apply the claims of each and every

patent that is being brought into the lawsuit to an accused [product or process] and

conclude that there is a reasonable basis for a finding of infringement of at least one

claim of each patent.”41 If this is not done, the plaintiff must be in position to offer “an

explanation for its failure.”42 “Failure to do so… should ordinarily result in… [Rule 11]

sanctions.”43

In the patent infringement suits (and despite the fact that regional circuit law

controls), the Federal Circuit has “interpreted Rule 11 to require, at a minimum, that an

attorney interpret the asserted patent claims and compare the accused device with those

claims before filing a claim alleging infringement.”44 The difficult issues are (1) how

deeply the legal investigation into claim meaning must go and (2) how sophisticated the

analysis of the accused product must be.

A. Interpretation of Claims

40 See generally Pellegrini v. Analog Devices, Inc., 2008 WL 2329403 (Fed. Cir. June 5, 2008) (finding Rule 11 violation where no evidence that direct infringement in the US had occurred in suit charging infringement under Section 271(f)). 41 View Eng’g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2001); see Classen Immunotherapies, Inc. v. Biogen IDEC, 381 F. Supp.2d 452 (D. Md. 2003) (dismissing suit, but refusing to sanction despite failure to investigate infringement). 42 View Eng’g., 208 F.3d at 986. 43 View Eng’g., 208 F.3d at 986. 44 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 295 (Fed. Cir. 2004), citing Antonious v. Spalding & Evenflo Companies, Inc., 275 F.3d 1066, 1072 (Fed. Cir. 2002); View Eng'g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000); Judin v. United States, 110 F.3d 780, 784 (Fed. Cir. 1997); S. Bravo Sys., Inc. v. Containment Techs. Corp., 96 F.3d 1372, 1375 (Fed. Cir. 1996) (affirming sanctions where lawyers relied on lay client to determine infringement). In some cases, the fact that regional circuit law applies may be outcome determinative. For example, the Fourth Circuit tends to take a more lenient approach to Rule 11 inquiries. See De Technologies, Inc., v. Dell Inc., 2006 WL 4677984 (W.D. Va. Feb. 28, 2006) (applying Fourth Circuit’s more relaxed standard to motion for sanctions based on inadequate pre-suit investigation and finding no violation).


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The threshold issue concerns interpreting the claims. An accusation of

infringement can be made only after the claims have been analyzed. Because claim

interpretation involves a question of law, it is subject to Rule 11(b)(2), which requires

that all legal assertions be non-frivolous.45

The problem the courts struggle with is the amount of effort and analysis required.

Are full-blown Markman-type analyses required, or is something less sufficient? This is

troublesome because, prior to construction of the claims by the district court, there is

always some doubt about infringement.

Courts, however, in analyzing Rule 11 motions hesitate to impose too great of an

obligation on patentees with respect to claim construction, if the patentee in fact has

conducted some level of analysis. “Claim interpretation is not always an exact science,

and it is not unusual for parties to offer competing definitions of even the simplest claim

language.”46 Thus, the question is not whether the “pre-filing interpretation of the

asserted claims was correct, but only whether it was frivolous.”47 The preliminary nature

of the inquiry, as well as the uncertainty regarding claim meaning, led one panel of the

Federal Circuit to emphasize the limited nature of the inquiry into the details of the claim

analysis:

Qwest asks the Court to delve into the merits of Centillion's infringement analysis; in other words, Qwest asks the Court to interpret a key claim of the '270 patent before any claim construction hearing has been held or motion for summary judgment has been filed. The Court refuses to make these types of determinations at this stage of the litigation. Cf. Cooter & Gell v. Harmarx Corp., 496 U.S. 384, 396, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) (stating that determination that a Rule 11 sanction is

not a judgment on the merits,” nor even “a district appropriate “is

45 Antonious v. Spalding & Evenflo Companies, Inc., 275 F.3d 1066, 1072 (Fed. Cir. 2002); 46 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 295 (Fed. Cir. 2004). 47 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 295 (Fed. Cir. 2004).


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court's assessment of the legal merits of the complaint,” but rather “requires the determination of a collateral issue: whether the attorney has abused the judicial process, and, if so, what sanction would be appropriate”). To the extent that Qwest's current motion seeks a determination on the merits, it is premature and the Court declines Qwest's invitation to decide the merits on the current record. To the extent that Qwest seeks to assert that Centillion's allegations of infringement are legally flawed and frivolous on their face, the Court cannot agree at this stage of the litigation.48

To sum up, while the claims must be construed, the question is whether the legal

determination of claim meaning is frivolous.49 Thus, adopting a claim construction that

“ignores the plain language of the disclosure” violates Rule 11.50 Given the reversal rate

of district courts of claim construction rulings, it would be hard to require more of

lawyers at the outset of litigation to do much more than this, and in fact the cases suggest

that a good faith effort to objectively construe claims is all that is required;51 doing

nothing is not enough, but full-blown claim analysis is not. Where, exactly, the amount

of effort required is a fact-dependent inquiry.

B. Application of Claims to Accused Product or Process

Reasonable inquiry into whether, as construed, the claims read on any accused

product or process made by the targeted defendant is the important second step.52 The

determination that a product infringes is an allegation of fact, and so is subject to Rule

11(b)(3).53 The amount of investigation required is subject to only a few bright lines.

On one end of the spectrum, failing to conduct any analysis of a publicly-

or reverse-engineered accused product clearly fails to meet available and easily analyzed 48 Centillion Data Sys., LLC v. Convergys Corp., 2006 WL 20777 (S.D. Ind. Jan. 04, 2006). 49 Antonious v. Spalding & Evenflo Companies, Inc., 275 F.3d 1066, 1072 (Fed. Cir. 2002). 50 Eon-Net, L.P. v. Flagstar Bancorp, Inc., 239 F.R.D. 609, 618 (W.D. Wash. 2006), aff’d in part, 2007 WL 2818634 (Fed. Cir. Sept. 27, 2007). 51 See Eon-Net, L.P. v. Flagstar Bancorp, Inc., 239 F.R.D. 609, 616-17 (W.D. Wash. 2006), aff’d in part, 2007 WL 2818634 (Fed. Cir. Sept. 27, 2007). 52 See Dome Patent LP v. Permeable Technologies, Inc., 190 F.R.D. 88 (W.D.N.Y. 1999). 53 Antonious v. Spalding & Evenflo Companies, Inc., 275 F.3d 1066, 1074 (Fed. Cir. 2002).


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the standard Rule 11 requires with respect to analyzing infringement.54 For example, in

Judin v. United States,55 the Federal Circuit held that the district court abused its

discretion in not awarding sanctions where the patentee could have purchased an accused

device relatively inexpensively, compared with the cost of litigation, and had not

compared the accused device with the patent claims prior to filing suit.56 Similarly,

relying entirely on a lay client to apply the claims is also improper.57

On the other end of the spectrum, a lawyer who tests an accused products that can

be reversed engineered58 or otherwise meaningfully broken down to be analyzed and

compares the products to the claims by way of competently59 prepared claim charts will

meet the standard required by Rule 11, even if it turns out that there is no infringement.60

In between, there are various practical problems that the courts do consider in

deciding how much effort is enough to satisfy the Rule 11 standard. In some

circumstances, Rule 11 will require physical examination of the accused product, at least

54 View Eng’g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2001) (imposing Rule 11 sanctions where patent holder performed no independent claim construction or written infringement analysis); Judin v. U.S., 110 F.3d 780, 784 (Fed. Cir. 1997) (Rule 11 violated where neither patentee nor attorney attempted to obtain accused device or compare it with patent claims); Verve, LLC v. Hypercom Corp., 2006 WL 2390505 (D. Ariz. Aug. 16, 2006) (analyzing state law claims where patentee “never obtained any Hypercom product and he was unsure whether he used or observed any Hypercom product” before filing suit). 55 110 F.3d 780 (Fed. Cir. 1997). 56 Id. at 784. 57 Antonious v. Spalding & Evenflo Companies, Inc., 275 F.3d 1066, 1074 (Fed. Cir. 2002). 58 Refac Int’l, Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048 (Fed. Cir. 1992). 59 For an example of incompetently prepared claim charts, see Eon-Net, L.P. v. Flagstar Bancorp, Inc., 239 F.R.D. 609 (W.D. Wash. 2006); Micromesh Tech. Corp. v. Am. Recreation Prods., Inc., 2007 WL 2501783 (N.D. Cal. Aug. 30, 2007). 60 See, e.g., Cambridge Prods., Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048 (Fed. Cir. 1992); Dome Patent LP v. Permeable Technologies, Inc., 190 F.R.D. 88 (W.D.N.Y. 1999); Rates Technoogy Inc. v. Mediatrix Telecom, Inc., 2007 WL 1987787 (E.D.N.Y. June 29, 2007) (claim charts and other evidence showed reasonable investigation). See also Rohm & Haas Co. v. Brotech Corp., 127 F.3d 1089 (Fed. Cir. 1997) (relying on various factors to conclude that district court erred in finding pre-suit investigation violated Rule 11); Valley Recreation Products, Inc. v. Arachnid, Inc., 1994 WL 530818 (Fed. Cir. Sept. 30, 1994) (same)


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where it is readily and easily accessible.61 Yet, sometimes doing so may be practically

difficult, if not impossible.

For example, little investigation can as a practical matter be done to ascertain

whether a competitor in its private factory is practicing a process covered by another

patent, since permission to physical examine the plant is not likely to be granted.62

However, reasonable steps may require approaching the owner of the factory with

concerns and seeking information about the process used, subject of course to appropriate

protective orders and prosecution bars.63 Likewise, the intangible nature of some patents,

particularly so-called business method patents, may preclude or limit pre-suit inquiry.64

Finally, there may be multiple, very similar products that might infringe: “it is not

always necessary for the plaintiff’s attorneys to inspect each product separately… At a

minimum, however, the evidence uncovered by the patent holder’s investigation must be

sufficient to permit a reasonable inference that all the accused products infringe.”65

Related to this is whether “claim charts” are required. A claim chart is, of

course, an accepted and common way to “map” the interpreted claim onto the accused

product or process. A few courts have stated that claim charts were, at least under the

circumstances, required. This is probably a fact-dependent issue, but prudence dictates

arts, lawyers use some reasonable analytical method to that, if not formal claim ch 61 See generally Intamin, Ltd. v. Magnetar Tech., Corp., 483 F.3d 1328 (Fed. Cir. 2007) (Rule 11 did not require patentee to cut open metal devices where it analyzed other information that was available to form a reasonable basis for asserting infringement); Eon-Net, L.P. v. Flagstar Bancorp, Inc., 239 F.R.D. 609 (W.D. Wash. 2006) (criticizing counsel for relying on advertisements about accused products rather than acquiring commercially available versions). 62 Cambridge Prods., Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048 (Fed. Cir. 1992) (affirming denial of sanctions where missing information was not accessible to plaintiff); Dome Patent LP v. Permeable Tech., Inc., 190 F.R.D. 88, 91-92 (W.D.N.Y. 1999) (denying sanctions where missing information “is obviously within the exclusive knowledge and control of [the defendant] at this time.”). 63 See Hoffman-La Roche Inc. v. Invamed Inc., 213 F.3d 1359 (Fed. Cir. 2000) (pre-suit inquiry was reasonable in part because patentee asked accused infringer to disclose its process, but it refused to do so). 64 De Technologies, Inc., v. Dell Inc., 2006 WL 4677984 (W.D. Va. Feb. 28, 2006). 65 Antonious v. Spalding & Evenflo Companies, Inc., 275 F.3d 1066, 1075 (Fed. Cir. 2002).


