January 15, 2013

SEC Reports Whistleblower Program Gathered Steam in 2012

994161_steam.jpgFollowing the SEC's payment of its first Whistleblower award in the amount of $50,000, the SEC reports that its Whistleblower Program generated a total of 3001 tips through fiscal year 2012. Read the report here: SEC Annual Report on the Dodd-Frank Whistleblower Program 2012.pdf. Big payouts and many more cases are expected. The SEC also reported that whistleblower tips identified over half of all fraud schemes uncovered in public companies, while outsiders, including the SEC, only identified about 5% of such schemes.

As preciously discussed on this blog, the SEC's Whistleblower Program provides regulatory authority for the SEC to pay 10-30% bounties to whistleblowers whose tips lead to a SEC enforcement action with cummulative penalties of over $1,000,000. Fines, disgorgement and interest paid all count toward the $1,000,000 threshold. The determination of the actual percentage and amount of the award is within the discretion of the SEC which is to consider the significance of the tip, the degree of assistance provided and the "programmatic interest " of the SEC in the particular action.

Skeptics continue to voice concerns that some employees will "blow the whistle" only to get the substantial reward rather than pursue internal company procedures to avoid or limit improper conduct. Despite these reasonable concerns, the SEC Whistleblower Program and similar measures are unquestionably the trend in compliance legislation and hold great public appeal. Companies subject to SEC jurisdiction should govern themselves accordingly.

January 7, 2013

Pennsylvania Supreme Court Holds That No Interception Occurred Where Police Read and Replied to Defendant's Text Messages

899402_you_have_mail.jpgWhen it comes to wiretapping, Pennsylvania is a two-party consent state--meaning both parties to a conversation must consent before a wire, electronic or oral communication is intercepted for the interception to be lawful. Although there are exceptions available, sometimes the "two-party" requirement in the Pennsylvania Wiretapping and Electronic Surveillance Act ("Wiretap Act") presents difficult issues for law enforcement. But in order for the Wiretap Act to even apply, there must be an interception of a communication. In Commonwealth v. Cruttenden, decided on December 17, the Pennsylvania Supreme Court narrowed the circumstances in which an interception occurs.

Cruttenden started out as an ordinary car stop along interstate 80 in Clearfield County. After the Pennsylvania State Troopers obtained consent to search the car, they found 35 pounds of marijuana, methamphetamines, drug paraphernalia, a .45 caliber handgun, and a cell phone. One of the car's occupants told the troopers that he had been using the cell phone to text one of the two defendants concerning an exchange of the marijuana for $19,000. The trooper, posing as the supplier, used the phone to text that defendant, and a meeting was set up. The two defendants arrived at the meeting place to conduct the transaction and were arrested. Both defendants were charged with attempt and conspiracy, and both filed motions to suppress the texts, claiming that the texts had been unlawfully intercepted under the Wiretap Act.

The trial granted the suppression motion. On appeal to the Superior Court, the Commonwealth argued that under a Superior Court case called Commonwealth v. Proetto, no interception had taken place and therefore the Wiretap Act did not apply. The Superior Court disagreed and affirmed the suppression order.
In Proetto, an officer, posing as an underage female, communicated with a suspected sexual offender in an Internet chat room using the screen name "Kelly15F." The Superior Court held that because the officer was a direct party to the conversation in the chat room, there was no interception and the Wiretap Act did not apply. But in Cruttenden, the Superior Court distinguished Proetto, on the basis that in the chat room the officer, rather than posing as an actual person, created an entirely separate computer profile, misrepresenting himself as a fictional person, "Kelly15F," while in Cruttenden the officer misrepresented himself as the intended recipient of the communication, namely the defendant's drug supplier. In effect, the Superior Court seemed to be saying, "if you pose as the intended recipient, as opposed to creating a totally separate identity, you have intercepted the communication and the Wiretap Act is violated."

The Supreme Court disagreed and reversed the Superior Court, calling the respective factual circumstances in the two cases "distinctions without a difference." It does not matter, the Supreme Court held, who the intended recipient of the communication is--"the fact which takes the case out of the purview of the Act is that [the defendant] elected to communicate with the person answering the call and that the communication was direct. Therefore, there was no eavesdropping or listening in, and no interception took place."

The effect of the Cruttenden decision is significant, particularly given the ease with which people today text each other. Any time a person texts, he or she is taking a risk that the person on the other end is a police officer. In Cruttenden, the defendant involved in the texts was suspicious and texted questions that only his drug supplier would know. When he got the right answers, he thought he was in the clear and proceeded to set up the rendezvous spot. What he didn't know was that his supplier was feeding the trooper the answers. After Cruttenden, the Pennsylvania Wiretap Act will not save the casual texter.

December 5, 2012

Requiring Mutual Discovery at Sentencing--Middle District Leads the Way in PA

Middle District PA.jpgIn federal court, a defendant is entitled to pre-trial discovery under Rule 16 of the Federal Rules of Criminal Procedure. This is an important due process protection that allows a defendant to know what he will be facing at trial. But what about at sentencing? Since most federal cases are resolved through guilty pleas, isn't it equally important to get copies of what the prosecutor provides to the probation officer to determine the Guidelines range? One would think so, but in most federal courts such disclosure during the sentencing phase is not required. Fortunately, a slow change seems to be underway, led by the Middle District of Pennsylvania.

