by Mary A. Dannelley

Limitations on communicating with represented parties are well-defined in ethical rules, and attorneys typically are cognizant of the rules prohibiting inappropriate contact with represented parties. But what about communications with unrepresented employees of an attorney’s own corporate client? Are there boundaries that an attorney must observe when dealing with his client’s own employees? Are there steps that an attorney should take to protect the corporate client’s assertion of the attorney-client privilege with respect to communications with its unrepresented employees? Are there steps that the attorney needs to take to ensure that information, including declarations gathered from employees during the fact-gathering process, may be utilized? Case law pertaining to internal investigations conducted by corporate counsel, as well as pre-certification communications with unrepresented employees in defending against employment class actions, can assist attorneys in avoiding  potential pitfalls in these communications.
In-house and outside counsel necessarily provide legal advice and representation to their corporate clients by communicating with their employees. United States v. Graf, 610 F.3d 1148, 1156 (9th Cir. 2010) (“As an inanimate entity, a corporation must act through agents. A corporation cannot speak directly to its lawyers.”) (citations omitted). However, an attorney’s interactions with employees of the corporate client in certain circumstances can blur the line as to the attorney-client relationship, creating potential conflicts of interest and misconceptions regarding application of the attorney-client privilege to those exchanges. In particular, an employee with whom a corporate attorney communicates may subsequently assert that the communications resulted in the formation of an attorney-client relationship between the attorney and the employee in his individual capacity. Alternatively, an employee may claim that he or she felt coerced or misled into providing information to the company’s attorney without a full appreciation of the attorney’s role. In either case, the attorney faces the risk that the attorney’s communications ran afoul of applicable ethical rules and information provided may not be used for the benefit of the corporate client. 
While an attorney may need to communicate with employees of the fictitious entity in order to provide legal advice and effective representation, the attorney’s client remains the entity: “In representing an organization, a member shall conform his or her representations to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body or constituent overseeing the particular engagement.” Cal. R. Prof. Conduct 3-600(A). The key to avoiding any potential misconception regarding communications with a corporate client’s unrepresented employees and where the attorney’s loyalties lie can be summed up in a single word: transparency.     

Step 1: Disclose Who You Represent and How Information May Be Used
Rule 3-600(D) of the California Rules of Professional Conduct provides guidance that serves to protect not only the attorney, but also the corporate client and its employees who participate in an investigation or provide information to an attorney. Specifically, Rule 3-600(D) provides that “[i]n dealing with an organization’s directors, officers, employees, members, shareholders, or other constituents, a member shall explain the identity of the client for whom the member acts, whenever it is or becomes apparent that the organization’s interests are or may become adverse to those of the constituent(s) with whom the member is dealing. The member shall not mislead such constituent into believing that the constituent may communicate confidential information to the member in a way that will not be used in the organization’s interest if that is or becomes adverse to the constituent.” Cal. R. Prof. Conduct 3-600(D). Compliance with Rule 3-600(D) is essential to avoiding any potential misunderstanding regarding the nature of corporate counsel’s relationship with unrepresented employees.
Rule 3-600(D) is generally consistent with the so-called Upjohn or corporate-Miranda warnings developed from federal case law. Originating from the seminal United Supreme Court case, Upjohn Co. v. United States, 449 U.S. 383 (1981), “Upjohn warnings” are regarded as the principle disclosures that an attorney should make to employees in advance of conducting an internal investigation. Those warnings include: (a) that the lawyer does not represent the individual employee; (b) that anything said by the employee to the lawyers will be protected by the company’s attorney-client privilege, subject to waiver of the privilege in the sole discretion of the company; and (c) that the individual may wish to consult with his own attorney if he has any concerns about his own potential legal exposure. See Ruehle v. United States, 583 F.3d 600, 604, n.3 (9th Cir. 2009).

