CONDUCT BY IN-HOUSE LAWYERS

Kyle Russell, Esq.

Jackson Lewis

Presentation to the Johnson County Bar Association

June 14, 2017.

A CASE STUDY

• In 2011, Jay Inhouse passes the Kansas Bar exam and is sworn in to the Kansas Bar.

• In 2014, Jay Inhouse is hired at BigCo as Senior Corporate Counsel.

• Jay is responsible for review of contracts and non-disclosure agreements.

• BigCo’s current outside counsel, BigFirmLLC, has been handling BigCo’s securities

and corporate acquisition work for many years. BigFirm also does contract and

non-disclosure work for BigCo. Jay manages BigFirm’s work in this area.

2

A CASE STUDY

• As an employee of BigCo, Jay signs BigCo’s code of conduct and its employee handbook.

• BigCo specifically prohibits conflicts of interest and requires that even the appearance of

a conflict must be reported.

• BigCo employees cannot accept gifts greater than $100 from vendors, suppliers or

potential vendors/suppliers.

3

A CASE STUDY

• Jay’s best friend, Bob Barker, is elected to Partnership at SmallFirmLLP.

• Shortly after becoming a Partner, Bob takes Jay to lunch and makes it clear he would like

to do work for BigCo. Jay states that he has to run those decisions by the General

Counsel, but that he would look for opportunities to “spread the work around” to other

firms including SmallFirm.

• In December 2016, Jay gets permission to spread the contract and non-disclosure work

to other firms. Jay contacts Bob, notifies him that work may be coming his way and signs

SmallFirm’s client engagement letter.

4

A CASE STUDY

• Two days after the announced move, Bob Barker sends Jay an email, “Thanks for your email on

the move of the work. I’m keeping my end of the deal. Here are your Super Bowl tickets and

a $5,000 visa card to cover your expenses at the game.”

• Jay attends the Super Bowl and is seen in prime seats by scores of BigCo employees watching

the game on television.

• An anonymous complaint is filed with BigCo’s ethics line alleging Jay received Super Bowl

tickets and other benefits in exchange for moving work from one law firm to another.

5

A CASE STUDY

• Today, BigCo’s General Counsel notifies Jay that he has been informed of an ethics complaint

against Jay related to attending the Super Bowl and he would like to discuss it next Monday

when he is in town.

• Jay immediately calls you in a panic and asks for advice. You agree to represent him. What

do you recommend? Here are Jay’s questions:

• What should I tell the General Counsel? Should I offer to repay the cash value of the gifts? Do I

have to self-report this to the Disciplinary Administrator’s office? What should I do if the

Disciplinary Administrator’s office investigates?

6

A CASE STUDY

• Two Kansas disciplinary cases involving in-house counsel provide some guidance as to

how to answer those questions.

• Both involved in-house counsel at large corporations.

• Both individuals were accused of wrongdoing.

• Both individuals opted not to tell the truth initially.

• However, the discipline issued by the Kansas Supreme Court differed significantly.

7

IN RE: WARE

• Ware was hired in August, 2000 by Sprint as an attorney in the Labor and Employment

section of the law department.

• Ware was responsible for responding to charges of discrimination made with state and

federal agencies against Sprint.

In re Ware, 279 Kan. 884, 112 P.3d 155

(2005)8

IN RE: WARE

• Sprint had a case tracking system to follow assigned matters.

• Matters were listed as “active” if no response to an agency has occurred.

• Matters were listed as “pending” if a response to an agency had occurred.

• Attorneys were required to provide narrative updates on a bi-weekly basis.

• Attorneys also kept an assignment log to track their own matters.

9

IN RE: WARE

• In June 2001 (approximately 10 months into her job), Ware is assigned to respond to a

Florida Commission on Human Relations (FCHR) charge filed by a Sprint employee in

Florida.

• Ware was required to respond by July 19.

• Ware did not respond by the deadline. (Missed Opportunity #1)

• In August 2001, 30 days after the deadline, Ware notified FCHR she would respond by

September, 2001.

