ACC Austin 2014 CLE/Golf/Spa Event May 9, 2014. 2 Michael DePonte, Shareholder and Litigation Manager – Austin, Jackson Lewis P.C. Who is the Client?

ACC Austin 2014 CLE/Golf/Spa Event

May 9, 2014

2

Michael DePonte, Shareholder and Litigation Manager – Austin,Jackson Lewis P.C.

Who is the Client? Ethical Guidelines for In-House Lawyers

3

• Attorney’s work is advisory and ongoing – sometimes difficult to pinpoint when need for Company representation and protection begins

• Relationship with officers and employees begins, and advice is given, before act of wrong-doing occurs

• Attorney can influence future Company behavior

• Lines may be blurred between business actor and legal advisor when events occur

• Obligation to explain that Company holds the attorney-client privilege, controls decision to retain or waive

Key Considerations for In-House Counsel

4

• Corporation is entitled to same protection of confidentiality as an individual client under the attorney-client privilege

• Difficulty in applying privilege in corporate context stems from inanimate nature of corporation:

– corporation can “speak” to attorney only via its agents

– lawyer represents corporation not individual agents

• Application of attorney-client privilege often turns on which corporate officials and employees act on behalf of the corporate entity as a client

What Do You Mean Who is the Client?

5

Warning: So Many Issues, So Little Time!

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• Protects disclosure of contents of communications between an attorney and an attorney’s client

• Applies only to private client communications

• Communications must be for purposes of securing legal advice

• Privilege has been claimed and not waived by client

• Determining when an attorney-client relationship is created informs the analysis of privilege in the corporate context

Attorney-Client Privilege

7

Confidential information includes both privileged and unprivileged client information

• Unprivileged client information is:

– all information relating to a client or furnished by the client

– other than privileged information

– acquired by the lawyer during the course of or by reason of the representation of the client

Duty of Confidentiality

8

Tex. Disciplinary R. of Professional Conduct 1.05 – Confidentiality of Information

• A lawyer shall not knowingly:

1. Reveal confidential information of a client or a former client to:

i. A person that the client has instructed is not to receive the information; or

ii. Anyone else, other than the client, the client’s representatives, or the members, associates, or employees of the lawyer’s firm

2. Use [such information] to the disadvantage of the client unless the client consents after consultations.

3. Use [such information] to the disadvantage of the former client after the representation is concluded unless the former client consents after consultation or the confidential information has become generally known.

4. Use of privileged information of a client for the advantage of the lawyer or of a third person, unless the client consents after consultation.


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A lawyer may reveal confidential information:

1. When expressly authorized in order to carry out the representation.

2. When client consents after consultation.

3. To the client, the client’s representatives, or the members, associates, and

employees of the lawyer’s firm, except when otherwise instructed by the client.

4. When the lawyer has reason to believe it is necessary to comply with a court order,

a Texas Disciplinary Rule of Professional Conduct, or other law.

5. To the extent reasonably necessary to enforce a claim or establish a defense on

behalf of the lawyer in a controversy between the lawyer and the client.

6. To establish a defense to a criminal charge, civil claim or disciplinary complaint

against the lawyer or his associates based on conduct involving client or

representation of client.

7. When the lawyer has reason to believe it is necessary to prevent the client from

committing a criminal or fraudulent act.

8. To the extent revelation reasonably appears necessary to rectify the consequences

of a client’s criminal or fraudulent act committed where the lawyer’s services had

been used.


See, Tex. Disciplinary R. of Prof’l Conduct 1.05 – Confidentiality of Information

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• Keeps a copy of the Texas Disciplinary Rules of Professional Conduct on his desk

• Presents regularly on ethics at SBOT seminars

• Sends monthly emails to his colleagues of the latest ethics updates from the Texas Center for Ethics

Meet Jack Lewis - The Ethical In-House Lawyer

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• Texas Disciplinary Rules of Professional Conduct

• ABA Model Rules of Professional Conduct

• Where Can Jack Obtain More Information?

– Texas Center for Legal Ethics: a 501(c)(3) public foundation organized for the purposes of promoting and enhancing ethics, professionalism and civility among the state’s lawyers” www.legalethicstexas.com

– The American Bar Association: www.abanet.org

– State Bar of Texas ethics helpline: 1-800-532-3947

Which Ethical Rules Apply to Jack Lewis in Representing ABC, Inc.?

http://www.legalethicstexas.com/

http://www.abanet.org/

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Jack Lewis is hired as in-house counsel for Company A. Company A and Company B are considering merging to form ABC, Inc. Company A’s CEO tells Jack Lewis that he will become the CEO of ABC, Inc., and that upon completion of the merger, Jack Lewis will be employed as in-house counsel for ABC, Inc.

Attorney for Company B tells Jack Lewis that the Company B’s CEO has secret plans to fire Company A’s CEO and his entire senior management – they will have no place at ABC, Inc. But the attorney tells Jack Lewis not to worry – he will still have his job as in-house counsel.

Who is Jack Lewis’ Client?

Any concerns here?

WWJD (What Would Jack Do?)

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The merger is complete and ABC, Inc. is up and running. One day Jack Lewis receives notice that a claim has been filed against ABC, Inc. The claim is insured. One of the officers of ABC, Inc., strongly advises Jack that he wants to defend the claim all the way to trial. He specifically tells Jack, “Do NOT settle, it’s a matter of principle!”

Jack speaks to ABC, Inc.’s insurer and learns that the insurer wants to settle and settle quickly.


Any concerns here?


14

ABC, Inc. is now the parent company of subsidiary XYZ, Inc. For as long as Jack Lewis has been employed as in-house counsel at ABC, Inc., subsidiary XYZ, Inc. has shared in ABC Inc.’s goal of becoming the world’s leading eco-friendly company.

Three years after the formation of XYZ, Inc., Jack learns that the subsidiary has plans to launch a new product that directly contravenes ABC Inc.’s mission.


Any concerns here?


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To Whom Does He Owe Allegiance?

ABC, Inc.

“Officers, directors, employees, and shareholders are the constituents of the corporate organizational client.”

See Model Rules of Professional Conduct R. 1.13(a) cmt. 1

Constituents

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• It Depends…

….Unlike individual clients who can speak and decide finally and authoritatively for themselves, an organization can speak and decide only through its agents or constituents such as its officers or employees … who act[] as an intermediary between the organizational client and the lawyer. This fact requires the lawyer under certain conditions to be concerned whether the intermediary legitimately represents the organizational client.

Tex. Disciplinary R. of Prof’l Conduct, R. 1.12 cmt. 1

What Do You Mean “Who is the Client?”

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One day ABC’s Compliance Officer, Ima Duwrong, comes to Jack Lewis’s office, closes the door, and says, “I want to confide in you. You’ve been such a great advisor to me in the past….

