Ex Parte Interviews of Employees and Former Employees

INTRODUCTION

1) actual participants in particular events or conduct, or

2) witnesses to particular conduct, or

3) those who in some other way have knowledge of particular conduct.

Insurance coverage litigators have increasingly turned to the use of private fact gathering because the important issues in coverage disputes are often related to particular conduct which will have a tendency to preclude or establish coverage for a particular underlying claim. In the late 1980's and early 1990's, the issues of intentional conduct, known loss or pre-existing conditions became a central issue in insurance coverage litigation. These cases presented a genuine need to delve into an historical look at prior activity, practices or a particular event.

The increasing number of claims for coverage for environmental liabilities, employment discrimination, sexual molestation and harassment, and various business-related torts targets the conduct and intent of the insured. No where is it more important to go behind the scenes to recreate a factual picture of what occurred in time gone by than in a coverage dispute where there is a bona fide question of whether a particular underlying claim is covered because of a dispute over how or why it happened.

The private pursuit of facts and the protections of the ethical rules and the attorney-client privilege collide when one side seeks an ex parte interview of an employee or former employee of the opposing party. At first blush, the issue may appear to be relatively straightforward: Pursuant to Rule of Professional Conduct 4.2, an attorney cannot communicate with a "party" that he knows to be represented by another attorney without consent. But, if a witness is not a party and is not known to be represented by another attorney, does anything prohibit that person from being interviewed in private?

As insurance coverage practitioners have seen over the last several years, the issue of ex parte interviews of employees and former employees has been the subject matter of a multitude of reported cases reaching different conclusions. The thought of a private interview of an employee or former employee by the other side is an especially emotional one because facts known to and communicated by a particular witness can have a devastating impact on the resolution of coverage issues. A litigant wants to feel comfortable and secure that his own "turf" will not be invaded by the other side, and that those who possess private details of ones life or operation will not be put in the position to potentially discuss them with the enemy.

The propriety of an ex parte interview with employees rose to the top of the "important legal issue" pile in coverage cases in late 1990, when a U.S. District Court concluded that both present and former employees of a corporation should be considered a "party" and, therefore, R.P.C. 4.2 prohibited ex parte investigative fact-finding of all current and former employees. Public Service Electric & Gas Co. v. Associated Electric & Gas Insurance Services, Ltd., 745 F.Supp. 1037, 1042 (D.N.J. 1990) (hereinafter "PSE&G"). The decision in PSE&G caused insurers and insureds to reevaluate the way in which they privately accumulated facts. After PSE&G, insureds and insurers alike sought private counsel on the scope and boundary of their ethical obligations under the Rules of Professional Conduct and sought clarification from judges on the "ground rules" for specific cases. Insurers subsequently argued that the decision in PSE&G was fundamentally flawed.

Courts focusing on ex parte interviews after PSE&G have generally refused to adopt its broad prohibition of all interviews of former employees and, instead, formulated a more limited proscription to ex parte contact. Even the District Court Judge who decided PSE&G has begrudgingly softened his position in a subsequent unpublished opinion. There is no uniformity, however, in the conclusions reached by courts who have addressed ex parte interviews in the 1990's. The cases truly represent a variety of interpretations of the boundaries of R.P.C. 4.2.

Private interviews and the use of private investigators are tremendously valuable litigation resources. The message here is that the attorney who plans to use them must make sure she has a fundamental understanding of not only the decisions in a particular jurisdiction, but also the ethical and privilege foundations which explain why the topic has become such an important one in the first place.

R.P.C. 4.2 AND DISCIPLINARY RULE 7.104(A)(1)

In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.

During the course of his representation of a client a lawyer shall not: * * * (1) communicate or cause another to communicate on the subject of the representation with a party he knows to be represented by a lawyer in that matter unless he has the prior consent of the lawyer representing such other party or is authorized to do so.