Unlike Rule 16, Rule 32 of the Federal Rules, which governs the sentencing procedure, does not require the disclosure of any material to the defense. The rule merely states that the probation officer must conduct a pre-sentence investigation and prepare a pre-sentence report. Some districts' local rules provide further guidance. For instance, the Eastern District of Pennsylvania Local Criminal Rules require the government to make available to the probation officer "all investigative and file material relevant to the case," but do not require that the material be disclosed to the defendant or his attorney. In practice, the probation officer typically relies upon evidence collected by the prosecution in the investigation to provide the factual support for such critical determinations as drug quantity, loss amount, the defendant's role in the offense, etc. The probation officer's decision on such determinations can have a significant effect on the Guidelines calculation, and ultimately the sentence. It seems natural, then, that the defense should have access to the documents that support the factual basis for such determinations.

So far, in Pennsylvania at least, only the Middle District of Pennsylvania has decided to change the rules to require reciprocal discovery during the pre-sentence investigation phase of a case. As explained by former Eastern District U.S. Attorney Peter F. Vaira in a recent article, the Middle District has amended its Local Rules to require mutual discovery of all material supplied to the probation officer for use in the pre-sentence report. The new rule (LCrR 32.1) states that "[t]he government shall provide to the defendant's counsel a copy of any documentary information provided to the probation officer to be considered in the preparation of the pre-sentence report at the same time as it is provided to the probation officer." The rule is reciprocal: "[t]he defendant or the defendant's counsel may submit documentary information to the probation officer and shall provide a copy to the attorney for the government at the same time as it is provided to the probation officer."

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November 27, 2012

Middle District of PA Holds Quid Pro Quo Not Necessary To Charge Violation of 18 U.S.C. §666

1035691_money_in_hand.jpg18 U.S.C. §666(a)(1)(B) prohibits, among other things, state government officials from accepting anything of value with an intent to be influenced or rewarded in connection with business related to the state government. There is a split amongst the circuits as to whether a conviction under §666 requires that the official actually confer some benefit in return for the payment (e.g., a quid pro quo). The Fourth and Second Circuits have held that a conviction under §666 requires a quid pro quo. The Sixth, Seventh, Eighth and Eleventh Circuits have held that a conviction under §666 does not require a quid pro quo. The Third Circuit has not ruled on this issue.

On November 21, 2012, Judge A. Richard Caputo, United States District Judge for the Middle District of Pennsylvania, held that no such quid pro quo is necessary:

The text of §666 only requires Defendants to accept or agree to accept anything of value with the intent to be influenced or rewarded in connection with any business or transaction...

The case, United States v. Musto, Case No.: 3:10-CR-338, involves charges against a former Pennsylvania State Senator, Ray Musto, who was indicted for accepting more than $28,000 from a construction company that sought preferential treatment in relation to certain state financed projects. The construction company at issue (although not named in the indictment) has subsequently been identified as Mericle Construction, whose principal, Robert K. Mericle, pled guilty in 2009 for a crime related to the corruption cases against former Luzerne County Judges Michael T. Conahan and Mark A. Ciavarella. In their motion to dismiss, Musto's attorneys argued that the indictment was factually insufficient because it did not plead that Mericle Construction received anything in return for the money that it allegedly paid to Musto. Judge Caputo disagreed, noting that while such a quid pro quo "is sufficient to violate [§666], it is not necessary."

Judge Caputo's memorandum opinion is attached here: United States v. Raphael Musto Memorandum Opinion on Motion to Dismiss.pdf

November 19, 2012

Department of Justice Publishes Business Persons' Resource Guide to the FCPA

1083202_business_man.jpgThe Criminal Division of the United States Department Of Justice has just published a 125-page "Resource Guide" to give both non-lawyers and lawyers at least some clarification in the real world workings of the Foreign Corrupt Practices Act ("FCPA"). Link to the FCPA Resource Guide here: FCPA Guidebook 2012.pdf. The Resource Guide is written in a conversational, non-legalistic style that business persons will likely find helpful. Business persons who conduct business in foreign countries have complained for many years that the practical workings of the FCPA were ambiguous, at best. Employees of American corporations abroad were unsure whether whether relatively minor conduct might be enough to amount to a violation of the law subjecting their employer and themselves to horrific penalties. There were many rumors of "zero tolerance" for even the most abstract payments and no place to quickly consult for an authoritative answer. The Resource Guide, while not perfect, at least partially fills that gap.