“I’ve been taking money from ABC, Inc. for years and no one knows. Obviously, I couldn’t afford that Bentley on my meager salary! But I’m getting ready to secretly repay the money because I’ve recently come into an inheritance!”

What is Jack Lewis’ course of action?


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A. Place Ima under citizen’s arrest and hold her until the police arrive.

B. Softly tell Ima to “never speak of this again.”

C. Ask Ima for a piece of the pie.

D. Inform Ima that he does not represent her and explain that he is going to report the matter.


POSSIBLE ANSWERS:

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A. Place Ima under citizen’s arrest and hold her until the police arrive.

B. Softly tell Ima to “never speak of this again.”

C. Ask Ima for a piece of the pie.

D. Inform Ima that he does not represent her and explain that he is going to report the matter.


POSSIBLE ANSWERS:

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Rule 1.12: ORGANIZATION AS A CLIENTTexas Disciplinary Rules of Professional Conduct

(a) A lawyer employed or retained by an organization represents the entity. While the lawyer in the ordinary course of working relationships may report to, and accept direction from, an entity’s duly authorized constituents, [in the situations described in paragraph (b)] the lawyer shall proceed as reasonably necessary in the best interest of the organization without involving unreasonable risks

-- of disrupting the organization and -- of revealing information relating to the representation to persons outside the organization.

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(b) A lawyer representing an organization must take reasonable remedial actions whenever the lawyer learns or knows that:

1) an officer, employee, or other person associated with the organization has committed or intends to commit a violation of a legal obligation to the organization or a violation of law which reasonably might be imputed to the organization; and

2) the violation is likely to result in substantial injury to the organization; and

3) the violation is related to a matter within the scope of the lawyer’s representation of the organization.

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Ima Duwrong insists that Jack keep her misdeeds quiet and allow her to “secretly” repay because she was the one who stuck her neck out to get Jack hired, and she sees Jack as “[her] lawyer” – Jack has advised Ima through numerous sticky situations, and Ima has confided in him before about personal issues, such as a recent divorce, usually during many long visits to the printers while awaiting materials for filing. Ima insists she obviously came Jack for his legal advice on how to best secretly repay the funds based on her past experience with and trust in him.

What should Jack Lewis do now?


23

POSSIBLE ANSWERS:

A. Now Jack can place Ima under citizen’s arrest, call the police.

B. Give Ima a 48-hour head start to leave the country before Jack does anything.

C. Remind Ima that when they discussed her divorce, he was speaking with her as a concerned friend. Remind Ima that she was represented by an attorney in the divorce and that he told Ima he knew nothing about family law. Restate that Ima was/is not his client, and he will report the matter to his client, ABC Inc.

D. Call his old law firm and ask if they are hiring.


24

POSSIBLE ANSWERS:

A. Now Jack can place Ima under citizen’s arrest, call the police.

B. Give Ima a 48-hour head start to leave the country before Jack does anything.

C. Remind Ima that when they discussed her divorce, he was speaking with her as a concerned friend. Remind Ima that she was represented by an attorney in the divorce and that he told Ima he knew nothing about family law. Restate that Ima was/is not his client, and he will report the matter to his client, ABC Inc.

D. Call his old law firm and ask if they are hiring.


25

Follow Up:

The CEO says to Jack, “Thanks, I will talk to Ima Duwrong, but we don’t need any more bad press – if you know what is good for you, you will forget you ever heard about this.”


What If the CEO Does Nothing?

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(c) Except where prior disclosure to persons outside the organization is required by law or other Rules, a lawyer shall first attempt to resolve a violation by taking measures within the organization. In determining the internal procedures, actions or measures that are reasonably necessary in order to comply with paragraphs (a) and (b), a lawyer shall give due consideration to:

(1) the seriousness of the violation and its consequences,

(2) the scope and nature of the lawyer’s representation,

(3) the responsibility in the organization and apparent motivation of the person involved,

(4) The policies of the organization concerning such matters, and

(5) Any other relevant considerations.


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(c) ….Such procedures, actions and measures may include, but are not limited to, the following:

(1) Asking reconsideration of the matter;

(2) Advising that a separate legal opinion on the matter be sought for presentation to appropriate authority in the organization; and

(3) Referring the matter to higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest authority that can act on behalf of the organization as determined by applicable law.


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• Refer matter to board of directors (or similar governing body)

• If unsuccessful, assess difficult issue of revealing confidential information to persons outside the organization

• Provisions of Rule 1.02 (Scope and Objectives of Representation) and Rule 1.05 (Confidentiality of Information) must be met in order to reveal confidential information to 3d party

Tex. Disciplinary R. of Prof’l Conduct 1.05, 1.02, 1.12 cmt. 7

Should Jack Lewis Report Up the Ladder or Beyond?

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• Optional Withdrawal– Lawyer may withdraw if no material adverse effects on client’s interests

– Lawyer may withdraw if client persists in course of action lawyer reasonably believes is criminal or fraudulent

Tex. Disciplinary R. of Prof’l Conduct 1.15 cmt. 7

• Mandatory Withdrawal– Lawyer must resign when lawyer knows the employment will result in

violation of rule of professional conduct or other law

• Withdrawal not permitted simply because client suggests such course of conduct (client may make suggestion with hope lawyer will not be constrained by a professional obligation)

Tex. Disciplinary R. of Prof’l Conduct 1.15 cmt. 2

Should Jack Lewis Withdraw?

30

• Sarbanes-Oxley Act: subjects attorneys to ethical standard in the representation of certain public companies:

– Counsel who “appear and practice“ before SEC must report material violation of securities law or breach of fiduciary duty by company to chief legal counsel or chief executive officer;

– If chief counsel or executive officer fails to appropriately respond, attorney must report to Board of Directors; and

– If no appropriate action is taken, Counsel “may” report to the SEC:

-- information which counsel “believes necessary” to prevent company from committing a violation likely to cause substantial financial harm to issuer or investors, or

-- to prevent issuer from committing criminal act, or-- to rectify material violation that caused substantial financial harm to the issuer or investors.

Sarbanes-Oxley Act § 307; 17 CFR Part 205 (“up the ladder rule”)

Don’t Forget SOX!

31

Follow Up:

The Board of Directors says to Jack, “Thanks for letting us know; please investigate Ima Duwrong and make recommendations to the Special Audit Committee of the Board as to our next steps.”



32

Follow Up:

In connection with his investigation, Jack Lewis sets up an interview of Ima Duwrong to get the details. As the interview begins, Ima immediately asks Jack: “Am I in trouble, Jack? Do I need a lawyer?”



33

Which Hat Are You Wearing?

