U.S. Official Accuses Bank of America of "Significantly" Hindering Federal Investigation (1) by HuffPostBiz

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									                                                                              Michael K. Jeanes, Clerk of Court
                                                                               *** Electronically Filed ***
                                                                                      Michelle Paigen
                                                                                    Filing ID 903533
                                                                               6/8/2011 6:45:00 PM




 1   Thomas C. Horne
     Attorney General
 2   (Firm State Bar No. 14000)
     Thomas K. Chenal (State Bar No. 006070)
 3   Carolyn R. Matthews (State Bar No. 013953)
     Assistant Attorneys General
 4   Office of the Attorney General
     1275 W. Washington Street
 5   Phoenix, AZ 85007-2926
     Telephone: (602) 542-3725
 6   consumer@azag.gov
 7   Attorneys for Plaintiff

 8                  IN THE SUPERIOR COURT OF THE STATE OF ARIZONA
 9                              IN AND FOR THE COUNTY OF MARICOPA
10   STATE OF ARIZONA, ex rel. THOMAS C.               Case No.: CV2010-033580
     HORNE, Attorney General,
11                                                     MOTION FOR ORDER AUTHORIZING
                   Plaintiff,                          PLAINTIFF TO CONDUCT EX PARTE
12                                                     INTERVIEWS OF DEFENDANTS’
            vs.                                        FORMER EMPLOYEES
13
     COUNTRYWIDE FINANCIAL
14   CORPORATION, et al.,
                                                       (Assigned to the Honorable J. Kenneth
15                 Defendants.                         Mangum)
16
17          Plaintiff State of Arizona ex rel. Thomas C. Horne, Attorney General, respectfully
18   moves this Court for an order authorizing the State to conduct ex parte interviews of
19   Defendants’ former non-management employees. Defendant Bank of America Corporation is a
20   company of more than 288,000 employees. See Bank of America 2010 Annual Report at 28,
21   relevant portions of which are attached hereto as Exhibit “A.” Upon information and belief,
22   during the period relevant to this matter, Defendants have employed thousands of call center
23   employees (sometimes referred to as customer service representatives) to answer customer
24   service calls from Arizona borrowers whose loans are serviced by Defendants (“Borrowers”).
25   The State brings this motion to request an Order authorizing it to conduct ex parte interviews of
26
 1   non-management level former Bank of America employees such as call center employees, so
 2   that the State can fully investigate its case as permitted and required by law.
 3   I.     The State’s Investigation Will Not Be Complete Unless It Can Conduct Ex Parte
            Interviews of Defendants’ Line-Level Former Employees.
 4
 5          The State alleges that Bank of America’s loss mitigation and foreclosure practices (“loss
 6   mitigation”) have resulted in deceptive conduct, including a pattern of misrepresentations to its
 7   Borrowers, in violation of the Arizona Consumer Fraud Act, A.R.S. §§ 44-1521 et seq. See
 8   Complaint ¶¶ 20-25. The liability the State alleges does not result from the conduct of
 9   individual Bank of America employees who are obligated to follow the Bank’s policies and
10   procedures, but who have no authority to establish policies, to ensure they are properly
11   implemented, or to allocate the resources necessary to properly execute them. To the contrary,
12   the State alleges an institutional failure caused by the actions or inaction of the institution itself,
13   as carried out by its top-level decision makers—officers, directors, and management-level
14   employees who were responsible for but failed to establish and implement appropriate loss
15   mitigation policies and procedures, to allocate sufficient resources and oversight to loss
16   mitigation, to provide appropriate hiring, training, supervision, and compensation of
17   employees, and to make changes and corrections to policies and provisions when warranted.
18   See Complaint ¶ 25 (alleging that “Arizona consumers’ experiences reflect a pervasive,
19   nationwide pattern and practice of conduct”).
20          One of the State’s two claims, for example, alleges violations of the Consent Judgment
21   between the State and certain Defendants. (The Consent Judgment is attached to the Complaint
22   as Exhibit A.) The Consent Judgment requires Bank of America to (among other things)
23   evaluate Eligible Borrowers for the agreed-upon loan modification options. See Complaint ¶
24   26 (citing Consent Judgment ¶ III.4.1). The State is not seeking to prove, and does not allege,
25   that individual employees of the Defendants made isolated mistakes in identifying and timely
26   evaluating specific consumers who were entitled to be considered for or provided with

