Opinion
NO. 2013-CV-00119
12-31-2013
XTL-NH, Inc. v. New Hampshire State Liquor Commission and Exel, Inc.
ORDER
The Plaintiff, XTL-NH, Inc. ("XTL"), has filed a Motion for Permission to Conduct Ex Parte Interviews of Certain Witnesses seeking, in substance, that it be permitted to interview, on an ex parte basis, current and former employees of the Defendant, the New Hampshire State Liquor Commission (the "Commission"). The Commission objects. For the reasons stated in this Order, XTL's motion is GRANTED in part and DENIED in part.
I
After unsuccessfully bidding on a Request for Proposal to obtain the Commission's warehousing contract, XTL brought a Petition for Preliminary and Permanent Injunction, challenging the award of the contract to Exel, Inc. By Order dated May 7, 2013, this Court denied relief, and the Petition was amended in July 2013 to seek a permanent injunction or other equitable relief, damages, and a jury trial. XTL has now filed a Motion for Permission to Conduct Ex Parte Interviews of Certain Witnesses seeking an order granting permission to conduct ex parte interviews of certain current and former employees of the Commission, and an order prohibiting counsel for the Commission from doing anything to affect the willingness of those witnesses who are willing to speak with XTL's counsel. XTL seeks to conduct ex parte interviews of the following categories of witnesses:
a. Former managerial employees of the [Commission];(Pl.'s Mot. for Ex Parte Interviews ¶ 1.)
b. Former non-managerial employees of the [Commission];
c. Former State employees of agencies other than the [Commission];
d. Current [Commission] non-managerial employees;
e. Current State employees of agencies other than the [Commission]; and
f. Former [Commission] employees who were acting as consultants to the [Commission] at all times pertinent to the events of this lawsuit.
XTL asserts that it has the right under New Hampshire Rule of Professional Conduct 4.2 ("Rule 4.2") to conduct these interviews without the consent, or presence, of counsel for the Commission, and without any interference from the Commission. The Commission objects, and asserts that the Attorney General's Office represents all current or former state employees who may have information regarding XTL's claims. (Def.'s Obj. to Ex Parte Interviews ¶¶ 6-7). In effect, XTL seeks a prophylactic ruling from the Court in advance of the interviews.
This procedure is recommended by the ABA Model Code Comment to Rule 4.2.
Both parties agree that the starting point for analysis is the text of Rule 4.2, which provides, in relevant part:
In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.N.H. R. Prof. Conduct 4.2.
This Rule is derived from the 2004 ABA Model Code. As XTL notes, by itself the Rule is "ambiguous with regard to whether a lawyer may conduct ex parte interviews of current or former employees or of other constituents of an organizational litigant without the consent of the organization's lawyer." (Pl.'s Mot. for Ex Parte Interviews ¶ 4.) The Comments to the Rule by the Ethics Committee note that the ABA comments adopt what is known as the managing-speaking test to determine when organizational personnel are "off-limits" under Rule 4.2. The Ethics Committee Comments note that several other tests have been used, known as the control group test, the blanket ban, the alter ego test, and the balancing test and that the New Hampshire Supreme Court has not ruled on the issue. The Ethics Committee Comments further note, however, that "while not controlling on the question of permissible ex parte contact with employees of a corporate opponent, it is worth noting that New Hampshire has adopted the control-group test for purposes of applying the attorney-client privilege in the corporate setting." N.H. R. Prof. Conduct 4.2, Ethics Committee Comment (citing N.H. R. Ev. 502(a)(2); Klonoski v. Mahlab, No. 95-153-M, 1996 U.S. Dist. LEXIS 20360, at *9 n. 2 (D.N.H. July 16, 1996), rev'd on other grounds, 156 F.3d 225 (1st Cir. 1998)).
However, the Court believes that the 2004 ABA Comments along with Rule 4.2 informs the Court's decision on what standard applies. The Comments to Rule 4.2 provided in relevant part:
[7] In the case of a represented organization, this Rule prohibits communications with a constituent of the organization who supervises, directs or regularly consults with the organization's lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability.Model Rules of Prof'l Conduct R. 4.2 cmt. 7 (2004). This test is plainly different than the narrow control group test, adopted by New Hampshire Rule of Evidence 502 in order to effectuate attorney-client privilege.
Consent of the organization's lawyer is not required for communication with a former constituent. If a constituent of the organization is represented in the matter by his or her own counsel, the consent by that counsel to a communication will be sufficient for the purpose of this Rule. Compare Rule 3.4(f). In communicating with a current or former constituent of an organization, a lawyer must not use methods of obtaining evidence that violate the legal rights of the organization. See Rule 4.4.