LAWYER

INVESTIGATOR

BOSS

FRIEND

COMPLIANCE

OFFICER

34

• In-house counsel often blend role of business advisor, corporate employee, and lawyer (legal and non-legal roles)

– Risk that communications with in-house lawyer may not be protected under attorney-client privilege

• To be privileged – must be shown that communication was for the purpose of providing legal services rather than general business advice

• Courts have difficulty distinguishing legal and business advice, no bright-line test but case-by-case scenario

– Courts may protect only those parts of communication that are identifiable as legal; may not protect communications in which in-house counsel is not acting primarily in his or her position as legal advisor

Providing Business Advice

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• In re Sealed Case, 737 F.2d 94,99 (D.C. Cir. 1984), the court set the issue as follows:

The lawyer whose testimony the government seeks in this case served as in-house counsel. That status alone does not dilute the privilege. We are mindful, however, the attorney was a company vice-president, and that certain responsibilities were outside the lawyer’s sphere.

The company can shelter the attorney’s advice only upon a clear showing that the lawyer gave it in a professional, legal capacity.

Providing Business Advice

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• Which hat are you wearing and who is the client?

• What is the objective of the investigation?

– Is it anticipated that the investigation results may become public?

– May be necessary to a defense in court?

• What best practices apply to interviews of corporate employees while conducting internal investigations on behalf of the Company?

– Are investigations driven by objective principles?

– Is attorney-client privilege protected?

– Still bound by confidentiality rules.

Internal Workplace Investigations

37

• The Upjohn Factors:

“[C]ommunications…to counsel for corporation acting as such, at direction of corporate superiors…to secure legal advice…,[with awareness by employees] that they were being questioned so that corporation could obtain advice, …were protected.”

• Was the information:

− necessary for the attorney to impart legal advice?

− available from someone in the “control group”?

− within the employees’ scope of corporate duties?

− made with knowledge by employees that purpose of counsel is to provide legal advice to the Company?

− communicated as confidential and thereafter kept confidential?

When Does Privilege Attach? Upjohn Factors

http://www.presentermedia.com/sendcontent.php?contentid=6116&fullpath=tp/jl3tPIn2/stick_figure_drawing_four_check_marks.gif

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• Warnings should inform constituent that the investigating attorney is representing Company and not the constituent.

• Warnings should be explicit and unambiguous to ensure constituent does not believe that an attorney-client relationship has been formed with the investigating attorney.

• Purpose of interview should be made clear so it is apparent that counsel is acting on behalf of Company and gathering information to provide legal advice to the corporation.

Recommended Steps for Interviewing Constituents

39

• Give constituent opportunity to ask questions about the Upjohn warning and counsel’s role

• Inform constituent that:

– interview is subject to the attorney-client privilege and regarded as confidential

– the privilege belongs to the Company, not the constituent

– the Company alone may decide if or when the interview content should be disclosed to third parties

Recommended Steps for Interviewing Constituents

40

Who’s There?

Agency Investigations:

The “BIG KNOCK” at Your Door

41

KEY QUESTIONS:

• What should the scope of the investigation be?

• Who in the enterprise controls the investigation?

• Who should conduct the investigation?

• How should the investigation be conducted?

• What will be done with the results?

42

• Identify “agents” who have capacity to speak for the corporate client—and communicate this to the Agency representative;

• Disclose your role as in-house counsel to agents and any employee witnesses and clarify your role;

• Determine the Company position on the parameters of privilege with respect to any prior in-house investigation(s); and

• Advise client as to strategies for response to Agency action/subpoenas/ reports, etc.

Ethical Duties During Agency Investigations

43

• Attorney-client privilege may be expressly waived, or found not to exist, by:

– Voluntary disclosure of the information or documents to a person other than the client who has no interest in maintaining the confidentiality

– Disclosure by revealing privileged information (during trial or deposition testimony, in court or administrative filings)

– Disclosure to 3rd parties or others not essential to the representation (insurance brokers, public relations specialists)

– Failing to timely assert privilege when confidential information is sought through the discovery process or otherwise

Waiver of Privilege

44

• Designate Legal Advice

– Clarify legal versus business communications

– Phrases: “from a legal perspective” or “the legal conclusion is”

– Sensitive communications should be restricted to senior management

• Separate Legal Role from Business Role

– Cleary communicate role

– If Company places in-house counsel in role of officer or director, Company should retain independent attorney in the event sensitive issues arise

– When occupying dual roles, document nature of in-house counsel’s communications with corporate officers, employees, directors or agents

Protecting Privilege and Avoiding Pitfalls

45

• Avoid accidental or shared privilege

– Keep all legal files separate from general corporate files, to avoid accidental disclosure

– Establish policies to protect the confidentiality of legal documents and clearly mark such documents as “legal”

– Limit the distribution of certain communications to a need-to-know basis

Protecting Privilege and Avoiding Pitfalls

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• Define what activities are “lawyering” versus “business” activities

• Key: done in preparation to defend client(s) in anticipated litigation?

• Segregate attorney/client communication documents and attorney work product and clearly mark same (maintain documentation of elements of “work product”)

Points to Remember

47

• Identify reporting “ladder” channels BEFORE there is an incident—i.e., agree on who receives “bad news” for the Company and who will act at the behest of counsel

• Avoid conducting internal investigations, unless litigation or Agency Investigation arising from incident has already commenced or been threatened, or attorney believes there is substantial likelihood litigation will commence

– Necessary for work-product doctrine to apply

Points to Remember

48

Who are you? Who? Who? We really want to know!

Think before you speak and act.

And Finally….

49

THANK YOU!

50

Joe Knight, PartnerBaker Botts LLP

Handicapping the Appellate Season

51

2012-2013 Statistics

United States Court

39/78 in May and June

Texas Supreme Court

38/78 in June and August

52

Pending Texas Supreme Court Cases

In re John Doe A/K/A "Trooper"13-0073; argued 11/07/13

Can a company compel Google to reveal the identity of an anonymous blogger who is disparaging the company's business?

How much of a showing of disparagement must a company make to defeat anonymity?

Must a court have personal jurisdiction over the blogger before deciding his right to anonymity?

53


Kinney v. Barnes & Burbage v. Burbage13-0043 & 12-0563; argued 01/09/14

If a statement is adjudged defamatory, can a court mandate removal of the statements from the Internet and enjoin repetition?

Does such restraint violate the Texas constitution?

"Every person is at liberty to speak, being responsible for the abuse of this right."

54


Americo Life v. Meyer12-0739; argued 11/06/13

Should an arbitration award be vacated because a party was deprived of its right to appoint a non-neutral arbitrator?

When a contract specifies arbitrator qualifications, does it preclude additional qualifications in the AAA rules?

If so, what is the remedy?

55


Exxon Mobil v. Drennen12-0621; argued 11/06/13

Should Texas courts honor a contractual choice of law clause and enforce forfeiture conditions on restrictive stock?

Do the forfeiture conditions constitute an unenforceable restrictive covenant?

56

Pending U.S. Supreme Court Cases

Halliburton v. Erica P. John Fund13-317; argued 03/05/14

What is the future of class-action securities fraud cases?

