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FMG Law Blog Line

Archive for February, 2019

Can California Associate Attorneys Be Disciplined For Their Boss’s Misconduct?

Posted on: February 27th, 2019

By: Gregory Fayard

The answer to this question is yes, in certain circumstances. In November 2018, after 29 years, California enacted new rules of professional conduct for lawyers. The new rules have some major changes from the old rules. One of the biggest changes applies to associate attorneys who are just doing what their boss-lawyer tells them. But what if the associate’s boss is instructing the associate to do something obviously unethical? In that case, the associate can be disciplined by the State Bar. The new rule on this point is 5.2. For example, if the associate’s boss advises the associate to lie to a client, or forge a signature, or divulge client secrets, then those breaches are so obvious the associate could be disciplined. All California lawyers must comply with ethics rules, even if acting at the direction of another. The Nuremberg defense does not fly.

What about a close call? What if the associate’s boss tells the associate to do the bare minimum on a case? That order arguably violates a lawyer’s duty of diligence (Rule 1.3). Or, what if the associate’s boss orders an associate to do everything and anything on a file? That order might violate Rule 3.2 which says lawyers shall not do tasks whose substantial purpose is to prolong or cause needless expense. In these two situations, the ethical breach is an arguable question—a “close call” if you will. In these situations the California associate would have a good argument for not being disciplined.

The new California rules of professional conduct, however, have created a potentially awkward employment situation for associates: if the subordinate lawyer believes his or her supervisor’s solution to an ethics issue would violate an ethical rule, “the subordinate is obligated to communicate his or her professional judgment regarding the matter to the supervisory lawyer.”  (See Comment to Rule 5.2.)

What should California lawyers keep in mind, then?

  1. Don’t blindly follow directions from your supervisor without thinking of the ethical implications;
  2. Doing something obviously unethical can get you in trouble with the State Bar even if the direction came from your boss;
  3. You probably will not be disciplined if an ethical question can be answered more than one way;
  4. You may have to have a talk with your boss if he or she is doing something obviously unethical.

My next blog will discuss whether a supervising lawyer in California can be disciplined for an associate’s unethical lapse.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].

What Constitutes a Reasonable and Defensible Process?

Posted on: February 27th, 2019

By: John Goselin

Society has coalesced around the general principle that businesses, governments or individuals in possession of personal confidential information (whether medical or financial) or personal identifiable information have a duty to protect that information from cyber bad guys stealing it. The reputational damage and financial costs associated with a cyber incident cannot be ignored.

But how much protection is enough? How many safeguards is it realistic to expect those in possession of information to put in place to protect that information? In other words, is there a recognized standard of care where the possessor of confidential information can feel comfortable that the protections/safeguards they have put in place are consistent with what the rest of the world is doing? Can you feel comfortable as a business owner, officer, director or IT specialist that what you are doing is reasonable and defensible in front of regulators, judges and potentially a jury?

Five years ago, the U.S Department of Commerce’s National Institute of Standards and Technology rolled out the “Framework for Improving Critical Infrastructure Cybersecurity.” The NIST’s Cyber Security Framework was last updated on April 18, 2018, and is a 48-page process outline that businesses should consider adopting as they assess the appropriate cyber security safeguards for their specific circumstance. According to the NIST, the Framework has been downloaded more than 500,000 times. The NIST Framework is not a definitive list of precisely what steps you should undertake, but it outlines a process for addressing this extremely complex issue. With a vetted, federally-endorsed process, you and your business can credibly state that you took reasonable steps to address a known problem and that the security measures you implemented were the result of a reasonable and defensible process. You will have something to say in your defense! That is a lot better than simply having your head in the sand.

In November 2018, the state of Ohio passed legislation that included a “safe harbor” against cyber liability for covered businesses that have adopted one of fourteen (14) recognized cyber-security process frameworks. In layman’s terms, if a business can show that they followed one of the approved “frameworks,” the business can avoid liability after the bad guys steal the data. The NIST Cyber Security Framework is one of the recognized industry frameworks. More states are likely to follow Ohio’s lead.

There is plenty of information available to help businesses develop a legally defensible process for handling cyber threats. Buckle down, adopt a process, get some help and put your business in a more defensible position vis-à-vis an unfortunate cyber incident.

If you have any questions or would like more information, please contact John Goselin at [email protected].

NLRB Decisions are Trending Pro-Employer

Posted on: February 27th, 2019

By: Amy C. Bender

The National Labor Relations Board (“NLRB”) under the Trump administration is showing a return to more conservative, employer-friendly interpretations of the laws regarding employees’ rights to engage in concerted activity to improve wages and working conditions. As a reminder, these protections apply to almost all private-sector employees, regardless of whether they belong to a union.