II
A
The Attorney General argues that it represents all state employees and that therefore ex parte contact is prohibited by Rule 4.2. While tacitly recognizing that Rule 4.2 implies a managing-speaking test, it argues that RSA 99-D requires that all State employees be considered their clients. RSA 99-D provides, in substance, that current and former New Hampshire employees are entitled to a defense and indemnification in civil suits brought against them pursuant to New Hampshire law. The Court cannot accept this argument. By its own terms, the statute only applies to those against whom a claim has been made, and does not apply to those against whom a claim has not yet been made or may never be made.
As a general rule, "[a]n entity cannot claim a blanket protection from ex parte interviews by taking the position that house counsel is responsible for all future legal matters affecting that entity." Matter of Madris, 97 A.D.3d 823, 826-27, (N.Y. App. Div. 2d. Dep't 2012) (citation and internal quotation omitted). Similarly "if a governmental party were always considered to be represented by counsel for purposes of the rule against ex parte communications, the free exchange of information between the public and the government would be greatly inhibited." Id. (brackets omitted) (quoting Schmidt v. State of New York, 279 A.D.2d 62, 65 (2000)). The RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 101 explicitly rejects the Commissions position, and allows direct lawyer contact with a government officer or employee except when a governmental client is represented with respect to negotiation or litigation of a specific claim. Comment c explains:
c. Negotiation or litigation involving a specific claim. When the government is represented in a dispute involving a specific claim, the status of the Government as client may be closely analogous to that of any other organizational party (see §100). Where such a close analogy exists, as stated in subsection (2), the anti-contact rule of § 99 applies, although with reduced scope. Thus, in prosecuting a tort claim against a governmental agency based on the activities of an agency employee in operating a motor vehicle, a personal interview with the employee is subject to the anti-contact rule. (See § 100(2)(b)). In any specific claims representation, contact is permissible with officers of governmental agencies other than the agency be specifically involved and with officers of the governmental agency in question who do not have power to bind the agency with respect to the specific matter.RESTATEMENT (THIRD) OF LAW GOVERNING LAWYERS § 101, cmt. c (2000).
Moreover, the mere assertion by the Attorney General's Office that it represents all State employees is insufficient to establish an attorney-client relationship. Harry A. v. Duncan, 330 F.Supp.2d 1133, 1141-142 (D. Mont. 2004). It follows that RSA 99-D does not prohibit XTL's counsel from interviewing current employees of the Commission who do not supervise, direct or regularly consults with the Commission's lawyer concerning the matter, who have authority to obligate the Commission with respect to the matter, or whose act or omission may be imputed to the organization.
B
Professional Conduct Rule 4.2 generally prohibits a lawyer from speaking with a nonclient he knows to be represented by counsel. With respect to general entities such as corporations or the Government, the identity of the client must be determined in order to understand the reach of the prohibition.
Courts in many jurisdictions seeking to define the underlying purpose of Rule 4.2 have cited Formal Opinion 91-359 of the American Bar Association Standing Committee on Ethics and Professional Responsibility. See, e.g., Humco, Inc. v. Noble, 31 S.W.3d 916, 920 (Ky. 2000); H.B.A. Mgmt., Inc. v. Estate of Schwartz, 693 So.2d 541, 544-46 (Fla. 1997). In that opinion, the Committee interpreted Rule 4.2 of the Model Code of Professional Responsibility, which is identical to New Hampshire Professional Conduct Rule 4.2, and "identified a dual rationale of the rule: to preserve the proper functioning of the legal system and to shield the adverse party from improper approaches." See P.T. Barnum's Nightclub v. Duhamell, 766 N.E.2d 729, 733 (Ind. Ct. App. 2002) (citation and internal quotation omitted) (examining Formal Opinion 91-359 of the American Bar Association Standing Committee on Ethics and Professional Responsibility). The Committee also noted that the Rule "rests on the notion that the presumptively superior skills of the trained advocate should not be matched against those of one not trained in the law." Id. (citation and internal quotation omitted).
The language of Rule 4.2 is clear, but its application may not always be when jural entities are involved. The Comments note that this Rule prohibits communication with "a constituent of the organization who supervises, directs or regularly consults with the organization's lawyer concerning the matter, or has authority to obligate the organization with respect to the matter, or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability." There is always a risk of violation of Rule 4.2 when current employees are interviewed for several reasons. First, the lawyer seeking to interview the nonclient may not be aware of what employees of the Government agency regularly consult with the organization's lawyers, or receive advice from them, or provide information to them. and Second, an adverse party's lawyer may also be unaware of what government employees have authority to bind the organization. Finally, an organization's lawyer has a legitimate concern about protecting the organization's privilege, which belongs to the organization and not to the employee.