Should the Court overrule the presumption of class-wide reliance based on the fraud-on-the-market theory?

If not, should a defendant be able to defeat class certification by showing that the alleged misrepresentation did not affect the stock price?

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Pending U.S. Supreme Court Cases

Alice Corp. v. CLS Bank13-298; argued 03/31/14

To what extent are computer-implemented inventions patentable?

Can the Court articulate a test that can be reliably applied to distinguish between inventions that merely use a computer to implement an abstract idea versus those that use a computer to do a new and useful thing?

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Joseph R. [email protected]

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Paul Hash, Shareholder and Litigation Manager – Dallas,Jackson Lewis P.C.

Retaliation Update and The Supreme Court’s Objective Test

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42 U.S.C. § 2000e-3(a)

(a) Discrimination for making charges, testifying, assisting, or participating in enforcement proceedings.• It shall be an unlawful employment practice for an employer to

discriminate against any of his employees or applicants for employment . . . because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.

Title VII Retaliation Provision

61

Burlington Northern & Santa Fe Railway Co. v. White:

• Employees who make Title VII retaliation claims no longer must prove they suffered an "ultimate” or “adverse” employment action (e.g., discharge, demotion, or loss of pay).

• Title VII prohibits subtle forms of retaliation, which can even include a change in work schedule.

Adverse Employment Action

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The New Standard:

– Whether a “reasonable employee would have found the challenged action materially adverse?”

SCOTUS encourages a broad reading of Title VII’s anti-retaliation provisions

Adverse Employment Action

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• Changing an employee’s position to one with same pay and title, and even more opportunity for advancement — not materially adverse. (Forde v. Donahue)

• Temporary move from office to cubicle — not materially adverse because temporary move was consistent with office policy. (Roncallo v. Sikorsky Aircraft)

• Supervisor giving complaining employee nasty looks and “cold shoulder” — not materially adverse. Write-ups and suspensions — materially adverse. (Nugent v. The St. Luke/Roosevelt Hospital Ctr.)

What Does “Materially Adverse Action” Mean?

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UT Southwestern v. Nassar

SCOTUS Holding: “But For” Causation

– A plaintiff alleging retaliation under Title VII must prove the retaliation was the “but for” cause of the adverse employment action.

Reversal of 5th Circuit: “Motivating Factor” Test

– 5th Circuit had held that a plaintiff could prove retaliation claim by showing retaliation was a “motivating factor” for the adverse action.

The Current Standard of Proof

65

Thompson v. North American Stainless

• The employer fired the fiancé of an employee who engaged in protected activity under Title VII.

• Held: Protection against retaliation under Title VII extends to employees who can demonstrate a close association with the employee who engaged in protected activity.

Associational Retaliation

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Crawford v. Metropolitan Gov’t of Nashville

– Employee gained protection by merely responding to general questions pursuant to an internal investigation.

Opposition: It Doesn’t Take Much

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EEOC v. CVC

• Suit challenging release document as violation of 707(a).

• Employee gives up right to file charge with EEOC.

• Section 707(a): prohibits employer conduct that constitutes a pattern or practice of impeding or resisting employee access to EEOC.

• Reversed earlier position taken in EEOC v. Eastman Kodak (2006).

“Pattern and Practice” Retaliation

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• HR/Legal involvement in disciplinary/termination decisions.

• Managerial training.

• Release templates should be reviewed.

Tips

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THANK YOU!

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Steven M. Tyndall, PartnerBaker Botts LLP

Show me the MoneyAn Update on the Current Deal

Environment

71

US Venture Funding by Quarter

Deals Deals Deals Deals Deals Deals Deals2008 2009 2010 2011 2012 2013 2014

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Q4Q3Q2Q1

$ $ $ $ $ $ $2008 2009 2010 2011 2012 2013 2014

$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

$35,000,000,000

Q4Q3Q2Q1

Number of Deals Aggregate Dollar Amount

Source: MoneyTree Report

72

Financings by Dollar Amount

AK/HI/P

R

Colorado

DC/Metro

plex

LA/O

range County

Sacra

mento/N.Cal

San D

iego

Silico

n Valley

Midwest

New England

North Centra

l

Northwest

NY Metro

Upstate N

Y

Philadelphia M

etro

South Centra

l

Southeast

SouthW

estTexa

s$0

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$14,000,000,000

2008200920102011201220131Q 2014


73

Financings by Number of Deals

AK/HI/P

R

Colorado

DC/Metro

plex

LA/O

range County

Sacra

mento/N.Cal

San D

iego

Silico

n Valley

Midwest

New England

North Centra

l

Northwest

NY Metro

Upstate N

Y

Philadelphia M

etro

South Centra

l

Southeast

SouthW

estTexa

s0

200

400

600

800

1,000

1,200

1,400

2008200920102011201220131Q 2014


74

Texas Venture Capital Investing

_x0004_2008 _x0004_2009 _x0004_2010 _x0004_2011 _x0004_2012 _x0004_2013 _x0007_1Q 2014

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Texas’ Share of US Venture Investing ($ basis)

Texas


75

VC Funding by Industry – 2009-2010

Life Sciences/HealthcareSoftwareIndustrial/EnergyTelecom/Networking/Comput-ers/ElectronicsMedia and Enter-tainmentIT ServicesSemiconductorsConsumer Products and ServicesFinancial ServicesBusiness Products and ServicesRetail/DistributionOther

2009

Life Sciences/HealthcareSoftwareIndustrial/EnergyTelecom/Networking/Comput-ers/ElectronicsMedia and Enter-tainmentIT ServicesSemiconductorsConsumer Products and ServicesFinancial ServicesBusiness Products and ServicesRetail/DistributionOther

2010


76


Life SciencesSoftwareIndustrial/EnergyTelecom/Networking/Comput-ers/ElectronicsMedia and EntertainmentIT ServicesSemiconductorsConsumer Products and ServicesFinancial ServicesBusiness Products and ServicesRetail/DistributionOther

2011


2012


77



2013

Life SciencesSoftwareIndustrial/EnergyTelecom/Networking/Computers/ElectronicsMedia and EntertainmentIT ServicesSemiconductorsConsumer Products and ServicesFinancial ServicesBusiness Products and ServicesRetail/DistributionOther

1Q 2014


78

Cleantech Investing

2008 2009 2010 2011 2012 2013 1Q 2014$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

$3,500,000,000

$4,000,000,000

$4,500,000,000

0

50

100

150

200

250

300

350

$4,1

66,9

92,5

00

$2,2

21,2

85,4

00

$3,7

85,0

29,6

00

$4,2

60,9

07,2

00

$2,9

62,2

78,5

00

$1,4

28,0

13,4

00

$357

,473

,100

296

228

294

324

236

174

33

$Linear ($)Deals


79

Venture Capital Exits – 2008-2014

2008 2009 2010 2011 2012 2013 1Q 2014 -

100

200

300

400

500

600

700

800

BuyoutIPOAcquisition


80

Private Equity Fundraising – 2008-2014

2008 2009 2010 2011 2012 2013 1Q 2014$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