Step 2: Memorialize the Disclosures in Writing
The Ninth Circuit case United States v. Ruehle, 583 F.3d 600 (9th Cir. 2009), illustrates not only the problems that can arise in the absence of clarity related to the nature of counsel’s communications with individual officers and employees of the corporate entity, but also the importance of memorializing the disclosures made to the individual employee in connection with those communications. In Ruehle, outside corporate counsel interviewed the company’s chief financial officer in connection with an internal investigation into alleged backdating of stock options. The purpose of the investigation was to gather information for the company’s audit committee. Id. at 603-04. In connection with a subsequent federal criminal investigation, outside counsel revealed the substance of its communications with the chief financial officer to federal investigators, with the company’s authorization. The chief financial officer objected to the introduction of this evidence against him in a criminal proceeding, claiming that he believed the corporate attorneys were also his attorneys at the time, and that the communications were subject to his attorney-client privilege. Id. at 605. Among other things, the chief financial officer pointed to the fact that civil lawsuits naming him personally had been filed at the time and the company’s counsel only subsequently recommended that he retain separate counsel.  Id. at 605-06. While corporate counsel claimed that they had provided appropriate Upjohn warnings, the chief financial officer disavowed any recollection of having received the admonitions. Id. 
Ultimately, the district court found that the chief financial officer had a reasonable belief that the corporation’s attorneys were also acting as his personal attorneys at the time of the investigation, that the chief financial officer never consented to the dual representation or to the disclosure of his communications with counsel, and that all such information should be suppressed. Id. at 606. The district court took the further step of referring the law firm to the California State Bar for possible disciplinary action. Id. On appeal, the Ninth Circuit did not find that the district court’s finding of dual representation was incorrect, but did conclude that: (a) the chief financial officer did not have a reasonable expectation that the communications were confidential since the purpose of the investigation was to gather information for company auditors, and (b) that a violation of the rules of professional conduct by a law firm does not support an order suppressing otherwise admissible evidence. Id. at 611-13.
Ruehle underscores the importance not only of providing the Upjohn warnings to employees in connection with internal investigations, but also of memorializing that those warnings have been provided. At a minimum, the admonitions should be memorialized in contemporaneous notes. A further precautionary step might include having two lawyers present during the investigatory communications.

Step 3: Avoid Misleading an Unrepresented Employee
Employment class action cases further emphasize making appropriate admonitions to company employees and documenting those admonitions to avoid ambiguity, as well as the importance of not misleading an unrepresented employee. Courts have noted that pre-certification communications with putative class members who remain employed by a corporate defendant in employment class action cases are not prohibited, provided that the attorney does not mislead or coerce the employee. Noting the potential conflict of interest and the heightened possibility for coercion because of an ongoing employer-employee relationship, at least one court has concluded that pre-certification communications with unrepresented employees implicate Rule 3-600(D), mandating that the attorney advise the employee that he or she represents the company and that the information communicated to the attorney may be used in the company’s interest, even if the employee later becomes adverse to the company. See, e.g., Mevorah v. Wells Fargo Home Mortgage, Inc., 2005 U.S. Dist. LEXIS 28615 (N.D. Cal. 2005) (citing Cal R. Prof Conduct 3-600(D)). Attorneys who run afoul of this rule with the hope of gathering favorable declarations for their corporate clients risk losing the ability to use the declarations for the benefit of their clients or the imposition of limitations on further communications. See id. at *14-19 (finding that pre-certification communications between counsel and employees were misleading and improper, and formulating corrective action).
In Rojas v. Zaninovich, Inc., 2012 U.S. Dist LEXIS 16043 (E.D. Cal. 2012) (findings on class certification accepted in part, rejected in part by 2012 U.S. Dist. LEXIS 51787), a magistrate judge making recommendations on class certification declined to strike declarations obtained by corporate counsel from putative class members employed by the defendant. Distinguishing Mevorah, the court noted a number of critical disclosures made to the employees evident on the face of the declarations. Each declaration indicated that the declarant knew that the case involved a class action in which the plaintiffs were seeking to represent employees, including the declarant. Each declarant was aware that the attorney who interviewed him or her and prepared the declaration represented the company and did not represent the individual employee’s interests. Finally, each declarant stated that he or she was signing the declaration voluntarily and without pressure. Id. at *39-40. Importantly, the court also noted that the attorneys had not misled the declarants in obtaining the declarations. Id. at *37-38. Like Reuhle, Rojas illustrates the importance not only of verbally clarifying the attorney’s role as counsel for the corporation and that information provided by an unrepresented employee may be used for the corporation’s benefit, but also of ensuring there is a written record of those communications. 
Attorneys may be reluctant to utilize such candor with employees for fear they may inhibit full disclosure by employees of information necessary for the client’s representation. However, the potential pitfalls of failing to adequately inform an unrepresented employee of the attorney’s role outweigh any potential chilling effect on those communications. Adequate disclosure of the attorney’s role as corporate counsel and an explanation that the company is the holder of the privilege and may use information provided at its discretion is critical to protect the client’s attorney-client privilege, to ensure that information gathered may be used by the client if necessary, to avoid misconceptions by unrepresented employees, and to ensure compliance with ethics rules.

Mary A. Dannelley is a sole practitioner in Irvine, California. Ms. Dannelley practices in the areas of commercial and employment litigation. She also provides employment counseling to employers and conducts independent workplace investigations. Ms. Dannelley can be reached at mary@dannelleylaw.com.