Category: Professional Liability

A Twisting Path: Illinois Licensure Actions Against Physicians, Nursing Home Administrators, Nurses, and Other Professionals

The Illinois Department of Financial & Professional Regulation (the Department), Division of Professional Regulation (the Division), regulates the licenses of numerous professionals in the health care fields, including physicians, nurses, nursing home administrators, and many others. For health care professionals facing an investigation, hearing, or potential disciplinary action related to alleged misconduct, the Division’s process can seem quite daunting and confusing. The information provided below, along with the advice of experienced legal counsel, can help you navigate this twisting path.

Notifications and Investigations

Most disciplinary actions are for the overly broad and subjective reason of “unethical or unprofessional conduct.” Individuals can come to the Division’s attention through complaints by dissatisfied patients, co-workers, or supervisors, or by referrals from other regulatory bodies such as the Illinois Department of Public Health (IDPH) or the Illinois Department of Healthcare and Family Services (IDHFS).

Although logic and efficiency dictate that the Division investigate any complaints it receives before alleging the licensed professional might have violated applicable regulations, that is not always the case. More often than not, the “investigation” begins with the filing of a notice to the licensee that the Division received a complaint, and the notice includes a request that the licensee appear at an informal conference. The Division sends such notices to the licensee’s home, as that is the address the Division has on file. Occasionally, licensees will be visited by an investigator at the place of business; this is usually done only when the state budget allows for such expenditures.

If this happens, then do not panic. For reasons detailed below, with the help of experienced counsel, many informal conferences result in the Division concluding that the licensee did nothing wrong.

There are numerous occasions when reporting to the Division is mandatory. For example, IDPH must report the names and license numbers of nursing home administrators when it cites certain deficiencies in a nursing home. Nurses who are administrators or officers of a health facility must report a nurse impaired by drugs or alcohol or who possesses, uses, or distributes drugs. IDHFS reports when physicians enter into integrity agreements or opt out of the Medical Assistance Program. If a health care licensee is accused of a sex crime, the prosecutor notifies the Division and the practitioner can only practice with a chaperone.

Disciplinary Conferences and Hearings

If the Division schedules an informal disciplinary conference, the licensee should consider hiring a lawyer. If the Division does not schedule an informal conference, then the licensee should ask the Division to do so. These conferences are typically handled by a Division attorney and a member of the relevant licensing board (the latter of whom usually takes the lead in asking questions and making the final decisions).

Informal disciplinary conferences generally take the place of an investigation and offer an excellent opportunity for the licensee to tell his or her side of the story. The board members who attend these conferences are typically in the same profession as the licensee (although not necessarily from the same kind of work environment), so they understand the practices, processes, and pressures facing the individuals who appear before them. The vast majority of such conferences end with a recommendation that no further action be taken.

A hearing is a far more formal process, conducted by an administrative law judge (ALJ) with a court reporter present and, generally, conducted according the rules of evidence. Again, the licensee can and should be represented by counsel. One or more members of the relevant board may be present and may participate by questioning witnesses. The ALJ prepares a report that is then reviewed by a committee of board members before it goes to the director of the Department for a final order.

Disciplinary Actions

Activities that generate disciplinary actions include sister-state discipline, drug/alcohol issues, failures related to treatment, and bureaucratic issues. In looking at recent disciplinary actions reported over a seven-month period on the Division’s website, physicians were disciplined for sister-state discipline 58 times, for drug/alcohol transgressions 20 times, treatment problems 50 times and bureaucratic issues 40 times. Nurses were disciplined for sister-state discipline 92 times, drug/alcohol transgressions 88 times, treatment problems 21 times and bureaucratic issues 46 times. Only one nursing home administrator — one on a temporary license, at that — was disciplined for failure to report abuse in a timely manner.

Disciplinary actions can include reprimand, additional continuing education hours, inservices, probation (for a defined or indefinite period), restrictions, quality assurance audits, fines, suspension, refusal to renew, placement in permanent inactive status, or termination. The Division may also place a letter in a licensee’s file, but the letter is not considered discipline — as such, these letters do not appear on the Division’s website. These letters essentially tell the licensee to avoid doing whatever brought them to the attention of the Division in the first place. The Division can use such letters as a basis for progressive discipline if the licensee comes to the Division’s attention for a similar reason in the future.

Disciplinary actions in one state affect licensure status in other states. They also may affect a licensee’s ability to participate in the Medicaid and Medicare programs and to prescribe controlled substances. Even an investigation that does not result in a penalty must on some occasions be reported, and failure to do so may result in further disciplinary action.

Protect Your Privileges!

Remember, holding a professional license is a privilege, not a right. Such a privilege is always subject to strict scrutiny and can be restricted as necessary to assure that the public are not harmed in any way. Needless to say, seeking out knowledgeable counsel is always recommended.

Article By Frances D. Meehan of Much Shelist, P.C.

© 2016 Much Shelist, P.C.

Is Your LinkedIn Profile Violating Attorney Advertising Rules? Depends.

Linkedin Logo NeonThe vast majority of lawyers have a LinkedIn page. Or if they don’t, their marketing department will make them create one eventually. Some use LinkedIn to build their profile and network, others to promote success, articles and speaking engagements. But is a LinkedIn page lawyer advertising and, if so, what must lawyers do to be sure they are on the right side of the Rules of Professional Conduct?