0

50

100

150

200

250

300

350

$256

,000

,000

$143

,000

,000

$86,

000,

000

$110

,000

,000

$131

,000

,000

$220

,000

,000

$39,

000,

000

286

167163

196 201

267

74

Capital RaisedFunds Closed

Axis Title

Source: PitchBook

81

Private Equity Dealflow – 2009-2014

2009 2010 2011 2012 2013 1Q 2014$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

$450,000,000

$500,000,000

0

500

1000

1500

2000

2500

3000$1

68,0

00,0

00

$375

,000

,000

$397

,000

,000

$451

,000

,000

$455

,000

,000

$108

,000

,000

1583

22322417 2544

2410

589

$

Deals

2009

2010

2011

2012

2013

2014

$0 $50,000,000 $100,000,000 $150,000,000

Q1

2009

2010

2011

2012

2013

2014

0 100 200 300 400 500 600 700

Source: PitchBook

82

Capital Markets and M&A Environment

• Current public market activity• Current M&A activity• 2014 expectations• Final thoughts

83

Steven M. [email protected]

www.bakerbotts.com

mailto:[email protected]

84

Patrick Richter, Of CounselJackson Lewis P.C.

Data Breach: Managing the Fallout

85

Unauthorized use of, or access to, records or data containing personal information.

• Personal Information (PI) typically includes first name or first initial and last name in combination with:

− Social Security Number

− Drivers License or State identification number

− Account number or credit or debit card number in combination with access or security code

− Biometric Information (e.g. NC, NE, IA, WI)

− Medical Information

What is a Data Breach?

86

Fines, Penalties, Settlements:

• State Attorney General-Vary By State

− Multipliers: Michigan permits civil fines of not more than $250 per failure (each person), with a maximum of $750,000

− Length of notification delay: Florida imposes fines when notification is not provided within 45 days. Calculate the fine as $1,000 per day for the first 30 days, and $50,000 for each 30 day period thereafter with a maximum fine of $500,000

• Health and Human Services

− Penalties and settlements in the millions of dollars

Private Cause of Action

• 14 states have some form of private action

Why Does This Matter?

87

Employment Context

• Loss, Theft, Improper Access, Inadvertent Disclosure− Laptop

− iPhone, Droid, iPad, Tablet, Blackberry

− Thumb Drive, Hard Drive

− Email

Can you identify all the devices containing PI?

How Does a Breach Occur?

88

Identify the internal team who will be handling the incident

Adhere to existing internal procedures• Data Incident Response Plan• Document steps taken

Notify/Coordinate with insurance carrier

Key Action Items

89

Determine whether this is a reportable breach

• State breach notification statutes and regulations− 46 states have a data breach notification requirement

− Definitions vary state by state

− Residency of the affected individual is key

• Risk of harm trigger− What is it? How can you make this decision?

− Document your decision

Employee Relations Concerns?

Key Action Items

90

Determine whether credit monitoring services will be

offered

• State laws do not require credit monitoring services in the

case of a data breach

• Protection? (e.g. only names and medical information, but not

social security # or financial account #)

• Peace of mind for affected employees?

• Company image to state agency investigator

• Review service agreements with vendors and coordinate

notification letters

Key Action Items

91

Be prepared for complaints and agency inquiry

• Complaints with the FTC or the state Attorney General’s office about breach notification or safeguarding information. Consider the following:

− Establish a complaint process for responding timely

− Review existing data privacy and security policies to ensure compliance

− Have rapid-response procedures in place to react to agency inquiry

Key Action Items

92

THANK YOU!

93

Stephanie F. Cagniart, AssociateBaker Botts LLP

How the Tail End of the Contract Can Sting

Dangerous “Miscellaneous” Terms

94

• Boilerplate vs. Design

• Freedom of Contract vs. Public Policy

Overview

95

Your rules, your turf

• Increasingly favored and enforced

• Promotes

− Predictability

− Efficiency

− Parties' expectations

• Make them work together

Choice of Law / Forum Clauses

96

Choice of Law: Texas

• Most significant relationship test

• Restatement Section 187

• Qualified transaction exception

97

Choice of Law: Practice Pointers

• Which law is most favorable?

• Conflict-of-laws exclusion

• Scope

− Types of claim− Non-contractual obligations

• Floating clause

• Splitting

• Forum-selection clause

98

Choice of Forum: Texas

• Presumptively valid

• Unless…

− Unjust and unreasonable− Fraud, overreaching, etc.− Public policy of forum− Seriously inconvenient for trial− Would it deny the party its day in court?

99

Choice of Forum: Practice Pointers

• Choice-of-Law

• Convenience / Assets

• Who is bound

• Floating

• Mandatory / Exclusive

• Federal / state ("in" vs. "of")

• "Filed in" vs. "filed and litigated in"

• Conspicuous (<$50,000)

100

Choice of Forum: Enforcement

Atlantic Marine Const. Co., Inc. v. U.S. Dist. Ct. for West. Dist. of Tex., 134 S. Ct. 568 (Dec. 3, 2013)

• "all but the most exceptional cases"

• 28 U.S.C. § 1404(a)

− Public-interest factors only− No weight to plaintiff's choice or private interests− Choice-of-law rules of chosen forum

• Forum non conveniens (state or foreign)

101

Disclaimer of Reliance Clause

Building Walls Around Your Contract

• Merger / Integration / "Entire Agreement"

− Parol evidence rule (+)

• Disclaimer of Reliance

− Fraud protection

102

Disclaimer of Reliance: The Big Three

Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997)

• Release (specific)

• Language− "no promise or agreement which is not herein expressed has

been made . . . none of us is relying upon any statement or representation of any agent of the parties being released hereby. Each of us is relying on his or her own judgment. . . ."

• Context

103


Forest Oil Corp. v. McAllen,268 S.W.3d 51 (Tex. 2008)

• Release (broad)

• Language

− "no promise or agreement which is not herein expressed has been made . . . none of them is relying upon any statement or any representation. . . . [Plaintiff] is relying on his . . . own judgment and each has been represented by . . . legal counsel."

• Factors

104


Italian Cowboy Partners v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011)

• Lease Agreement

• Language

− "neither Landlord nor Landlord's agents . . . have made any representations or promises . . . except as expressly set forth herein."

− "This lease constitutes the entire agreement between the parties hereto with respect to the subject matter hereof."

