From the Sidebar - Trial, Litigation and The Practice of Law

By Hayes Hunt and Thomas M. O'Rourke

It is not uncommon for the parties to play hardball litigation to exert pressure on the other side to settle a case.  But if your opposing party engages in tactics that you perceive to be coercive, should you immediately seek relief from the court?  A recent decision illustrates some of the issues to consider before you ask a judge to solve your litigation problems.

In The Board of Trustees of the University of Illinois v. Micron Technology, Inc., a patent infringement suit, the University alleges that Micron sold semiconductors that were made using its patented process.  Before the lawsuit, the parties had a collaborative relationship and Micron actively recruited the University’s engineering students to work in its facilities.   The lawsuit brought this relationship to an end.  An email from Micron’s Academic Program Manager to many of the University’s engineering professors in January 2013 read as follows:

Because Micron remains a defendant in a patent infringement lawsuit that [the University] filed against Micron . . . , effective immediately, Micron will no longer recruit [University] students for open positions at any of Micron’s world-wide facilities.

The University immediately demanded confirmation from Micron that it would not engage in any further communications of this kind.   Micron requested a legal basis for the University’s demand, which apparently was never provided, and refused to confirm that it would cease its communications.  The University then filed a motion with the court seeking “an injunction that prohibits Micron from sending similarly coercive correspondence to the University.” 

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By Hayes Hunt and Michael Zabel

Let’s say one day you observe your local police officer walk a drug-sniffing police dog up to the front door of your neighbor’s house.  The dog sniffs around outside, then gives a positive signal to the officer.

Did you just witness the police conduct a search of your neighbor’s home?  The answer, according to a recent opinion from the Supreme Court of the United States, is yes.

Recently, the Court handed down its opinion in Florida v. Jardines, its second drug-sniffing dog case from last term.[1]   In Jardines, the Court held that “the government’s use of trained police dogs to investigate the home and its immediate surroundings is a ‘search’ within the meaning of the Fourth Amendment.”

The facts of Jardines are essentially what were laid out above.  Police received an unverified tip that marijuana was being grown in the home of Joelis Jardines.  Police officers approached Jardines’ home with a trained drug-sniffing dog.  The dog sniffed around the front porch area of the home and the base of the front door, and gave an alert signal indicating he had detected drugs.  On the basis of the dog’s signal, police applied for and obtained a warrant, and executed a search of Jardines’ home later that day, discovering marijuana plants inside.

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By Hayes Hunt and Jeffrey Monhait

Last month, the U.S. Court of Appeals for the D.C. Circuit in United States v. Ring, No. 11-3100 (D.C. Cir. Jan. 25, 2013), upheld a conviction for bribery under the public sector honest-services fraud statute, expanding the definitions of "corrupt payments" and "official action," and thus making it easier for federal prosecutors to secure convictions under this statute. The court, in an opinion by Judge David Tatel, held: (1) implicit quid pro quo is sufficient for a bribery conviction, and no actual agreement by the public official is necessary; (2) there is "official action" when a lawyer in the Justice Department emails a secretary with the Immigration and Naturalization Service requesting expedited review of a visa application; and (3) the trial court did not abuse its discretion under the First Amendment or Federal Rule of Evidence 403 in allowing the jury to draw an adverse inference from a defendant's history of lawful campaign contributions.

The Facts

The defendant, Kevin Ring, worked as a lobbyist for Jack Abramoff. His role included fundraising for campaign contributions and developing and maintaining relationships with public officials to serve the lobbying firm's clients. Although campaign contributions were the primary means of accessing public officials, Ring treated these individuals to dinners, drinks, travel, concerts, sporting events and other forms of entertainment. A 2004 federal investigation of Abramoff ultimately led to the prosecution of Ring. At trial, he was convicted on three counts of honest-services fraud, one count of paying an illegal gratuity, and one count of conspiracy to pay an illegal gratuity, and sentenced to 20 months in prison, the opinion said.

Lawful Lobbying vs. Corrupt Bribery

The court noted that "lobbying has been integral to the American political system since its very inception." It is an enormously influential political machine. As of 2008, there were more than 14,000 registered Washington lobbyists, and lobbying expenditures on Congress and federal agencies exceeded $3 billion. "Lobbyists serve as a line of communication between citizens and their representatives, safeguard minority interests and help to ensure that elected officials have the information necessary to evaluate proposed legislation," the opinion said.

