Department of Justice Attorneys: In a League of Their Own? (Or "Look Who's Talking to Your Client.")

James M. McCauley, Ethics Counsel

Your firm has been representing SOMNIAC, a publicly-held computer software company. A pioneering company in the high-tech industry, Marty Southar, the CEO, and his brother-in-law, Fritz Westheimer, the Marketing Director, asked you to serve as corporate counsel. Following a successful initial public offering, the company's stock took a dive, but not before Marty and Fritz unloaded some of their stock. SOMNIAC, Fritz and Marty have received notice from the SEC that they are under investigation by the SEC for possible securities law violations under Rule 10b-5 for insider trading. You contacted counsel for the SEC to advise that you are representing these clients.

Subsequently, you learn that, with the help of the U.S. Attorney's Office, Westheimer met with the government's lawyers and worked out a settlement of the charges against him personally, in exchange for an agreement to testify in the criminal cases the government is preparing against Southar, for insider trading and against the company for a fraudulent prospectus in connection with the I.P.O. Outraged that the goverment's attorneys communicated ex parte with your client, you filed a complaint with the State Bar alleging a violation of DR 7-103(A)(1). The disciplinary rule prohibits an attorney from communicating with a party which the attorney knows to be represented by counsel without the prior consent of the attorney representing such party or except as authorized by law.

In response to your complaint, the government asserts that you are the attorney guilty of misconduct by attempting to represent multiple parties with conflicting interests, that you did so in order to obstruct the government's ability to communicate with key witnesses, and that Westheimer was not a "controlling agent" of the company and thus not really your client. Even if he was, the government continues, Justice Department Regulations supercede the states' ethics rules and explicitly permit communications with represented parties and therefore the ex parte contacts with Westheimer were "authorized by law" within the meaning of DR7-103(A)(1) or Model Rule 4.2. See, e.g., 28 C.F.R. § 77.6 (1994) (sometimes referred to as the "Reno Regs").

"How could this be?" you ask yourself, "The attorneys for the government were admitted to practice in some state and therefore subject to that state's rules governing communications with represented parties." You ponder, "I thought the government's attorneys are subject to the same ethics rules as the rest of us."

Every state has an ex parte contact rule prohibiting an attorney from communicating with a person he or she knows to be represented by an attorney, unless that attorney consents or unless the communication is authorized by law. Virginia Code of Prof. Resp, DR 7-103(A)(1); ABA Model Rule 4.2; ABA Model Code DR 7-104. These ethics rules apply in federal court. Under the Federal Rules for Disciplinary Enforcement, the ethics rules adopted by the highest court of the state in which the federal court sits govern the conduct of attorneys practicing in that court. United States District Court Rules, E.D. Va., FRDE Rule IV; United States District Court Rules, W.D. Va., Rule 26.

The "no contact" rule raises many questions. Does the term "party" mean that a civil or criminal action must be filed or pending, or does the rule apply to pre-suit contacts with parties represented by counsel? Obviously, the rule would plainly forbid a plaintiff's attorney in a pending civil case from negotiating a settlement directly with the defendant without the knowledge of the defendant's lawyer. But how does the rule apply in a criminal case? Does it apply before charges are filed? Does the rule still apply if the defendant wants to initiate an ex parte contact with the prosecutor? If a person, represented by counsel, is the target of an ongoing criminal investigation or an undercover operation, does the rule prohibit contacts with this person to gather evidence? How does the rule apply if an attorney represents a corporation charged with a crime? Does the attorney for the corporation represent all of its employees, requiring the prosecutor to have the corporate attorney's consent to speak with any employees?

After every state had adopted some version of the "no contact" rule during the 1970s, criminal defense lawyers invoked the rule as a means of further restricting prosecutors and law enforcement agents beyond those limits imposed by constitution or statute. Thus, for example, defense attorneys interpreted the rule as forbidding communications by law enforcement officials with a represented target of a criminal investigation, regardless of whether a constitutional right to counsel had yet attached (i.e., non-custodial interrogations of a target known to be represented by counsel). This approach led to motions to suppress evidence purportedly obtained by law enforcement in violation of the "no contact" rule. Although the "no contact" rule is directed at lawyers, a lawyer may not avoid the prohibition by making such communication through an agent or investigator. ABA Model Rule 8.4(a); United States v. Partin, 601 F.2d 1000 (9^th Cir. 1979); United States v. Thomas, 474 F.2d 110 (10^th Cir. 1973).

