Navigating ethics issues in FERC enforcement investigations

Midwest Energy Midwest Energy receives a preservation letter from FERC’s Office of Enforcement The letter refers to a subject matter and timeframe, including reference to employee Jaime Miles In-house counsel Chip Capprati is responsible for the matter Chip’s office for Midwest is in D.C.

Lighthouse Law Midwest counsel Chip calls his outside counsel, Howard Lighthouse, who practices in NYC. Howard prepares an engagement letter with Midwest Energy Engagement letter states that Lighthouse Law is “subject to the codes or rules of professional responsibility for the jurisdictions in which we practice.”

Entity as the Client How about Howard? As in-house counsel, who is Chip’s client? D.C. Rules of Professional Conduct: Rule 1.13--Organization as Client (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. Comment [1]: An organizational client is a legal entity, but it cannot act except through its officers, directors, employees, shareholders, and other constituents. Officers, directors, employees, and shareholders are the constituents of the corporate organizational client. How about Howard?

Witness Testimony FERC Enforcement asks for investigative testimony from Midwest Energy employee, Jaime Miles Jaime does not have his own attorney, so he asks Chip if Howard can help Can Chip appear with employee Jaime Miles for testimony? Can Lighthouse Law represent Midwest Energy and its employee?

Rights of Witnesses 18 CFR §1b.16 Rights of witnesses. (b) Any person compelled to appear, or who appears in person at a formal investigation by request or permission of the Investigating Officer may be accompanied, represented and advised by counsel, as provided by §385.2101 of this chapter and these rules, except that all witnesses shall be sequestered and, unless permitted in the discretion of the Investigating Officer, no witness or the counsel accompanying any such witness shall be permitted to be present during the examination of any other witness called in such proceeding. When counsel does represent more than one person in an investigation, for example, where the counsel is counsel to the witness and his employer, said counsel shall inform the Investigating Officer and each client of said counsel's possible conflict of interest in representing that client and, if said counsel appears with a witness giving testimony on the record in an investigation, counsel shall state on the record all persons said counsel represents in the investigation.

Which Rules Apply? If he is to appear for testimony with Jaime Miles, Howard must travel to Washington, D.C. Howard is admitted in another jurisdiction, but not in D.C. What rules of ethics apply if Howard appears at FERC representing a client?

Rules of Professional Conduct: Rule 1 Rules of Professional Conduct: Rule 1.7--Conflict of Interest: General Rule (a) A lawyer shall not advance two or more adverse positions in the same matter.    (b) Except as permitted by paragraph (c) below, a lawyer shall not represent a client with respect to a matter if:        (1) That matter involves a specific party or parties and a position to be taken by that client in that matter is adverse to a position taken or to be taken by another client in the same matter even though that client is unrepresented or represented by a different lawyer;        (2) Such representation will be or is likely to be adversely affected by representation of another client;        (3) Representation of another client will be or is likely to be adversely affected by such representation;        (4) The lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by the lawyer’s responsibilities to or interests in a third party or the lawyer’s own financial, business, property, or personal interests.    (c) A lawyer may represent a client with respect to a matter in the circumstances described in paragraph (b) above if        (1) Each potentially affected client provides informed consent to such representation after full disclosure of the existence and nature of the possible conflict and the possible adverse consequences of such representation; and        (2) The lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client.

Common (Joint) Representations Rule 1.7, Comment [17] When seeking to establish or adjust a relationship between clients, the lawyer should make clear that the lawyer’s role is not that of partisanship normally expected in other circumstances and, thus, that the clients may be required to assume greater responsibility for decisions than when each client is separately represented. Any limitations on the scope of the representation made necessary as a result of the common representation should be fully explained to the clients at the outset of the representation. See Rule 1.2(c).

And then … Following the initial investigative testimony, Jaime Miles tells lawyer Howard Lighthouse that he previously filed a whistleblower claim for the conduct at issue Jaime asks Howard not to tell Chip Can Howard tell Midwest Energy? Can Howard continue with the representation?

