VIEWS: 4 PAGES: 20 POSTED ON: 9/4/2011
COUNSEL: ETHICS TRAINING IS FOR YOU, TOO! Presentation to the SACRS Attorney Breakout November 12, 2008 Harvey L. Leiderman & Jeffrey R. Rieger SPECIAL ETHICAL CONSIDERATIONS FOR PUBLIC PENSION ATTORNEYS Public money involved Client owes fiduciary duties to members and the system Open meetings, public records and transparency Client is a diverse board Board delegates day to day administration to staff Inside counsel are often employed by plan sponsor and are members of the client retirement system Outside counsel may represent more than one system 2 SPECIAL ETHICAL CONSIDERATIONS FOR PUBLIC PENSION ATTORNEYS Weighing the attorney-client privilege against the policy of governmental transparency Striking a balance between staff’s need to administer the system and the board’s governing authority over the system Helping the board navigate multiples sets of laws that often conflict Recognizing “conflicts” and “bias” – real or perceived – that arise because of relationship to other parties 3 ATTORNEY-CLIENT PRIVILEGE The Rule: Applies to communications made in confidence between a client and his or her attorney for the purpose of obtaining legal advice Privilege and authority to waive it held by the client Can be waived intentionally or inadvertently Rule of Professional Conduct 3-100. Can only reveal confidential information if you “reasonably believe[ ] the disclosure is necessary to prevent a criminal act that [you] reasonably believe[ ] is likely to result in death of, or substantial bodily harm to, an individual” 4 ATTORNEY-CLIENT PRIVILEGE Best Practice: Utilize privilege to obtain information and provide advice confidentially, but assume that no communication is privileged and that it may later appear in somebody else’s hands Waived by board Inadvertent waiver Litigation waiver Investigation waiver 5 ATTORNEY-CLIENT PRIVILEGE Best Practice: Do all you can to avoid inadvertent waiver Separate legal advice from business advice -- “predominant purpose” and “because of” tests Labeling communications as privileged Advise recipient regarding further distribution Think about next steps that result from your advice – further legal input, staff processes, board processes, etc. 6 PUBLIC PENSION FUND COMPLICATIONS Absent limited exceptions, the board (the client) must have all discussions and vote in open session Complete analysis may require input from third parties (actuaries, plan sponsors, member organizations, etc.) CA Evidence Code 952 – privilege is not defeated by disclosure to persons “who are present to further the interests of the client in the consultation or those to whom disclosure is reasonably necessary for…the accomplishment of the purpose for which the lawyer is consulted.” Staff may make decisions based on your advice, without further board input 7 SCENARIO FOR DISCUSSION Based on your best analysis, you believe a system’s current practice (perhaps long standing) is inconsistent with the governing statutory scheme, but you also believe the issue is not a “slam dunk” if the issue went to court How do you advise the board of the “error,” without inviting litigation in the event the board does not follow your advice? How do you advise the board of any uncertainty in your analysis without inviting litigation in the event the board does follow your advice? Can closed session be used and, if so, how? Can privileged letters to the board be used and, if so, how? 8 WHO IS THE CLIENT? Rule of Professional Conduct 3-500 “A member shall keep a client reasonably informed about significant developments relating to the employment or representation …” Who is the “client”? What are “significant developments”? 9 WHO IS THE CLIENT? Rule of Professional Conduct 3-600 (A) “[A] member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement” (B) If staff or board member is acting against system’s interests: (1) Urge reconsideration of the matter while explaining its likely consequences to the organization; and/or (2) Refer the matter up the chain – possibly all the way to the board “if warranted by the seriousness of the matter” (3) Cannot breach privileges absent potential for death or substantial bodily harm 10 WHO IS THE CLIENT? Rule 3-600 Cont. (C) If taking it up the chain of command does not work “the member's response is limited to the member's right, and, where appropriate, duty to resign” (D) Must inform staff and board members that you represent the board and may not lead them into believing that they may communicate confidential information to you “in a way that will not be used in the organization’s interest if that is or becomes adverse” to staff member or board member 11 PUBLIC PENSION FUND COMPLICATIONS Administrator and staff run the system on a day-to-day basis Administrator and staff are primary points of contact for both inside and outside counsel Board meets only once or twice a month Brown Act requires open meeting for discussion with more than a quorum Different board members may have different views on what is in the system’s interest 12 SCENARIO FOR DISCUSSION Based on your best analysis, you believe a system’s current practice (perhaps long standing) is inconsistent with the governing statutory scheme, but the Administrator with whom you have been discussing the issue does not want to bring it to the board for discussion and potential corrective action Has the board delegated its relationship with counsel to the Administrator? Can you accept that under the Rules of Professional Conduct? Is the answer different for inside and outside counsel? Do you circumvent the Administrator and go straight to the board? If so, how do you do this without violating the Brown Act? 13 FOLLOWING THE LAW Rule of Professional Conduct 3-210 An attorney “shall not advise the violation of any law, rule, or ruling of a tribunal unless the member believes in good faith that such law, rule, or ruling is invalid … [and] may take appropriate steps in good faith to test the validity of any law, rule, or ruling of a tribunal.” 14 PUBLIC PENSION FUND COMPLICATIONS “The Law” Governing statues and the Constitution IRS Code and Regulations Conflict of Interest Laws 15 SCENARIO FOR DISCUSSION You read the governing statutes, the IRS Code and Regulations and California’s conflict of interest laws, and they say different things. Hmmmmm … 16 CONFLICTS OF INTEREST AND BIAS Rule of Professional Conduct 3-310 Must have informed written consent to: Accept representation of more than one client in a matter in which the interests of the clients potentially conflict Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict Represent clients in different matters whose interests conflict in one of those matters Enter into an aggregate settlement against two or more clients Note: this rule does not apply to class action settlements subject to court approval 17 CONFLICTS OF INTEREST AND BIAS Political Reform Act, Government Code section 1090 and other conflict of interest laws Generally preclude “officials” from participating in governmental decisions that impact their own “interests” Q: Are counsel “officials”? Many exceptions may apply depending upon circumstances Criminal penalties Civil penalties Voiding of contracts 18 PUBLIC PENSION FUND COMPLICATIONS County counsel (and inside counsel) are likely members of the retirement system and may be personally impacted by decisions for which they provide legal advice County counsel is employed (and paid by) a plan sponsor, which may have different interests than the board Outside counsel may represent multiple retirement boards, which may have different views on controversial issues and the outcome of litigation 19 SCENARIO FOR DISCUSSION Retiree and active members initiate litigation against almost every retirement system in the state alleging that a failure of boards to follow governing law has denied them their full retirement benefits. Settlement discussions are about to begin. You are county counsel regularly assigned to advise the board of retirement. Should you participate in the settlement discussions on behalf of the board of retirement? On behalf of the board of supervisors? Both? You are outside counsel to more than one retirement system. Two of your clients have completely different views regarding the merits of the claims against them and the positions they should take in response. Can you represent both clients in the litigation? Either? 20
"Harvey Leiderman _ Jeff Rieger_ Reed Smith LLP - SACRS"