How To Avoid Being GM’ed: The Wrongs and Rights of Clients and Lawyers

A general malaise?

A general malaise?

The GM internal-investigation report  about ignition-switch problems raises a host of issues, one of which is its unusually sharp criticism of GM internal lawyers.  Criticism of lawyers is nothing new, of course.  Lawyer-jokes always blame lawyers; lawyers’ spouses frequently blame lawyers; clients sometimes blame lawyers.

But public reports drafted by lawyers infrequently blame lawyers, so this one merits attention, most especially by internal lawyers in large organizations; by the outside counsel who serve them; and by the businesspeople who are the true clients.

 

What are the key takeaways?

The Normal, Uneasy.   Skim the report.  (Just skim it — it’s too long to read cover to cover without heroin.  If you have heroin, you have other issues besides ignition recalls and attorney ethics).  On a practical, professional level, what’s your reaction?

One reaction is, Not much.  It is remarkable how normal the actions of GM’s outside counsel and internal lawyers seem, and how characteristic of the operation of large organizations that are at once diffuse, sprawling and “siloed” (to use the term du jour).  Anybody who works in or serves a large organization will recognize the course of events, the mis-allocation (or absence) of resources, the personal dynamics and the outcomes described the GM report.  Despite expressions of editorial shock and Congressional indignation, the lawyer-narrative laid out in the GM report is, in many important ways, more normal than aberrant.

 

Advising on this quarter's numbers.

Advising on this quarter’s numbers.

The Uneasy Normal, Uneasier.  Prepare for a change in the public perception — and, perhaps, in regulation — of commonplace concepts of attorney-client privilege and the general confidentiality of lawyers’ work.  Prepare also for a coordinate change in internal-lawyers’ reporting obligations within the corporation.  Perceptions of  lawyers are mixed, and we should generalize with caution, but jury consultants regularly note the suspicion and distrust with which lawyers are viewed —  especially lawyers for big companies.  Elsewhere, we have explained how laypeople see corporate counsel as mob lawyers.

 

 

Preparing for summer hearings.

Preparing for summer hearings.

Summertime, and the Congressional Livin’ Is Easy.  Congress is composed of laypersons who are political animals and who are no great respecters of privilege and confidentiality.  As a former oversight-and-investigations lawyer for a House committee, I can testify: summer is the high season for O&I hearings.  Nothing is going on legislatively, O&I hearings don’t require lobbyists or constituents, it is hot as hell but most House and Senate hearing rooms have good air-conditioning these days and, if you get some hearings under your belt in June and July, you’ll have plenty as a Member to talk about in your district or state.

It is by no means inconceivable that bills will be introduced seeking to impose, in GM-like situations, a Sarbanes-Oxley style “reporting” requirement on internal lawyers (or outside counsel, or both), coupled with a “private attorney general” concept and whistleblower bounties.  As in the SOX, internal-investigation world, if the matter is sufficiently serious, you may need two law firms: one firm that does an investigation and prepares a report that we all know will end up in the hands of the Government, and one firm that provides advice to the company (or the board, or a committee of the board) and over whose work we hope to maintain privilege.  We have addressed internal investigations and related problems before.

[Full disclosure moment: My law firm does a lot of products-liability work, all of it on the defense side (that is, on behalf of the people who make the products that allegedly cause the complained-of injury).  We are not involved in the matters described in the report, but we have in the past represented and continue today to represent automotive manufacturers.  I do little products work; the primary way I judge a car is by its air-conditioning.  Nevertheless, consider my biases as you read].

 

Doubts about who the client is?

Doubts about who the client is?

A change in the way we view lawyers and their roles.  We may be faced with an evolving re-definition of that law school chestnut: Who is the client?  Is the client now the Government?  This is a critical threshold question. In the narrative laid out in the GM report, the “client” of the internal lawyers and of the outside counsel is not the government, or a government agency or a regulator.  The client is not the buyer of a GM car or the passenger in a GM car.  The client is not a Member of Congress, an editorial writer or a blogger.  The lawyer — at least while she or he is acting as counsel — owes a duty only to the client, a client which, in this situation, is a non-natural person called a “corporation.”

Professor Peter Henning is generally right on the money with regard to white-collar matters, but he jumps the gun when he so quickly blames lawyers in this kind of situation:

 

In the aftermath of the savings and loan scandal, Judge Stanley Sporkin asked how a once-prominent financial institution could engage in a pattern of misconduct. “Where were the professionals when these clearly improper transactions were being consummated?” he asked.

For General Motors, the negligence and incompetence that resulted in at least 13 deaths and multiple injuries from a faulty ignition switch is equally troubling. Numerous lawyers were on the scene, but none took responsibility for making sure their client did not continue to keep defective cars on the road.