Common (Joint) Representations Ethics Opinion 327 – Joint Representation: Confidentiality of Information Revisited In its retainer agreement, the prior firm had explained to all of the jointly represented clients that it was “understood that … information you provide to use in connection with our representation of you may be shared by us with the Other Individuals whom we represent.” Where a client informs the lawyer before disclosing certain confidential information that he or she intends to reveal something that may not be shared with the lawyer's other clients (notwithstanding a prior agreement to do so), the lawyer has an obligation at that point to inform the client that no such confidences may be kept. Under such circumstances, the lawyer can generally withdraw from representing the disclosing client and continue to represent the other clients.

Common (Joint) Representations Rule 1.7, Comment [16] As to the duty of confidentiality, continued common representation will almost certainly be inadequate if one client asks the lawyer not to disclose to the other client information relevant to the common representation. This is so because the lawyer has an equal duty of loyalty to each client, and each client has the right to be informed of anything bearing on the representation that might affect that client’s interests and the right to expect that the lawyer will use that information to that client’s benefit. See Rule 1.4. The lawyer should, at the outset of the common representation and as part of the process of obtaining each client’s informed consent, advise each client that information relevant to the common representation will be shared, and explain the circumstances in which the lawyer may have to withdraw from any or all representations if one client later objects to continued common representation or sharing of such information.

Common (Joint) Representations Ethics Opinion 327 – Joint Representation: Confidentiality of Information Revisited Here, by contrast, the prior firm apparently received information that it knew the disclosing client did not wish revealed to the other clients. Under the terms of the retainer agreement, the prior firm's duty to communicate any relevant information to the other clients included any relevant information learned from other clients in the same matter, and this duty attached at the moment the prior firm learned the information. This underscores how important it is for a lawyer carefully to explain to all clients in a joint representation that, when they agree that any relevant or material information may be shared with one another, they cannot expect that any relevant or material confidential information they may subsequently reveal to the lawyer will be kept from the other co-clients.

Common (Joint) Representations Rule 1.7, Comment [33] Where more than one client is involved and the lawyer must withdraw because a conflict arises after representation has been undertaken, the question of whether the lawyer may continue to represent any of the clients is determined by Rule 1.9. Rule 1.9 A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent. “Informed consent” denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.

Withdrawal From Representation Rule 1.16--Declining or Terminating Representation (b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interests of the client, or if: (1) The client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent; (2) The client has used the lawyer’s services to perpetrate a crime or fraud; (3) The client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled; (4) The representation will result in an unreasonable financial burden on the lawyer or obdurate or vexatious conduct on the part of the client has rendered the representation unreasonably difficult; (5) The lawyer believes in good faith, in a proceeding before a tribunal, that the tribunal will find the existence of other good cause for withdrawal.

And then … Howard withdraws from representing Jaime Miles and, with his consent, continues to represent Midwest Energy Jaime has a contentious separation from Midwest Energy New lawyer for Jaime Miles asks Howard at Lighthouse Law for copies all communications and documents What does Howard have to send? Can Howard claim attorney-client privilege for communications with Midwest Energy?

Withdrawal From Representation Rule 1.16--Declining or Terminating Representation (d) In connection with any termination of representation, a lawyer shall take timely steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled, and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers relating to the client to the extent permitted by Rule 1.8(i).

Withdrawal From Representation What constitutes papers “to which the client is entitled”?  Ethics Opinion 333 describes this as “all material that the client or another attorney would reasonably need to take over the representation of the matter, material substantively related to the representation, and material reasonably necessary to protect or defend the client’s interests.”  Emails? Emails to both Chip and Jaime? Responses to subpoena? Company responses that employee assisted with preparing the response?

Common (Joint) Representations Rule 1.7, Comment [15] A particularly important factor in determining the appropriateness of common representation is the effect on client-lawyer confidentiality and the attorney-client privilege. With regard to the attorney-client privilege, the prevailing rule is that, as between commonly represented clients, the privilege does not attach. Hence, it must be assumed that if litigation eventuates between the clients, the privilege will not protect any such communications, and the clients should be so advised.