MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 133
CONTACTS WITH CURRENT AND FORMER EMPLOYEES, OFFICERS, DIRECTORS AND MANAGING AGENTS

Because contacts with current and former employees and members of a company’s control group are always an important (and often misunderstood) issue in all types of litigation, I am summarizing the status of that law. (This is, by far, the longest Mediation Message I’ve ever written but once I started, I couldn’t stop.)

Before present Rule of Professional Conduct 2-100, there was Rule 7-103 which stated “A member of the State Bar shall not communicate directly or indirectly with a party whom he knows to be represented by counsel upon a subject of controversy, without the express consent of such counsel. This rule shall not apply to communications with a public officer, board, committee or body.” Rule 7-103 prohibited all contacts with current employees. (Mills Land & Water Co. v. Golden West Refining Co. (1986) 186 Cal.App.3d 116; Bobele v. Superior Court (1988) 199 Cal.App.3d 708, 713-714.)

Existing Rule 2-100 provides: “(A) While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer. [¶] (B) For purposes of this rule, a ‘party’ includes: [¶] (1) An officer, director, or managing agent of a corporation or association, and a partner or managing agent of a partnership; or [¶] (2) An association member or an employee of an association, corporation, or partnership, if the subject of the communication is any act or omission of such person in connection with the matter which may be binding upon or imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization.”

“Control group” and “managing agent” defined (see 2-100(B)(1)): A control group consists of “ ‘ “officers and agents … responsible for directing [the company’s] actions in response to legal advice.” ’ ” (Bobele v. Superior Court, supra, at p. 712.) A managing agent is “An employee that “exercise[s] substantial discretionary authority over significant aspects of a corporation’s business.” (White v. Ultramar (1999) 21 Cal.4th 563, 577 [definition for punitive damages purposes]; Snider v. Superior Court (2003) 113 Cal.App.4th 1187, 1208-1209 [White’s definition applies to Rule 2-100(B)(1) and is consistent with the control group definition in Bobele].)

Rule 2-100(B)(2)’s “binding” statement language: “(P)aragraph (B)(2) focuses on the subject matter of the communication and arguably applies to employees outside of an organization’s control group if the subject matter of the conversation is the employee’s act or failure to act in connection with the matter at issue, and that act or failure to act could bind the organization, be imputed to it, or if the employee’s statement could constitute an admission against the organization.” (Snider v. Superior Court, supra, at pp. 1202-1203; italics in original.) The “may constitute an admission on the part of the organization” category “only applies to ‘high-ranking executives and spokespersons’ with the authority to speak on behalf of the organization.” (Id. at p. 1209; the same standard applies to authorized admissions as an exception to the hearsay rule in Evidence Code sec. 1222. (O’Mary v. Mitsubishi Electronics America, Inc. (1997) 59 Cal.App.4th 563, 572; accord, Snider v. Superior Court, supra, at p. 1203.)

Rule 2-100 regarding contacts with current members: “[R]ule 2-100 permits opposing counsel to initiate ex parte contacts with … present employees (other than officers, directors or managing agents) who are not separately represented, so long as the communication does not involve the employee’s act or failure to act in connection with the matter which may bind the corporation, be imputed to it, or constitute an admission of the corporation for purposes of establishing liability.” (Triple A Machine Shop, Inc. v. State of California (1989) 213 Cal.App.3d 131,140, 143.) La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court (2004) 121 Cal.App.4th 773, 788-789 holds that rule 2-100 allows attorneys to contact directors for a represented corporation where the director’s separate counsel had consented to the contact although the corporation’s counsel had not. (Id. at pp. 776-777, 784.) La Jolla Cove Motel, however, does not allow contacts “in most situations” with “a director of a corporation” “by opposing counsel without the permission of corporate counsel. It is only in the situation where the director has retained separate counsel that rule 2-100 allows ex parte contact upon consent of that counsel.” (Id. at p. 789.)