Rules 7.1 to 7.5 of the Massachusetts Rules of Professional Conduct govern lawyer advertising and solicitation. Some states, like New York, provide very detailed rules about what an advertisement may or may not include (or what it must include), how long it should be retained, etc.  In fact, whereas Mass. R. Prof. C. 7.1 contains only two sentences, its New York counterpart is more than three pages long.

Because of the more specific requirements in New York, an important issue for lawyers there (and other states with similarly detailed attorney advertising rules) is whether their individual profile on LinkedIn constitutes attorney advertising. If it is advertising, the attorney would have to comply with requirements like labeling the content “Attorney Advertising” and preserving a copy (of each iteration) for at least one year.

Last month, the Association of the Bar of the City of New York Committee on Professional Ethics issued a formal opinion that stated that a LinkedIn profile does not constitute attorney advertising unless it meets each of five criteria:

  • It is a communication made by or on behalf of the lawyer;
  • The primary purpose of the LinkedIn content is to attract new clients to retain the lawyer for pecuniary gain;
  • The LinkedIn content relates to the legal services offered by the lawyer;
  • The LinkedIn content is intended to be viewed by potential new clients; and
  • The LinkedIn content does not fall within any recognized exception to the definition of attorney advertising. Formal Opinion 2015-7.

The NYC Committee report noted that it had come to a different conclusion that the Professional Ethics Committee of the New York County Lawyer’s Association (“NYCLA”), which had concluded in March 2015 that “[a] LinkedIn profile that contains only one’s education and current and past employment does not constitute Attorney Advertising[, but] [i]f an attorney chooses to include information such as practice areas, skills, endorsements, or recommendations, the attorney must treat his or her LinkedIn profile as attorney advertising and include appropriate disclaimers pursuant to Rule 7.1.”NYCLA Ethics Op. 748 (2015).

For practitioners in Massachusetts, the New York debate may be academic. There is no question that Massachusetts lawyers may advertise on the internet. See Mass. R. Prof. C. 7.2(a) (“Subject to the requirements of Rules 7.1 and 7.3, a lawyer may advertise services through written, recorded or electronic communication, including public media.”). And, even if an attorney’s LinkedIn profile were considered to be “advertising” in Massachusetts, the only requirement that the lawyer must comply with is the same requirement that runs through all of the Rules of Professional Conduct: honesty. See Mass. R. Prof. C. 7.1 (“A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.”). But this, of course, is the norm in all facets of legal practice. See, e.g., Mass. R. Prof. C. Preamble, 2.1, 3.3, 3.9, 4.1, 8.2, 8.4.

Thus, at least here in the Commonwealth, a lawyer who scrupulously insures that his or her LinkedIn profile is truthful and not at all false or misleading – including with respect to statements that the attorney is a “specialist” or “certified” in a particular field of law, see Mass. R. Prof. C. 7.4 – is within the bounds of our governing Rules.

Article By Scott McConchie of Sherin and Lodgen LLP

© 2016 SHERIN AND LODGEN LLP

Third Circuit Federal Appeals Court Rules Attorneys Have Right to Publish Praise from Judges

The Rainmaker Institute

A federal appeals court issued a ruling yesterday that attorneys have a First Amendment right to publish ads that quote judges praising them, a decision that reverses a lower court ruling.

federal judgeThe case involves a New Jersey employment attorney, Andrew Dwyer, who initially published praise from two jurists on his website.  The published quotes were excerpts from unpublished (but publicly available) judicial opinions.   One of the judges sent Dwyer a letter requesting that his quote be removed from the website.  Dwyer refused because he did not believe the quote was misleading or false.

The matter was forwarded to a committee of the New Jersey Bar, resulting in a proposed guideline that barred attorneys from using a quotation from a judge or court opinion regarding the attorney’s abilities or legal services.  Dwyer argued that the new guideline was an unconstitutional ban on free speech.

Fast-forward to 2012, when the NJ Supreme Court approved an amended guideline saying that attorneys could use quotes from judges or opinions, but that the full text of the opinion must be used instead of excerpts.

Dwyer filed suit against the NJ Bar committee that developed the guideline before it went into effect and moved for a TRO and preliminary injunction to enjoin enforcement of the guideline.  A NJ District Court denied the request.  Both parties then filed cross-motions for summary judgment, which the District Court granted to the committee.

Dwyer then appealed and yesterday, the Third U.S. Circuit Court of Appeals ruled in his favor, calling the guideline “onerous” and saying that it imposed an unconstitutional burden on Dwyer:

“Guideline 3 as applied to Dwyer’s accurate quotes from judicial opinions thus violates his First Amendment right to advertise his commercial services. Requiring Dwyer to reprint in full on his firm’s website the opinions noted above is not reasonably related to preventing consumer deception.”

This decision could have farther-reaching effects in terms of how attorneys use testimonials in their advertising.  Will certainly be interesting to watch!

