Alerts and Updates

Third Circuit Upholds Permitting Testimony of Outside Corporate Counsel Against Former CEO

March 31, 2011

In a case that highlights the significance of clarifying the scope of outside corporate counsel's representation of individual employees, the Third Circuit—in an unpublished opinion in United States v. Norris1—upheld introducing the testimony of former counsel to the Morgan Crucible Company ("Morgan" or the "Company") against Morgan's former CEO, Ian Norris. In Norris, the corporation expressly and voluntarily waived its attorney-client privilege; and despite correspondence from counsel suggesting otherwise, the CEO was unable to establish that corporate counsel also represented him in his individual capacity.

Although the Third Circuit's unpublished opinion in Norris provides only a perfunctory analysis, the facts adduced in the district court reveal a dispute that might have been averted if counsel and the Company had more clearly described the scope of counsel's representation.

Background of Prosecution

Norris was charged with—and with the testimony of Morgan's former outside counsel, was convicted of—corruptly persuading, and attempting and conspiring to corruptly persuade, others with an intent to influence their testimony in grand jury proceedings.2 The prosecution arose from a grand jury investigation of an international price-fixing conspiracy involving Morgan. The grand jury price-fixing investigation led, in turn, to a plan to obstruct the grand jury's investigation by tampering with witnesses; providing false information to the government; and concealing or destroying documents relevant to the grand jury investigation. Norris, Morgan's CEO, was at the center of that plot. After receipt of a subpoena, Norris organized the destruction of files and documents evidencing or reflecting price-fixing meetings and agreements with competitors. Morgan's CEO also directed false summaries of meetings Morgan had with competitors ("scripts") to be distributed to individuals who had knowledge of those price-fixing meetings.

Counsel's Testimony

The district court permitted Morgan's corporate counsel to testify (upon waiver of privilege by Morgan) that:

  1. In interviews with counsel, Norris and his subordinates all told counsel the same agreed-upon story about their price-fixing meetings, and encouraged counsel to pass along the false information to investigators;
  2. Norris and another officer authorized counsel to provide the "scripts" to the government;
  3. Counsel, without request of the government and with Morgan's permission, passed those "scripts" along to the government; and
  4. Counsel was not told that the scripts were inaccurate: i.e., that counsel was unwittingly used in the scheme to conceal the price-fixing.

Justification for Permitting Counsel's Testimony Against the CEO

Because Morgan expressly and voluntarily waived its attorney-client privilege in connection with counsel's testimony in the CEO's prosecution, the central issue was whether counsel also represented the CEO in his individual capacity. The government contended—and the district and Third Circuit courts agreed—that Norris had not satisfied the five-part Bevill test to establish the existence of an individual attorney-client relationship with Morgan's corporate counsel.3

Morgan's counsel submitted an affidavit in which he stated that he represented the Company only, and not Norris as an individual. Counsel also averred that his regular practice was to inform individual employees that he and his firm represented the Company—not individual officers or employees. Additionally, because all communications between Norris and counsel occurred after the Company had retained outside counsel to represent the Company, the government maintained that no preliminary discussions were protected by an individual attorney-client privilege.4

Counsel's Correspondence About the Scope of His Representation

Counsel's correspondence to the government about the scope of his representation created some apparent ambiguity about whether he represented Norris as well as the Company. In the course of his representation, counsel for Morgan informed the government that he "presumptively" represented "all current employees," specifically those employees who the government "would like to have appear before the grand jury."5 Counsel also wrote to Morgan's in-house counsel, stating that he had informed the government that he and his firm represented the Company and its current employees.6

According to the government, Norris could not have understood counsel's correspondence with the government and in-house counsel to establish an individual attorney-client relationship. The government contended that counsel's correspondence concerning its representation of Morgan's employees referred to counsel's representation of employees in their representative capacity. Moreover, Norris could not have relied upon the correspondence to the contrary—Morgan's counsel sent the correspondence after the events about which counsel was to testify occurred, and Norris never saw it.