The case of United States v. Hammad, 846 F.2d 864 (2d Cir. 1988), later revised 858 F.2d 834 (1988), brought the issue to a head. The court, in its initial opinion, ruled that DR 7-104⁽¹⁾ applies to federal criminal investigations both before and after indictment. Further, a federal prosecutor violates the rule by using an informant to gather information by communicating with a suspect known to be represented by counsel. See also DR 1-102(A)(2) (a lawyer may not circumvent a disciplinary rule through the actions of another). The Second Circuit concluded that any evidence obtained as the result of a contact prohibited by the rule was tainted and could be suppressed. The Second Circuit later revised its opinion fearing that its earlier opinion might unduly hamper criminal investigations particularly where savvy organized criminal defendants would retain "house counsel" in an attempt to immunize themselves from contact by law enforcement. In its revised opinion, the court recognized that a prosecutor is "authorized by law" to employ legitimate investigative techniques in conducting or supervising criminal investigations and that the use of informants to gather information from a suspect, even if represented by counsel, falls within the ambit of such authorization. Hammad, supra, 858 F.2d at 839.⁽²⁾

Somewhat relieved by the Second Circuit's revised opinion in United States v. Hammad, the Justice Department concluded that there was enough uncertainty on this issue to generate further litigation and problems. Consequently, to ensure that DR 7-104 could not be invoked to cripple federal investigative techniques, the DOJ developed its own policy which was disseminated in a memorandum dated June 8, 1989 by then Attorney General Richard Thornburg (the "Thornburg Memo"):

In the course of investigating and prosecuting violations of federal criminal law and litigating civil enforcement matters, law enforcement officers, including Department of Justice attorneys, and those acting at their direction often have occasion to contact or communicate with individuals represented by counsel. Such contacts or communications are an important element employed by the Department, and any individual acting at the direction of that attorney, is authorized to contact or communicate with any individual in the course of an investigation or prosecution unless the contact or communication is prohibited by the Constitution, statute, Executive Order, or applicable federal regulation.

Thornburg Memo at 9. The "Thornburg Memo" went further to state that this new policy was to be codified in the Code of Federal Regulations, which ultimately it was, under the direction of current Attorney General Janet Reno in July of 1994. 28 CFR Part 77. In addition, the "Thornburg Memo" announced that it would challenge states' efforts to enforce the "no contact" rule in contravention of the DOJ's new policy by invoking the "supremacy clause" of the United States Constitution. The "Thornburg Memo" immediately faced criticism and opposition. In one case, for example, a federal district court in New Mexico rejected a federal prosecutor's challenge to a state disciplinary proceeding in which the state bar alleged that the federal prosecutor had violated the "no contact" rule. The court stated:

[T]he government threatens the integrity of our tripartite structure by arguing [that] its lawyers, in the course of enforcing the laws regulating public conduct, may disregard the laws regulating their own conduct. . . . [T]he insolence with which the Government promotes this as official policy irresponsibly compromises the very trust which empowers it to act.

In re John Doe, 801 F. Supp. 478, 480 (D.N.Mex. 1992). In addition, even after the DOJ adopted federal regulations permitting ex parte contacts, the private bar never accepted the DOJ's argument that its practices were "authorized by law" within the meaning of ABA Model Rule 4.2 and its predecessor, DR 7-104. Indeed, as stated in ABA Formal Opinion 95-396, the federal prosecutor's conduct is forbidden under the "no contact" rule even if the represented party is not under indictment. The ABA's Standing Committee on Legal Ethics adopted the position that the DOJ regulations permitting ex parte contacts with represented individuals would be "authorized by law" only if the regulation had "been properly promulgated pursuant to statutory authority that contemplates regulation of the character in question." While the majority opinion refrained from deciding whether the "Reno Regs" met that test, in a concurring opinion, Lawrence J. Fox wrote that the Department's "regulations are clearly not authorized by law" because "[t]here is no Congressional grant of authority to the Justice Department to issue regulations undermining the fundamental rights of clients to be represented by counsel."