                                                       -2-
 1   modifications. Instead, the State asserts that Defendants failed at an institutional level to ensure
 2   that they had the capacity and framework for providing eligible Arizona consumers with the
 3   mandated modifications. See Consent Judgment, Complaint Exhibit A §§ 2.2.3, 3.1, at 10-11.
 4          As another example, the State asserts that Defendants have failed to meet their Consent
 5   Judgment commitment to make decisions on Borrowers’ loan modification requests within 60
 6   days on average. See Complaint ¶¶ 30-33. The Bank’s ability to comply with this time frame
 7   depends entirely on whether the Bank has devoted sufficient resources to hire the staff and
 8   deploy the technology and other systems to process loss mitigation requests in a timely manner.
 9   Thus, this claim does not depend upon the acts or omissions of individual employees who may
10   have delayed actions on individual consumer modifications.
11          The State also alleges violations of the Consumer Fraud Act, in that Defendants made
12   misrepresentations to Borrowers about its loss mitigation and foreclosure activities. See
13   Complaint ¶¶ 79-195. For instance, the State has evidence that Defendants promised that
14   consumers who met the conditions of their trial modifications would be converted
15   automatically and without delay into permanent modifications. See Complaint ¶¶ 93-97.
16   Defendants made these representations on its website, in letters, and in other public statements
17   that were made by and that must have been approved by senior managers. Call center
18   employees merely relayed these representations when, on information and belief, they relied on
19   scripts and other directives from senior managers regarding what they should tell consumers
20   who called to determine the status of their permanent modifications or to complain when they
21   did not come through. The deceptive nature of these representations is evidenced by Bank of
22   America’s self-described “aged inventory” of trial modifications that waited for more than three
23   months for conversion, which approached 32,000 during the relevant time. See Complaint ¶ 97
24   (noting that this number was four times larger than Bank of America’s nearest competitor at the
25   time). This is and can only be the result of failures of management—not line employees.
26

                                                     -3-
 1          Although the State believes that it will be able to prove that the choices made by
 2   Defendants’ management caused Defendants to violate the law, the State also will depend on
 3   the testimony of line-level Bank of America employees who struggled with limited resources,
 4   inadequate systems, and insufficient training and supervision, relied on scripts provided by their
 5   supervisors, and otherwise attempted to comply with the policies and procedures that
 6   Defendants put in place. These employees are mere witnesses. They can speak about their
 7   interactions with consumers, the realities of Defendants’ day-to-day operations, and their
 8   understanding of and any problems in executing Defendants’ directives. Accordingly, it is
 9   important for the State to be able to talk with Defendants’ former call center employees, who
10   are more likely than current employees to feel that they can speak candidly and freely. For
11   reasons laid out below, the State has reason to believe that it will not be able to conduct a full
12   and fair investigation if Defendants’ counsel is present during these interviews.
13          In addition, the State expects that some former employee interviews will be preliminary
14   or information-gathering only. Former employees may be able to provide information about
15   documents and potential witnesses that could better prepare the State’s counsel for employee
16   depositions to follow. See, for example, the letter attached hereto as Exhibit “B” from an
17   anonymous current employee, which provides information about Defendants’ loss mitigation
18   procedures and supervision and training of employees. In addition, the sheer number of
19   potential witnesses in this case presents logistical hurdles that can be substantially eased if the
20   State is not required to arrange every single witness interview around the schedules of counsel
21   for Defendants.
22          As laid out below, the State believes that Arizona law permits it to conduct ex parte
23   interviews with former employees. Furthermore, the State has good cause to seek such
24   interviews in this case. In recent correspondence, Defendants asserted that there is no basis for
25   the State’s concern that Defendants will interfere with the State’s discovery of Defendants’
26   former employees if the State cannot conduct its interviews outside the presence of Defendants’