To achieve these ends, lobbyists develop personal relationships with officials, through campaign contributions and events including, for example, dinners, drinks, concerts and sporting events. As long as gifts do not constitute bribery, lobbyists are free to use them to "curry political favor," the opinion said. The line dividing legal lobbying from corrupt bribery is crossed when a gift is tied to a particular act. (See United States v. Sun-Diamond Growers of California, 526 U.S. 398, 405-08 (1999).) In Ring, the court commented that although the "distinction between legal lobbying and criminal conduct may be subtle ... it spells the difference between honest politics and criminal corruption."

The Supreme Court set the scene for Ring in Skilling v. United States, 130 S. Ct. 2896, 2907 (2010), in construing the public sector honest-services fraud statute to cover "only bribery and kickback schemes."

'Implicit' Quid Pro Quo Is Sufficient

Ring challenged the jury instructions underlying his bribery conviction for three flaws in stating: "(1) that an explicit quid pro quo was required; (2) that the official must agree to the exchange; and (3) that, at the very least, a corrupt payment must be offered." The court rejected all three challenges.

Ring claimed McCormick v. United States, 500 U.S. 257 (1991), required an explicit quid pro quo. There, the Supreme Court required an explicit quid pro quo to criminalize campaign contributions under the Hobbs Act. Ring urged the court to extend that holding to other things of value, but the court found that, in addition to the fact that it is unclear what an explicit quid pro quo requirement would look like in practice, campaign contributions are distinguishable from other things of value. In a world where political campaigns are privately funded, public officials must solicit contributions. Free lobster tails and Rolling Stones tickets simply do not serve this same purpose. Thus, there was far less concern about "criminalizing politically necessary activity or chilling constitutionally protected speech" and the court declined to impose an explicit quid pro quo requirement.

Ring also claimed the prosecution was required to prove that the public official accepted the offer. Based on Skilling's conclusion that honest-services fraud covers only bribery and kickbacks, the federal bribery statute, 18 U.S.C. §201(b), provides background for honest-services bribery. The court commented that the bribery statute "defines two separate crimes: the act of offering a bribe and the act of soliciting or accepting a bribe." Because bribery does not require that the official accept the bribe, neither does honest-services bribery. The key to bribery is intent — the intent to affect a quid pro quo, and the intent to influence an official act. Thus, the statute is satisfied by proof beyond a reasonable doubt of "intent to offer or solicit an exchange of official action for personal gain."

Ring's final challenge to the instructions was that they failed to require that the defendant intended to offer a quid pro quo exchange. Both sides agreed this element was necessary, and the court found that the jury was properly instructed as to this element. Instructions must require, and these did, "a specific intent to influence official acts, an intent that the official realize or know that the corrupt exchange is being proposed, and a showing that the gifts were conditioned upon the official act or agreement." The court concluded that the mens rea element, rather than the conduct itself, distinguishes legal lobbying from corrupt bribery. 

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By Hayes Hunt and Michael Zabel

By now, the concept of Upjohn warnings should be familiar to any counsel, whether in-house or external, who represents a corporation's interests in an internal investigation. In a nutshell, an Upjohn warning is derived from the Supreme Court decision in Upjohn v. United States, 449 U.S. 383 (1981), and is a mechanism for establishing corporate privilege by which corporate counsel explains to the corporation's officers and employees that when the individual officer or employee provides a statement to corporate counsel in the course of an internal corporate investigation, it is the corporation — and not the individual — that holds the attorney-client privilege for that statement.

A pair of significant cases in 2012 demonstrated just how important proper documentation of an Upjohn warning can be for establishing a privilege claim.

The first case is In re Google, 462 F. App'x 975 (Fed. Cir. 2012). You probably read about the legal battle pitched last year between technology giants Google and Oracle. In February 2012, several months before a jury found that Google did not infringe on two of Oracle's patents, the U.S. Court of Appeals for the Federal Circuit ruled that an internal email by a Google engineer was not protected under Upjohn because nothing indicated that the engineer had prepared the email "in anticipation of litigation or to further the provision of legal advice."

Google had argued that the engineer's email was made at the request of in-house counsel for the purpose of investigating Oracle's infringement allegations. In support, Google offered a declaration from its counsel that the email was prepared at his request. The Federal Circuit rejected Google's argument, observing that the content of the email itself suggested that the engineer's email was a response to a request from Google management relating to Google's pursuit of a license for Oracle's patents — and not a response to a request from counsel for assistance in the infringement suit.