ARTICLE BY

Stephen Fairley
 
OF 
The Rainmaker Institute

Supreme Court Makes Landmark Rulings on Attorney Fees in Patent Cases

Andrews Kurth

On April 29th,  the U.S. Supreme Court made it much easier to recover attorney fees in patent lawsuits, issuing two unanimous landmark decisions overruling Federal Circuit precedent. The statute at issue, 35 U.S.C. §285, allows for the court to award reasonable attorney fees to the prevailing party in “exceptional cases.” Since its decision in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381 (2005), the  Federal Circuit has held that exceptional cases are those cases which are proven by clear and convincing evidence to be both “objectively baseless” and “brought in subjective bad faith.” Also, in the past several years, the Federal Circuit has reviewed the objectively baseless element of its test for exceptional cases de novo without deference to the district courts. Today’s decisions have rejected all these principles. In doing so, the two decisions continue the Supreme Court’s series of cases overturning Federal Circuit principles in patent cases that may be viewed as at odds with principles applied in analogous circumstances in non-patent cases. These decisions also undoubtedly will compel litigants to re-consider their exposure to fee awards and how to approach requests for fee awards.

In Octane Fitness LLC v. Icon Health & Fitness Inc., case number 12-1184, the Court overruled Federal Circuit precedent that “[a] case may be deemed exceptional” under §285 only in two limited circumstances: “when there has been some material inappropriate conduct,” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.”  Brooks Furniture Mfg., Inc., v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381 (2005). The Supreme Court pointed out that, in the five decades following the adoption of §285, both before and after the creation of the Federal Circuit, the courts had applied the statute “in a discretionary manner, assessing various factors to determine whether a given case was sufficiently “exceptional” to warrant a fee award.” It found that since the Brooks Furniture case in 2005, the Federal Circuit “abandoned that holistic, equitable approach in favor of a more rigid and mechanical formulation.” Continuing its tradition of mining copyright cases for analogous principles (and mining patent cases similarly in copyright cases), the Supreme Court pointed to its decision in Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023 (1994) and to dictionary definitions of the word “exceptional,” the Supreme Court held that:

an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances. As in the comparable context of the Copyright Act, “[t]here is no precise rule or formula for making these determinations,’ but instead equitable discretion should be exercised ‘in light of the considerations we have identified.” (quoting Fogerty).

The Supreme Court also rejected the “clear and convincing” evidentiary hurdle established by the Federal Circuit to recovering fees under §285. In doing so, the Court stated:

We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence.…And nothing in § 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one. Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard….

In the companion case of Highmark Inc. v. Allcare Health Management Systems Inc., case number 12-1163, the Court also dealt with attorney fees under 35 U.S.C. §285. Again, the Court rejected Federal Circuit precedent and held that decisions to award attorneys’ fees are not reviewed de novo by the Federal Circuit. In doing so, the Court stated “that an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court’s §285 determination.” Here again, the Supreme Court pointed to principles that other non-patent cases had applied in similar situations:

Traditionally, decisions on “questions of law” are “reviewable de novo,” decisions on “questions of fact” are “reviewable for clear error,” and decisions on “matters of discretion” are “reviewable for abuse of discretion.” Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). For reasons we explain inOctane, the determination whether a case is “exceptional” under § 285 is a matter of discretion. And as in our prior cases involving similar determinations, the exceptional-case determination is to be reviewed only for abuse of discretion…As in Pierce, the text of the statute “emphasizes the fact that the determination is for the district court,” which “suggests some deference to the district court upon appeal,”….As in Pierce, “as a matter of the sound administration of justice,” the district court “is better positioned” to decide whether a case is exceptional…because it lives with the case over a prolonged period of time. And as in Pierce, the question is “multifarious and novel,” not susceptible to “useful generalization” of the sort that de novo review provides, and “likely to profit from the experience that an abuse-of-discretion rule will permit to develop.

Over the past several years, the Supreme Court has overturned Federal Circuit precedent that applied idiosyncratic rules in patent cases when other non-patent cases dealing with similar matters have generally applied other rules. These two cases continue in the same vein, sending a clear message that patent cases are not so exceptional, at least as to common procedural matters, as to warrant special rules.

It is uncertain what impact these decisions will have on the number of patent cases being brought or on the types of patent cases brought. It is also uncertain how many more cases will be the subject of attorney fee awards. Nonetheless, today’s decisions should provide district court judges with confidence that fees awarded in the proper circumstances will be upheld on appeal.

It also remains to be seen what impact these decisions will have on legislation aimed squarely at non-practicing entities (“NPEs”) that is currently making its way through Congress. The Innovation Act, which has been passed by the House, specifically provides for fee shifting through which a court may force the losing party to pay the winning party’s attorney’s fees and/or costs. Such a change would represent a fundamental shift in the U.S. litigation principle that each side ordinarily pays its own fees and costs. Perhaps the Senate, which is debating a reduced version of the Innovation Act, will consider the Supreme Court’s decisions as sufficiently empowering the district courts to address abusive patent-litigation practices and will drop fee shifting from the Innovation Act. Click here for more information about the Innovation Act.