                                                      -4-
 1   attorneys. To the contrary, the State does have a legitimate basis for concern. The Arizona
 2   Attorney General has learned that Bank of America recently significantly interfered in the
 3   investigation of Bank of America conducted by the United States Department of Housing and
 4   Urban Development, Office of Inspector General (“HUD-OIG”), one of the federal agencies
 5   with oversight authority over Bank of America. See Declaration of William W. Nixon,
 6   attached hereto as Exhibit “C” (“Nixon Declaration”). As the agency responsible for loans
 7   made through the Federal Housing Agency (“FHA”) (and with the ability to bar banks from
 8   making FHA loans), HUD-OIG should have had significant leverage to ensure Defendants’
 9   cooperation.
10          The general objective of the HUD-OIG investigation was to determine whether Bank of
11   America complied with applicable foreclosure procedures when processing foreclosures on
12   FHA-insured loans. Nixon Declaration ¶ 10. Among other things, the HUD-OIG auditors
13   attempted to review Bank of America’s foreclosure policies and procedures and to interview
14   staff to determine how the bank operates to comply with requirements. Id. William Nixon, the
15   Assistant Regional Inspector General for Audit, who managed the Bank of America
16   Foreclosure Review, reports that the review “was significantly hindered by Bank of America’s
17   reluctance to allow us to interview employees,” among other things. Id. ¶¶ 1, 9, 11. Further,
18   “[w]hen interviews were permitted, the presence or involvement of the bank’s attorneys limited
19   the effectiveness of those interviews. On a number of occasions, the bank’s attorneys refused
20   to allow employees to answer questions.” Id.
21          If the bank hindered an investigation by its federal regulator, there is every reason to
22   believe it would similarly hinder the State’s investigation in this case. Accordingly, the State
23   has good cause to believe that Defendants will interfere in its interviews if they are not
24   conducted ex parte, and, further, that Defendants would contact potential interviewees to
25   influence them in some way if their identities are disclosed to Defendants before the interviews
26   take place. Because this interference could not be fully remedied by follow-up interviews, and

                                                     -5-
 1   because, as laid out below, Arizona law permits ex parte interviews, the State seeks the Court’s
 2   permission to conduct such interviews.
 3   II.    With a Limited Exception, Arizona Law Permits Attorneys to Conduct Ex Parte
            Interviews of Former Employees of an Opposing Party.
 4
 5          Under Arizona law, the general rule is that an attorney may conduct ex parte interviews
 6   of former employees of an opposing party. Lang v. Superior Court, 170 Ariz. 602, 607, 826
 7   P.2d 1228, 1233 (App. 1992) (“We believe the better approach is to permit ex parte contacts
 8   with former employees.”). To reach this conclusion, the Arizona Court of Appeals interpreted
 9   and applied Arizona Ethical Rule 4.2, which states:
10          In representing a client, a lawyer shall not communicate about the subject of the
            representation with a party the lawyer knows to be represented by another
11          lawyer in the matter, unless the lawyer has the consent of the other lawyer or is
12          authorized by law to do so.

13   The purpose of Rule 4.2 is to “(1) prevent unprincipled attorneys from exploiting the disparity

14   in legal skills between attorneys and lay people, (2) preserve the integrity of the attorney-client

15   relationship, (3) help to prevent the inadvertent disclosure of privileged information, and (4)

16   facilitate settlement.” Lang, 170 Ariz. at 604, 826 P.2d at 1230.