The second case is Custom Designs & Manufacturing v. Sherwin-Williams, 39 A.3d 372, 374 (Pa. Super. Ct. 2012). Just as in the Google case, the court in this case rejected a corporation's privilege claim under Upjohn because the record did not indicate that the disputed communication was prepared at the request of counsel. In Custom Designs, the plaintiff was a cabinet company whose building caught fire and was significantly damaged. The day after the fire, a Sherwin-Williams employee visited the site of the fire and shortly thereafter prepared two memoranda addressed to Sherwin-Williams' in-house counsel. The cabinet company later sued Sherwin-Williams, alleging that Sherwin-Williams' products had caused the fire. In discovery, Sherwin-Williams claimed privilege with regard to its employee's two memoranda to its counsel.

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By Hayes Hunt and Michael Zabel

How much evidence is enough to establish the crime-fraud exception to attorney-client privilege? With its recent opinion in In re Grand Jury, Nos. 12-1697 & 12-2878 (Dec. 11, 2012), the U.S. Court of Appeals for the Third Circuit addressed the issue in the context of subpoenas issued to the former in-house counsel of a company subject to a grand jury investigation. According to the precedential opinion, a party seeking to challenge attorney-client privilege by means of the crime-fraud exception must produce evidence demonstrating a "reasonable basis to suspect" that the elements of the crime-fraud exception have occurred. This newly announced standard clarifies Third Circuit precedent and at the same time serves to highlight the split among the federal courts of appeals over how to construe the "prima facie evidence" standard for the crime-fraud exception first articulated by the U.S. Supreme Court in Clark v. United States, 289 U.S. 1 (1933).

Every good lawyer knows, of course, that the attorney-client privilege does not offer absolute protection of his or her communications with a client. One important exclusion from the realm of attorney-client privilege is the crime-fraud exception, which, in the words of the Supreme Court, "assures that the seal of secrecy ... between lawyer and client does not extend to communications made for the purpose of getting advice for the commission of a fraud or crime." (See United States v. Zolin, 491 U.S. 554, 109 S. Ct. 2619, 2621, 105 L. Ed. 2d 469 (1989).) A party seeking to overcome attorney-client privilege through the crime-fraud exception must introduce prima facie evidence that (1) the client was committing or intending to commit a fraud or crime, and (2) the attorney-client communications were in furtherance of the alleged fraud or crime.

Federal circuit courts have offered differing articulations and conclusions over what constitutes prima facie evidence. Some courts have held that the evidence proffered must be sufficient to allow the court to require the privilege holder to come forward with an explanation for the evidence offered against the privilege. (See, e.g., United States v. Boender, 649 F.3d 650, 655 (7th Cir. 2011).) Other courts, such as Grand Jury, look for evidence that, if believed by a fact-finder, would establish the elements of an imminent or ongoing crime or fraud. A third group of circuit courts requires a reasonable basis in the evidence to believe that the attorney's services were used by the client to foster a crime or fraud. (See, e.g., In re Grand Jury Proceedings, 417 F.3d 18, 23 (1st Cir. 2005).)

In adopting the "reasonable basis" standard, the Third Circuit acknowledged that its own past pronouncements of what constitutes prima facie evidence under the crime-fraud exception had been "not particularly helpful." In Grand Jury, however, the court took care to define the contours of the "reasonable basis" standard. "It is intended to be reasonably demanding, neither speculation nor evidence that shows only a distant likelihood is enough," the court wrote. "At the same time, the party opposing the privilege is not required to introduce evidence sufficient to support a verdict of crime or fraud or even to show that it is more likely than not that the crime or fraud occurred."

The factual circumstances of Grand Jury present additional items of interest for in-house counsel. In the case, ABC Corp. (a pseudonym used by the court) and two of its principals were subjects of an ongoing grand jury investigation into an alleged criminal tax scheme. As part of its investigation, the federal government served subpoenas on three former in-house attorneys of ABC Corp. Both ABC Corp. and its former employees asserted attorney-client and work-product privileges, and the government invoked the crime-fraud exception in response. The district court then ordered the former in-house counsel to comply with the subpoenas.

Although the order was not directed at ABC Corp., the company sought immediate appeal under the Perlman doctrine, a rule established in Perlman v. United States, 247 U.S. 7 (1918), which allows a privilege holder to immediately appeal an adverse disclosure order without being held in contempt first by the court when the privileged information is in the possession of a disinterested third party, who will likely disclose the information rather than be held in contempt of court. The Third Circuit found that the former in-house attorneys were indeed disinterested third parties who would likely be unwilling to be held in contempt to protect ABC Corp.'s privilege. Applying the Perlman rule, the court therefore found jurisdiction to hear ABC Corp.'s appeal. 

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