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compare the claims to the accused products or processes. Often this will be a claim chart,

since it is familiar to patent practitioners, but it need not always be, since reasonableness,

not bright lines, is the norm under Rule 11 and other pertinent law governing pre-suit

investigations.

B. Invalidity of the Patent

Both plaintiffs and defendants must conduct reasonable inquiry concerning

invalidity of the patent-in-suit. The patentee generally has a far easier duty to satisfy.66

For the patentee, the Federal Circuit has held that the patentee can rely on the

statutory presumption of validity in 35 U.S.C. § 282 to support its belief that the patent

was valid.67 In addition, if licenses have been taken under the patent, that also provides

additional evidence of validity.68 Accordingly, in the absence of actually knowing before

filing suit of strong, clear and convincing evidence of invalidity,69 a patentee probably

need do to avoid violating Rule 11.

Because of this presumption, however, more investigation is required of a

defendant before alleging invalidity, whether pled in a declaratory judgment complaint or

an answer asserting invalidity. Assertions of invalidity must also be based upon

reasonable inquiry under Rule 11 and taking into account the clear and convincing

evidence standard. Certain obligations may prove to be bright lines: in the case of

allegedly invalidating prior art, for example, a lawyer should at minimum ensure that

asserting the invalidating art is “prior art” under one of the there is a reasonable basis for

66 See generally, VData, LLC v. Aetna, Inc., 2006 WL 3392889 (D. Minn. Nov. 21, 2006). 67 Avia Group Int’l, Inc. v. L.A. Gear Cal., Inc., 853 F.2d 1557, 1562 (Fed. Cir. 1988); Q-Pharma, 360 F.3d at 1303; Micromesh Tech. Corp. v. Am. Recreation Prods., Inc., 2007 WL 2501783 (N.D. Cal. Aug. 30, 2007). 68 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 295 (Fed. Cir. 2004). 69 See Thermocycle Int’l, Inc. v. A.F. Hinrichsen Sales Corp., 1991 WL 120299 (S.D.N.Y. June 26, 1991).


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subsections of Section 102. This often can be accomplished by looking at the date of a

printed publication and comparing it to the filing date of a US patent.

On the other hand, some issues may require additional investigation. For

example, where public accessibility is an issue – such as where a dissertation allegedly

anticipates a claim, but the lawyer knows no facts concerning whether and if so when it

became “publicly accessible” and so “prior art” under Section 102 -- reasonable

investigation is required into the factors underlying accessibility. The lawyer must

conduct a reasonable investigation to support a nonfrivolous basis to assert that the

dissertation was publicly accessible prior to the critical date.

C. Unenforceability

Again, both patentee and accused infringer have obligations relating to

unenforceability. But, also again, the obligations on patentee are less.70 A patent is

presumed valid and enforceable and so, absent strong clear and convincing evidence

known to the patentee of unenforceability of the patent-in-suit, no further investigation

would normally be necessary.

As for the defendant, whether pled in a declaratory judgment complaint or an

answer asserting unenforceability, allegations of inequitable conduct must also be based

upon reasonable inquiry.71 While the amount of investigation is substantively no

different for allegations of unenforceability rather than invalidity, as a practical matter the

Federal Circuit’s repeated condemnations of unnecessary and ill-conceived allegations of

70 See generally, VData, LLC v. Aetna, Inc., 2006 WL 3392889 (D. Minn. Nov. 21, 2006). 71 In re Hayes Microcomputer Prods., Inc. Patent Litig., 982 F.2d 1527, 1546 (Fed. Cir. 1992) (“Although we deplore such unfounded accusations of inequitable conduct as occurred here, we nevertheless uphold the district court's denial of sanctions under Fed.R.Civ.P. 11.”); Serious Materials, LLC v. Supress Prods., LLC, 2008 WL 754878 (N.D. Cal. March 21, 2008) (denying sanctions for having pled inequitable conduct).


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inequitable conduct as a practical matter indicate that more investigation may be

required. After all, a practitioner is accusing someone of intentionally deceiving the

patent office – a very serious matter -- and that can result in loss of registration as well as

malpractice liability.

3. Conduct During Investigations that Can Lead to Unprofessionalism

A. Using Undercover Investigators to Gather Evidence is Also Limited

Only a few courts and bar associations have addressed the precise issue of

whether it is ethical for a lawyer to hire a third party to contact an actual or

potential party who must misrepresent himself to obtain potential evidence of

wrong‐doing, including that of trademark or patent infringement. The authorities

that have addressed the issue have split.

72 Further, they have split even while

interpreting identically worded rules. With this split, and with a lack of case law on

the issue in most jurisdictions, lawyers who rely upon undercover investigations or

“white lies” during investigations do so at some peril.

Having said that, in many cases evidence gathered by undercover

investigations is used without challenge and no doubt under the assumption by all

involved that dissembling during investigations is neither unethical nor

sanctionable.73 It also appears fairly settled that government lawyers, such as those

72 See Michael Bonsignore, Rules Exist for a Reason: A Commentary on Lawyers Hiring Investigators to Partake in Deceptive Tactics, 21 Geo. J. Legal Ethics. 655 (2008); Gerald B. Lefcourt, Fighting Fire with Fire, 36 Hofstra L. Rev. 397 (2007); Kathryn M .Fenton, Ask the Ethics Experts: Ethical Implications of Lawyer Participation in Undercover Investigations and Other Covert Activities, 16 SUM Antitr. (2002). 73 See generally, Isbell, 8 Geo. J. Legal Ethics at 797-802 (discussing numerous cases where evidence gathered in undercover investigations was admitted without questioning whether the practice in some way implicated legal ethical issues). See also Sanfill of Ga. Inc. v. Roberts, 502 S.E. 2d 343, 344 (Ct. App. Ga. 1998) (investigator called defendant to find location of former employee).


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involved in criminal investigations74 and even bar grievance investigations,75 may

use undercover investigations and the “deception” that accompanies them.

However, despite the fact that deception is often used and unchallenged, it is

an open question in most jurisdictions as to whether deception in civil litigation

violates the ethics rules.76 At least three rules are implicated when a lawyer directs

that a nonlawyer, such as a legal assistant or independent investigator, to provide

false information (including a fake name) to third parties: whether the conduct

constitutes an impermissible ex parte contact with a “represented party” under

Model Rule 4.2; whether any statements made must comply with Model Rule 4.3,

governing unrepresented parties; and whether a dissembling investigator violates

either Model Rule 4.1 or 8.4, which prohibit deceitful conduct.

First, to be clear, if the lawyer cannot engage in the conduct, then he cannot

induce a nonlawyer to engage in the conduct for him. A lawyer cannot simply use an

investigator to do what he cannot do.77 For example, a lawyer cannot hire an

investigator to contact a person who is “represented by counsel” in terms of Rule 4.2

r, if the person is not “represented by counsel” under and obtain information. No 74 See Utah St. B. Ethics Advisory Comm.. Op. No. 02-05 (March 18, 2002) (noting that both the ABA and other states had found undercover investigatory practices ethical when conducted by government lawyers to gather evidence); U.S. v. Parker, 165 F. Supp. 2d 431, 476 (W.D.N.Y. 2001) (holding that the rule prohibiting deceit “does not apply to prosecuting attorneys who provide supervision and advice to undercover investigations.”) 75 See Virginia Eth. Op. 1842. 76 See id. (“We do not address in this opinion and specifically reserve the issue of whether the analysis and result of this opinion apply to a private lawyer’s investigative conduct that involves dishonesty, fraud, misrepresentation or deceit.”); Am. B. Ass’n Comm. On Ethics and Professional Responsibility Formal Op. 01-422 (2001) (“The Committee does not address in this opinion the application of the Model Rules to deceitful, but lawful conduct by lawyers, either directly or through supervision of the activities of agents and investigators, that often accompanies nonconsensual recording of conversations in investigations of… discriminatory practices, and trademark infringement. We…. leave for another day the… question of when investigative practices involving misrepresentations of identity and purpose nonetheless may be ethical.”) 77 See, e.g., In re Environmental Ins. Declaratory Judgment Actions, 600 A.2d 165 (N.J. Super. Ct. 1991); Upjohn Co. Aetna Cas. & Sur. Co. 768 F. Supp. 1186 (W.D. Mich. 1991).


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Rule 4.2, may an attorney hire an investigator to engage in a contact that violates

Rule 4.3. 78

At the same time, however, a client who is not a lawyer is not covered by the

disciplinary rules and is entitled to a full and accurate assessment of the client’s

ability to contact opposing parties or conduct investigations. Lawyers who explain

to a client that the lawyer cannot undertake activities that the client can should be

extremely careful, however, not to cross the line between explaining the client’s

rights and inducing the client to act on the lawyer’s behalf.79 For example, while the

lawyer might advise the client as to the parameters of a legal investigation, the

lawyer should consider not participating in the decision as to exactly how the client

or undercover investigator will proceed.80

Thus, the question of whether a lawyer may engage in “deceit” or dishonesty

during undercover investigations becomes paramount. If he cannot do it, he cannot

request others to do it for him.

78 Model Rule 5.3 (responsibilities of lawyer for activities of supervised non-lawyers). The Ethics 2000 version of the comments to Model Rule 4.2 provide: “Communications authorized by law may also include investigative activities of lawyers representing governmental entities, directly or through investigative agents, prior to the commencement of criminal or civil enforcement proceedings.[] This implies that a communication is not “authorized by law[] where the lawyer conducting the activity is not representing a government entity. 79 See Jones v. Scientific Colors, Inc., 201 F. Supp.2d 820 (N.D. Ill. 2001) (allowing lawyer to use information that, had he acquired it rather than his client, would have been inadmissible due to Rule 4.2) 80 Id.; see Mena v. Key Food Stores Co-op., Inc., 758 N.Y.S.2d 246 (Sup. Ct. Kings County NY 2003).


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The following shows that the courts are split, dramatically, on how Rule 4.2

operates in this context. One option that lawyers have used, as a result, is to ask the

court for permission to use undercover investigators.81

1. Does Rule 4.2 Apply to the Contact? Rule 4.2 in states that follow the Model Rules provides:

In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has he consent of the other lawyer or is authorized to do so by law or a tcourt order.

Thus, for the rule to apply, the lawyer must be representing a client, must be

communicating about the subject of the representation, and must be communicating

with a person the lawyer “knows” to be represented by counsel “in the matter.”

Thus, the rule does not apply if the lawyer is not representing a client. Beyond that,

the lines are less bright.