17          The State is filing this motion rather than simply interviewing former employees without

18   court authority because Lang establishes an exception to the general rule that is not easily

19   applied to the facts of this case. The court held that ER 4.2 “does not bar counsel from having

20   ex parte contacts with a former employee of an opposing party . . . unless the acts or omissions

21   of the former employee gave rise to the underlying litigation or the former employee has an

22   ongoing relationship with the former employer in connection with the litigation.” 170 Ariz. at

23   607, 826 P.2d at 1233 (emphasis in original). Although the court seems to have intended this

24   language to describe a narrow exception, Defendants have interpreted the exception so broadly

25   that it would, at least in this case, entirely swallow the rule.

26

                                                       -6-
 1          Lang was a consumer fraud and misrepresentation case brought by an automobile
 2   purchaser against the automobile dealership that sold her a car. Id. at 603, 826 P.2d at 1229.
 3   To support her response to the dealership’s motion for partial summary judgment, Lang
 4   submitted affidavits from the dealership’s former finance director/general sales manager and
 5   the former controller. Id. at 603-04, 826 P.2d at 1229-30. In a special action proceeding, the
 6   court of appeals overturned the trial court’s order striking the affidavits. The court noted that
 7   there was no Arizona case law on the issue of ex parte contacts with former employees and that
 8   Arizona’s ethics committee had been unable to reach a definitive conclusion on the issue. Id. at
 9   604, 826 P.2d at 1230. The court observed that the majority of courts considering the issue had
10   held that Rule 4.2 covers only current employees and agreed with the reasoning of the
11   American Bar Association Committee on Ethics, which concluded that Rule 4.2 does not
12   prohibit ex parte contacts with unrepresented former employees. Id. at 606-07, 826 P.2d at
13   1232-33 (citing ABA Formal Op. 91-359 (March 22, 1991)). Noting that neither the text of the
14   rule nor its comments give any indication the rule was intended to cover former employees, the
15   court said: “There is no reason to expand the scope of the ban once the employment
16   relationship ends.” Id. at 607, 826 P.2d at 1233. It is worth noting that, after Lang was
17   decided, the ABA expressly stated that Rule 4.2 does not apply to former employees. See ABA
18   Model Rules of Prof’l Conduct R. 4.2, cmt. 7 (2006) (“Consent of the organization’s lawyer is
19   not required for communication with a former constituent.”), attached hereto as Exhibit “D.”
20          In creating the exception, the Lang court stated that Rule 4.2 does intend to prohibit ex
21   parte contacts with employees and former employees when their acts or omissions “gave rise to
22   the underlying litigation.” Lang, 170 Ariz. at 607, 826 P.2d at 1233. The court’s illustration
23   depicts a narrow exception:
24          For example, if an employee hired to drive a truck is involved in an accident
            that occurs in the course and scope of employment, the fact that the employee
25          leaves his or her employment should not determine the propriety of ex parte
26          communications. Clearly, the employee’s acts or omissions in connection with


                                                     -7-
 1          any litigation that arises out of the accident can be imputed to the former
            employer for purposes of civil liability.
 2
 3   Id. As applied to this case, if the deceptive conduct alleged was attributable to the independent
 4   acts of a few specific employees, then the State would agree that Lang would preclude the State
 5   from interviewing those employees ex parte about their acts that give rise to Defendants’
 6   liability. But that is not the State’s case here. The State’s allegations of liability are not based
 7   on the acts of particular employees or particular events, but rather on company-wide policies
 8   carried out over several years by thousands of non-management employees. See Complaint.
 9   Further, the State is not asking for ex parte interviews of current employees or of former
10   management employees, whose acts and omissions are directly at issue in this case. Rather, the
11   State wishes to interview only former non-management employees, who were mere witnesses
12   to conduct that may give rise to Defendants’ liability. The State wants to interview these
13   individuals about what they saw and heard about Defendants’ companywide policies, about
14   how Defendants’ policies worked in practice, and about Defendants’ failure to ensure
15   compliance with the law and the Consent Judgment. See Complaint. The State is asking for
16   nothing more than the opportunity to fully investigate its case by interviewing the only
17   available witnesses to Defendants’ implementation of their policies and procedures.
18          Defendants argue that the State cannot interview any of their thousands of former
19   customer service representatives, on the theory that their acts and omissions “may be imputed
20   to the organization,” or may have given “rise to the underlying litigation.” Joint Pretrial
21   Statement at 16. However, neither the fact that former employees “may have information
22   which is damaging” to Defendants, nor Defendants’ “desire to protect the organization from
23   liability-creating statements justifies a blanket ban on ex parte communications.” Lang, 170
24   Ariz. at 607, 826 P.2d at 1233. Arizona ethics opinions following Lang reinforce this view.
25   See Ariz. Ethics Op. 00-05 (stating that “[c]ontacts with a former employee are not prohibited
26   merely because that person may have information which is harmful to the opposing party”);