Former employees, including managerial, under rule 2-100, can be contacted: “Plaintiffs may inquire about relevant facts but not about any privileged communications concerning those facts.” (Bobele v. Superior Court, supra, at pp. 714-715 [rule 7-103 analysis]; see also Nalian Truck Lines, Inc. v. Nakano Warehouse & Transportation Corp. (1992) 6 Cal.App.4th 1256, 1259 (Rule 2-100 permits communications with a former member of the corporation’s “control group”) and Continental Insurance Co. v. Superior Court (1995) 32 Cal.App.4th 94, 118-119 (Nalian’s reasoning applicable to both rule 2-100(B)(1) and (2).) Mills Land & Water Co. v. Golden West Refining Co., supra, at p. 128 discouraged contacts with former company directors because they could possess potentially privileged information about the pending litigation but has been distinguished by La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court, supra, at pp. 788-789 because Mills Land relied upon former rule 7-103, which imposed a blanket prohibition against contacts with any constituents of a business or corporation.

Policy allowing former employees to be interviewed: Former employees are sometimes the best available source of information regarding unprivileged events (State Farm & Casualty Co. v. Superior Court (1997) 54 Cal.App.4th 625, 638) and they may be reluctant to speak if they could only do so in the presence of the entity’s attorney. (G-1 Holdings, Inc. v. Baron & Budd (S.D. N.Y. 2001) 199 FRD 529, 533.)

Rule 2-100 should be interpreted narrowly: “(R)ule 2-100 must be interpreted narrowly because a rule whose violation could result in disqualification and possible disciplinary action should be narrowly construed when it impinges upon a lawyer’s duty of zealous representation.” (Continental Ins. Co. v. Superior Court (1995) 32 Cal.App.4th 94, 119.)

Consequences for violation of rule 2-100: “(T)he corporate attorney-client privilege extends not only to communications between corporate counsel and members of the control group, but also to communications with middle and low level corporate employees.” (Upjohn Co. v. United States (1981) 449 U.S. 383, 390.) “Rule 2-100 does not define the scope of the attorney-client privilege; rather, it bars ex parte communications with opposing parties regardless of whether the information sought, obtained or conveyed is privileged from disclosure.” (Triple A Machine Shop, Inc. v. State of California, supra, at pp. 140-141.) Violation of the privilege by an improper ex parte communication may lead to disqualification, exclusion of the evidence or other appropriate measures to achieve justice and ameliorate the effect of improper conduct. (Snider v. Superior Court, supra, at p. 1212.) The improper ex parte communication requires an intention to violate rule 2-100 “or any other standard of ethical conduct.” (Jorgensen v. Taco Bell Corp. (1996) 50 Cal.App.4th 1398, 1404; Snider v. Superior Court, supra, at p. 1215 [actual knowledge required before an attorney violates rule 2-100].) A failure to conduct discovery or communicate with opposing counsel where counsel has reason to believe that an employee of a represented organization might be covered by rule 2-100 may constitute circumstantial evidence of actual knowledge that the employee came within rule 2-100. (Id. at pp. 1215-1216.)

Obligations of counsel regarding contacts with a current member of an entity: “(T)o avoid potential violations of the attorney-client privilege, an attorney contacting an employee of a represented organization should question the employee at the beginning of the conversation, before discussing substantive matters, about the employee’s status at that organization, whether the employee is represented by counsel, and whether the employee has spoken to the organization’s counsel concerning the matter at issue. If a question arises concerning whether the employee would be covered by rule 2-100 or is in possession of privileged information, the communication should be terminated.” (Id. at p. 1213.)

Warning letters about possibly improper contacts with current members of an entity: “Once a dispute arises that could lead to litigation, it is also incumbent upon an organization and its counsel to take proactive measures to protect against disclosure of privileged information by informing employees and/or opposing counsel their position concerning communications between employees and opposing counsel.” (Ibid.) Warning letters may be sent before the filing of a lawsuit. (Jorgensen v. Taco Bell Corp., supra, at p. 1403.) The organization may also instruct its employees to contact them before speaking to opposing counsel. (Snider v. Superior Court, supra, at p. 1212.) The entity, however, may not “bring former employees back into the fold for purposes of a lawsuit merely because there is a risk that the former employee might disclose unfavorable facts.” (Bobele v. Superior Court, supra, at p. 713.)

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, May 2017