A. Is there a “Matter?” The timing of the investigation may be critical to whether contact with an

opposing party, or an employee thereof, violates Rule 4.2. If the contact occurs

before a “matter” exists, or counsel knows the person is represented by counsel in

that matter, then Rule 4.2 does not apply.82

While the concept is clear at the margins, it is hazy in the middle. On one

end of the spectrum, once suit is filed a “matter” exists. But a “matter” can exist

before litigation is filed.

81 See, e.g., Flebotte v. Dow Jones & Co., 2001 US Dist. LEXIS 21327 (D. Mass. June 28, 2001). 82 See generally, Weider Sports Equip. Co. v. Fitness First, Inc., 912 F. Supp.2d 502 (D. Utah 1996).


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Most courts appear to require more than just the possibility of litigation,

however. Two similar cases illustrate the factors that courts consider in

eterm er, prior to filing suit, a “matd ining wheth ter” exists.

In the first, Jorgenson v. Taco Bell Corp., 58 Cal. Rptr.2d 178 (Cal. App. 1996),

Taco Bell sought to disqualify a lawyer who, prior to filing an employment

discrimination suit, had hired a private investigator who had interviewed the

alleged harasser and two other employees. Taco Bell argued that the lawyer should

have known that, once suit was filed, the employees would be represented by

counsel, and so the contacts were improper. The court rejected the argument, and

refused to disq o n t : ualify the lawyer. In s doi g it s ated

Taco Bell’s proposal has wide and troubling implications. Under it, counsel for a plaintiff who is a tort victim would risk disciplinary action by interviewing adverse parties or their employees, if that counsel “should have known” such interviewees would be represented by some unidentified counsel after a complaint is filed. Reasonable investigations by counsel in advance of suit being filed to determine the bona fides of a client’s claim would be precluded.

Every plaintiff’s attorney should know, for example, that some defense counsel will, with rare exceptions, be provided by a liability insurance carrier to represent its insured after the filing of a complaint alleging acts within the ambit of the coverage. Similarly, every defense counsel should know that frequently an injured plaintiff who may, without counsel, preliminarily negotiate with the liability arrier’s representative, will ordinarily retain counsel to file suit if no csettlement is reached. In these situations, Taco Bell’s proposed expansion of the application of rule 2‐100 [California’s version of Model Rule 4.2] would arguably mean that both plaintiff and defense attorneys would be subjected to disciplinary action for violating rule 2‐100 if they directed interviews of claimants or alleged tortfeasors, although no etermination to file suit had been made and no lawyer to file or efend it had been retained. dd


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Taco Bell contends that it had unidentified “house counsel,” as Jorgensen’s attorney “should have known,” available to communicate with Jorgensen’s attorney before her investigator conducted interviews of its employees. Taco Bell reasons that Jorgensen’s lawyer had to first identify its house counsel and seek that counsel’s permission to interview Taco Bell’s employees to avoid violation of rule 2‐100. Numerous corporations in America have full or part‐time house counsel. That knowledge or presumptive knowledge does not trigger the application of rule 2‐100, unless the claimant’s lawyer knows in fact that such house counsel represents the person being

en that interview is con tinterviewed wh duc ed.83

In the second, Shoney’s, Inc. v. Lewis, 875 S.W.2d 514 (Ky. 1994), the court

disqualified a lawyer who had taken precomplaint statements from two of the

defendant’s managers while investigating whether to file a sexual harassment suit.

The court held there was a matter, and the lawyer knew the employees were

represented in it, because the lawyer had discussed the matter with the employer’s

lawyer before contacting the employees. The court suppressed the statements

gained through the improper contact.

Some courts have interpreted the rule to apply even before suit is filed, and

even without knowing that the entity – let alone the person – is represented by

counsel. This was the result in a patent case in Pennsylvania, where the court

rejected the argument that, pre‐suit and without communication between counsel, a

“matter” could not exist.84

If there is a matter, the communication must be about the matter.85 The

something other than the “matter” in which she lawyer may freely discuss

83 Jorgensen, 58 Cal. Rptr.2d at 180. See Weider Sports Equip. Co. v. Fitness First, Inc., 912 F. Supp.2d 502, 511-12 (D. Utah 1996) (no matter existed under similar facts, but where rule used word “party” rather than “person,” and so concluding a “matter” exists only when litigation exists). 84 Penda Corp. v. STK, LLC, 2004 WL 1628907 (E.D. Pa. July 16, 2004) (excluding evidence). 85 See Penda Corp. v. STK, LLC, 2004 WL 1628907 (E.D. Pa. July 16, 2004) (holding that pre-suit inquiry about availability for purchase of infringing goods in the district was about the “matter”).


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represents a client, as a comment to the rule makes clear: “This rule does not

prohibit communication with a represented person, or an employee or agent of such

a person, concerning matters outside the representation. For example, the existence

of a controversy between a government agency and a private party, or between two

organizations, does not prohibit a lawyer for either from communicating with

nonlawyer representatives of the other regarding a separate matter.”86 While in a

disciplinary case distinctions about the meaning of “matter” matter, they do not in

the real world because of the risk of the client not remembering the conversation as

clearly “unrelated” as the lawyer did, or of a court characterizing the contact as

involving the same “matter” even if the lawyer did not subjectively think it did. Care

needs to be given when a contact is made about some other “matter,” including

considering whether to obtain consent to record the conversation to avoid

misunderstandings.

B. Does Counsel “Know” the Person is “Represented by in RCounsel” terms of ule 4.2?

“Knowledge” is defined to include not just actual knowledge, but also

knowledge that can be inferred from the circumstances.87

With respect to “represented by counsel,” when a natural person is the

opposing party, there is little to analyze under this prong. A natural person who is

named as a party to a suit and who has a lawyer is “represented by counsel.”88

However, if an entity (corporation, partnership, etc.) is the opposing party,

presented by counsel” in Rule 4.2 is counter‐intuitive the meaning of the term “re

86 Iowa R. 32:4.2, cmt. 4. 87 Featherstone v. Schaerrer, 34 P.3d 194 (Utah 2001). 88 Askins v. Colon, 608 S.E.2d 6 (Ga. App. 2004).


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and, also, not uniform among the states. This section addresses how courts have

interpreted “represented by counsel” as applied to entities.

1. Federal Choice of Law Rules

Patent litigation is filed in federal court. In federal court, many circuits hold

that state rules do not control, even if the local rules of the court specifically adopt

the stat ” applies e rules. Instead, “federal law to ethical issues.89

The federal district court in McCallum faced this issue in the context of an ex

parte contact with employees of a party opponent, reasoned as follows:

This court has adopted a code of conduct in its local rules. Local Rule 505 utilizes the Code of Professional Responsibility promulgated by the Supreme Court of North Carolina. Notwithstanding, this Court must look to federal law in order to interpret and apply those rules. That is, even when a federal court utilizes state ethics rules, it cannot abdicate to the state’s view of what constitutes professional conduct, even in diversity cases. Therefore, while this Court has adopted the North Carolina Professional Code as its code of conduct, it still must look to federal law for interpretation of those canons and in so doing may consult federal case law and other widely accepted national codes of conduct, such as the ABA Model Rules. In addition, the Court may presume the attorney to be familia with and bound by the ethical rules of the courts in which the rattorney is admitted to practice.90

The court rejected the plea, from the attorney whose conduct was at issue, to follow

only the North Carolina rules:

This Court may apply its ethical code of conduct to out‐of‐state attorneys who practice before this Court and can sanction conduct which takes place in other states. By choosing to litigate in this Court, counsel submit to this Court’s federal law interpretation of ethical canons wherever the conduct takes place. Plaintiffs’ counsel has not shown that the interpretation set out today is in direct contradiction of any duty imposed by the state where he was admitted to practice or

curred. Even if those states permitted the conduct where the conduct oc 89 E.g., In re Dresser Indus., 972 F.2d 540 (5th Cir. 1992). 90 McCallum, 104 F.R.D. at 108 (citations omitted).


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at issue, that does not give an attorney permission to operate in contravention of the ethical duties as determined by this Court. If there is a disparity between ethical obligations of different states, counsel’s only choice is to follow the more expansive duty or seek guidance from this Court..91

Likewise, in a Maryland Federal district court analyzed for the first time the

propriety of ex parte contacts with former employees of a party opponent. Noting

that the Maryland Rules of Professional Conduct were merely “the point of

departure” for its analysis, the court analyzed authorities applying the Model Code,

the Model Rules, and the Restatement of the Law Governing Lawyers.92 The court

held that ex parte contacts with former employees could be improper even though

Maryland’s bar opinions had held precisely the opposite.93 Although recognizing that

the law regarding ex parte contacts was “blurry” and that the question was one of

first impression, the court disqualified the lawyers for violating its newly‐minted

rule, stating:

The issue is not whether counsel incorrectly interpreted unsettled law, but whether [counsel] displayed an inappropriate disregard for the unsettled nature of that law. . . . [As] appellee stated in Cagguila [v. Wyeth Lab, Inc., 127 F.R.D. 653 (E.D. Pa. 1989)], ‘in such an uncertain area of ethical conduct, we believe that a prudent attorney would have iven notice to opposing counsel of the intent to take such a gstatement.’94

Thus, care must be given not only to the interpretation of the state rule, but to any

federal decisions on point. Determining the “national standard” on the scope of who

is “represented by counsel” under Rule 4.2 is difficult at best.

91 McCallum, 149 F.R.D. at 112 (emphasis added). 92 Camden, 910 F. Supp. at 1118 93 See id. at 1119 94 Camden, 910 F. Supp. at 1124, quoting University Patents, Inc. v. Kligman, 737 F. Supp. 325, 329 (E.D. Pa. 1990) (quoting Cagguila v. Wyeth Lab, Inc., 127 F. R. D. 653 (E.D. Pa. 1989)).


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2. Current Employees of An Opposing Party.

ABA Model Code DR7‐104(a) provides that a lawyer shall not: Communicate or cause another to communicate on the subject of the representation with a party the lawyer knows to be represented by another lawyer in that matter unless the practitioner has the prior onsent of the other practitioner representing such other party or is cauthorized by law to do so. Courts have split on the scope of the prohibition in DR7‐104(a) as applied to

corporate party current employees, disagreeing on which employees should be

considered to be “represented” by a lawyer representing the corporation.95 Courts

had rea ned:so

ex parte 1. only communications with those in the “control group” ‐‐ were prohibited;

ex parte2. only communications with “upper level” personnel ‐‐ broader than the “control group” ‐‐ were prohibited;

ex part with authority to 3. only e communications with any agent bind the corporation were prohibited; or

4. all ex parte communications were prohibited.96 With respect to Model Rule 4.2 a comment explains that the rule prohibits

contacts “with [1] persons having a managerial responsibility on behalf of the

organization, and [2] with any other person [a] whose act or omission in connection

with that matter may be imputed to the organization for purposes of civil liability or

[b] whose statements may constitute an admission on the part of the

organization.”97

95 See Brown v. St. Joseph County, 148 F.R.D. 246, 249-51 (N.D. Ind. 1993). 96 See Brown, 148 F.R.D. 253-54 (collecting cases). 97 Model Rule 4.2, cmt.