The last concern is particularly acute in this case, which involves a public bidding process for a State contract which occurred over a lengthy period of time, and was, according to the record, subject to review and oversight by the Attorney General's Office. The Court can take judicial notice of right-to-know requests which have been filed in this matter in which the Commission has asserted work product privilege with respect to numerous documents. Rule 4.2 does not exist in a vacuum. Rule 4.4 (b) specifically requires that a lawyer not utilize material which was inadvertently provided, such as privileged material. But what is or is not work product may not be apparent to a non-lawyer.
The problem is ultimately protecting the organization's privilege. Under the circumstances of this case, the Court therefore believes that while there may be current Commission or State nonmanagerial employees who may be interviewed without violating the strictures of Rule 4.2, the risk of disclosure requires prophylactic procedures. Accordingly, with respect to current employees, ex parte interviews may be permitted only under the following circumstances:
1. The Plaintiff shall provide counsel for the Commission with a list of current Commission or State employees it seeks to interview. The list shall be designated "attorneys' eyes only", and shall not be disclosed to anyone beyond counsel for the Commission.
2. Within 20 days of receipt of the list, counsel for the Commission shall advise the Plaintiff if they believe that any witness the Plaintiff seeks to interview falls within the prohibition of Rule 4.2. If the parties dispute whether or not a witness may be interviewed consistent with Rule 4.2, a motion for protective order shall be filed prior to any interview taking place.
With respect to any employees whose interview is not barred by Rule 4.2, the Plaintiff's counsel shall be permitted to contact them on an ex parte basis and without prior notice to the Commission's counsel so long as the Plaintiff's counsel shall:
1. Identify himself to each person, including the fact of the litigation and that he represents the plaintiff in the litigation. See Rule 4.3;
2. Inform each person that he or she has the right to decline to be interviewed and has the right to request the counsel from the Attorney General's Office be present during the interview;
3. Refrain from asking questions that would likely reveal information protected by the attorney-client privilege or work product doctrine; and
4. Limit his questions to the subject matter of this litigation.
Counsel for the Commission must refrain from doing anything "to affect the willingness of current and former employees to decide whether they are or will be willing to speak with plaintiff's counsel." Davis v. Creditors Interchange Receivable Mgmt., LLC., 585 F.Supp.2d 968 (N.D. Ohio 2008).
C
More difficult is the issue of whether Rule 4.2 prohibits the interview of prior employees in the somewhat unusual circumstances of this case which involves bidding on a public contract which will last for some 20 years. In the years since promulgation of Rule 4.2, the majority of the courts in jurisdictions with a cognate of Rule 4.2 have held that contacts with former employees are not barred by Rule 4.2. See Hazard, Jr. & Irwin, Toward a Revised 4.2 No-Contact Rule, 60 HASTING L.J. 797, 840-41 (2009) (stating "The Model Rule, the Restatement (Third), and most courts permit communications with former employees. These authorities generally assert that once a constituent's affiliation with an organization ceases, there is a greatly diminished risk that communications with that person will harm the organization's client-lawyer relationship) (citing ABA Committee on Ethics and Professional Responsibility, Formal Opinion 359 (1991)).
See also Valassis v. Samelson, 143 F.R.D. 118, 121-22 (E.D. Mich. 1992) (noting that the majority of courts have held that Rule 4.2 does not apply to former employees and applying an analysis focusing on the language of Rule 4.2 over its underlying comments); P.T. Barnum's Nightclub, 766 N.E.2d at 734, 737 (adopting a text-based approach of Rule 4.2 permitting contact with former employee of adverse party and citing additional cases); Humco, 31 S.W.3d 916, 920 (Ky. 2000); Estate of Schwartz, 693 So.2d 544-46; State ex rel Charleston Area Medical Ctr. v. Zakaib, 437 S.E.2d 759, 763 (W. Va. 1993); 2 Hazard, Jr. & Hodes The Law of Lawyering § 38.7 (3d ed. Supp. 2011) ("The no-contact regime . . . does not address communications with former agents and employees and technically there should be no bar, because former employees cannot bind the organization, and their statements cannot be introduced as admissions of the organization.") (emphasis in original).