10

IN RE: WARE

• Ware did not respond by September, 2001. (Missed Opportunity #2)

• In January, 2002, FCHR notified Ware that the charge against Sprint had been amended and

asked for a response by March 4, 2002.

• Ware did not respond by March, 2002. (Missed Opportunity #3)

11

IN RE: WARE

• FCHR sent a fax to Ware requesting a position statement.

• Ware did not respond to the fax. (Missed Opportunity #4)

• On April 2, 2002 FCHR left a voicemail asking for a position statement.

• Ware responded asking for an extension to respond until April 16, 2002.

• Ware failed to provide a position statement by April 16. (Missed Opportunity #5)

12

IN RE: WARE

• On April 22, FCHR faxed a letter asking for a position statement by May 4, 2002 and

warned that the failure to respond could result in an adverse finding of

probable cause.

• Ware failed to provide a position statement by May 4, 2002. (Missed Opportunity #6)

• On May 6, 2002 Ware requests an extension until May 10, 2002.

• Ware failed to provide a position statement by May 10, 2002. (Missed Opportunity #7)

• On June 4, 2002 FCHR issues cause determination against Sprint based on the fact that

Sprint had failed to provide information to the agency after reasonable notice and an

opportunity to cure had been provided.

13

IN RE: WARE

• Ware falsely reported the status of the Florida matter to Sprint repeatedly.

• She changed the status from active to pending in the case tracking system even though

she had not responded.

• Ware directed her secretary to provide false narratives of the status of the matter and

omitted notice of the adverse determination.

14

IN RE: WARE

• Employee filed suit on July 18, 2002.

• Outside counsel requested the file from Ware.

• On July 22, 2002, Ware responds that she would send it.

• On July 31, 2002, when asked for the file again, Ware claims to have sent it on July 29,

2002.

• The file was never sent.

15

IN RE: WARE

• When confronted by Sprint about the case and the false status reports in the case

tracking system, Ware blamed the errors on her secretary.

• However, Ware’s secretary was keeping detailed notes on Ware’s directives because she

was concerned that Ware would blame her for errors that were not hers.

• Ware deleted her assignment log and claimed to Sprint have no idea how it was deleted.

16

IN RE: WARE

• Sprint filed a written complaint with the Kansas Disciplinary Administrator.

• In response to the complaint, Ware initially claimed to the investigator that the mistakes

were due to errors by her secretary and that she had never received notice from FCHR

with a warning of an adverse inference or a finding of cause.

• Ware also claimed that the charges against her were retaliation for an internal complaint

of sexual harassment against her supervisor.

• Ware subsequently changed her position and claimed that case tracking errors were

related to a change in terminology which confused her.

17

IN RE: WARE

• Kansas Supreme Court four violations: KRPC 1.3, KRPC 8.4(c), Supreme Court Rule 207(b), and Supreme

Court Rule 211(b).

• KRPC 1.3 - Reasonable promptness and diligent representation by failing to defend the employment

discrimination case.

• KRPC 8.4(c) – Conduct involving dishonesty, fraud, deceit or misrepresentation by falsifying internal Sprint

documents to make it appear she acted

• Supreme Court Rule 207(b) – failing to cooperate in the disciplinary investigation by providing a false and

misleading response to the investigator

• Supreme Court Rule 211(b) – failure to file a timely written answer to the formal disciplinary complaint.

• Finding: Suspension from practice for one year. (6/3/2005)

• Ware was granted reinstatement in 2007. (In Re Ware, 279 Kan. 884 (2007)

18

IN RE: ELLIS

• In 2001, Troy Ellis was hired by Koch Industries, Inc. as in-house counsel.

• In 2005, he became in-house counsel for Koch subsidiary, Invista.

• Koch and Invista share a common food vendor, Eurest.

• In August 2007, cashiers and a manager for Eurest observed Ellis place food on his tray

and leave without paying.

In re Ellis, 288 Kan. 604, 204 P.3d 1161,

1164 (2009)19

IN RE: ELLIS

• From September 3 to September 7, 2007, cashiers of Eurest observed Ellis taking food

several times without paying for it.