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The comment has been subject to wide‐ranging interpretations, particularly

the comment with respect to the “admissions” prong.98 To exhaustively survey the

interpretations would take a law review article. A recent case catalogs the potential

categories of current employees who may be subject to Rule 4.2, and in this

particular jurisdiction, all of them are:

1. Current officials of the corporation or organization who have managerial responsibility;

2. Other current corporate or organizational employees whose act or omission in connection with the matter may be imputed to the corporation or organization for purposes of civil or criminal liability;99

3. Those who are responsible for implementing the advice of the corporation’s or organization’s lawyers;

4. Any members of the corporation or organization whose own interests are directly at stake in a representation; and

5. An agent or servant of the corporation or organization whose statements concerns a matter within the scope of the agency or employment, which statement was made during the existence of the relationship and which is offered against the corporation or organization as an admission.100

Because the rule has been subject to disparate interpretations, careful analysis

should be given to whether a particular current employee comes within the scope of

the prohibition. Indeed, as next shown, the rules themselves are not, always,

identical to the Model Rule, thus making predictability that much more difficult.

98 See, e.g., Camden v. Maryland, 910 F. Supp. 1115 (D Md. 1996) (collecting cases which take varying approaches); Featherstone v. Schaerrer, 34 P.3d 194 (Utah 2001) (same). 99 See Mendez v. Hovensa, LLC, 2008 WL 90678 (D. V.I. March 31, 2008) (analyzing this prong); Hill v. Shell Oil Co., 209 F. Supp.2d 876 (N.D. Ill. 2002) (analyzing this prong and concluding that gas station attendants were “represented by counsel” under this prong as their conduct was at issue in class action case). 100 Penda Corp. v. STK, LLC, 2004 WL 1628907 (E.D. Pa. July 16, 2004); Paulson v. Plainfield Trucking, Inc., 210 F.R.D. 654, 657-58 (D. Minn. 2002) (citing and collecting cases); Featherstone v. Schaerrer, 34 P.3d 194 (Utah 2001) (same); Mendez v. Hovensa, LLC, 2008 WL 90678 (D. V.I. March 31, 2008) (same).


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Under the “National Standard” approach to determining the rules of ethics

governing attorney conduct in federal court litigation, consideration must be given

to the approach of the Model Code, the Model Rules, and any applicable state rules.

Thus an attorney seeking to contact a present employee of a party opponent must

carefully evaluate the propriety of the contact under each of these three approaches,

and weigh the relative merits of each. If the contact is improper under one or more

approaches, extreme care should be given before engaging in any ex parte contact.

a. Just Gathering Evidence from a Website May be Unethical

Is a visit to an opponent’s website during litigation a violation of Rule 4.2? Put

the other way, does anything prevent an adversary from accessing an opponent’s web

page and gleaning information from it, and then using it against the site owner, if a matter

exists?

The Oregon Bar Association addressed this issue.101 It recognized that the digital

nature of the contact was irrelevant: if the contact was prohibited in the real world, then

it was prohibited in digital one, too.102 Thus, since a lawyer can obviously read a 10-K

filed by its opponent, or its annual report, a lawyer who reads information posted on a

website is not violating the rule.

While a passive review of publicly accessible information does not violate the

rule against ex parte contacts, websites are often interactive. The Oregon Bar

Association distinguished between different degrees of interactivity:

Some web sites allow the visitor to interact with the site. The t of providing feedback about the site or ordering interaction may consis

101 Oregon St. B. Ass’n. Op. No. 2001-164 (Jan. 2001). 102 Id.


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products. This kind of one-way communication from the visitor to the Web site also does not constitute communicating “with a person” as that phrase is used in DR 7-104. Rather, it is the equivalent of ordering products from a catalog by mailing the requisite information or by giving it over the telephone to a person who provides no information in return other than what is available in the catalog……

A more interactive Web site allows the visitor to send messages and receive specific responses from the Web site or to participate in a “chat room.” A visitor to a Web site who sends a message with the expectation of receiving a personal response is communicating with the responder. The visitor may not be able to ascertain the identity of the responder, at least not before the response is received. In that situation, a lawyer visiting the Web site of a represented person might inadvertently communicate with the represented person. If the subject of the communication with the represented person is on or directly related to the subject of the representation, the lawyer violates DR 7-104.

For example, assume Lawyer B’s client is a retailer in whose store a personal injury occurred. Lawyer A could visit the store and purchase products without the consent of Lawyer B, and could ask questions about the injury of clerks and other witnessed not deemed represented for purposes of DR 7-104. Lawyer A could not, however, question the store owner or manager or any clerk whose conduct was at issue in the matter. That same analysis applies if Lawyer B’s client operates an “e-store.” Lawyer A could visit the “e-store” site and review all posted information, purchase products, and respond to surveys or other requests for feedback from visitors. Lawyer A could not send a demand letter or an inquiry through the Web site requesting information about the matter in litigation unless Lawyer A knew that the inquiry would be answered by someone other than Lawyer B’s client (or, if the client is a corporation, someone deemed represented).103 Thus, passively entering an opponent’s website does not implicate the rule against

ex parte contacts. Information on a web page is not “confidential” and can be used

against a client in a matter. Only if the contact crosses into an improper “interactive

inquiry” can the rule be violated.

There is one error ‐‐ and it is important ‐‐ in the Oregon opinion. Under the

ay not contact a person through the Internet unless the Oregon opinion, a lawyer m

103 Id.


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lawyer knows the person is not represented. This is incorrect, loose language. See

below. The Oregon Bar Association’s opinion takes the prohibition against ex parte

contacts too far. Unless the lawyer knows the person with whom she is interacting

is “represented” in terms of Model Rule 4.2, the contact should be proper. That

issue is discussed more fully below.

3. Former Employees of an Opposing Party

Courts interpreting DR7‐104(a) also had applied different interpretations to

prohibitions a nst c tacting forgai on mer employees, including:

1. all ex parte communications were prohibited; 2. only ex parte communications with former employees whose

r omission u o acts o s could be attrib ted t the corporation were prohibited;

y ex par e3. onl t communications with former managerial or “upper level” employees were prohibited; or

. no ex parte communications with former employees were 4

prohibited.104

By the late 1980's, most states adopted versions of ABA Model Rule 4.2.105

Courts had, however, split as to whether and if so how the rule applied to ex parte

contacts with former employees. The source of the split was the comment to Model

Rule 4.2, quoted just above. Focusing on the comment, courts had inconsistently

interpreted the state rules, some courts concluding that they did not apply to former

employees, one holding that its state rule barred all communication, and others

concluding that its rule permitted ex parte communication under certain

circumstances.106

104 See Hanntz v. Shiley, 766 F. Supp. 258, 271 (D.N.J. 1991). 105 See, e.g., University Patents, Inc. v. Kligman, 737 F. Supp. 325 (E.D. Pa. 1990) 106 See Valassis v. Samelson, 143 F.R.D. 118 (E.D. Mich. 1992) (collecting cases). See In re Domestic Air Transp. Antitrust Litig., 141 F.R.D. 556 (N.D. Ga. 1992) (discussing split).


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A very few courts had adopted a virtually absolute ban on ex parte contacts

with all but the lowest‐level former employees.107 Although other courts have

rejected the total ban including the judge who authored the PSE & G opinion

himself,108 the total ban still has some support:

The PSE&G decision is appealing in several respects. First, it provides a bright‐line test for members of the bar seeking to comply with ethical rules. Second, it advances one of the policy goals underlying the ethical rule: to protect parties and witnesses from overreaching by attorneys. Third, it arguably aids in the development of clear factual records in the sense that it fosters use of depositions. While depositions are admittedly a more expensive discovery technique than informal, ex parte interviews, they protect “the rights of all arties without unduly favoring or prejudicing” either, and they Afar pmore reliable and ethically sound” than informal discovery tools.109 In 1991, the ABA specifically stated that Model Rule 4.2 did not apply to

former employees under any circumstances.110 Since that time, almost every

decision has reasoned that the state counter‐parts to Rule 4.2 do not apply to former

employees.111

107 Public Serv. Elec. & Gas Co. v. Associated Elec. & Gas Ins. Serv., Ltd., 745 F. Supp. 1037 (D.N.J. 1990). 108 See Andrews v. Goodyear Tire & Rubber Co., Inc., 2000 WL 175098 (D.N.J. 2000) 109 Shearson Lehman Bros., Inc. v. Wasatch Bank, 139 F.R.D. 412, 416 (D. Utah 1991) (quoting PSE&G). 110 ABA Formal Op. 91-359 (1991). 111 See Smith v. Kansas City So. Ry. Co., 87 S.W.3d 266 (Mo. App. 2002); Shearson, 139 F.R.D. at 417-18; Brown, 148 F.R.D. at 253-54. See also Ohio Comm’n on Grievances and Discipline Op. 96-1 (Feb. 2, 1996) (no bar to ex parte contacts with former employees). The vast majority of courts have concluded that the rule does not apply, at all, to former employees. See, e.g., Johnson v. Ohio Dept. Of Youth Serv., 231 F. Supp.2d 690 (N.D. Ohio 2002) (“Ex parte contact with a former employee is not, however, prohibited.”); In re Grievance Proceeding, 2002 WL 31106389 (D. Conn. July 19, 2002) (prohibition of 4.2 does not apply to former employees); Wallace v. Valentino’s of Lincoln, 2002 WL 31323811 (D. Neb. Oct. 17, 2002) (“ former employees of a corporate party may be interviewed by adverse counsel without the permission of the corporate counsel if the former employees are not individually represented in the same matter”); Humco, Inc. v. Noble, 31 S.W.3d 916 (Ky. 2000) (“A former employee with no present relationship with the organizational party is not a “party’ under the rule...”); Hanntz v. Shiley, Inc., 766 F. Supp. 258, 267 (D.N.J. 1991) (the policies of Rule 4.2 “do not justify a wholesale restriction on discovery of factual information, damaging or not.”); DuBois v. Gradco Systems, Inc., 136 F.R.D. 341, 345 (D. Conn. 1991).