Independent Contractors – The NLRB recently issued a decision returning to the pre-Obama era, employer-friendly “common law agency” test for determining whether a worker is an employee or an independent contractor. This ruling makes it easier for employers to classify workers as independent contractors, which benefits employers since independent contractors do not have certain rights that employees have, such as the right to unionize (and employers do not have to pay taxes or insurance on independent contractors, among other distinctions).

Joint Employers – The NLRB recently closed the period to submit comments on its proposed rule regarding the standard for when two entities are considered joint employers. Under the proposed rule, an entity will be deemed a joint employer only if it has and exercises substantial, direct, and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine. The current standard from the Obama administration allows a finding of joint employment if an entity exercises indirect control or merely has the contractual right to exercise control, which can result in increased liability for businesses.

Employee Handbook Rules – The NLRB recently issued guidance on when an employer’s workplace policy interferes with employees’ rights to engage in protected concerted activity. The guidance provides that a policy will be placed into one of three categories (generally lawful, warrants individualized scrutiny, or unlawful) and be subject to a balancing test between the policy’s negative impact on employees’ ability to exercise their rights and the policy’s connection to employers’ right to maintain discipline and productivity in their workplace. This guidance provides employers more clarity and detail on how to craft lawful policies and also makes clear that policies will be analyzed to determine the impact they would have (and not just conceivably could have) on employees’ rights.

These developments signal good news for employers, and let’s hope this trend continues.

For questions or assistance in reviewing or preparing your workplace policies, contact Amy Bender at 770-818-1421 or [email protected]

The Supreme Court Sets Groundwater Pollution in its Sights

Posted on: February 20th, 2019

By: Ze’eva Kushner

Yesterday, the United States Supreme Court decided to hear an appeal from the Ninth Circuit’s decision in Hawai’i Wildlife Fund et al. v. County of Maui, 886 F.3d 737 (9th Cir. 2018). The Supreme Court will be hearing this case in the Fall to resolve a circuit split regarding whether discharging pollution that travels underground before emerging into an ocean, river or other major waterway requires a permit under the Clean Water Act.

Congress passed the Clean Water Act in 1972. The goal of the Clean Water Act is “to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” 33 U.S.C. § 1251(a). One of the primary provisions of the statute makes it unlawful for anyone to discharge a pollutant, meaning adding pollution, to the waters of the United States, including the territorial seas. 33 U.S.C. §§ 1362(12), (7).

The provisions of the Clean Water Act have been interpreted by a number of courts over the years, with the coverage of groundwater pollution being a thorny issue for some time. In February 2018, the Ninth Circuit held that Maui County had to comply with the permitting requirement of the Clean Water Act in order to continue to dispose treated water through underground wells after it was shown that the treated water made its way into the Pacific Ocean through fissures in the ocean floor.

The Fourth Circuit made a similar finding a few months later in a case involving a gasoline pipeline spill in South Carolina when it determined that the Clean Water Act covered claims that the spill contaminated nearby creeks and wetlands after traveling through groundwater.

However, in September 2018, the Sixth Circuit changed direction when it ruled on two cases involving the pollutants released by coal ash ponds, holding that the Clean Water Act cannot be used to regulate pollution that travels through groundwater before reaching navigable waters such as a river or ocean.

Thus, it is up to the Supreme Court to resolve the debate regarding how direct of a connection there must be between a source of pollution and the waters that get polluted. Whether a pollutant that goes underground before making its way into a major waterway is subject to the Clean Water Act will have a major impact on industries across the country.

If you have any questions or would like more information, please contact Ze’eva Kushner at [email protected].

Latest FINRA Rules to Regulate Expungement Actions

Posted on: February 19th, 2019

By: Margot Parker

FINRA recently announced its approval of enhanced training and guidance for arbitrators hearing expungement requests, an issue under increasing scrutiny as over 90% of such actions are currently granted. The proposal is now under review by the SEC and represents a step toward making it more difficult for brokers to have customer complaints expunged from their public records. The proposed rules also include a ban on compensated non-attorney representatives (NARs) from representing clients in FINRA arbitrations, as part of another step to strengthen the arbitration process.

While a ban on NARs has been widely supported, critics of the expungement process believe more should be done to take the burden away from customers to fight expungement actions. FINRA states that it shares these concerns. To reduce the high volume of expungements in the past, it codified a rule stating: “expungement is an extraordinary remedy that should be recommended only under appropriate circumstances.” With these recent steps, we may continue to see changes in the regulation of FINRA expungement actions in the near future.

If you have any questions or would like more information, please contact Margot Parker at (310) 937-2066 or [email protected].