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Archive for the ‘Professional Liability and MPL’ Category

How Can The Trump-Cohen Tape Be Public?

Posted on: July 31st, 2018

By: Greg Fayard

A lawyer and client talk. The lawyer records the conversation. The recording is made public. How can this be?

That’s what happened to then candidate Donald Trump and his New York lawyer Michael Cohen. The conversation occurred in September 2016. Trump was not aware Cohen recorded the discussion. The recording is a few minutes long and encompasses several topics, including reference to a possible payment to a Playboy model with whom Trump allegedly had an affair in 2006, although this is never expressly discussed. At one point a cash or check payment is referenced. The two speak in a verbal shorthand.

The FBI, as part of an investigation by the U.S. Attorney’s Office for the Southern District of New York, confiscated the recording in April 2018 (see earlier blog discussing this here) while investigating attorney Cohen. The recording was made public in July 2018, but it is unclear by whom.

The conversation between Cohen and Trump is ordinarily protected by the attorney-client privilege, although it is clear other people were around Trump and Cohen, calling into question whether Trump waived the privilege by speaking openly to his lawyer in front of others. Nevertheless, a special master, working under United States District Judge Kimba Wood in New York determined the tape to be privileged. Trump, as Cohen’s client, “owns” the privilege.

However, the President’s legal team “waived” the attorney-client privilege, permitting the tape’s disclosure. The question is why? Four possible reasons come to mind:

  1. The tape had already been leaked, leaving the President no other viable option but to waive the privilege;
  2. Waiving the privilege permits the President’s advisors to discuss the tape openly;
  3. Discussing the tape without officially waiving the privilege might open the door to a broader waiver of communications between Cohen and Trump; and/or
  4. If Trump’s team asserted the privilege over the tape, the government could try to overcome the privilege by asserting the “crime/fraud exception.” Simply put, a client’s communication to an attorney cannot be privileged if the communication was made with the intention of committing or covering up a crime or fraud.

At worst, if a payment to the model was actually made (not yet confirmed), such a payment might have to be reported under federal campaign finance law. The failure to do so could be a campaign finance violation. Trump allies, however, would argue any such payment was not campaign-related, but a common occurrence for a celebrity dealing with the tabloids. In any event, failing to report a campaign-related payment is not a ordinarily a crime.

Lastly, why would an attorney record his privileged conversations with a client? Only attorney Cohen can answer that (and he has not). It could be innocuous—instead of taking notes, he recorded conversations. But not advising Trump of the recording is problematic. Nevertheless, under New York law, one party recording another party without his consent is legal. (N.Y. Penal Law §§ 250.00, 250.05.)  If Cohen, however, leaked the tape when it was still considered privileged, and before Trump waived the privilege, he could face discipline from the State Bar of New York for breaching an attorney’s duty of confidentiality. (New York Rule of Professional Conduct 1.6.)  Regardless, the President was certainly not pleased with Cohen’s secret recording:

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

Let’s Eat Grandma! Punctuation Matters

Posted on: July 19th, 2018

By: Ted Peters

California Corporations Code Section 1601 provides certain rights to shareholders of corporations doing business in California.  Specifically, as the statute currently reads, corporations are required to open their books and records upon written demand from any shareholder as long as the purpose of the demand is “reasonably related” to the shareholder’s interests.  In 2016, the California Court of Appeal in Innes v. Diablo controls, Inc., 248 Cal.App.4th 139 (2016), held that Section 1601 did not require a corporation to produce records in any particular place; rather, the corporation was required only to produce records in the state where they were located, even if outside of California.

On February 13, 2018, California Representative Brian Maienschein (R) sponsored a bill that would amend Section 1601.  In June, and without a single “no” vote against it, the California Legislature enacted the bill, AB 2237 (Maienschein).  Governor Jerry Brown signed the bill into law on July 9, 2018.

A redlined version of the changes to Section 1601 clearly illustrates that the amendments, which go into effect next year, effectively reverse the holding from Innes.  Specifically, when a shareholder demands an inspection, the records are to be made available for inspection “at the corporation’s principal office in [California], or if none, at the physical location for the corporation’s registered agent for service of process in [California].”  The amendment also provides an alternative procedure which would permit the shareholder to elect to receive the corporation’s books, records, and minutes by mail or electronically, as long as the shareholder agrees to pay the reasonable costs for copying or converting the requested documents to electronic format.