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However, the earlier authority remains “good law” in many states, and some

contrary decisions came after the 1991 ABA opinion.112 This means that the scope

of “represented by counsel” could be based upon cases decided before the 1991 ABA

opinion, and it could be difficult to get a court to reject prior state law decisions on

the stre pngth of the ABA’s 1991 o inion.113

In addition, some state rules may in fact be broader than, even though

worded the same as, Model Rule 4.2. Even now, the precise scope of Rule 4.2 as it

applies to former employees is an open question in some jurisdictions.114 A recent

opinion from South Carolina illustrates how difficult predicting what a rule is even

where only a single state’s rules might apply and thus understates the difficulty in

federal court litigation (as well, for that matter, in states where there as yet no clear

judicial interp iretat on of the state version of rule 4.2):

The Committee admonishes the Bar to be careful when contemplating contact with former employees. "The attorney who seeks [prior] court approval does not risk an ethical violation, but one who does not acts at his or her own peril." In re Aircrash Disaster, 909 F.Supp. 1116 (N. D. Ill. 1995). Such an interview is "a veritable minefield in which. . . . short and tentative steps are the most appropriate." Driggs Reorg. Corp. v. Driggs, 217 B.R. 67 (D. Md. 1988). Because the American Bar Association Standing Committee on Ethics and Professional Responsibility or the South Carolina Ethics Advisory Committee provides a particular analysis and interpretation of Rule of Professional Conduct 4.2, does not mean that a particular court in or

outh Carolina will draw the same conclusions. Of outside the State of S

112 See, e.g., Schwartz v. Hood, 2002 WL 974678 (D. Mass. May 8, 2002) (“I will not distinguish between former and current employees since their statements and wrongful acts could be equally imputed to the defendant for purposes of liability.”); Camden, 910 F. Supp. at 1120-22; Rent Club, Inc. v. Transamerica Finance Corp., 811 F. Supp. 651, 657-58 (M.D. Fla. 1992). 113 See Park, 1996 WL 450263 at *1-2 (attempting to reconcile Florida’s conflicting cases and Opinion 91-359). 114 E.g., Patriarca v. Center for Living & Working, Inc., 778 N.E. 2d 877 (Mass. Sup. Jud. Ct. 2002) (“The question of the general applicability of rule 4.2 to former employees is one we need not address because, on the facts presented, the former employees in question would not have been protected, even while employed, from ex parte contact by rule 4.2.”); Featherstone v. Schaerrer, 34 P.3d 194 (Utah 2001).


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particular note is that federal law governs the conduct of attorneys in deralfe courts. In re Snyder, 472 U.S. 634, 645 n.6 (1985).

In the State of New Jersey, for example, three separate Federal District Court judges came up with three separate tests for allowing ex parte contacts with former employees. See, Public Service Electric & Gas Co. v. Associated Electric & Gas Insurance Services Ltd., 745 F. Supp 1037 (D. NJ 1990); Curley v. Cumberland Farms, Inc., 134 F.R.D. 77 (D. N.J. 1991); and In re The Prudential Insurance Co. of America Sales Practices Litigation, 911 F.Supp. 148 (D. N.J. 1995). To add confusion, the judge in the PSE & G case reversed his position recently in Andrews v. Goodyear Tire & Rubber Co., Inc., 2000 WL 175098 (D. N.J. 2000). The Southern District of New York engaged in an excellent analysis of the issue, reaching the conclusion that interviews with former employees were allowed in Polycast Technology Corp. v. Uniroyal, Inc., 129 F.R.D. 621 (S.D. N.Y. 1990). Likewise, courts in Illinois, Michigan, and Connecticut have allowed contact with former employees. Orlowski v. Dominick's Finer Foods, Inc., 937 F.Supp. 723 (N.D. Ill. 1996); Valassis v. Samuelson, 143 F.R.D. 118 (E.D. Mich. 1992); and Dubois v. Gradco Systems, Inc., 136 F.R.D. 341 (D. Conn. 1991). In Virginia, ex parte contacts with former employees have been precluded where the former employee's statements may impute iability to the former employer. Armsey v. Medshares Management lServices, Inc., 184 F.R.D. 569 (W.D. Va. 1998). In Florida, some courts draw the line not on the nature of the prior employment, but rather on the former employee's knowledge. Contact may be had with any ex‐employee, but no confidential information may be elicited. Rent Club Inc. v. TransAmerica Rental Finance Corp., 811 F.Supp. 651 (M.D. Fla. 1992). In another case, however, a Florida court decided that ex‐employees can be freely interviewed ex parte, but only subject to a series of guidelines that range from counsel identifying him or herself as adverse to the former employer to counsel delivering all of his or her work product to the other side, listing the employees contacted and all interview notes. ang v. Reedy Creek Improvement District, 888 F.Supp. 1143 (M.D. Fla. 95).

L19 Without being mindful of the views of various courts and jurisdictions on this subject, attorneys may find their evidence excluded and themselves disqualified from further representation. See, Zachair Ltd. v. Driggs, 965 F.Supp. 741 (D. Md. 1997). It is the interpretation of this Committee, however, that Rule 4.2 does not, at present, preclude ex parte communications with former employees. Any other interpretation "should be made by a duly promulgated amendment to the rule itself, rather than by the gloss of caselaw."


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Davidson Supply Co., Inc. v. P.P.E., Inc., 986 F.Supp. 956, 958 (D. Md. 1997) (disagreeing with the Zachair opinion and relying upon the nterpretation of Rule 4.2 given by the Maryland State Bar iAssociation). COMMITTEE NOTE: This issue engendered much discussion among the committee members. Some members were of the opinion that a lawyer could not properly communicate ex parte with a former employee who was a member of the former employer's control group. Others believed that it was improper for a lawyer to communicate ith a former employee whose act or omission may be imputed to the w

organization for purposes of civil or criminal liability.115 Under the “national standards” approach to determining the rules of ethics

governing attorney conduct in federal court litigation, consideration must be given

to the approach of the Model Code, the Model Rules, and the relevant state’s rules.

Once again, an attorney seeking to contact a former employee of a party opponent

must carefully evaluate the propriety of the contact under each of these three

approaches, and weigh the relative merits of each. If the contact is improper under

one or more approaches, extreme care should be given before engaging in any ex

parte contact: as shown below, improper ex parte contacts may result in severe

sanctions, including disqualification, thus obviating any savings achieved by

avoidin ociated with formal discovery. g the costs ass

4. InHouse Counsel’s Inability to Alter Rule 4.2

The fact that a represented organization has in‐house (or outside) counsel

does not mean that every employee is covered by Rule 4.2, as the foregoing shows.

As a corollary, counsel for an entity cannot “unilaterally create or impose

115 S.C. B. Ethics Advisory Comm. Op. 01‐01 (2001)


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representation of employees by corporate counsel” because that would “impede the

course n leading to or following the filing of a lawsuit.”of investigatio 116

5. Other Forms of Liability and Problems

This paper focuses on the ethical rules. However, under some circumstances

lawyers who have engaged third parties to make false statements have been

accused of fraud.117 Thus, although the focus of the paper is on ethics, state

common law fraud and other law obviously may also be pertinent.

C. Does Model Rule 4.2 Apply to Undercover Investigations? Two IP cases recently both found violations of Rule 4.2 where the conduct

occurred after litigation had commenced. A third found a violation beforehand. The

latter, first.

In Penda Corp. v. STK, LLC,118a lawyer contemplating a patent infringement

suit asked his paralegal to make calls to determine whether, for purposes of venue,

infringing sales were occurring in the district. The paralegal, on her own, decided to

say that her husband was looking for the product – a bedliner for a pick‐up truck –

when she made the calls. The court held that the customer service manager that the

paralegal contacted was a person “represented by counsel” because he could make

116 Terra Int’l, Inc. v. Mississippi Chem. Corp., 913 F. Supp. 1306 (N.D. Iowa 1996); see La Jolla Cove Motel & Hotel Apts., Inc. v. Superior Court, 121 Cal. App.4th 773 (Ct. App. Cal. 2004) (in-house counsel cannot assert blanket representation of all current employees); Patriarca v. Center fo Living & Working, inc., 778 N.E.2d 877 (Sup. Jud. Ct. Mass. 2002) (same); Humco, Inc. v. Noble, 31 S.W.3d 916 (Ky. 2000) (knowledge that company has in-house counsel does not mean lawyer “knows” all its employees are represented by counsel); ABA Formal Eth. Op. 95-396 (1995) (general counsel cannot ethically assert blanket representation of all current and former employees); Sup. Ct. Ohio Bd. Of Comm’rs on Grievances & Discipline Op. No. 2005-3 (Feb. 2005) (same); Phila. Eth. Op. 97-6 (July 1997) (same). 117 E.g., Sunrise Assisted Living, Inc. v. Sunrise Healthcare Corp., 1999 WL 33798757 (E.D. Va. Apr. 9, 1999) (analyzing whether crime-fraud exception applied to lawyer’s representation of client in acquiring mark from third party). 118 2004 WL 1628907 (E.D. Pa. July 16, 2004).


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admissions against his corporate employer. The court held that her contacts were

covered by Rule 4.2 – even though they occurred prior to filing suit – and excluded

evidence as a result of the violation. Though excluding evidence gained through the

communication, the court did state that it did “not want to overstate the violation”

which it characterized as “not egregious.”119

There were also two cases where the contact occurred afterward. In the first,

Midwest Motor Sports, Inc. v. Arctic Cat Sales, Inc.,120 the defendants had hired an

undercover investigator to pose as ordinary consumers and attempt to purchase

snowmobiles that they were not authorized to sell. In deciding that Rule 4.2 had

been violated, the court held that the contacts with the defendant’s owner, made for

the purpose of obtaining admissions, violated Rule 4.2’s prohibition against contacts

with “represented persons.”

A similar result was reached in a 2007 patent case decided by Judge

Robinson of Delaware.121 After suit had been filed, the law firm representing a

patentee purchased on the open market an accused infringing product and retained

an emp : loyee of the opposing party to assist in setting it up. The court reasoned

Given Mr. Lin's position and level of responsibility with respect to the Alcatel System, and because he was directed (as an employee of a represented party) to engage in conduct directly relevant to the subject matter of this litigation by F & R,5 the court finds that F & R violated Model Rule 4.2.122

119 Id. 120 144 F. Supp.2d 1147 (D.S.D. 2001), aff’d, 2003 WL 22382960 (8th Cir. 2003). 121 Microsoft Corp. v. Alcatel Business Systems, 2007 WL 4480632 (D. Del. 2007) 5 [Court’s footnote 5: “In the alternative, F & R was neither forthright nor disinterested when it consciously put Mr. Lin, without the benefit of legal representation, in the unwitting position of being directed to engage in conduct that has direct consequences vis a vis his employer and the subject matter of this litigation, conduct that violates Model Rules 4.1(a), 4.3 and 8.4(c).”] 122 Id.


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On the other hand, several courts have concluded that, even if technically

violated by undercover investigations that obtain admissions from “represented”

employees, for policy reasons not expressed in the rule, contacts that are not

designed to solicit privileged information even if they solicit admissions does not

violate the rule.

In Gidatex, S.rL. v. Campaniello Imports, Ltd.,123 the defendants filed a motion

in limine to exclude evidence obtained prior to filing suit by the plaintiff’s

undercover investigators from defendants’ sales clerks that showed that the

defendant had not complied with the plaintiff’s cease and desist letter. The evidence

showed that the investigators had misrepresented their purpose and identities in

determining whether trademark violations were not on‐going.