                                                      -8-
 1   Ariz. Ethics Op. 95-07 (noting facts that testimony of former employee may be detrimental to
 2   former employer and that former employee may have witnessed an unlawful act of former
 3   employer do not determine propriety of contact).
 4          The ban Defendants seek would not further the purposes of Rule 4.2, but rather would
 5   operate as an unnecessary restriction upon informal discovery that can more efficiently advance
 6   the cause of discovering the facts. Id. This is especially true in this case involving huge
 7   corporations, where a blanket rule banning informal interviews with former employees would
 8   not protect the attorney-client relationship or attorney-client communications—since former
 9   non-management employees would have no access to privileged information that could be
10   improperly obtained. Rather, such a rule would effectively preclude all informal discovery
11   from these important witnesses to Defendants’ implementation of their relevant policies and
12   procedures.
13          The State’s request is consistent with the majority of courts that have interpreted Rule
14   4.2 as well as with ABA Formal Opinion 91-359. See, e.g., Clark v. Beverly Health & Rehab.
15   Servs., 797 N.E.2d 905, 906 (Mass. 2003) (lawyer’s contact with a nurse formerly employed at
16   Defendant nursing home who was on duty the night that patient died was proper, even though
17   nurse was “directly involved” in the subject matter of the litigation); Smith v. Kalamazoo
18   Ophthalmology, 322 F. Supp. 2d 883, 885 (W.D. Mich. 2004) (interview in civil rights case of
19   former personnel manager with extensive knowledge directly related to litigation was proper);
20   Fleetboston Robertson Stephens, Inc. v. Innovex, Inc., 172 F. Supp. 2d 1190, 1195 (D. Minn.
21   2001) (plaintiff's counsel contacted defendants’ former CEO to discuss matters relevant to the
22   litigation); see also infra. p. 13. Although these cases are not controlling, they do provide
23   persuasive support for a narrow construction of the Lang exception to the general rule.
24          It is crucial that the State be permitted to interview former employees without the
25   presence of Defendants’ counsel, so that these witnesses can speak freely and without
26   interference and the State can carry out its investigation and discover the truth. It is also crucial

                                                      -9-
 1   that the State be permitted to delay identifying any former employee it contacts unless and until
 2   it has conducted an interview of the employee, to prevent Defendants from attempting to
 3   influence any interview before it is conducted. The State will of course fully comply with its
 4   disclosure obligations. Following any interview, the State will provide the name of the former
 5   employee interviewed. If the State wishes to use any former employee as a witness, it will so
 6   notify Defendants, and the State will also timely disclose any evidence that any former
 7   employee might provide to the State.
 8   III.   The State Also Seeks the Court’s Guidance About Interviews Previously Conducted
            By Outside Counsel for the State of Nevada.
 9
            As argued herein, the State believes its attorneys should be permitted under ER 4.2 to
10
     conduct ex parte interviews of former Bank of America non-managerial employees. In the
11
     event the Court disagrees, however, then the State requests that the Court resolve the following,
12
     related issue that Bank of America raised in its Joint Pretrial Statement.
13
            A.     Factual Background.
14
15          The State’s outside counsel in this matter, Cohen Milstein Sellers & Toll (“Cohen
16   Milstein”), also represents the Nevada Attorney General’s Office in similar litigation that is
17   currently pending in the United States District Court for the District of Nevada. Solely in
18   connection with its representation of the State of Nevada, Cohen Milstein interviewed a number
19   of Defendants’ former Nevada call center representatives and one current call center
20   representative who reached out to counsel.
21          In the Joint Pretrial Memorandum, Defendants alleged that Cohen Milstein’s conduct in
22   interviewing these individuals on behalf of the Nevada Attorney General violated Arizona
23   Ethical Rule 4.2. Joint Pretrial Memorandum § VII(B). Without any basis whatsoever,
24   Defendants further accuse the State of Arizona of directing the interviews “under the guise of
25   the Nevada Attorney General,” presumably as a means to avoid Arizona ethical rules. Id.
26   These are serious and inflammatory allegations, and they are wholly unsupported by fact or