The government in essence maintained that the intended meaning of the correspondence was ultimately irrelevant under Bevill. Norris was not seeking personal legal advice and was not communicating with counsel in his individual capacity, and his communications with counsel concerned corporate (not personal) matters related to the grand jury's investigation of the Company.7

The District Court's Findings

Applying the Bevill factors following an evidentiary hearing, the district court agreed with the government's position,8 finding that:

  1. The CEO did not approach counsel for legal representation—counsel was contacted by the Company. The CEO did not ask counsel to represent him personally in the investigation;
  2. Counsel did not understand that he was representing Norris. To the contrary, according to the district court, the fact that counsel advised Norris to retain separate counsel belies any claim of individual representation; and
  3. The conversations between Norris and counsel involved matters only within Morgan or the business affairs of Morgan. Counsel never discussed Norris' personal liability or exposure, or other personal confidential matters with Norris.

With respect to counsel's correspondence in which he stated that he "presumptively" represented Morgan's employees, the district court agreed with the government. The court held that the correspondence was "designed to designate [counsel] as the contact person in the event the grand jury issued subpoenas, rather than an entry of appearance on behalf of unnamed and unidentified employees."9

The Significance of Clarifying the Scope of Representation

In light of the absence of detail in the Third Circuit's opinion upholding the district court's decision in Norris, it is unknown how counsel's communications about the scope of representation affected the Bevill analysis. To potentially avoid needless ambiguity in future investigations, outside counsel and their clients should establish with precision whether counsel represents corporate officers and employees in their individual capacity. If so, appropriate written conflict waivers and engagement letters would be essential.

Before conducting interviews of any corporation employee, including executives, counsel should providing each witness with an Upjohn warning,10 so that she or he understands that the attorney-client privilege in connection with the investigation applies to, and can be waived by, the company rather than the witness. Counsel represents the interests of the company, and not the witness.

Whatever the intended scope of the attorney-client relationship, it is essential to provide clarification at the earliest opportunity or as soon as any indication of a potential conflict arises. In Norris, counsel and the Company could likely have avoided substantial confusion about the scope of the representation if, when first learning that the non-contemporaneous "scripts" had been prepared and distributed to executives, counsel paused his investigation and made his role apparent before continuing.11 Counsel may want to be aware of any indication that an executive with decision-making authority at a company may have had a role in the conduct subject to investigation—and may also wish to advise the company and the executive that separate counsel is necessary.

For Further Information

If you have questions about this Alert, please contact George D. Niespolo, Frederick (Rick) R. Ball, Marco A. Gonzalez, Jr., Daniel R. Walworth, any of the lawyers in the White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Practice Group or the attorney in the firm with whom you are regularly in contact.

Notes

  1. United States v. Norris, No. 10-4658 (3d Cir. March 23, 2011) (not published).
  2. 18 U.S.C. § 371; 18 U.S.C. § 1512(b)(1), 18 U.S.C. § 1512(b)(2)(B).
  3. In re Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d 120, 125 (3d Cir 1986) ((1) approached counsel for purpose of seeking legal advice; (2) made clear that they were seeking legal advice in their individual capacities; (3) counsel communicated with them in their individual capacities, knowing of potential conflict; (4) communications were confidential; and (5) those communications did not concern matters within company or general affairs of company).
  4. United States v. Norris, No. 2:03-CR-00632, Docket No. 76-1 at 4 (E.D. Pa. June 10, 2010) (Reply in support of motion to permit counsel's testimony) (citing Bevill, 805 F.2d 120).
  5. Norris, No. 2:03-CR-00632, Docket No. 58-1 at 16 (E.D. Pa. June 1, 2010) (Memorandum in support of motion for order to permit counsel's testimony).
  6. Norris, No. 2:03-CR-00632, Docket No. 70 at 4-5 (E.D. Pa. June 5, 2010) (Memorandum in opposition of motion to permit counsel's testimony).
  7. Id.
  8. Norris, No. 2:03-CR-00632, Docket No. 109 at 8-14 (E.D. Pa. July 12, 2010) (Memorandum opinion) (applying Bevill, 805 F.2d 123). Although neither the Third Circuit nor the district court addressed the differences, if any, concerning privilege laws between jurisdictions, in matters involving more than one jurisdiction, counsel should take choice of privilege law considerations into account as an investigation proceeds.
  9. Id. at 13.
  10. Upjohn Co. v. United States, 449 U.S. 383 (1981).
  11. Norris, No. 2:03-CR-00632, Docket No. 109 at 3 (counsel learned of non-contemporaneous "scripts" from unnamed "executive" during first investigative interview).

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