The court held that Rule 4.2 was “technically” violated, since the sales clerks’

statements were being offered as “admissions;” and the clerks were “represented by

counsel” even though suit had not been filed, because of the “permanent adversarial

status of the parties.” 124 However, the court then held:

Although Bailey’s conduct technically satisfies the three‐part test generally used to determine whether counsel has violated the disciplinary rules, I conclude that he did not violate the rules because his actions simply do not represent the type of conduct prohibited by the rules. The use of private investigators, posing as consumers and speaking to nominal parties who are not involved in any aspect of the litigation, does not constitute an end‐run around the attorney/client privilege. Gidatex’s investigators did not interview the sales clerks or trick them into making statements they otherwise would not have ade. Rather, the investigators merely recorded the normal business outine in the Campaniello showroom and warehouse.mr 125

123 82 F. Supp.2d 119 (S.D.N.Y. 1999). 124 82 F. Supp.2d at 124-25. 125 82 F.Supp.2d at 125-26.


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The court emphasized that its “analysis of the technical requirements of the

disciplinary rules only underscores my earlier conclusion that these rules do not

apply in the context of this case.”126

The same results have been reached even when the investigation occurred

post‐complaint (to ferret out violation of an injunctive order). For example, a

similar result was reached in Apple Corps. Ltd. v. Int’l Collectors Soc’y.127 There, the

plaintiff filed a motion for civil contempt alleging the defendants had violated a prior

order enjoining the defendants from selling certain stamps bearing likeness of The

Beatles except in a manner approved by the court. After the order had been

entered, the plaintiff’s attorney had her secretary order some of the stamps in a

manner that had not been approved by the court. Specifically, she had her several

people call the defendants using false names and giving false reasons for why they

wanted to order the stamps. The defendant sold the stamps in ways that were not

approved by the court.

In addition to opposing the motion, the plaintiff sought sanctions, arguing

that the defendants had acted unethically in using undercover investigators to

procure the stamps.128 Under New Jersey’s rule, however, only members of the

“litigation control group” are covered by New Jersey’s rule 4.2.129 As a result, the

contacts did not violate Rule 4.2.

126 82 F. Supp.2d at 126, n.3. 127 15 F. Supp.2d 456 (D.N.J. 1998) 128 The district court struggled mightily with the issue of choice of law, since the lawyers who engaged in the conduct were licensed in New York, but the court was in New Jersey, which did not have a rule specifying which rules applied. 15 F. Supp.2d at 472‐73. The court ultimately held that New Jersey’s rules applied. 129 15 F. Supp.2d at 474.


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In dicta, however, the court also reasoned that Rule 4.2 could not be violated

by the sort of typical undercover investigation:

There is no evidence that any of Plaintiffs’ investigators asked the sales representatives any questions about instructions given or received with regard to Beatles/Lennon stamps. Plaintiffs’ investigators did not ask the sales representatives about Defendants’ practices or their own practices or policies with regard to Beatles/Lennon stamps. The sales representatives’ communication with Plaintiffs’ counsel and investigators were limited to recommending which stamps to purchase and accepting an order for Sell‐Off Stamps. The investigators did not ask any substantive questions other than whether they could order the Sell‐Off Stamps. The only misrepresentations made were as to the callers’ purpose in calling and their identities. They posed as normal consumers. The investigator did not make any misrepresentation that he or she was a Beatles/Lennon Club member. In most instances, Plaintiffs’ investigators told the sales representative that he or she was not a Beatles/Lennon Club member. Furthermore, Defendants charged all of Plaintiffs’ investigators’ the higher, non‐member price for the Sell‐Off Stamps.

RPC 4.2 cannot apply where lawyers and/or their

investigators, seeking to learn about current corporate misconduct, act as members of the general public to engage in ordinary business transactions with low‐level employees of a represented corporation. To apply the rule to the investigation which took place here would serve merely to immunize corporations from liability for unlawful activity, while not effectuating any of the purposes behind the rule. Accordingly, Ms. Weber’s and Plaintiffs’ investigators’ communications with Defendants’ sales representatives did not violate RPC 4.2.130

Finally, the district court of Utah in dicta in a breach of contract action held

that Rule 4.2 could not be applied prior to suit being filed because it would frustrate

Rule 11 investigations:

What becomes apparent is that Rule 4.2, as Icon would have not a matter of ethics but becomes, in reality, a the court apply it, is

130 15 F. Supp.2d at 474-75 (citations omitted). This same approach – of permitting ordinary consumer purchases but not investigations that sought to “trick” employees was approved in the copyright decision of Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., 2005 WL 357125 (S.D.N.Y. Feb. 14, 2005).


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rule of political and economic power that shelters organizations, corporations and other business enterprises from the legitimate less costly inquiry and fact gathering process sometimes necessary to make a legitimate assessment of whether a valid claim for relief exists. Rule 11 F.R.C.P. provides that an attorney may not file and serve a complaint unless “to the best of the person's knowledge, information and belief, found after an inquiry reasonable under the circumstances ... [that], the allegations and other factual contentions have evidentiary support, or if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery....” See B.F. Goodrich v. Murtha, 815 F.Supp. 539 (D.Conn.1993) (complaint must be grounded in fact); In re Keegan Management Co., Securities Litigation, 154 F.R.D. 237 (N.D.Cal.1994) (Federal Courts cannot tolerate complaints grounded solely on metaphysical inferences). The rigid application of Rule 4.2 to organizational contacts can frustrate the inquiry necessary to meet Rule 11, F.R.C.P. standards. Such a broad construction is irresponsible. Therefore, a construction of Rule 4.2 that is compatible with the objectives of Rule 11, F.R.C.P. is appropriate. This supports a conclusion that as Rule 4.2 is now written for application in this court as to organizations, it should be held applicable only after litigation as been commenced and not to all levels of employees who could hmake an admission of evidence.131

Often, though allowing a contact, a court will draw a line between proper and

improper investigations – lines that may not always be bright.132 For example, in

the Shell Oil decision, the plaintiffs used investigators to determine whether gasoline

attendants were more frequently requiring African American drivers to pre‐pay for

gasoline than Caucasian drivers. Though finding the gas station attendants were

“represented by counsel” in the matter – because their conduct could establish

liability on behalf of Shell in the suit – the court nonetheless reasoned that policies

precluded punishing the lawyers. The court, nonetheless, drew some boundaries

and imagined a continuum of conduct:

131 912 F. Supp. at 508-09. 132 Hill v. Shell Oil Co., 209 F. Supp.2d 876 (N.D. Ill. 2002)


42


[W]e think there is a discernable continuum in the cases from clearly impermissible to clearly permissible conduct. Lawyers (and investigators) cannot trick protected employees into doing things or saying things they otherwise would not do or say. They cannot normally interview protected employees or ask them to fill out questionnaires. They probably can employ persons to play the role of customers seeking services on the same basis as the general public. They can videotape protected employees going about their activities n what those employees believe is the normal course. That is akin to isurveillance videos routinely admitted. Here we have secret videotapes of station employees reacting (or not reacting) to plaintiffs and other persons posing as consumers. Most of the interactions that occurred in the videotapes do not involve any questioning of the employees other than asking if a gas pump is prepay or not, and as far as we can tell these conversations are not within the audio range of the video camera. These interactions do not rise to the level of communication protected by Rule 4.2. To the extent that employees and plaintiffs have substantive conversations outside f normal business transactions, we will consider whether to bar that oevidence when and if it is offered at trial.133

There are also numerous cases where the propriety of undercover

investigation was not analyzed, and evidence admitted without objection.134

Whether this is because of culture, unawareness by the parties and court, or other

factors is not known. Finally, there are a few cases where defendants attempted to

use the ex parte contacts offensively, such as for the basis of an unclean hands

defense. These efforts have failed.135

133 209 F. Supp.2d at 880 (citation omitted). 134 E.g., Louis Vuitton SA v. Spencer Handbags Corp., 765 F.2d 966 (2d Cir. 1985); Eros Entertainment, Inc. v. Melody Spot, LLC, 2005 WL 4655385 (E.D. N.Y. Oct. 11, 2005); Phillip Morris USA, Inc. v. Shalabi, 352 F. Supp.2d 1067 (C.D. Cal. 2004). See also Am. Soc’y of Composers, Authors & Publishers v. Pataki, 1997 WL 438849 (S.D.N.Y. Feb. 27, 1997); Am. Soc’y of Composers, Authors and Publishers v. Pataki, 930 F. Supp. 873 (S.D.N.Y. 1996). 135 E.g., Cartier v. Symbolix, Inc., 386 F. Supp.2d 354 (S.D. N.Y. 2005) (reasoning that investigation could not form the basis of an unclean hands defense in a trademark case because it was “collateral” to the trademark infringement and, in dicta observing that the investigations were proper under Gidatex and Apple Corps); Cartier v. Symbolix, Inc., 454 F. Supp. 2d 175 (S.D.N.Y. 2006) (same but in context of rejecting argument that use of investigator was “consent” to trademark infringement).


43






The net impact of these decisions should be disconcerting, since they rely

upon policies that may or may not be adopted by other courts or by the disciplinary

agency responsible for licensing the lawyer involved. Many draw lines about the

propriety of conduct that other courts have rejected, such as the notion that Rule 4.2

cannot apply pre‐suit. Thus, even when operating in a district or jurisdiction with a

case on the books, care must be exercised. There are few bright lines.

Even assuming Rule 4.2 is not violated, however, the lawyer must still be

concerned with whether Rule 4.3 is implicated.

2. Does Model Rule 4.3 Apply to Undercover Investigations? Model Rule 4.3 requires lawyers to respect the rights of unrepresented

parties. That rule provides:

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

Significantly, many courts have interpreted this rule to require a sort of “civil

Miranda” warning to “unrepresented” persons. For example, a Georgia federal court

stated:

The Court will require, however, that plaintiffs comply with Model Rule 4.3 as it relates to a lawyer's dealings with unrepresented persons. Accordingly, prior to making any ex parte contact with former employees of the defendant airlines, plaintiffs must deliver to the former employee a letter informing her of the nature of the lawyer's role in the matter giving occasion for the contact, including the identity of the lawyer's client and the fact that the witness's


44

former employer is an adverse party. Counsel must also inform the former employee that she has no obligation to talk with plaintiffs' counsel. The Court will not require, as requested by defendants, that the letter include the name, address, and telephone number of the relevant corporate defendant's counsel.136

The structure of the investigation may bear on whether Rule 4.3 applies.

Some argue that the typical undercover investigation is not the type of conduct

covered by these rules. Based in part on this, the leading commentators argue that

Rule 4.3 does not app

ly:

Like Rule 4.2, this Rule is clearly limited to circumstances where the lawyer is acting as a lawyer ‐‐ in this case, “dealing on behalf of a client.” Moreover, the prohibitions embodied in the Rule ‐‐ on stating or implying to the unrepresented person addressed that the lawyer is disinterested, and on allowing such a person to persist in misunderstanding the lawyer’s role ‐‐ clearly have application only to a lawyer who is acting as a lawyer. Like Rule 4.2, Rule 4.3 is intended to prevent a lawyer from taking advantage of a third party. While Rule 4.2 turns upon the actual conduct of the lawyer, however, Rule 4.3 turns upon the presumed expectations of the third party in dealing with a lawyer. Thus, both of the prohibitions in Rule 4.3 rest on the premise that a person acting in the capacity of a lawyer engenders expectations as to probity and candor that the ethical rules require a lawyer to honor. A lawyer acting as a lawyer but disguising his identity as such in dealing with an unrepresented person can also violate Rule 4. because, although he is acting as a lawyer, he as allo

3h wed that person to misunderstand that fact.