• Factors (modified)

105

Disclaimer of Reliance: Practice Pointers

Drafting from the Big Three

• Language

− Disclaimer of representations clause− No-reliance clause− Prominently displayed

• Factors (non-exclusive)

− Negotiated− Specific issue− Arm's length− Counsel− "Knowledgeable"

106

Disclaimer of Reliance: Practice Pointers

Beyond the Big Three

• Potential Factors

− Beginning vs. End− Non-disclosure− Custom / Usage− Course of Performance

• Unjustified reliance

− Miller Global Prop., LLC v. Marriott Int'l, Inc., 418 S.W.3d 342 (Tex. App.--Dallas 2013) (pet. filed)

107

Amendments Clause

If you can make it, you can unmake it!

• “No Oral Modifications”

• Intent

108

Amendments: Arbitration at Risk?

Unilateral-Amendment Clause and Arbitration: Is the agreement illusory?

• In re Halliburton, 80 S.W.3d 566 (Tex. 2002)

• Post-Halliburton approaches

109

Amendments: Practice Pointers

Unilateral-Amendment + Arbitration:Drafting options

• ADR carve-out

or

• Halliburton-type savings clause

− Notice and Acceptance− Prospective application− Termination

110

Severability Clause

Double-edged sword

Saves your contract

x Binds you to a bargain you don't want

111

Severability Clause: Practice Pointers

Tailoring the clause

• Blue line vs. reasonableness

• Savings clause

• Executor

• Deletion vs. reformation

• Economic adjustment clause

• Identify "essential" terms

112

Stephanie F. [email protected]

www.bakerbotts.com

113

Kevin Lashus, Office Managing Shareholder, Jackson Lewis P.C.Maggie Murphy, Shareholder, Jackson Lewis P.C.

The New I-9: A Brave New World of Compliance and Enforcement

114

Revised Form I-9 – What Has Changed?

115

Section 1 (Employee Information)

Section 1. Employee Information and Attestation (Employees must complete and sign Section 1 of Form I-9 no later than the first day of employment, but not before accepting a job offer.)

116

Section 2 (Documentation)

(Employers or their authorized representative must complete and sign Section 2 within 3 business days of the employee’s first day of employment. You must physically examine one document from List A OR examine a combination of one document from List B and one document from List C as listed on the “Lists of Acceptable Documents” on the next page of this form. For each document you review, record the following information: document title, issuing authority, document number, and expiration date, if any.)

117

Section 2 (Certification)

118

Dire Consequences for Employers

119

• From FY 2009 through FY2012, ICE conducted about 9,140 administrative I-9 inspections

• During that time, 1,174 employers received final fine assessments totaling $31.17M (ICE sought $52.72M in assessments)

• Pew Research Center: an estimated 11.5M unauthorized workers made up an estimated 5.2% of the active workforce in the US

• DHS OIG: “HSI’s inconsistent implementation of the administrative inspection process . . may have hindered its mission” (Feb. 2014)

Latest Developments

120

• Battle between compliance and reform advocates

• Increases in government audit activity, less incentive to negotiate fines, greater oversight over the local offices

• Growing (liaison) role of ICE at the worksite

• Discreet information gathering (data-mining)

• Resolutions to “help” business with mandatory E-Verify (EEVS)

What’s Ahead

121

THANK YOU!

122

Nick Schuneman, Senior AssociateBaker Botts LLP

Troll Update: Can These @#$%&! be Stopped?

123

Outline

• Understanding the problem− Troll impact− The many species of troll

• What can be done?− Anti-troll weapons from legislation and the courts− Defensive strategies

124

Understanding the troll problem

125

The Impact of the Troll Problem

• In 2013, NPEs filed 4,800 patent infringement suits− Total number of patent infringement suits = 6,200− 2,700 unique defendant companies

• RPX estimates total cost of NPE activity in 2013 at $12.8 billion− Includes litigation costs, attorney's fees, and

settlements/judgments

Source: RPX, 2013 NPE Cost Report

126

The Many Species of Troll

• Common troll (Example: TracBeam, LLC)− Shell companies and/or plaintiff's attorneys that acquire

patents to assert in litigation• Bankrupt troll (Example: Williamson (AtHome))

− A practicing entity goes bankrupt and asserts its patents as a means to cover debts / recoup investment

• Privateer− Practicing entity spins off IP holdings into a troll

• Supertroll (Example: Acacia)− NPE with hundreds of individual portfolios

• Megatroll (Example: Intellectual Ventures)− NPE with thousands of patents in a giant portfolio and

significant financial backing

127

What can be done about trolls?

128

Current Status of Patent Legislation

• America Invents Act− Signed into law September 16, 2011

• House Bill H.R. 3309 ("Innovation Act")− Passed on December 5, 2013

• Senate Bill ("Patent Transparency and Improvements Act of 2013")− Currently in Judiciary Committee

− Introduced by Sen. Leahy

− On April 18, Sens. Schumer and Cornyn proposed an amendment incorporating various concepts from the House bill

129

Some anti-troll provisions in the legislation

• Strict requirements on demand letters

• Heightened pleading standard

• Identifying real parties in interest

• Joinder reform, and its effect on transfer

• Customer stay

• Discovery limits and cost-shifting

• Fee-shifting

130

Demand Letters and Pre-suit Investigation

• House: demand letter cannot be used as evidence of willful infringement unless it includes detailed information about patent, patent owner, and infringement theory

• Senate:− Same willful infringement limits as House Bill − Inadequate demand letter → suit may not proceed

− Limited to NPEs and customer suits− Does not apply to communications re: existing license agreements

• Notes− Frivolous demand letters can be ignored?− Greater incentive to sue without pre-suit notice

131

Pleading Specificity

• House & Senate bills both eliminate Form 18 and require heightened specificity in pleading, including:− Identification of each asserted patent, each asserted claim, each

accused product (name or model number)− Element-by-element infringement theory -- Claim charts?

− Indirect infringement - description of underlying direct infringement− Standing, jurisdiction, list of other complaints asserting the patents− Whether the patents are SSO-essential or subject to government

licensing requirements

• Possible escape clause? − Information "not readily accessible" can be plead generally, along

with description of efforts made to obtain required information

132

Identification of Real Party in Interest

• House− Complaint must disclose: assignee; entities with right to

sublicense; ultimate parent; and any entity with a financial interest

− Must be disclosed to PTO, court, and adverse party− Ongoing duty of disclosure to the PTO

• Senate− Same as the House, except no requirement to disclose to

the PTO upon filing a complaint

133

Improper Joinder

• Under the AIA, plaintiffs may no longer join multiple unrelated defendants− 35 U.S.C. § 299

• In theory, new joinder law should make transfer easier− Transfer analysis on case-by-case basis, not net

convenience across all related cases− But plaintiff's ties to district, judicial economy, and

court's prior familiarity may still be enough

134

Stay of Actions against Customers

• House and Senate bills would both stay actions against customers if:− Manufacturer is party to an action involving the same patent− Customer agrees to be bound by res judicata− Manufacturer and customer consent in writing− Motion filed timely

− Later of 120 days after service of complaint or entry of the first scheduling order

Notes− Will it backfire?