Article By:

Jeff C. Dodd
Gregory L. Porter
Sean S. Wooden
Of:
Andrews Kurth

Keeping Third Party Communications Protected by the Attorney-Client Privileged

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A recent Pennsylvania federal court decision highlights the difficulty in keeping third party communications privileged.  (King Drug Co. of Florence, Inc. v. Cephalon, Inc., No. 06-CV-1797, 2013 WL 4836752 (E.D. Pa. Sept. 11, 2013)).  In Cephalon, the court found third party communications privileged because the third party performed a role for Cephalon substantially identical to that of Cephalon employees.  The Federal Trade Commission (FTC) had sought an order requiring Cephalon to produce documents shared with or created by its third party consultants in connection with work the consultants performed for Cephalon that Cephalon withheld or redacted based upon theattorney-client privilege.

In keeping the documents protected, the court followed other courts and adopted the broader “functional equivalent” approach to third party communications.  According to the court, this approach “reflects the reality that corporations increasingly conduct their business not merely through regular employees but also through a variety of independent contractors retained for specific purposes.” Cephalon, 2013 WL 4836752, at *7.  The broader “functional equivalent” analysis looks at the following factors.  First, third party consultants must perform a role substantially identical to that of an employee.  For example, in Cephalon, the consultants worked closely with employees by providing managerial support, strategic advice, and participating in making preservations to senior management.  The consultants also had dedicated office space and were subject to confidentiality agreements.  Second, the documents or communications must be kept confidential.  And, third, the documents or communications must be made for the purpose of providing or obtaining legal advice.

However, not all courts agree with this broader approach.  Other courts have adopted a narrower “functional equivalent” test.  The main differences with the narrower approach are that consultants must be incorporated into the staff to perform a corporate function that is necessary in the content of actual or anticipated litigation, and possess information needed by attorneys in rendering legal advice.  See In re Bristol-Myers Squibb Sec. Litig., No. 00-1990, 2003 WL 25962198, at *4 (D.N.J. June 25, 2003).

The varying scope of the functional equivalent test highlights that the most important factor in keeping third party communications privileged is to know your jurisdiction’s viewpoint.  Other considerations include making certain that consultants are the functional equivalent of employees, and that the communications are kept confidential and created for the purpose of obtaining or providing legal advice.

Article by:

Karne O. Newburn

Of:

McDermott Will & Emery

Indicted—Not Once, But Twice! Former GlaxoSmithKline In-House Counsel, Lauren Stevens, Tells Her Harrowing Story And Hard Lessons Learned From Being Indicted

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Imagine, one of the worst things that could happen to any person, especially an attorney—being indicted.  This not only happened to former GlaxoSmithKline (“GSK”) Vice President and Associate General Counsel, Lauren Stevens (“Stevens”) once—but twice!  On November 8, 2010, a federal grand jury in the District of Maryland returned an indictment charging Stevens with one count of obstructing an official proceeding  in violation of 18 U.S.C. §1512, one count of falsification and concealment of documents in violation of 18 U.S.C. §1519, and four counts of making false statements in violation of 15 U.S.C. §1001. On March 23, 2011, the District Court dismissed the indictment without prejudice due to erroneous and prejudicial legal advice that the prosecutors gave to the grand jury.  However, on April 13, 2011, Stevens was indicated again, based on the same charges in the earlier indictment.  For more than 18 months, Stevens lived this harrowing ordeal, and eventually was exonerated of any wrong doing.  Stevens will discuss the events leading up to the indictment, the grueling court proceedings, and the lessons she learned at the National Association of Women Lawyers’ Ninth Annual General Counsel Institute on November 8, 2013 at the Intercontinental Hotel in New York City.

The indictments against Stevens arose out of a letter from the Food and Drug Administration (“FDA”) to GSK stating that it had information that GSK possibly promoted the use of Wellbutrin (a drug approved by the FDA to treat depression) for an unapproved use (namely, weight loss).  The FDA requested that GSK voluntarily provide numerous materials and information related to the promotion of Wellbutrin.

GSK assembled a team, led by Stevens, which included in-houseattorneys, a former FDA reviewer, and employees from GSK’s marketing, compliance, regulatory affairs and medical divisions, to respond to the FDA’s request.  GSK also retained an outside law firm to conduct an internal review and advise GSK how to respond to the inquiry.  Ultimately, GSK submitted six substantive letters, all signed by Stevens, in which she denied that GSK promoted Wellbutrin for an unapproved use and/or paid doctors to give promotional talks that included information on the unapproved use.  On December 17, 2010, the government filed a motion to bar Stevens from relying on the defense of advice of counsel on the basis that it was not a defense to a charge of violating 18 U.S.C. §1519 because, the government argued, the statute is not a specific intent crime.  That same day, Stevens filed a motion to disclose the government’s presentation to the Grand Jury relating to the advice of counsel defense.  She also filed two motions to dismiss Count II of the indictment.  In the first motion, Stevens sought dismissal for unconstitutional multiplicity and for failure to state an offense, arguing that Counts I and II violated her due process rights because they sought to impose multiple punishments for the same offense.  She also argued that the government’s case was legally flawed because the government did not allege that she altered or falsified any pre-existing documents.  In her second motion, Stevens sought dismissal of Count II on the basis that the charges were unconstitutionally vague.

On February 25, 2011, Stevens filed her opposition to the motion to exclude, arguing that where a defendant relies in good faith on the advice of counsel, she lacks the intent necessary to be found guilty of making false statements and obstructing justice, which required proof that she “knowingly” submitted false information.  She also argued that she met the prerequisites for asserting the defense because outside counsel was aware of all material facts as evidenced by over 350 drafts of the six response letters to the FDA and 1,300 pages of notes regarding the matter.