• On September 10, 2007 Koch security installed a video camera in the cafeteria.

20

IN RE: ELLIS

• On September 21, 2007 Ellis was observed entering the cafeteria, placing food on the

tray and leaving with out paying. His conduct was not captured by the video camera.

• On September 25 and September 27, Ellis entered the cafeteria, placed food on his tray

and left with out paying. His conduct was captured on video camera.

21

IN RE: ELLIS

• On September 28, 2007 Ellis was confronted about the theft by Koch’s General Counsel

and the VP of Ethics and Compliance for Invista. Ellis denied stealing food.

• Later that day, after viewing video of his conduct, Ellis admitted the misconduct.

• Ellis later sent an email to Koch’s General Counsel apologizing and saying the following: “I

lied. I stole. I violated the Code of Conduct.”

• Ellis was instructed to self-report to the Disciplinary Committee’s office.

22

IN RE: ELLIS

• On October 11, 2007, Ellis sent a letter to the Disciplinary Committee’s office which

included “due to oversight and time pressure, I did not immediately pay for those lunches,

but intended to in the future.”

• Ellis did not repay the café for the lunches before the Supreme Court considered the

matter.

• Ellis noted in his letter that he was forced to resign from Koch / Invista.

23

IN RE: ELLIS

• Ellis was found to have violated KRPC 8.4(b) – a criminal act- and KRPC 8.4(c) –

engaging in dishonesty.

• Kansas Supreme Court issued a published censure and ordered the café be paid for the

meals.

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COMPARISON OF THE CASES

• Both were in-house counsel for large corporations.

• Both lied initially when confronted by the

employers with misconduct allegations.

• Both were fired or forced to resign.

• Both involved knowing violations.

• Both involved actual injury to another.

• Both involved the aggravating factor of dishonest or

selfish motive.

• Both involved the aggravating factor of a pattern of

misconduct.

• Both involved the mitigating factor of a lack of prior

disciplinary record.

• Also, Ware had the mitigating factor of inexperience

in the practice of law and Ellis had the aggravating

factor of substantial experience the practice of law.

25

SO, WHY THE DIFFERENCE?

• It should be noted that the Kansas Supreme Court did not specifically note the differences

between these two cases.

• Ware did not self-report.

• Ellis self-reported (after being told to do so).

• Ware engaged in obstruction of the investigation and provided the investigator a letter with false and

misleading statements.

• Ware also blamed someone else for her conduct. Ellis did not obstruct the investigation.

• The lesson to be learned: Self-report, cooperate fully with any investigation and be truthful

even if it hurts.

26

DUTY TO SELF REPORT

• Note the obligation to self-report a violation. KRPC 8.3(a): “(a) A lawyer having

knowledge of any action, inaction, or conduct which in his or her opinion constitutes

misconduct of an attorney under these rules shall inform the appropriate professional

authority.”

• The Kansas Supreme Court did not find a violation of 8.3(a) with regard to Ware,

but there is no evidence to suggest she complied with 8.3(a).

• See also J. Nick Badgerow’s article “The Beam and the Mote: A Review of the Lawyer’s duty

to Report” from the Journal of the Kansas Bar Association February, 2013.

27

DUTY TO COOPERATE – SUPREME COURT RULE 207

• (b) It shall be the duty of each member of the bar of this state to aid the Supreme Court, the

Disciplinary Board, and the Disciplinary Administrator in investigations concerning

complaints of misconduct, and to communicate to the Disciplinary Administrator any

information he or she may have affecting such matters.

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SO, WHAT SHOULD YOU TELL JAY?

• What should I tell the General Counsel? The truth. Describe exactly what happened and do

not hold back. Also, do not delete anything.

• Should I offer to repay the firm who offered the gift? Yes. Offer to do this and do it.

• Do I have to self-report this?Yes. Do it immediately.

• What should I do if the Disciplinary Administrator’s office investigates? Tell the truth. Describe

exactly what happened and do not hold back. Also, do not delete anything. Offer to provide and

actually provide requested documents.

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ANY QUESTIONS?

Thank you.