− Could incentivize plaintiffs to sue customers and ignore manufacturers, or wait to sue manufacturers later

− Can the manufacturer file the motion to stay?

135

Stay of Action Pending IPR or CBM

• Stay pending inter partes review− Analysis same as in reexamination

• AIA includes specific requirements regarding stay pending review of covered business method patent − Court must consider specific factors − Moving party has right to immediate interlocutory

appeal of denial− VirtualAgility v. Salesforce (ED Tex, 2014)

136

Discovery Limitations: Pre-Markman Stay

• House− If claim construction is required, discovery shall be limited to only information

necessary for claim construction until after a Markman order− Exceptions: when necessary to ensure timely resolution, when necessary to

resolve a motion, when denial would be a manifest injustice, when necessary for actions seeking relief based on competitive harm

• Senate similar to House, except:− Only applies to NPE plaintiffs− No exception for timely resolution

• Notes− Only applies if court determines claim construction is necessary.

− Return to the days of eve of trial claim constructions?

137

Discovery Limitations: Core Documents and Cost-Sharing

• House− Rule-making responsibility assigned to Judicial Conference− Suggested rules:

− Core document discovery− Electronic communication (specificity; limits; cost-shifting

beyond limits)− Additional documents (cost-shifting / fee-shifting; bond; limits)

• Senate− Similar to House, but suggestions are not as loaded

138

Fee Shifting

• House: reasonable fees and expenses to prevailing party − …unless the position and conduct of the nonprevailing party

was reasonably justified or special circumstances exist to make an award unjust− Bill as introduced set standard at "substantially justified"

− Unilateral covenant not to sue = non-prevailing− Interested parties may be joined to pay the fees

• Senate: Same as House, but standard is whether nonprevailing party was objectively reasonable

139

In the Meantime… Lower Bar for § 285 Fee Awards

• 35 U.S.C. § 285 authorizes attorneys fees in "exceptional cases"

• The Supreme Court recently broadened the district court's discretion for § 285 awards− "Exceptional case" = "simply a case that stands out from others"− Awards are now reviewed for abuse of discretion

− Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. (April 29, 2014)− Octane Fitness, LLC v. Icon Health & Fitness, Inc. (April 29, 2014)

140

Defense Strategies

• "Consistent Porcupine"

• "Play the man, not the hand"

• "Pay the man"

• Insurance-like mechanisms

141

142

Nick Schuneman

[email protected]

www.bakerbotts.com

143

Sujata Ajmera, Associate, Jackson Lewis P.C.Julie Tower, Associate, Jackson Lewis P.C.

Tips from the Trenches

144

1. Using Trayvon Martin look-a-likes for target practice isn’t a good idea. Port Canaveral, Florida (April 2013)

2. If you don’t tell employees that it is inappropriate to lick someone’s face, how else are they supposed to know? Jackson v. City of San Diego (2013)

Tips from the Trenches: 1 and 2

145

3. In case you were wondering, this is not how you respond to a wage and hour complaint. Lolange v. Z-Two Diner New York (July 2013)

Tips from the Trenches: 3

146

4. Note to supervisors – if an employee is pranked with a “kick me” sign…don’t actually kick him. Palacio v. Intel Corp, Albuquerque, New Mexico (May 2013).


147

5. You may have an obligation to provide a reasonable accommodation…but giving a legally blind work a power saw may not end up well. Theis v. Oklahoma League for the Blind, Oklahoma City, OK (May 2013)


148

6. You can’t fire employees who refuse to have “staring contests” or “scream at ashtrays.” EEOC v. Dynamic Medical Services, Southern District Florida (2013)

7. But you probably can fire someone for being a “brony.” Reddit.com (September 2013)


149

8. Employees take these words seriously. Miami, Florida (December 2013)


150

9. Asking your paralegal to join your polygamous union as a “third wife” probably isn’t the advancement opportunity she was looking for. Rafi v. Ray, S.D.N.Y. (2013)


151

10. Just because she looks like a lady…doesn’t mean “she” wants to be called one. Valeria Jones v. Bon Appetit Management, Oregon (February 2014)


152

11. Be sure to read the fine print. Allen v. Chanel, Inc., S.D.N.Y. (2013)

12.Don’t forget to check Facebook. Gulliver Schools, Inc. v. Snay, Florida App. Ct. (2014)


153

Kevin Meek, PartnerBaker Botts LLP

DISCLAIMER: I am not an ethics expert, nor do I want to be.

Ethics and The Modern Attorney-Client Relationship

154

Lawyers = Kindergarteners

In a 20 case before Judge Sparks the lawyers were invited to a "kindergarten party."

The party will feature many exciting and informative lessons, including: How to telephone and communicate with a lawyer; How to enter into reasonable agreements about deposition

dates . . . and; An advanced seminar on not wasting the time of a busy

federal judge and his staff . . . .

Morris v. Coker, No. A-11-MC-712-SS (W.D. Tex. Aug. 26, 2011).

155

"All I really need to know I learned in kindergarten." -- Roger Fulghum

Share everything.

Play fair.

Don't hit people.

Put things back where you found them.

Clean up your own mess.

Don't take things that aren't yours.

Say you're sorry when you hurt somebody.

Wash your hands before you eat.

Flush.

Warm cookies and milk are good for you.

Live a balanced life - learn some and think some and draw some and paint and sing and dance and play and work every day some.

Take a nap every afternoon.

When you go out into the world, watch out for traffic, hold hands and stick together.

Be aware of wonder.

156

Share everything.

ABA Model Rule 3.3

Texas Disciplinary Rule of Professional Conduct 3.03

A lawyer shall not "knowingly":

• make "a false statement of fact or law" or fail to "correct a false statement of material fact or law previously made,"

• fail to disclose controlling legal authority that is directly adverse and not disclosed by opposing counsel,

• offer false evidence or fail to take remedial measures where the lawyer later learns of its falsity.

157

Share everything.

158

Play fair.

ABA Model Rule 3.4--Fairness to opposing party and counsel

A lawyer shall not:• unlawfully obstruct another party's access to evidence or unlawfully alter, destroy,

or conceal a document or other material having potential evidentiary value;• falsify evidence, counsel / assist a witness to testify falsely, or offer an unlawful

inducement to a witness;• knowingly disobey an obligation under the rules of the tribunal;• make frivolous discovery requests or fail to make reasonably diligent efforts to

comply with a legally proper discovery request; and• in trial

− allude to any matter in trial that the lawyer does not reasonably believe is relevant or that will not be supported by admissible evidence;

− state a personal opinion as to the justness of a cause, the credibility of a witness, the culpability of a civil litigant, or the guilt or innocence of an accused.

159

Play fair.


ABA Model Rule 3.4

+

A lawyer shall not, in trial:

• habitually violate an established rule of procedure or evidence; and

• engage in conduct intended to disrupt the proceedings.