On March 23, 2011, the Court denied the government’s motion to prohibit Stevens from asserting the advice of counsel defense.  The Court then dismissed the indictment without prejudice due to erroneous and prejudicial legal advice the prosecutors gave to the grand jury.

On April 13, 2011, a federal grand jury re-indicted Stevens.  The trial commenced thirteen days later, and proceeded through May 6, 2011, at which time the government rested its case.  Stevens filed a Rule 29 Motion for Acquittal on the basis that the government failed to present evidence sufficient to prove beyond a reasonable doubt any of the six counts.  On May 10, 2011, the Court granted Stevens’ Motion and dismissed the indictment.  The Court determined that the government was given access to attorney-client privileged communications, which formed the basis of the government’s case, as the result of an erroneous decision by a Massachusetts magistrate judge that the communications were evidence of a scheme to perpetrate a crime of fraud.  However, the documents revealed a “studied, thoughtful analysis of an extremely broad request from the [FDA] and an enormous effort to assemble information and respond on behalf of the client.”  Although GSK’s responses may not have satisfied the FDA, they were sent to the FDA in the course of Stevens’ bona fide representation of a client and in good faith reliance on both external and internal lawyers for GSK.  The Court concluded: “the defendant sought and obtained the advice of counsel of numerous lawyers.  She made full disclosure to them.  Every decision that she made and every letter she wrote was done by consensus.”  Further, although some statements were not literally true, they were made in good faith which would negate the requisite element of intent required for the charged crimes.

Stevens learned many lessons from this ordeal including: (1) when hiring outside legal counsel, make sure they know all of the facts; (2) make sure other parties know you have hired outside counsel; (3) take clear, accurate notes, knowing they could end up in Court; and (4) be careful in correspondence with adverse parties.

Article By:

 of

Does My Email Communication Constitute a Binding Agreement?

GT Law

In an era where the prevalence of email exchanges in the business arena is almost commonplace, clients and attorneys should be aware that a form of identification which could constitute their signature in an email, attesting to the substance of a negotiated settlement, may be considered a binding and enforceable stipulation of settlement under CPLR 2104.  Last month, a unanimous panel of the Appellate Division, Second Department, held, in Forcelli v. Gelco Corporation, 27584/08, that an agent for a vehicle insurer who sent an email message to plaintiff’s counsel, with her name entered at the bottom of the email, summing up the settlement terms in an automobile accident case, constituted “a writing subscribed by [client] or his attorney” as required under the statute.

The Forcelli case was brought by Mr. Forcelli and his wife for injuries Mr. Forcelli allegedly suffered in connection with a three-car accident on the Saw Mill River Parkway.  One of the cars was driven by the defendant Mitchell Maller who was driving a car owned by defendant Gelco Corporation.  In January 2011, Gelco and Maller (the “Gelco Defendants”) moved for summary judgment seeking dismissal of all claims.  In March 2011, the Gelco Defendants met with plaintiffs and their counsel for mediation.  Ms. Brenda Greene, a claims adjuster with the insurer of the Gelco Defendants’ vehicle, was also present and she informed Plaintiffs that she had authority to settle the case on behalf of her insured.  Although the mediation did not result in an immediate settlement, the parties continued their discussions and on May 3, 2011, Ms. Greene orally offered to settle the case for $230,000.  Plaintiffs’ counsel orally accepted the offer on behalf of the Plaintiffs.  Ms. Greene then sent an email message to Plaintiffs’ counsel memorializing the terms of the settlement.  On May 4, 2011, Plaintiffs signed a release in exchange for receiving the $230,000.  A few days later, on May 10, 2011, the Supreme Court issued an order granting the Gelco Defendants’ motion for summary judgment dismissing all claims against them.  After the Court’s decision, the Gelco Defendants took the position that there was no settlement finalized under CPLR 2104.  Plaintiffs moved to enforce the settlement agreement as set forth in Ms. Greene’s email message.

Writing for the unanimous panel, Judge Sandra Sgroi stated that “given the now widespread use of email as a form of written communication in both personal and business affairs, it would be unreasonable to conclude that email messages are incapable of conforming to the criteria of CPLR 2104 simply because they cannot be physically signed in a traditional fashion.”  Specifically, Judge Sgroi noted that the agent ended the email with the expression “Thanks Brenda Greene,” which “indicates that the author purposefully added her name to this particular email message rather than a situation where the sender’s email software has been programmed to automatically generate the name of the email sender….”  Judge Sgroi noted that Ms. Greene’s email message set forth the material terms of the settlement agreement and contained an expression of mutual assent.  Importantly, the settlement was not conditioned on any further occurrence and the record clearly demonstrated that Ms. Greene had apparent authority to settle the case on behalf of the insured.

Judge Sgroi cited to both First and Third Department decisions where those Courts came to the same conclusion.  In Williamson v. Delsener, 59 A.D.3d 291 (2009), the Appellate Division, First Department held that “emails exchanged between counsel, which contained their printed names at the end, constitute signed writings (CPLR 2104) within the meaning of the statute of frauds and entitle plaintiff to judgment.”  The First Department noted that the email communications evidenced that Delsener was aware of and consented to the settlement and there was no indication in the record that counsel was without authority to enter into the settlement.