A few courts take a more restrictive view, reasoning that employee statements could eventually constitute admissions. Pardo v. General Hosp. Corp., No. 98-2714, 2000 WL 33170689, at *2-3 (Mass. Super. Ct. Oct. 31, 2000). This reasoning tends to rely upon the Comments to Rule 4.2 and focuses on the acts, omissions, or statements of former employees that occurred while they were employed and that could be imputed onto a corporation. See Rockland Trust Co., 1999 WL 95722, at *11-16. Some courts adopt a flexible approach, holding that the key factor in evaluating the propriety of a lawyer's contact with a former unrepresented employee of an adverse party is the likelihood that privileged information will be disclosed to an opponent in litigation. See Hazard, Jr. & Irwin, supra, at 841 (citing cases for the proposition that"[o]ther courts prohibit communication if the former employee has been privy to confidential or privileged information. . . ."); see also Fleetboston Robertson Stephens, Inc. v. Innovex, Inc., 172 F.Supp.2d. 1190, 1195 (D. Mass. 2001). These views are, however, plainly in the minority. RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 100, cmt. g.
Citing, inter alia, Hurley v. Modern Continental Constr. Co., No. 94-11373, 1999 WL 95723, at *2 (D. Mass. Feb. 19, 1999), Rockland Trust Co. v. Computer Assocs. Int'l, Inc., No. 95-11683 DPW, 1999 WL 95722, at *4 (D. Mass. Feb. 19, 1999) and Pratt v. National R.R. Passenger Corp., 54 F.Supp.2d 78, 79-80 (D. Mass. June 28, 1999).
Counsel for XTL is certainly aware of his responsibility to adhere to Professional Conduct Rules 4.3, Dealing With Unrepresented Person and 4.4, Respect for Rights of Third Persons. However, a former employee may not be aware of his or her rights, including his or her right not to speak to an attorney at all or to seek advice from his or her former employee's counsel. A significant risk in the unusual circumstances of this case is that a nonlawyer may not realize that information he is providing is protected by the work product privilege. Part of the purpose of Rule 4.2 is to ensure that the "presumptively superior skills of the trained advocate should not be matched against those of one not trained in the law."P.T. Barnum's Nightclub, 766 N.E.2d at 733 (citation omitted).
The identity of individuals who are both former employees and individuals who may have provided or received privileged work product is likely small, and counsel for the Commission certainly has the ability to meet with those individuals in advance of any interview by counsel for XTL, and advise them of their rights. Furthermore, counsel for the Commission has the ability to advise them of areas of inquiry that are privileged and the fact that the privilege belongs to the Commission and not to them. Moreover, counsel for XTL is or should be aware that where privileged information is obtained as the result of an interview which violates the Rules of Professional Conduct, the ordinary remedy is disqualification to avoid tainting the litigation before the court. ChampionsWorld, LLC v. United States Soccer Federation, 276 F.R.D. 577, 589, (N.D. Ill. 2011). This fact provides a powerful deterrent for XLT's counsel to proceed cautiously.
Although they may not, of course, attempt to discourage potential witnesses from meeting with Plaintiff's counsel.
Balancing these considerations, the Court believes that application of the majority rule, as set forth in the Restatement, allowing counsel for XTL to proceed with interviews of all former employees who are willing to speak to them is appropriate, because the risk of a violation of the Commission's attorney-client privilege or work product privilege is low. RESTATEMENT (THIRD) OF LAW GOVERNING LAWYERS, § 100. This Order does not, however, bar the Commission from seeking a protective order if specific reasons exist to prohibit interview of a particular former employee. For example, if the Plaintiff's counsel seeks to interview a former employee who held a confidential position or whose conduct is the subject of the litigation in question, a different result might be reached. See generally Polycast Technology Corp. v. Uniroyal, Inc., 129 F.R.D. 621, 628-29 (S.D.N.Y. 1990) Chancellor v. Boeing Co., 678 F.Supp. 250, 253 (D. Kan. 1988).
III
XTL also seeks to interview former Commission employees "who were acting as consultants to the [Commission] at all times pertinent to the events of this lawsuit." (Pl.'s Mot. for Ex Parte Interviews ¶ 1.) As previously noted, the Court is aware from Right-to-Know Requests which have been filed that a significant number of documents relating to this transaction have been withheld based upon the work product privilege Different considerations are therefore applicable in this circumstance. Such consultants may have been retained for many reasons; based on the representations made so far in this litigation, there is at least a reasonable basis to believe that communication by the Commission with retained consultants might well have been in anticipation of litigation and therefore privileged under both the Superior Court Rules and the work product doctrine, which is available to the State. Riddle Spring Realty v. State, 107 N.H. 271 (1966).
Whether a communication is privileged pursuant to the work product doctrine is often difficult to determine and likely unintelligible to a layperson. Under the unusual circumstances of this case, based on the record before the Court, the balance tips in favor of prohibiting ex parte communication of consultants hired by the State at times pertinent to the events of this lawsuit. Counsel for XTL may not engage in ex parte contact with former Commission employees who were acting as consultants to the Commission at any time pertinent to the events of this lawsuit.
SO ORDERED
________________
Richard B. McNamara,
Presiding Justice