Since Rule 4.3 rests upon assumed expectations

of persons dealing directly with lawyers, it should have no vicarious applicability to lawyers supervising the activities of undercover investigators and testers, for the latter by definition do not represent themselves as acting on behalf of a lawyer, and so cannot engender

f the sort that Rule 4.3 is intended to represented person is realistically likely

expectations oprotect. No un

136 In re Domestic Air Transp. Antitrust Litig., 141 F.R.D. 556 (N.D. Ga. 1992).


45

to apply his or her expectations of lawyers to an investigator or tester. Rule 4.3 could apply, however, to the activities of an investigator who represented himself as acting on behalf of a lawyer.137

Several courts have accepted this conclusion. One court suggested in dicta

that Rule 4.3 d

id not apply, reasoning:

Rule 4.3, Utah Rule of Professional Conduct treats contact with unrepresented persons. Icon, by this argument, assumes Thompson was not represented, either in an individual capacity, which he was not, or as a corporate representative which has not been established. The invocation of Rule 4.3 accepts Thompson’s status as that of a non‐represented person. Under Rule 4.3 the lawyer, in dealing with such a person, is not to imply that the lawyer is not disinterested. However, Rule 4.3 may apply only to lawyers not investigators since the expectations are those of the unrepresented person dealing with a lawyer. It has been suggested the rule “should have no vicarious liability to lawyers supervising the activities of undercover investigators and testers, for the latter by definition do not represent themselves as acting on behalf of a lawyer so they cannot engender expectations of the sort that Rule 4.3 is to protect.” No unrepresented person is realistically likely to apply his or her expectations of lawyers to an investigator or tester. Rule 4.3 could apply, however, to the activities of an investigator who represented himself as acting on behalf of a lawyer. Icon has not shown a basis for invocation of Rule 4.3 under this analysis.138

In the trademark context, the court in Apple Corps. Ltd. v. Int’l Collectors

Soc’y,139 stated:

The attorney disciplinary rules also restrict an attorney’s communications with an unrepresented party. New Jersey RPC 4.3 specifically provides protection for unrepresented employees. RPC 4.3 states that:

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or

lawyer is disinterested. When the lawyer imply that the

137 Isbell, 8 Geo J. Legal Ethics at 825 (footnotes omitted). 138 Weider Sports Equip. Co. v. Fitness First, Inc., 912 F. Supp.2d 502, 511-12 (D. Utah 1996) (citations omitted) (quoting the Isbell article). 139 15 F. Supp.2d 456, 476 (D.N.J. 1998)


46



knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role n the matter, the lawyer shall make reasonable efforts ito correct the misunderstanding … It is clear from the language of RPC 4.3 that it is limited to

circumstances where an attorney is acting in his capacity as a lawyer ‐‐ “dealing on behalf of a client.” Therefore, its prohibitions on allowing the unrepresented person to misunderstand that the lawyer is disinterested only apply to a lawyer who is acting as a lawyer. Like RPC 4.2, RPC 4.3 was intended to prevent a lawyer who fails to disclos his role in a matter from taking advantage of an unrepr

eesented third party. Plaintiffs’ counsel and investigators in testing compliance were

not acting in the capacity of lawyers. Therefore, the prohibitions of RPC 4.3 do not apply here. RPC 4.3 does not apply to straightforward transactions undertaken solely to determine in accordance with Rule 11 of the Federal Rules of Civil Procedure, the existence of a

well‐founded claim‐‐in this case a claim of contempt.140

At least one court has held, however, that Rule 4.3 and the admonitions

required apply to undercover investigations, and another has indicated the

possibility exists. The federal court for the District of South Dakota reasoned:

When an attorney or an investigator or other agent for the attorney attempts to conduct an ex parte interview with a current employee of an adversary organization or corporation, Rule 4.3... controls.

* * * The attorney or investigator shall: (1) fully disclose his or her

representative capacity to the employee, (2) state the reason for seeking the interview as it concerns the attorney’s client and the employer, and (3) inform the individual of his or her right to refuse to be interviewed. The attorney or investigator shall not, under any circumstances, seek to obtain attorney‐ client or work product inform tion from the employee.a

141

140 (Citations omitted). 141 144 F. Supp.2d at 1157 (citation omitted).


47

Similarly, in the patent case involving F&R, the court stated that Rule 4.3

might apply to and prevent undercover investigations, though it did not need to

reach that issue, expressly relying instead on the holding that the contacts violated

Rule 4.2.

Even if Rule 4.3 does not apply, the investigating attorney has some

additional complications. The Apple court’s statement that the investigation must

before it is begun comply with Rule 11 obviously creates some additional issues:

ostensibly, a lawyer may not use undercover investigators to determine whether a

claim exists; he may use it only to confirm an otherwise well‐founded claim. This

creates, as one court observed, a “troubled” relationship between Rule 4.2 and the

requirement in Rule 11 that lawyer d a re s s con uct adequ te p ‐suit inve tigations:

If read literally, and implying the broadest possible interpretation for the term admission, a construction could arise from the argument that any communication that could fit under Rule 801(d)(2)(D) F.R.E [defining “admissions”] would be prohibited, therefore, virtually any communication with an organization employee would be prevented without the organization’s counsel being present or contacted if the organization is a party. This could prevent any pretrial inquiry that would gather evidence from an employee of an organization. In most instances, this would block acquisition of important evidence about corporate practices e.g. civil right violations, age discrimination, improper corporate or labor practices, improper commercial practices, and frauds. This application of Rule 4.2 would preclude, prior to litigation, the gathering of the necessary factual information to determine if a valid claim for relief could be maintained and in its most exaggerated context leave a party without a factual basis to assert an avenue of redress. The troubling features of this application of Rule 4.2 are observed in In re Air Crash Disaster Near Roselawn, Indiana, 909 F. Supp. 1116 (D.N.D.Ill.1995). The purpose of preserving attorney/client integrity is not involved where there is no protected interest under the attorney/client relationship standard of Upjohn. The concern for the coercion of an employee who may make a statement and to protect against exploitation can be dealt with in the context of the conduct of counsel and the trustworthiness of the


48

statement. The rule does not protect against organizational counsel’s own misconduct in interviewing organizational employees. Further, Rule 4.2 creates an “ethical minefield” for counsel, therefore, the court finds the suggested conclusion in In re Air Crash Disaster, supra not to be fully acceptable.142

3. Is the Use of an Undercover Investigator “Dishonest” Under Rule

8.4 or Rule 4.1? Even if Rule 4.2 does not apply and Rule 4.3 does not require the investigator

to reveal his true identity and admonish the interview subjects to obtain their own

lawyers, Rules 4.1 and 8.4 may be implicated, since a lawyer who hires an

investigator to conduct a deceitful investigation may be indirectly misrepresenting

material facts or engaging in dishonest conduct. If so, those rules are violated.

Model Rule 4.1 requires that “in the course of representing a client,” a lawyer

not knowingly “make a false statement of material fact ... to a third person” or “fail to

disclose a material fact to a third person when disclosure is necessary to avoid

assisting in a criminal or fraudulent act by a client....” Model Rule 8.4(c) prohibits

engaging “in conduct involving dishonesty, fraud, deceit or misrepresentation.”

It is clear that honesty is incompatible with the use of testers and undercover

investigators. The question is: is the use of testers, as a result, incompatible with the

ethics rules?

In the abstract, acting “ethically” would certainly include acting “honestly.”

Many would say that honesty is one of the core values of the legal profession. In that

regard, disciplinary rules specifically require lawyers be “truthful” in statements to

others; require them to disclose material facts to avoid committing fraud; and

142 Weider, 912 F. Supp. at 508-09 (citations and footnotes omitted).


49

prohibit them from engaging “in conduct involving dishonesty, fraud, deceit or

misrepresentation.” 143

Yet, when lawyers are attempting to prove various wrongs, they often need

to resort to tactics that clearly do not involve full disclosure of material facts and

which clearly do involve deceit. For example, in employment or housing

discrimination, it may be helpful for a lawyer to have minorities apply for jobs or

seek to rent an apartment in order to obtain recordings or other evidence

demonstrating that the would‐be or actual defendant is violating the law. Likewise,

in trademark disputes, it may be helpful to the trademark owner to purchase a

product to demonstrate that “knock‐offs” are being sold, in violation of the

trademark.144

These undercover investigations by their nature require that the actors be

less than honest. These investigations also often include the use of surreptitious

tape recording or video taping ‐‐ an activity which can be illegal in some states, and

may be unethical in others. The minority applicant does not, in fact, want the job;

the trademark owner, in fact, wishes the item were not available and has no need for

it. In both circumstances, the goal of the contact is to gather evidence, not to rent an

apartment or buy a product or service. They no doubt assist the victim of the wrong

by permitting evidence to be gathered that could not be obtained were total honesty

of inarguably dishonest and deceitful conduct violate required. Whether this form 143 Model Rules 4.1; 8.4(c). In addition, by violating rule 8.4, the lawyer could violate rule 4.4. See Isbell, 8 Geo. J. Legal Ethics at 826. In addition, an investigation that is illegal is clearly unethical. 144 Lawyers may not circumvent their ethical obligations by hiring a nonlawyer to do the work for them. Model Rule 5.3(c)(1) (providing that a lawyer is responsible for conduct by a nonlawyer that violates the rules if the lawyer “orders or, with the knowledge of the specific conduct, ratifies the conduct involved.”)


50

the rules in the context of civil litigation is a question that has split the courts, bar

associations, and commentators.

No one seems to dispute, for example, that a person who dissembles as to his

purpose or identity in making a contact is, in fact, making a misrepresentation of

material fact. The rules prohibit doing so.

That is where the disagreement begins.

On the one hand, perhaps a majority of authorities reason that the fact that

the conduct violates the rules does not end the inquiry: the issue should be whether

the deeper issue of whether the conduct furthers the goals of the profession, and not

whether when viewed literally the conduct violates the rule. Values, not literalism,

matters most, some say, and the values of being free from discrimination or freedom

from infringement of property rights exceeds the values furthered by enforcing a

strict interpretation of the rules.

Others, however, say that because disciplinary rules are that quasi‐criminal

rules the violation of which can result in forfeiture of the right to practice law a rule

which does not mean what it says should be amended.145 Further, they point out

that the use of deception imposes costs on innocent people, as well as actual wrong‐

doers: a company that is not infringing a trademark or committing discrimination

but which has its time and resources consumed by those who are not actually

interested in buying its products or renting its homes is harmed. One could imagine,

also, lawyers using testers in order to create cases where there had been no prior

complaint of discrimination.