Likewise, in Newmark & Co. Real Estate Inc. v. 2615 East 17 Street Realty LLC, 80 A.D.3d 476 (2011), which involved payment of a commission under a brokerage agreement, the First Department found that although the defendant did not sign the brokerage agreement sent by the plaintiff, there were several email communications, supported by other documentary evidence, which contained the terms of the brokerage agreement.  The Court stated that “an email sent by a party, under which the sending party’s name is typed, can constitute a writing for the purposes of the statute of frauds.”  The email agreement set forth all relevant terms of the agreement and thus “constituted a meeting of the minds.”

The Appellate Division, Third Department, held in Brighton Investment, LTD. v. Ronen Har-ZVI, 88 A.D.3d 1220 (2011) that “an exchange of emails may constitute an enforceable contract, even if a party subsequently fails to sign implementing documents, when the communications are sufficiently clear and concrete to establish such an intent.”  (internal citations omitted.)

While the law in this area is plainly evolving, clients and attorneys should be careful when setting forth terms of a settlement or conducting any sort of negotiations via email.  One simple suggestion that may reduce the risk that emails with typed signatures (or even a signature block) at the bottom may unintentionally create a binding agreement is to include in the email a form of disclaimer that the email is for negotiation purposes only and does not constitute or give rise to a binding legal agreement.  We certainly have not heard the last word on this subject.  It will be up to the Court of Appeals to render a decision that will hopefully give some degree of finality to the issue of whether name identification on an email constitutes the type of signature required for a binding settlement under CPLR 2104.

Article By:

 of

Does A Securities and Exchange Commission (SEC) Attorney Commit An Ethical Violation By Encouraging Whistleblowing Lawyers?

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The Harvard Law School Forum on Corporate Governance and Financial Regulation included a comprehensive post by Lawrence A. West which tackles the question of whether attorneys can be award seeking whistleblowers.  I want to approach the topic from the other direction.  May an SEC attorney actively solicit disclosure of client confidences from an member of the California State Bar?

California lawyers are governed by the State Bar Act (Cal. Bus. & Prof. Code §§ 6000 et seq.) and the California Rules of Professional Conduct adopted by the Board of Governors of the State Bar of California and approved by the Supreme Court of California pursuant to Sections 6076 and 6077 of the Business and Professions Code.  The federal District Courts located in California have adopted California’s statutes, rules and decisions governing attorney conduct.  Central District Local Rule 83-3.1.2, Eastern District Local Rule 180(e), Northern District Local Rule 11-4, and Southern District Local Rule 83.4(b).

Section 6068(e) provides that members of the California bar must “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client”.   The only statutory exception permits, but does not require, an attorney to ”reveal confidential information relating to the representation of a client to the extent that the attorney reasonably believes the disclosure is necessary to prevent a criminal act that the attorney reasonably believes is likely to result in death of, or substantial bodily harm to, an individual”.

Rule 1-120 of the California Rules of Professional Conduct provides that a member “shall not knowingly assist in, solicit, or induce any violation of these rules or the State Bar Act,” including Section 6068(e).   Thus, an SEC attorney who is a member of the California State Bar (or subject to the local rules of the U.S. District Court) could be found to violate Rule 1-120 if she actively induces an attorney to violate of Section 6068(e).

Of course, the SEC has taken the position that its attorney conduct rules (aka “Part 205 Rules”) preempt conflicting state law.  However, there is a real question of whether the SEC acted in excess of its authority in purporting to immunize lawyers.  More importantly, it is questionable whether the SEC can preempt state law in this regard.  In 2004, I co-wrote a law review article for the Corporations Committee of the Business Law Section of the State Bar that considered these questions in detail, Conflicting Currents: The Obligation to Maintain Inviolate Client Confidences and the New SEC Attorney Conduct Rules, 32 Pepp. L. Rev. 89 (2004).  The other authors were James F. Fotenos, Steven K. Hazen, James R. Walther, and Nancy H. Wojtas.

If you think it is ok to violate your client’s confidences, you may want to reflect on the case of Dimitrious P. Biller.  In 2011, an arbitrator order Mr. Biller to pay his former employer $2.6 million in damages and $100,000 in punitive damages.   According to the arbitrator,Hon. Gary L. Taylor (Ret.), Mr. Biller “did the professionally unthinkable: he betrayed the confidences of his client.”  The arbitration award was confirmed by the trial court and upheld by the Ninth Circuit Court of Appeals, Biller v. Toyota Motor Corp., 668 F.3d 655 (9th Cir. 2012).  You may also want to consider what Justice Shinn had to say about an attorney who disclosed confidential client information after being ordered to do so by a trial court:

Defendant’s attorney should have chosen to go to jail and take his chances of release by a higher court

People v. Kor, 277 P.2d 94, 101 (Cal. Ct. App. 1954) (emphasis added).

Finally, you may want to put yourself in the position of a client.  How effectively represented would you feel if you knew that your lawyer could be rewarded for violating your confidences?  How would you feel about a government agency that believes it is permissible to encourage lawyers to do the “professionally unthinkable”?