                                                    -10-
 1   law. The State respectfully requests that this Court rule that counsel’s conduct was permitted
 2   under Nevada ethical rules, that Nevada ethical rules apply to interviews conducted on behalf
 3   of the State of Nevada, and that those interviews were therefore entirely proper under Arizona
 4   ethical rules. The State requests this ruling now to put to rest Defendants’ potentially chilling
 5   and damaging allegations.
 6          B.     Nevada’s Ethical Rules Apply to Cohen Milstein’s Interviews.
 7          If, as the State has laid out, Arizona ethical rules permit ex parte interviews with
 8   Defendants’ former employees, then counsel’s interviews were permissible under the rules of
 9   both jurisdictions. Even if this Court finds that Arizona does not permit such contact, counsel’s
10   interviews were proper under the rules of the jurisdiction in which they were carried out and
11   therefore, under Arizona rules, were proper in Arizona as well.
12          Arizona Ethical Rule 8.5 applies conflict of law provisions to determine which
13   jurisdiction’s ethical rules apply. ER 8.5 states, in relevant part:
14          (b)    Choice of Law. In any exercise of the disciplinary authority of this
            jurisdiction, the rules of professional conduct to be applied shall be as follows:
15
16                 (1)    for conduct in connection with a matter pending before a tribunal,
                   the rules of the jurisdiction in which the tribunal sits, unless the rules of the
17                 tribunal provide otherwise.
18   Ariz. R. Sup. Ct. 42, ER 8.5. Under this rule, Nevada’s ethical rules apply to govern the

19   conduct of lawyers in connection with matters pending before Nevada tribunals. Therefore,

20   Nevada ethical rules govern the conduct of Cohen Milstein in connection with the litigation

21   pending before the Nevada District Court.

22          This rule applies even where, as here, the lawyers also practice in Arizona. In Arizona

23   Ethics Opinion No. 90-19 (Dec. 28, 1990), the Arizona Supreme Court Judicial Ethics

24   Advisory Committee (the “Committee”) relied on ER 8.5 to hold that a lawyer whose conduct

25   was permitted by the ethical rules of the Navajo Nation Bar Association would not be subject to

26   disciplinary action under the Arizona rules. The Committee concluded that the rules of the