145 See Sean Keveney, The Dishonesty Rule: A Proposal for Reform, 81 Tex. L. Rev. 381,398 (2002).


51

A. Authority Holding White Lies are Acceptable

Commentators have argued that the Model Rules can and should be

interpreted as not prohibiting misrepresentations made by testers.146 There are

both statutory construction and policy arguments that have been mustered to hold

that what is clearly a misrepresentation by an investigator is not a

“misrepresentation” in terms of rule 8.4(c).

nt: The leading commentators explored the statutory construction argume

That principle [of statutory construction] would require that Rule 8.4(c) apply only to misrepresentations that manifest a degree of wrongdoing on a par with dishonesty, fraud, and deceit. In other words, it should apply only to grave misconduct that would not only be generally reproved if committed by anyone, whether lawyer or nonlawyer, but would be considered of such gravity as to raise questions as to a person’s fitness to be a lawyer. Investigators and testers, however, do not engage in misrepresentations of the grave character implied by the other words in the phrase [dishonesty, fraud, deceit] but, on the contrary, do no more than conceal their identity or

e. 47 purpose to the extent necessary to gather evidenc 1

One case adopted this statutory construction argument.148 The policy argument has been used to justify several cases holding that

investigators’ misrepresentations are not “misrepresentations.” In Apple, for

example, the court essentially reasoned that rule 8.4(c) should not be construed to

cover “misrepresentations” article to conclude that the rule simply did not apply to

misrepresentations regarding identity or purpose, reasoning:

146 David B. Isbell & Lucantonio N. Salvi, Ethical Responsibility of Lawyers For Deception by Undercover Investigators and Discrimination Testers: An Analysis of the Provisions Prohibiting Misrepresentation Under the Model Rules of Professional Conduct, 8 Geo J. Legal Eth. 791, 811-826 (1995); 147 Isbell, 8 Geo J. Legal Ethics at 817 (footnotes omitted). 148 Apple Corps. Ltd. v. Int’l Collectors Soc’y, 15 F. Supp.2d 456 (D.N.J. 1998). See also Jane Shay Wald, Trademark Searches and Investigations, 668 PLI/Pat 9 (Nov. 2, 2001) (discussing cases).


52


Undercover agents in criminal cases and discrimination testers in civil cases, acting under the direction of lawyers, customarily dissemble as to their identities or purposes to gather evidence of wrongdoing. This conduct has not been condemned on ethical grounds by courts, ethics committees or grievance committees. This limited use of deception, to learn about ongoing acts of wrongdoing, is also accepted outside the area of criminal or civil‐rights law enforcement. The prevailing understanding in the legal profession is that a public or private lawyer’s use of an undercover investigator to detect ongoing violations of the law is not ethically proscribed, especially where it would be difficult to discover the violations by other means.

* * *

Plaintiffs could only determine whether Defendants were complying with the Consent Order by calling [Defendants] directly and attempting to order [The Beatles] stamps. If Plaintiffs’ investigators had disclosed their identity and the fact that they were calling on behalf of Plaintiffs, such an inquiry would have been useless to determine [Defendants’] day‐to‐day business practices in the ordinary course of business.149

Similarly, the trademark case of Gidatex, S.rL. v. Campaniello Imports, Ltd.,150

recognized that statements by undercover investigators were “technical” violations

of rules prohibiting misr es n taepr entations, but onetheless s ted:

As for DR 1‐102(A)(4)’s prohibition against attorney “misrepresentations”, hiring investigators to pose as consumers is an accepted investigative technique, not a misrepresentation. The policy interests behind forbidding misrepresentations by attorneys are to protect parties from being tricked into making statements in the absence of their counsel and to protect clients from misrepresentations by their own attorneys. The presence of investigators posing as interior decorators did not cause the sales clerks to make any statements they otherwise would not have made. There is no evidence to indicate that the sales clerks were tricked or duped y the investigators’ simple questions such as “is the quality the same?” or “so there is no place to get their furniture?”

b

* * *

149 15 F. Supp.2d at 475. 150 82 F. Supp.2d 119 (S.D.N.Y. 1999).


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These ethical rules should not govern situations where a party

is legitimately investigating potential unfair business practices by use of an undercover posing as a member of the general public engaging in ordinary business transactions with the target. To prevent this use of investigators might permit targets to freely engage in unfair business practices which are harmful to both trademark owners and consumers in general. Furthermore, excluding evidence obtained by such in estigators would not promote the purpose of the rule, namely preserv ion of the a t

vat t orney/client privilege. In this case, Gidatex had a right to determine whether

Campaniello had complied with Gidatex’s “cease and desist” letter dated October 16, 1997. The evidence gathered by the investigators demonstrates that defendants’ employees informed consumers that plaintiff’s business no longer exists and that the other brands of furniture sold by Campaniello are “the same” as the Saporiti Italia brand. Neither of these statements are true. Courts have recognized the relevance of such evidence.151

B. Authorities Finding White Lies to Be Deceitful.

The Oregon Supreme Court wrote the seminal case explaining that the rules

literally do not permit white lies. In re Gatti, 152 The case presents multiple ironies.

Several years before the relevant events, Gatti had previously complained to the bar

about the conduct of the DOJ in using undercover investigators to pose as injured

workers for purposes of infiltrating chiropractors’ and lawyers’ offices in a sting

involving fraudulent workers’ compensation claims. The lawyer’s complaint was

rejected by the bar, which advised him in writing that government lawyers “have

more latitude in carrying out the agency’s regulatory powers in a surreptitious

fashion than members of the Bar in the private sector.”153

151 82 F. Supp.2d at 122 (footnotes and citations omitted). 152 8 P.3d 966 (Or. 2000). 153 8 P.3d at 969


54

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=OR_caselaw&volume=8&edition=P.3d&page=966&id=118299_01

Later, the lawyer made some phone calls an introduced himself under false

pretenses in order to gather information for possible litigation. A complaint was

filed with the Bar against the lawyer, arguing that he violated disciplinary rules by

making false statements in conducting this investigation. After rejecting the

argument that the Bar was estopped from asserting that his misrepresentations

constituted an ethics violation because the Bar had advised him that government

lawyers conducting such investigations did not violate the rules, the court concluded

that the lawyer had committed willful violations of the rules since he had

misrepresented his identity in conducting the investigation.154

The court then turned to whether the rule should be interpreted to allow for

an exception for misrepresentations limited “only to identity or purpose and made

solely for purposes of discovering information....”155 Noting that various civil rights

and other organizations had filed amicus briefs supporting this view, the court

reasoned that as a court it was powerless to create an exception:

As members of the Bar ourselves‐‐some of whom have prior experience as government lawyers and some of whom have prior experience in private practice‐‐this court is aware that there are circumstances in which misrepresentations, often in the form of false statements of fact by those who investigate violations of the law, are useful means for uncovering unlawful and unfair practices, and that lawyers in both the public and private sectors have relied on such tactics. However, ORS 9.490(1) provides that the rules of professional conduct “shall be binding upon all members of the bar.” (Emphasis added.) Faithful adherence to the wording of DR 1‐102(A)(3), DR 7‐ 102(A)(5), ORS 9.527(4), and this court’s case law does not permit recognition of an exception for any lawyer to engage in dishonesty, fraud, deceit, misrepresentation, or false statements. In our view, this court should not create an exception to the rules by

ad, any exception must await the full debate that judicial decree. Inste 154 8 P.3d at 974 155 Id.


55

is contemplated by the process for adopting and amending the Code of Professional Responsibility. See ORS 9.490(1) describing process for formulating rules of professional conduct). Furthermore, this court is prohibited from inserting into ORS 9.527(4) an exception that the statute does not contain. ORS 174.010. That statute applies to a member of the bar “whenever * * * [t]he member is guilty of willful deceit or misconduct in the legal profession[.]” We decline to adopt an exception to DR 1‐102(A)(3) and DR 7‐102(A)(5), and we are without authority to read into ORS 9.527(4) an exception that the statute does not contain. Those disciplinary rules and the statute

6

apply to all members of the Bar, without exception.15

The Oregon court reached the same conclusions in In re Ositis,157 where the

attorney had hired an investigator to misrepresent his identity by posing as a

journalist in conducting some telephone interviews related to potential litigation.

The court reiterated the reasoning of Gatti rejecting the argument that “an exception

from the broad disciplinary rule prohibiting misrepresentation is necessary if

lawyers are to succeed in discovering and rooting out wrongful conduct....”158 The

court stated that “faithful adherence” to wording of the rule, as well as to its

precedent, did not “permit recognition of an exception for any lawyer to engage in

dishonesty, fraud, deceit, misrepresentation, or false statements.”159 Eventually,

however, the Oregon legislature amended the rule to permit an exception for efforts

“to obtain information on unlawful activity through the use of misrepresentations or

other subterfuge.”160

156 8 P.3d at 976 (citations and internal quotation marks omitted). 157 40 P.3d 500 (Or. 2002). 158 40 P.3d at 502. 159 Id. See also Sequa Corp. v. Lititech, Inc., 807 F. Supp. 653 (D. Colo. 1992) (holding that a lawyer who believes that another lawyer has violated the rules must report it, not engage in his own investigation that relies upon dissembling and misrepresentation). 160 Or. D.R. 1-102(D). See Arthur Garwin, Covert Work OK, 1 No. 6 Am. B. Ass’n. J. E-Report 9 (Feb. 15, 2002).


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http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=OR_caselaw&volume=40&edition=P.3d&page=500&id=118299_01


In addition to this authority, some authority could be read to require

disclosure by the investigator of the full facts. For example, the authorities

discussed above regarding the propriety of ex parte contacts with unrepresented

persons suggests that full disclosure is required. Georgia’s bar association, for

example, wrote that, while it was appropriate to engage in an ex parte contact with a

former employee, since the former employee had the right to decide whether to give

evidence against its former employer, “it would be unethical to use deceit and false

pretenses to deny the former employee is or her right.”161

A Pennsylvania bar opinion recently addressed this issue in the context of

Facebook, the popular social‐networking site.162 The inquirer was a lawyer who

had deposed a woman who stated in her deposition that she had a Facebook page.

The lawyer believed the page would reveal information that he could use to impeach

her testimony. Knowing, however, that she would not “friend” him on Facebook, he

proposed to have an assistant use a fake name and hope to gain access to her page,

and to then provide the information to him, which he would then use at trial to

impeach her.

The Pennsylvania bar association briskly said no to his request, labeling his

plan “deceptive.” It reached this conclusion even assuming she let every other

person who asked to be her friend onto her page: “Even if, by allowing virtually all

would‐be ‘friends’ onto her FaceBook… pages, the witness is exposing herself to

risks like that [identifying information that is disclosed to the world], excusing

e improper. Deception is deception, regardless of the deceit on that basis would b 161 St. B. of Ga. Formal Advisory Op. No. 94-3 (Sept. 1994). 162 Pa. Eth. Op. 2009-02 (March 2009).


57

60

victim’s wariness in her interactions on the internet and susceptibility to being

deceived.”163

Finally, Judge Robinson in the F&R patent case indicated that undercover

investigations after suit is filed may violate Rule 8.4(c), though she based her

holding on other grounds.

163 Id.


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how ethics rules prevent compliance with rule 11, …

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