The DOJ, by adopting a regulation that permits federal attorneys to communicate with represented parties under circumstances which the courts, state and federal, would regard as unethical, has set the stage for constitutional battle between the federal executive and federal judiciary. Can a federal executive agency's rulemaking authority subvert the judiciary's exclusive right to regulate attorneys practicing before it? In a very recent case, the Eighth Circuit has said "No" and has concluded that the "Reno Regs" do not make the Department's attorneys "authorized by law" to communicate ex parte with represented individuals. United States ex. rel. O'Keefe v. McDonnell Douglas Corp., ___ F.3d ___ , 1998 WL 1924 (8^th Cir., January 6, 1998).

The case arose as a qui tam action brought by a former employee of the defendant corporation, alleging that McDonnell Douglas had mischarged labor hours of its employees on certain government military contracts in violation of the False Claims Act (31 U.S.C. §§ 3729-33). The United States subsequently intervened and the DOJ began its pre-trial investigation by making ex parte contacts with various present and former lower-level employees of McDonnell Douglas without the consent of the company's counsel. The trial court entered a protective order preventing contacts as to present employees, basing its decision on Missouri's version of Model Rule 4.2 prohibiting contacts with parties represented by counsel. The government appealed arguing that the federal regulations [28 C.F.R. § 77.10 (a)] authorized the DOJ's attorneys to communicate with current employees of the defendant because no such employee was a "controlling individual" as defined in the regulations. Similar to the "control group" test in Virginia's legal ethics opinions, these employees were not at a high enough level in the organization to participate as a decision maker in the determination of the organization's legal position vis-a-vis the subject litigation or investigation. Missouri's rule protects such employees from ex parte contacts just as the proposed Virginia Model Rule 4.2 would, if adopted.

The Eighth Circuit concluded that the Justice Department lacked the required congressional or statutory authority to issue the "Reno Regs" and that the provisions permitting ex parte contacts

with current employees of McDonnell Douglas were invalid and of no effect. The Court upheld the district court's finding that the ex parte contacts violated Missouri's ethics rules, as adopted and followed in the federal courts sitting in Missouri. Rejecting the Government's position that ex parte contacts with the employees of McDonnell Douglas were "authorized by law", the Eighth Circuit affirmed the district court's protective order.

In regard to the government's "supremacy clause" argument, the court relegated the issue to a footnote, stating that federal preemption and supremacy considerations do not apply when a court is asked to balance competing federal rules. Attorneys practicing before the federal courts in Missouri, by federal court rule, were obliged to follow Missouri's ethics rules, and a competing DOJ regulation did not preempt the rules of a federal court.

Time will tell whether this decision will put to rest an issue that has been debated for at least ten years. McDonnell Douglas reaffirms the independence of the judiciary in regulating the professional responsibility of lawyers and that the power to regulate belongs to the judiciary and cannot be usurped by the rulemaking process of a federal executive agency.

ENDNOTES

1. DR 7-104 is the ABA's version of the "no contact" rule. Virginia's rule, DR 7-103(A)(1), is identical, except for the numbering.

2. The Justice Department has consistently advocated, and the courts have recognized the legitimacy of undercover operations, even when they involve the investigation of individuals who keep an attorney on retainer. United States v. Lemonakis, 158 U.S.App.D.C. 162, 485 F.2d 941 (1973), cert. denied, 415 U.S. 989 (1974); United States v. Sutton, 255 U.S.App.D.C. 307, 801 F.2d 1346 (1986); United States v. Vasquez, 675 F.2d 16 (2d Cir, 1982); United States v. Jamil, 707 F.2d 638 (2d Cir. 1984). These cases hold that the sixth amendment right to counsel attaches only after initiation of adversary judicial criminal proceedings, e.g., formal charge, preliminary hearing, indictment, information or arraignment. Therefore, according to these opinions, contacts with represented individuals by federal prosecutors or law enforcement agents during the course of an undercover or grand jury investigation do not violate the "no contact" rule (ABA Code of Prof. Resp., DR 7-104).