R.P.C. 4.2 has several purposes. The rule is designed to prevent a represented party from being overwhelmed by opposing counsel in the absence of friendly counsel. Hanntz v. Shirley, Inc., 766 F.Supp. 258, 265 (D.N.J. 1991) citing Wright By Wright v. Group Health Hospital, 691 P.2d 564 (1984); Miller & Calfo, Ex Parte Contact with Employees and Former Employees of a Corporate Adversary: Is It Ethical?, 42 Bus. Law. 1053, 1054 (1987); Comment, Ex Parte Communications with Corporate Parties: The Scope of the Limitations on Attorney Communications with One of Adverse Interest, 82 Nw. U.L. Rev. 1274,1277 (1988). Assuming that a lay person involved in a lawsuit may be subject to undue pressure or outright trickery to negatively affect his or her own case, R.P.C. 4.2 requires the presence or consent of one's own counsel. Id.

R.P.C. 4.2 also protects the attorney-client relationship from invasion by opposing counsel. To the extent that a prospective witness has or had access to privileged information, R.P.C. 4.2 seeks to protect the confidences of a party which may become the subject of an ex parte inquiry.

It is argued the attorney-client privilege, when read into R.P.C. 4.2, prevents ex parte communications with former employees. See PPG v. BASF, 134 F.R.D. 118 (D.C.W.P. 1990). It has been noted that certain former employees "continue to personify the organization even after they have terminated their employment relationship". G. Hazard & W. Hodes, The Law of Lawyering (2d Ed. 1990). Within this class would be former managerial employees who were involved in the transaction giving rise to the suit. Id. This continuing relationship could raise an issue under R.P.C. 4.2. See PPG, 134 F.R.D. at 122.

On the other side, it is argued that the rationale that former managerial employees should be off limits is not based upon the fact that they had some senior position with the corporation, but rather upon the assumption that they may have had access to privileged information. G. Hazard & W. Hodes, supra, at 738; see PPG, 134 F.R.D. at 123. The attorney-client privilege, not R.P.C. 4.2, may be a basis to argue against ex parte communications with former employees regardless of whether they were managerial. This was demonstrated by the Supreme Court in Upjohn v. United States, 449 U.S. 383 (1981). In Upjohn, the Court was faced with the question of which corporate employees were within the attorney-client privilege held by the corporation with respect to communications with its counsel. 449 U.S. at 390, 101 S. Ct. at 683. The Court declined to limit the privilege to control group employees. Id. at 391-92. The Court acknowledged non-managerial employees will often be the ones most involved in corporate legal issues. Id. The Court reasoned, however, that to hold that only control group employees are within the privilege would "frustrate the very purpose of the privilege by discouraging the communication of relevant information by employees of clients to attorneys seeking to render legal advice to the client corporation". Id. at 392.

One Court has held that the attorney-client privilege alone cannot be used to justify an absolute proscription against ex parte communications with former employees. This is so because the attorney-client privilege exists only to the extent attorney-client confidences are implicated. Hanntz, 766 F.Supp. at 270.

The American Bar Association Standing Committee on Ethics and Professional Responsibility summarized the purpose of R.P.C. 4.2 in Formal Opinion 91-359, citing Wright, 691 P.2d 564 (1984):

The purposes of the rule against ex parte communications with represented parties are 'preserving the property functioning of the legal system and shielding the adverse party from improper approaches' (citing ABA Formal Opinion 108 (1934)).

As stated above, both the Rules of Professional Conduct and the Disciplinary Rules limit the proscription of ex parte conduct to a "party". When dealing with an entity with more than one current or former employee two important issues arise. First, are all current employees considered a party who cannot be interviewed ex parte if the entity itself is represented by counsel? Second, can any former employee be considered a party and, if so, what is the test to determine when a witness formerly employed by a party may be approached ex parte for fact-gathering?

The official Comment to R.P.C. 4.2 does not specifically define the word "party" but does interpret the Rule. The Comment includes:

In the case of an organization, this Rule prohibits communications by a lawyer for (1) party concerning the matter in representation with persons having a managerial responsi-bility on behalf of the organization, and with any other person with whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization. If an agent or employee of the organization is represented in the matter by his or her own counsel, the consent by that counsel to a communication will be sufficient for the purposes of this Rule. Compare Rule 3.4(f). This Rule also covers any person, whether or not a party to a formal proceeding, who is represented by counsel concerning the matter in question.