Most people, when they pay for a lawyer, want that lawyer to be their lawyer and not someone else’s.  Indeed, that concept of loyalty is a foundation of the conflict-of-interest rules (rules, by the way, far more demanding than what is considered normal in the marketplace).  Under current law and rules, and with few exceptions, lawyers internal and external have neither a duty nor a warrant to serve multiple masters simultaneously.  The most relevant provision is Rule 1.13  (“Organization As Client”) of the ABA Model Rules of Professional Conduct, which are restrictive about what a lawyer representing an organization may and may not reveal.

Even the “reporting up” obligations, which are limited, are focused on the client:

If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the organization as determined by applicable law.

This question is distinct, of course, from what is wise, merciful or sane from a business or spiritual standpoint, and one could make an argument that losing track of the ignition problem was “likely to result in substantial injury to the organization.”  But if the question is, Where were the lawyers?, the answer is, They were right there.

 

A file too far.

A file too far.

A Forest-and-Trees Cliche.  In future litigation, if wholesale problems still get lost in the retail landscape, they will imperil your job.  If the GM report is accurate, there was never a genuine “visibility” problem about the ignition switch.  “Visibility” was not the problem.  “Irritability” was the problem.  Lawyers tend to deal with the irritant at hand; they put out the fire first that is closest and hottest.  They are trained to do so — first in law school, by “spotting issues” instead of looking at a scenario as a whole, and then in private practice, with the demarcation of work into mostly fenced-off fields (called “cases”) and of compensation into fractions of time (called “tenths of an hour”).  In addition, for internal lawyers, a combination of too many demands, insufficient resources and a corporate focus on the monthly or the quarterly has the same grinding effect.  An in-house friend, a accomplished lawyer at a large corporation with a good reputation, says that her only criticism of her job is that she never — ever — has time to actually think.

So what, as a practical matter, can we do — internal lawyers, outside counsel and businesspeople?

Grow Real Ethics.  There is no substitute for actual ethics, opposed to consultant-thick compliance programs and ever-muddied regulation.  We have written on the compliance versus ethics problem before.

Senior Citizens Unite.  Older lawyers – internally and externally — have to speak up.  Young lawyers lack professional and financial traction, as noted in at least one instance in the GM report.

 

Team A v. Team B

Team A v. Team B

Be A Spook.  When faced with “serial” litigation, try the CIA Team B approach of pitting two teams — one internal, one external – against each other on the same topic or issue.  (Outside law firms are useful for this exercise, if there is money in the budget).  As a way of addressing the Soviet strategic threat, Team B has had many critics, but alternative, competitive thought is always worth considering (and is always more expensive).

Misery Loves Company.  Outside lawyers are proficient at CYA.  Consider ways to put your outside law firms more firmly on the ethical hook.

 * * * *

Without the right budget and the right approach, none of this may matter, but give it some thought.  By itself, the fact that we all believe that we are serving our clients won’t keep us from getting “GM’ed.”


Board Room, Bored Room and the Existential Horror of Styrofoam Coffee Cups: 13 Ways to Avoid Waiving Privilege in Corporate Meetings

And, how are we supposed to have a meeting without Wi-Fi?

And, how are we supposed to have a meeting without Wi-Fi?

This discussion by Mark Herrmann at Above The Law — Law Firm Meetings Vs. Corporate Meetings, Meetings, Meeting, And Meetings! — is a wonderful set-piece about meetings.  Read the whole article, but here he compares law-firm meetings  corporate meetings:

Corporations are different. They’re publicly traded. They’re often much larger than law firms. They’re divided into operational divisions with pyramidal structures, with many people reporting to fewer people who report to fewer people still who report to someone near the top. Put that all together, and it means meetings. And meetings. And meetings. And meetings. In fact, to my eye, there are four types of corporate meetings . . . .

First, there are meetings that are necessary to move the ball. These are the types of meetings that you experience at law firms: Several people are undertaking different tasks. The tasks must be coordinated, and you need a unifying mind at the top to know what’s happening. So you meet.

Or you’re struggling with a tough issue that you can’t resolve alone. You need help, so you meet.

Thus, the first type of meeting is one that’s substantively necessary: You meet to move the ball.

But we set meetings at corporations for many other reasons, too.

Because of the frequency of internal corporate meetings, and the manner in which they are conducted, they are prime pathways to waive the company’s privilege.  How can we minimize the likelihood of doing so?

The modernist American poet Wallace Stevens (1879-1955) wrote Thirteen Ways of Looking at a Blackbird.  You are an internal corporate lawyer.  Think of this article as “Thirteen Ways Of Looking At An Outlook Invitation.”