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Social Media & Emerging Employer Issues: Are You Protected?

McBrayer NEW logo 1-10-13

On June 13, 2013, Business First of Louisville and McBrayer hosted the second annual Social Media Seminar. The seminar’s precedent, Social Media: Strategy and Implementation, was offered in 2012 and was hugely successful. This year’s proved to be no different. Presented by Amy D. Cubbage and Cynthia L. Effinger, the seminar focused on emerging social media issues for employers. If you missed it, you missed out! But don’t worry, a seminar recap is below and for a copy of the PowerPoint slides click here.

McBrayer: If a business has been designated an entity that must comply with HIPAA, what is the risk of employees using social media?

Cubbage: Employers are generally liable for the acts of their employees which are inconsistent with HIPAA data privacy and security rules. As employees’ use of social networking sites increase, so does the possibility of a privacy or security breach. An employee may be violating HIPAA laws simply by posting something about their workday that is seemingly innocent. For instance, a nurse’s Facebook status that says, “Long day, been dealing with a cranky old man just admitted into the ER” could be considered a HIPAA violation and expose an employer to sanctions and fines.

 

McBrayer: Should businesses avoid using social media so that they will not become the target of social media defamation?

Effinger: In this day and age it is hard, if not impossible, for a business to be successful without some use of social media. There is always the risk that someone will make negative comments about an individual or a business online, especially when anonymity is an option. Employers need to know the difference between negativity and true defamation. Negative comments or reviews are allowed, perhaps even encouraged, on some websites. If a statement is truly defamatory, however, then a business should make efforts to have the commentary reported and removed. The first step should always be to ask the internet service provider for a retraction of the comment, but legal action may sometimes be required.

 

McBrayer: When does a negative statement cross the line and become defamation?

Effinger: It is not always easy to tell. First, a statement must be false. If it is true, no matter how damaging, it is not defamation. The same goes for personal opinions. Second, the statement must cause some kind of injury to an individual or business, such as by negatively impacting a business’s sales, to be defamation.

 

McBrayer: Can employers ever prevent employees from “speaking” on social media?

Effinger: Employers should always have social media policies in place that employees read, sign, and abide by. While it is never really possible to prevent employees from saying what they wish on social media sites, some of their speech may not be protected by the First Amendment’s freedom of speech clause.

 

McBrayer: What constitutes “speech” on the internet? Is “liking” a group on Facebook speech? How about posting a YouTube video?

Effinger: This is a problem that courts and governmental employment agencies, like the National Labor Relations Board, are just starting to encounter. There is no bright-line rule for what constitutes “speech,” but it is safe to say that anything an employee does online that is somehow communicated to others (even “liking” a group or posting a video) qualifies.

 

McBrayer: Since a private employer is not bound by the First Amendment, can they terminate employees for social media actions with no repercussions?

Effinger: No! In fact, it could be argued that private employees are afforded more protection for what they say online than public employees. While a private employer has no constitutional duty to allow free speech, the employer is subject to state and federal laws that may prevent them from disciplining an employee’s conduct. As a general rule, private employees have the right to communicate in a “concerted manner” with respect to “terms and conditions” of their employment. Such communication is protected regardless of whether it occurs around the water cooler or, let’s say, on Twitter.

 

McBrayer: It seems like the best policy would be for employers to prohibit employees from discussing the company in any negative manner. Is this acceptable?

Effinger: It is crucial for companies to have social media policies and procedures, but crafting them appropriately can be tricky. There have been several instances where the National Labor Relations Board has reviewed a company’s policy and found its overly broad restrictions or blanket prohibitions illegal. Even giant corporations like General Motors and Target have come under scrutiny for their social media policies and been urged to rewrite them so employees are given more leeway.

 

McBrayer: Is social media a company asset?

Cubbage: Yes! Take a moment to consider all of the “followers”, “fans”, or “connections” that your business may have through its social media accounts. These accounts provide a way to constantly interact with and engage clients and customers. Courts have recently dealt with cases where a company has filed suit after a rogue employee stole a business account in some manner, for instance by refusing to turn over an account password. Accounts are “assets,” even if not tangible property.

 

McBrayer: What is the best way for an employer to protect their social media accounts?

Cubbage: Social media accounts should first be addressed in a company’s operating agreement. Who gets the accounts in the event the company splits? There are additional steps every employer should take, such as including a provision in social media policies that all accounts are property of the business. Also, there should always be more than one person with account information, but never more than a few. Treat social media passwords like any other confidential business information – they should only be distributed on a “need to know” basis.

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Six Ways to do Business Overseas While Reducing the Perils of Future Litigation

Sheppard Mullin 2012

As an executive or in-house counsel, your work likely reaches across the globe.

90% of companies in the United States are involved in litigation—much of it international. American companies have increased overseas business from 49% in 2008 to 72% as late as 2010.

If you work for a medium to large corporation, you are liking working overseas or interacting with colleagues that are. This means that you are likely working around the clock putting out fires, making deals, and juggling regulatory hurdles. Are you worried of running so fast in such unknown territory that you may miss something? Do you wish you had more time to learn everything to minimize your company’s business and litigation risks?