                                                      -11-
 1   jurisdiction in which the attorney was practicing at the time should govern the attorney’s
 2   conduct in the jurisdiction. Id. at 5. Both the sovereign powers of the jurisdiction and the
 3   reasonable expectations of attorneys practicing within that jurisdiction demand this choice. Id.;
 4   see also Ariz. Ethics Op. No. 99-13 (Dec. 1999) (tribal rules permitted paralegal to represent
 5   clients in tribal court and therefore paralegal was not engaged in unauthorized practice of law
 6   under Arizona ethical rules); Comm. on Ethics of the Md. State Bar Ass’n, Op. 86-28 (Oct. 7,
 7   1985), at 3-4 (“Where a Maryland attorney is acting in a foreign jurisdiction in accordance with
 8   that jurisdiction’s Code of Professional Responsibility, . . . his conduct is ethical per se.”);
 9   Comm. on Prof’l and Judicial Ethics of the State Bar of Mich., Informal Op. CI-709 (Dec. 29,
10   1981), at 3 (no violation of Michigan ethics rules where conduct was permitted under
11   California rules).    Thus, the Nevada ethics rules govern Cohen Milstein’s conduct while
12   representing the State of Nevada in its judicial proceeding pending in Nevada.
13            C.    Nevada’s Ethical Rules Permit Attorneys to Interview Ex Parte Former
                    Employees of an Opposing Party.
14
15            In Nevada, a lawyer may interview former employees and non-management current
16   employees of a party ex parte. In Rebel Communications, LLC v. Virgin Valley Water District,
17   2011 WL 677308, *7-8 (D. Nev. Feb. 15, 2011), the district court held that the Nevada
18   Supreme Court would find that Nevada law would allow ex parte communications with an
19   opposing party’s former employees. In reaching this conclusion, the court relied upon the
20   Nevada Supreme Court decision in Palmer v. Pioneer Inn Associates, 59 P.3d 1237 (Nev.
21   2002).
22            In Palmer, the state supreme court analyzed application of Nevada’s Rule 4.21 to an
23   employee of a corporation or other organization and held that an attorney is prohibited from
24
     1
25          Effective May 1, 2006, former Nevada Supreme Court Rule 182 became Rule 4.2 of the
     Nevada Rules of Professional Conduct. The text of the rule is substantially the same as Arizona
26
     ER 4.2 and states: “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
                                                     -12-
 1   contacting an organization’s current employee only if the employee has managing authority
 2   sufficient to give the employee the right to speak for and bind the corporation. 2 In choosing
 3   this managing-speaking agent test over the party-admission test, the court said:
 4          It is not the purpose of the rule to protect a corporate party from the revelation
            of prejudicial facts. Rather, the rule’s function is to preclude the interviewing
 5          of those corporate employees who have the authority to bind the corporation.
 6
            . . . [E]mployees should be considered “parties” for the purposes of the
 7          disciplinary rule if, under applicable [state] law, they have managing authority
            sufficient to give them the right to speak for, and bind, the corporation.
 8
 9   Id. at 1248 (quoting Wright by Wright v. Group Health Hospital, 691 P.2d 564, 569 (Wash.

10   1984)). The call center employees interviewed by Cohen Milstein have no management

11   authority to bind Bank of America. Therefore, Cohen Milstein’s interviews of these employees

12   were proper under Nevada law.

13          Because, under Palmer, interviews of Defendants’ non-management current employees

14   are permitted by Nevada’s ethical rules, interviews of non-management former employees are

15   allowed as well. Palmer’s analysis shows the path that Nevada courts would follow in

16   evaluating communications with former employees.