160

Play fair.

"Would it be a violation of the Canons of Ethics for an attorney to file with the trial judge a brief covering the principal points involved in a pending action without furnishing a copy to opposing counsel?"

OF COURSE IT WOULD!!

See Texas Ethics Opinion 88, 18 Baylor L. Rev. 232 (1966)

161

Play fair.

Don't try to establish personal jurisdiction over the defendant based on a single purchase of the defendant's products in the forum state, especially if you were the purchaser.

• Plaintiff's counsel asserted that jurisdiction was proper based on a single purchase order for the "sale of two hundred of the alleged infringing products" in the forum state.

• The court criticized the plaintiff's lack of candor, noting that the one purchase order on which plaintiff exclusively relied was "made at the behest of [plaintiffs]."

See Edberg v. Neogen, 17 F.Supp.2d 104 (D. Conn. 1998).

162

Don't hit people. In a letter to a British lawyer regarding a divorce proceeding,

the author (a Texas lawyer) included the following paragraph:

At this time, it looks that we are going to furnish your little country with a lot more American dollars, and I suppose in time our boys will be returning to fight your battles with American dollars and weapons as in the last two wars; however, we are a free democratic people and believe in helping the weak nations. We go where we please and do just about as we desire.

The Ethics Committee had the following thoughts:

The committee deeply deplores the gratuitous insult contained in such last paragraph. We . . . feel that it may possibly call for action by a grievance committee.

See Texas Ethics Opinion 20, 18 Baylor L. Rev. 204 (1966).

163

Don't hit people.

164


ABA Model Rule 3.4(a)

Texas Disciplinary Rule of Professional Conduct 3.04(a)

"A lawyer shall not unlawfully obstruct another party's access to evidence."

165


Don't tamper with the evidence--produce what should be produced in a timely manner.

• In a patent infringement suit, defendants' counsel initially claimed that source code and other reports were either lost or destroyed.

• Although the documents were eventually produced, the court was not pleased.

See Keithley v. HomeStore.com, Inc., 2008 WL 3833384, at *1 (N.D. Cal. Aug. 12, 2008).

166


If you screw up, correct the mistake instead of covering it up.

• The plaintiff in a patent infringement suit filed a motion to strike defendant's pleadings based on the failure of defense counsel to respond to discovery requests.

• Defense counsel claimed that he had sent the plaintiff's counsel an e-mail regarding the discovery requests, but the plaintiff claimed this e-mail was never received.

Furminator, Inc. v. Petvac Group LLC, Case No. 2-08-cv-338-TJW (E.D. Tex. Aug. 5, 2011).

167


And if you don't clean up your mess before anyone finds out, the rest of us will have to report your bad behavior.

ABA Model Rule 8.3

and


With some narrow exceptions, "a lawyer having knowledge that another lawyer has committed a violation of applicable rules of professional conduct that raises a substantial question as to that lawyers honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate disciplinary authority."

168


ABA Model Rule 1.15


A lawyer shall hold property of clients or third persons . . . separate from the lawyer's own property.

Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person.

Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive . . . .

169


This includes your client's spouse.

According to the South Carolina Supreme Court:

Sexual involvement with the spouse of a current client, while not expressly prohibited by the language of our Rules of Professional Conduct, . . . is a per se violation of [the Rules of Professional Conduct], as it creates the significant risk that the representation of the client will be limited by the personal interests of the attorney.

http://www.abajournal.com/news/article/sex_with_clients_spouse_is_a_per_se_legal_ethics_violation_top_s.c._court_s/

170


ABA Model Rule 1.9

Texas Disciplinary Rule of Professional Conduct 1.09(a)(3)

A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

171


Conflicts arising from joint defense agreements

5th Circuit:

• Analyzes the issue as one of contract and confidentiality rather than conflict.

• Non-clients, by definition cannot rely upon rules imputing knowledge among members of a firm because those rules apply to clients only.

See Wilson P. Abraham Constr. Corp. v. Armco Steel Corp., 559 F.2d 250 (5th Cir. 1997) (per curiam).

172



Texas courts:

• Every lawyer in a firm is irrebutably presumed to be disqualified from representing a party adverse to a former co-defendant of a client.

See Nat'l Med. Enterprises v. Godbey, 924 S.W.2d 123 (Tex. 1996).

173



Federal Circuit:

• AMD and Nintendo were parties to a Joint Defense Agreement ("JDA"), which provided:

• "Nothing contained in this Agreement has the effect of transforming outside or inside counsel for either party into counsel for the other party . . . . The parties expressly acknowledge and agree that nothing in this Agreement . . . shall be

used as a basis to seek to disqualify the respective counsel of such party in any future litigation."

• AMD's former in-house counsel later represented SMG against Nintendo, who moved to disqualify his entire firm.

174



Federal Circuit (Cont'd)

• The district court granted Nintendo's motion, concluding that the JDA's waiver provision did not apply to an in-house lawyer who was no longer employed by a party to the agreement.

• On petition for a writ of mandamus, the Federal Circuit ordered the district court to vacate its disqualification order.

175



Federal Circuit (Cont'd)

• The Federal Circuit stated:

"[T]he Agreement's terms clearly point away from the district court's conclusion . . . . Nintendo agreed not to seek disqualification of then 'respective counsel of such party [i.e., AMD] in any future litigation.' [The attorney in question] was indisputably a 'respective counsel' of AMD, and, contrary to Nintendo's objections, the breadth and temporal scope of the waiver are broad enough to include 'any future litigation' between Nintendo and a party employing, or represented by, [the attorney in question]."

In re Shared Memory Graphics, 659 F.3d 1336 (Fed. Cir. 2011)

176


177

Flush.

ABA Model Rule 1.5

• Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payments of fee that has not been earned.

• The lawyer may retain papers relating to the client to the extent permitted by other law only if such retention will not prejudice the client in the subject matter of the representation.

178

Flush.

Texas Ethics Opinion 570

• A former client has demanded to see the lawyer's file on the representation of the client.

• The lawyer previously provided a copy of the majority of the documents contained in the file, but withheld copies of the lawyer's notes.

• "A lawyer's ethical obligations may vary depending on the type, source, or content of the document and other relevant factors."

• Regarding the lawyer's notes, "the attorney is the agent of the client, and the work product generated by the attorney in representing the client belongs to the client."

179

Take a nap every afternoon.

But not in court . . .

• The 5th Circuit granted a new trial to an inmate whose lawyer consistently slept during the trial, noting the "fundamental unfairness in [the inmate's] capital murder trial created by the consistent unconsciousness of his counsel."

Burdine v. Johnson, 262 F.3d 336 (5th Cir. 2001).

180

When you go out in the world, watch out for traffic, hold hands, and stick together.

181

Kevin J. Meek

[email protected]

www.bakerbotts.com