Thus, it is now clear that corporations doing business in the State of California will be required to produce records in California, regardless of where the records are maintained.  The significance of this change is obvious enough, but wait, there’s more… When amending the statute, the legislature made another minor change to the first sentence of the statute.

Previously, what was open to inspection were “The accounting books and records and minutes of proceedings…”  As amended, what will be open to inspection will be “The accounting books, records, and minutes of proceedings…”  The insertion of two commas seems innocent enough, but could lead to a heated debate as to the scope of shareholder inspections in general.  The term “accounting” in the original statute could have been interpreted to modify just “books” or both “books and records.” With the amendment, however, it would seem that “accounting books” and “records” are two separate things and a corporation might be justified in refusing to produce “accounting records” to the extent they differed from “accounting books.”

Maybe the drafters of the amendment were simply sticklers for the proper use of punctuation and thought it best to tidy the statute up.  Or maybe they intended to narrow the scope of what records corporations are required to produce.  Or perhaps the change was intended to send no message at all.  Why does it matter and who really cares?  Well, punctuation does matter, even one little comma.  At least grandmothers around the globe think so; there is a world of difference between  “Let’s eat Grandma” and “Let’s eat, Grandma.”

If you have questions or would like more information, please contact Ted Peters at [email protected].

Insuring Against Rule 68 Offers of Settlement

Posted on: June 28th, 2018

By: Matt Grattan

One tool defense lawyers in Georgia frequently use to induce settlements is an offer of settlement under O.C.G.A. 9-11-68.   Rule 68 allows either party to a tort action to serve a written offer to settle the claim, so long as the offer is made within a certain time and satisfies several other elements under the statute.  If a Rule 68 offer is properly made by a defendant and rejected, that code section allows a defendant to recover its post-rejection attorney’s fees and expenses from a plaintiff in the event the plaintiff does not recover at least 75% of the offered amount at trial.

It is easy to see how the fee-shifting provision in Rule 68 can provide defense attorneys with leverage during settlement negotiations.  Simply put, it forces plaintiffs to put some skin in the game.  Because paying the defendant’s attorney’s fees and costs can significantly reduce or even eliminate a plaintiffs’ award at trial (and in turn a plaintiffs’ attorneys’ fees), plaintiffs may be more inclined to settle rather than face such risks at trial.

The fee-shifting benefit from Rule 68, however, could potentially be diminished by companies like LegalFeeGuard.   Established in Florida in 2012 to combat that state’s offer of settlement statute, LegalFeeGuard has recently started offering insurance policies in Georgia that cover attorney’s fees and costs under O.C.G.A. 9-11-68.  LegalFeeGuard offers no-deductible policies with limits as low as $10,000 and as high as $250,000.   Policies are triggered by a judgment in a bench trial or the return of a verdict in a jury trial, and are available to plaintiffs and defendants for a wide array of cases, including personal injury, breach of contract, and intentional torts.

What does the availability of fee-shifting insurance mean for defense lawyers and their clients?  LegalFeeGuard recently launched in Georgia (and the author is unaware of any other similar companies), so it is tough at this point to determine what kind of impact fee-shifting insurance will have on litigation in Georgia.  But this is certainly a development for lawyers to keep an eye on (particularly since LegalFeeGuard claims on its website to have sold over 1,000 policies in Florida) as such insurance may persuade more plaintiffs to roll the dice and take their case to trial knowing the downside risk of paying fees and costs is reduced, if not altogether eliminated.

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

In California Lawyer-Client Sex Will Soon Be A No-No

Posted on: May 14th, 2018

By: Greg Fayard

In California, lawyers can have consensual sex with their clients as long as it is not based on coercion or in exchange for legal services. That will change this Fall.  On May 10, 2018, the California Supreme Court approved comprehensive changes to the lawyer Rules of Professional Conduct—the first major change in 29 years.  Under the new rules, California lawyers cannot have consensual sex with their clients—except in one of two situations: 1) the client is the lawyer’s spouse or domestic partner; or 2) a sexual relationship existed prior to the lawyer-client relationship.  This means California lawyers can be disciplined by the State Bar for having consensual sex with clients.

The sex ban has been divisive even though at least 17 other states have adopted a similar ban. Supporters of the lawyer-client sex ban argue the relationship between a lawyer and client is inherently unequal, so any sexual relationship is potentially coercive. Others claim the blanket ban is an unjustified invasion of privacy.

The new Rule is 1.8.10 and goes into effect November 1, 2018.

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