Should a lawyer be able to represent both a corporation and its employees? If a corporation’s executives and other employees can’t trust the company’s lawyer not to cooperate in their prosecution, how can anyone speak openly to that lawyer on behalf of the corporation?
These, the National Association of Criminal Defense Lawyers argued, were among the questions raised by the Third Circuit’s decision in United States v. Norris, which the Supreme Court this week declined to review. Morgan Crucible Co. had waived its attorney-client privilege as part of its cooperation with an antitrust investigation by the Department of Justice, and the government used this waiver to enable the attorney to testify in the criminal prosecution of Morgan’s ex-CEO, Ian Norris—even though the attorney had been representing both Morgan and Norris. The defense lawyers’ organization, in an amicus brief supporting Supreme Court review , argued that the circumstances under which the Third Circuit’s ruling (which that court flagged as “not precedential”) would permit a corporate employee to claim the company’s lawyer as his own and stop him from testifying against him were too narrow:
Under Norris IV, any communications between outside criminal counsel retained by a corporation and the latter’s officers, directors, or employees will not be privileged upon the corporation’s waiver of its own privilege if said conversations touch on corporate affairs even generally. Ethical counsel will of course advise the individual corporate officers of this new rule of law. The officers, in turn, will be reluctant to speak to corporate counsel. . . . As a result of the Third Circuit’s decision, the “apprehension of disclosure” which this Court has recognized as threatening to the “administration of justice” will be a constant cloud hanging over discussions between corporate counsel and the company’s officers, chilling their ability to cooperate, through full and complete communications, in effectively resisting potential criminal charges.”
Executives’ interest in protecting themselves from prosecution would thus be placed in conflict with their corporations’ interest in their cooperating with corporate counsel. One or the other would have to be sacrificed. And yet, because the actions of the company consist in the actions of its employees, it may be exceedingly difficult for the individuals and corporation to defend themselves except by cooperating with one another, which is a major advantage to having the same lawyers defend both. Indeed, the corporation can take no action, including in its own legal defense, except through individuals—often the same individuals who might become suspects.
One might suppose that this could be avoided if corporations refuse to waive attorney-client privilege. And indeed it could be. But the discretion regulators and prosecutors have often empowers them to place very heavy pressure on a corporation. So the company’s loyalty to its former employees and executives is a frail shield. The only effective way to protect corporate employees’ ability to confide in corporate lawyers is to ensure that employees may insist on the privacy of their revelations to lawyers hired to represent both the employees and the corporation, even if the company later chooses to cooperate with the government. Denying them that right diminishes the ability of both businessmen and their businesses to defend themselves in court.
Further reading: In the KPMG case, Judge Lewis Kaplan held that inducing a corporation to breach its contractual commitment to pay employees’ legal bills can be a constitutional violation , and the Second Circuit upheld his decision to throw out the charges against the employees.