17
18
     matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or
19
     a court order.”
20   2
            The court analyzed the competing considerations at play in determining how to apply the
21   no-contact rule in the case of organizations. On the one hand, the court stated, the primary
     purpose of the rule is to protect the attorney-client relationship from intrusion by opposing
22   counsel and to protect against disclosure of privileged information. Palmer, 59 P.3d at 1240 &
     n.8, 1242. On the other hand, the court weighed the also important policies of “permitting more
23   equitable and affordable access to information pertinent to a legal dispute; promoting the court
24   system’s efficiency by allowing investigation before litigation and informal information-
     gathering during litigation; permitting a plaintiff’s attorney sufficient opportunity to adequately
25   investigate a claim before filing a complaint in accordance with Rule 11; and enhancing the
     court’s truth-finding role by permitting contact with potential witnesses in a manner that allows
26
     them to speak freely.” Id. at 1242. In this case, the customer service representatives contacted
     by Cohen Milstein would have no access to Defendants’ lawyers or to privileged information.
                                                      -13-
 1          Although Palmer did not address whether Rule 4.2 applies to former employees,
 2   Comment 7 to ABA Model Rule 4.2 does so explicitly: “Consent of the organization’s lawyer
 3   is not required for communications with a former constituent.” This is consistent with the
 4   majority rule in the United States. See Rebel Communications, supra, 2011 WL 677308 at *7;
 5   Rotunda & Dzienkowski, Legal Ethics, The Lawyer’s Deskbook on Professional Responsibility,
 6   § 4.2-6 at 898 (2010) (“Neither Rule 4.2 nor its Comments require a lawyer representing a
 7   client in a matter adverse to a corporation to seek permission of that corporation’s attorney
 8   before interviewing former employees of the corporate party about the subject of the
 9   representation.”) (emphasis in original); 2 Hazard, Hodes and Jarvis, The Law of Lawyering, §
10   38.7 n.2 (2011 supp.) (“A few decisions have held that all former employees are governed by
11   the no contact rule. . . . Such decisions are clearly wrong, however, given the text of Rule 4.2
12   and the underlying policies of the rule discussed in its Comments.”) (citation omitted).
13          Nevada law clearly permits counsel’s communications with Defendants’ former and
14   current non-management employees. It is indisputable that customer service employees, whose
15   duties were to answer customer service calls, lack the authority to bind any of the Defendants.
16   Under both Palmer and Rebel Communications, counsel’s contacts with current and former
17   non-management employees were permitted under Nevada law.
18          Because Cohen Milstein’s interviews of former employees concerned its representation
19   of Nevada in a Nevada proceeding, there was nothing improper about them. Moreover, as
20   stated repeatedly to Defendants, those interviews took place without the knowledge of, consent
21   of, or participation of the Arizona Attorney General’s Office. Defendants’ bald assertion that
22   the Arizona Attorney General’s Office or its outside counsel manipulated the Nevada Attorney
23   General’s Office into conducting these interviews for it is insulting and completely without
24   foundation or good faith basis.
25
26

                                                    -14-
 1   IV.    Conclusion
 2          The State respectfully requests that this Court rule that: (1) Arizona Ethical Rule 4.2 and
 3   Lang permit the State to conduct ex parte interviews of Defendants’ former employees who are
 4   merely fact witnesses and were not responsible for Defendants’ institutional policies; and (2)
 5   the State may refrain from disclosing the identities of such witnesses until after the interviews
 6   have been conducted. As a result, the interviews of Defendants’ non-management employees
 7   by the State’s outside counsel were proper under Arizona Ethical Rule 4.2. Even if the Court
 8   finds that Arizona Ethical Rule 4.2 does not permit such ex parte interviews, the State asks that
 9   the Court find that the interviews conducted were proper under Nevada law and therefore were
10   not improper under Arizona’s ethical rules.
11          RESPECTFULLY SUBMITTED this 8th day of June, 2011.
12                                                     Thomas C. Horne
                                                       Attorney General
13
14
15                                                     By /s/ Carolyn R. Matthews
                                                        Thomas K. Chenal
16                                                      Carolyn R. Matthews
                                                        Assistant Attorneys General
17                                                      Attorneys for Plaintiff
18   ORIGINAL filed electronically using
     AZTurboCourt this 8th day of June, 2011.
19
20   COPY of the foregoing mailed
     this 8th day of June, 2011 to:
21
22   Don Bivens
     Robert Henry
23
     Snell & Wilmer L.L.P.
24   400 East Van Buren Street
     Phoenix, AZ 85004-2202
25   and
26

                                                    -15-
 1   Matthew W. Close
     O’Melveny & Myers LLP
 2   400 South Hope Street
 3   Los Angeles, CA 92551
     and
 4   Brian D. Boyle
     O’Melveny & Myers LLP
 5
     1625 Eye Street, NW
 6   Washington, DC 20006
     Attorneys for Defendants
 7
 8
 9   /s/ Catherine Jacobs
     #1950649.3
10
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15
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17
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26

                                -16-

								
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