Skipping email.

Skipping email.

1.           Judges and juries think you’re a gangster.  Realize that judges and juries, the ultimate consumers of lost privilege, think that internal counsel are some kind of consigliere — at  best.  You are perceived (wrongly, usually) as a businessperson worried about budgets or looking good for the boss or covering up problems, rather than as lawyer with independent judgment, ethical constraints and multiple clients rather.  This is why, for example, agents and prosecutors do not especially like you, either, and may ask that you not attend employee interviews.  The privilege caselaw about internal lawyers is often not great, either.

2.           Pretend that you are Tom Hagen.   In the movies The Godfather and The Godfather Part II, the consigliere to Don Vito Corleone (Marlon Brando), and later Don Michael Corleone (Al Pacino), is Tom Hagen (Robert Duvall). 

A supporting role.

A supporting role.

Fantasize that you actually are a consigliere, which has the two-fold benefit of (a) driving other people crazy and (b) preserving privilege.  Follow steps (3) to (13) below.

3.           Face-to-face.  Among mob movies, The Godfather franchise still reigns supreme.  In The Godfather, does anybody talk on the phone?  Not if they can help it: somebody’s always listening.  You should assume the same.

Face-to-face, outside, with a cement mixer in the background is best for avoiding audio surveillance. 

"Don't worry about anything, Frankie Five Angels." "Thanks Tom. Thanks." ―Frank Pentangeli and Tom Hagen

“Don’t worry about anything, Frankie Five Angels.”
“Thanks, Tom. Thanks.” ―Frank Pentangeli and Tom Hagen

You’ve seen it in the movies.  Face-to-face is best for preserving privilege, too: no forwarded emails or unintended texts to worry about.  (f you want to unnerve others in the meeting, you can pay your drug-addled nephew, the one at the construction company, fifty dollars to drive a cement mixer back and forth outside).

"I hate taking work calls in the shower."

“I hate taking work calls in the shower.”

4.           Phone over email.  If it’s raining outside, or if cement mixers are too grimy, use the phone rather than email or text.

5.           Maximize formality to maximize privilege.  Here in the 21st century, business is supposedly informal, collaborative and horizontal rather than hierarchical.  (Supposedly.  Mainly, in many informal, collaborative and horizontal offices I see guys who would barely look good in suit-and-tie wearing clothes designed for junior-high volleyball coaches).  Privilege, on the other hand, is formal: privilege law draws sharp distinctions based upon need-to-know; control groups versus the controlled; and circles within circles.  If an activity actually helps the business, the product or the service, or is useful to and used by lots of people across the organization, it’s probably not privileged.

6.           If it was good enough for the Dead Sea scrolls, it’s good enough for you.  If there are to be agendas at the meeting, print them out on paper and then, after the meeting, collect them back up.

A blank slate.

A blank slate.

7.           Put a bullet in bullet-lists.  A PowerPoint presentation is already sufficiently soul-eating.  (See Edward Tufte’s work on this subject).  Do not compound the problem by allowing meeting attendees to tote the presentation around: do not print out the PowerPoint slides and do not distribute them. 

8.           They no longer make carbon paper.  Ban “cc’s,” an abbreviation for “carbon copy.”  (Remember mimeograph machines, though?  Nothing made you think “second grade” more than the smell of mimeograph fluid).  Some employees seem to think that the more they “cc,” the more they communicate (or the more CYA they have).  In general, the longer the “cc” list, the more likely that privilege will be lost, if indeed the email was privileged in the first place.

9.           “Re” is a Latin prefix, not a meaningful communication.  Do not re-use the same subject line in emails.  Despite advances in technology, recycled “re” lines make pulling out the privileged thread more difficult and encourage thoughtless, too-rapid correspondence.

Your choice for illegibility.

Your choice for illegibility.

10.        Crimson Security.  If you must distribute documents with important factual and legal findings, print them on red paper.  When scanned or photocopied, red paper turns black.  You do not waive anything because no one can read anything.

11.        Technological omerta.  Look into “Silent Circle” or similar tools to minimize the permanence of emails.

12.        Upjohn Massacres.  Speak the language of Upjohn, frequently, meetings.  It sobers people up.  Seriously: people need to remember that the substance of the meeting is privileged and that the privilege is held by the company.

13.        BYOD Is More Of A Menace to Privilege Than BYOB.  Bug your IT people about making and enforcing a coherent policy on the phenomenon of “bring your own device” to work.  (BYOD is not going away.  Most employees would much rather bring their own device to work than bring their own children to work).

There's work in here, somewhere.

There’s work in here, somewhere.

Good luck.