As in-house counsel are often the ones starting an internal investigation, they need to be mindful of the same issues that appear when outside counsel are conducting an internal investigation. I wrote about the referral for discipline in the Ruehle case and the malpractice claim in Pendergast-Holt investigation in Attorney-Client Privilege and Internal Investigations.
It is even more important to clarify that the in-house counsel represents the organization. Employees are often used to dealing with in-house counsel as colleagues and give little regard to who they actually represent. After all, it is natural for employees regularly interacting with with in-house counsel to view them as their lawyer. Under the ABA’s model rules, Rule 1.13 (f) requires:
In dealing with an organization’s directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.
It is important to keep notes that you made the disclosure. Part of the issue in the Ruehle case and the Pendergast-Holt investigation is over what was said to the individual employees regarding representation. Treat the clarification statement as a “Corporate Miranda.”
Does the employee then have the right to remain silent? The Miranda rights under the Fifth Amendment are a limitation on the government, not a private company. The employee can remain silent, but you can terminate the employee for not cooperating. Of course it is good practice to let the employee know ahead of time what the consequences are for not cooperating.
Do they have the right to attorney? Again, the Miranda rights under the Fifth Amendment are not a limitation on a private company. There is a practical question about how you want to treat employees and whether the responses will be better if the employee talks with a lawyer before answering. It is probably better to give the employee a reasonable amount of time to get their own lawyer.
One aspect of the Miranda warning does come into play. What the employee says can be used against them.
What if they can’t afford an attorney? Back to the statement that the Miranda rights under the Fifth Amendment are not a limitation on a private company.
But corporate law does come into play for attorney costs. Under Delaware corporate law, a Delaware corporation must indemnify an officer or director who is successful on the merits or otherwise in the defense of a qualifying claim. (see §145 (c) of the Delaware General Corporation Law) In addition to the required indemnification, a Delaware corporation may indemnify individual employees for expenses incurred “if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.” (see §§145 (a) & 145 (b) of the Delaware General Corporation Law) Then there are often contractual arrangement with senior management for indemnification and a D&O insurance policy that may trigger the payment of defense costs. Other types of entities and other states’ laws that may have different treatment of defense costs and indemnification.
It is important to set up guidelines and protocols for investigations. Has your organization put together its own Corporate Miranda?
- Ethical and Practical Issues in Internal Investigations by In-House Counsel at Investment Advisers and Mutual Funds (.pdf) by David Bayless of Covington & Burling – firm website
- Attorney-Client Privilege and Internal Investigations – previous post
- Model Rules of Professional Conduct from the American Bar Association
- Miranda warning
- Subchapter IV Directors and Officers of the Delware General Corporation Law §§141-146
- Corporate Miranda Warnings Take on Great Importance (.pdf) by Robert Ullmann and Sarah Walters of Nutter McClennen & Fish LLP
- “Corporate Miranda Warnings”: The Lessons of Upjohn Co. V. U.S. by Heath Szymczak
Image is from Wikimedia Commons:CBP Border Patrol agent reads the Miranda rights