I have good and bad news. The bad—it is nearly impossible to know all of the intricacies of international law, customs, or the unique business challenges facing your company. The good news—you don’t have to. The reality is that ignorance of international law is not what gets you in trouble . . . facts do. Case in point, see Wal-Mart’s bribery scandal in Mexico.

Here are six habits you already know and should put into practice to reduce the risks of bad facts leading to future international litigation:

1. Watch What You Put in Email

You are in charge of an international project and the pressure is mounting. Your foreign counterparts seek written assurances. So, you go on the record via email stating definitively and unequivocally the company’s position. Years later and, with hindsight, you learn you were wrong and it comes back to bite you in litigation. Or maybe you feel especially close to your Brazilian counter-part after a night of food and drinks, so you share information via email about your company’s “issues.” That email is later produced in litigation and becomes evidence against your company.

Remember, emails live on forever and travel . . . fast! Like water leaks, emails go unnoticed until the full impact of their damage emerges years later.

This is basic, but often key in litigation. If you are doing business overseas: watch your tone, grammar, use of local colloquialisms, or use of vague undefined terms (e.g. “material” breach). Avoid definitive words like: “always,” “never,” or “definitely.” Give yourself margin for error. If you are assuming, say so in your email. If you still need approval for your written position, note as much in the email. Ask yourself, “is what I am writing something I would be okay having blown up on an overhead projector in court?” If so, send away.

2. Write Facts Down and Do So Clearly

The fear of bad facts or cross-examination should not deter you from writing. Given the language barriers of international work, communication is vital to your success. So, you should write emails and correspondence. But how? The key is clarity of facts.

This means, writing facts, not conclusions or opinions. When you portray facts, be objective and detail-oriented. For example, retell the other side’s position and your company’s response. Don’t assume that the other side will stick to the same story they told you orally, so document it.

However, you are often called to make conclusions or state an opinion. When you do, make sure you identify why, the process leading to the conclusion/opinion, and what factors could change your initial viewpoint.

Litigation is drama and international litigation is drama on a global scale where each side gives their “story.” Take the lead and document the “real story” by writing it down. When you do, and litigation erupts, a litigator like me can clearly and persuasively tell your story.

3. Respect Cultural Sensitivities, But Don’t Be Afraid to Follow Up

You are in meetings with your counter-parts in Asia and essential business issues come up. Yet, you are concerned about being culturally sensitive and not losing “face.” So, you let the issue pass and put it on your to-do list. As the days pass, hundreds of other “to-do” issues join it on your list and you forget.

Respect cultural sensitivities, but always follow-up. Better yet, document it, follow-up over the phone or in person, and document what you did. I have seen clients’ major multi-million dollar litigation matters get sidetracked because an executive failed to follow-up on a legitimate concern and subsequently “waived” the issue.

4. Be a Gatekeeper and Assert Your Contractual Rights

Companies and their executives fly to the moon to strike an international deal that benefits the company. They hire great lawyers to put in all the bells and whistles to protect their business interests. Yet, when the deal meets the reality of daily business life, gravity takes over and the precious rights protected in the contract fall flat to earth.

If you are the executive sent overseas to manage the project or handle the international distribution business, become the gatekeeper. That means: read the previously negotiated contract, understand it, ask questions about it, know it intimately, and then follow the terms of the contract.

If the contract gives you the right to documents from the foreign company, politely, but firmly get your documents. If the contract calls for a delivery schedule, follow it and insist the other side do the same. If the contract requires your foreign counterpart to act a certain way, do a number of things, or behave within the confines of a certain standard, make sure they do.

Your failure to know your contract and follow it, could waive important rights, change the terms of the contract, and create multiple avenues of arguments for the other side. This could come to haunt you later when you are back in the United States and the project you were in charge of heads to litigation.

5. Ask Questions, Look Around, and Gather Information

Maybe the most important and underused tool in your arsenal to reduce the risk of overseas business leading to litigation is to ask questions.

As you undertake your overseas assignment, you will notice that some things don’t make sense. When this happens, ask questions. Who is the foreign executive you are dealing with? What is his role in the company? Why is he asking you to meet with him and a foreign government official at a swanky resort? Could this be a problem? Maybe, but you will never know where you and your company stand unless you ask questions.

While you are asking questions, look around. If you are managing a construction project in Qatar, get on the ground and look at the project site. Don’t rely on others to tell you what is happening, see it for yourself. Open your eyes . . . is anything off? What’s there that shouldn’t be there? What isn’t there that should be there? If you know your contract (as in Tip 4 above), you will know what doesn’t look right.

Gather readily available information. The reality is that international litigation becomes very difficult and expensive from the United States when all of the evidence remains overseas. So, if you hear your foreign counter-part discuss a “regulation,” “policy,” or “contract” that they are relying on, ask to have a copy . . . and actually get it. Doing so will give your company an advantage in discovery if litigation ensues.

In the end, use your senses. What do you see and hear? Does it smell or feel right? If not, take note, ask questions, and gather information as it occurs.

6. Seek Advice

Note, it is wise to seek advice on international law when doing business overseas. Whether you are working on an international investment deal,cross border real estate transaction, want to protect your intellectual property, or are worried about immigration exposure, it is good business to get counsel.

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