The most valuable part of the Resource Guide is the section that lists numerous travel, gift and entertainment hypotheticals that sound very much like real life situations that a corporation engaging in foreign commerce might run into. The first hypothetical for example finds no fault with an American company which provides business class airfare to foreign senior officials traveling a long distance to examine the company's facilities and products especially since the company's own employees would be entitled to such an upgraded ticket if they were on a journey of similar length. The hypothetical continues to find no fault with taking the foreign officials to a reasonably priced dinner, a baseball game and a play. The line is crossed in the hypothetical, however if the foreign officials are given first class tickets, told to bring their spouses and given a week long, all expenses paid trip to Las Vegas after the review of the more mundanely located factory.

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November 16, 2012

Attennnnn-tion! 4 Important Lessons From the General Petraeus Scandal

6444_email_or_e-mail.jpgThe dirty details of this presently unfolding scandal do not require repetition on this page. Google will lead you to all that you want (and don't want) to know about these sordid details. However, you won't read much of the following advice in the mainstream media. So, here we go ...

1) Discuss business on corporate e-mail accounts only

The FBI's cyberstalking investigation led to a personal Gmail account, which the government accessed and ultimately resulted in the downfall of General Patraeus. A recent Google transparency report revealed that it has fully or partially complied with at least 90% of the U.S. government's nearly 8,000 requests for user data during the first half of 2012. http://www.google.com/transparencyreport/userdata requests/ The lesson learned is that it is much easier for the government to get e-mails from Gmail, then from your own IT department. This is information that (1) you do not control; (2) might not have notice that the government has requested access to; and (3) do not have say whether the communications are protected by some privilege or confidentiality clause. As a corporation, there are many things that you might want to keep quiet: trade secrets, potential business deals, future products, etc. As Google does not have your company's interests at heart, having employees discuss these developments through personal e-mail accounts could lead to their public disclosure. Further, you would receive no notice that the information has been sought out by the government. Therefore, reminding your employees to keep business e-mails on corporate e-mail accounts will prevent your company's private issues from going public.

2) Be careful who you are e-friends with

While investigating the cyberstalking complaint, the e-mails of the victim led to the discovery of potentially inappropriate e-mails of another senior general who was uninvolved in the original cyberstalking charge. Now that senior general is being investigated. The lesson learned here is that the government, while investigating someone else on a matter unrelated to you, could come to learn information that would place you or your corporation under surveillance or investigation. Therefore it is imperative that not only you keep your corporate and personal e-mails separate (see point 1), but also that you know the person who are sending the e-mails to. A joke in poor taste to someone under surveillance could result in you landing in hot water.

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November 16, 2012

Financial Advisor Convicted of Insider Trading for Trading on Info Received at AA Meeting

952313_gavel.jpgHere is an update to our October 8, 2012 post about an insider trading case involving information received at an Alcoholics Anonymous ("AA") meeting.

On November 15, 2012, a jury in the Eastern District of Pennsylvania found Timothy McGee guilty of insider trading based on his use of information he received from a fellow member of his AA group. McGhee was a financial adviser for Ameriprise Financial Services Inc. As you may recall, a corporate executive of Philadelphia Consolidated Holding Corporation ("PHYL") who was also a member of McGhee's AA group spoke to McGhee about his struggles arising out of the stress created by the pending acquisition of PHYL. McGee used that knowledge to purchase PHYL stock in advance of the acquisition transaction, netting almost $300,000 after the company went public. In less than four hours, a jury determined that McGee was guilty of acting on insider information. Sentencing has been scheduled for February 20, 2013 and McGee could face up to 25 years in prison. In addition, McGee also faces a civil suit, which had been stayed pending the outcome of the criminal trial, based on the $1.5 million that others netted from his disclosure of the information.

November 8, 2012

Internal Investigations and Attorney-Client Privilege: CAVEAT SPEAKER

592542_businessman_walking.jpgJoseph M. Elles, Carter's Inc.'s former Vice President of Sales, is facing federal criminal charges alleging that he aided Carter's in misstating its income in various Securities and Exchange Commission filings. The case is United States v. Elles, No. 1:11-CR-445 (N.D. Ga). Elles has objected to the government's attempts to introduce into evidence statements that he made to attorneys conducting an internal investigation for Carter's. (See U.S. v. Elles Response in Opposition to Motion to Admit Defendant's Statements.pdf) The government contends that Elles admitted his guilt during the course of a seven hour interview with counsel that conducted the internal investigation. Elles disagrees, arguing that his statements are "a far cry from the elements necessary to prove guilt beyond a reasonable doubt as alleged."

Elles raises several arguments why his statements should not be admitted. First, he claims that his cooperation with the internal investigation was coerced because Carter's said it would withhold his severance payments if he did not participate. He also attacked counsel's motives, calling them "former SEC and AUSA attorneys [who] were working hand in glove with prosecutors." As proof of this collusion, Elles pointed out that Carter's immediately waived privilege and turned over his interview to the FBI and the United States Attorney's Office the day after the interview was conducted. Elles also argues that if the portion of the interview that the government seeks to introduce is allowed, that he should be allowed to introduce other portions of his interview (which was summarized by counsel in a 33 page memorandum) and to cross examine the attorneys who conducted the interview to explain the context of his statements and to demonstrate that, as Vice President of Sales, he was not responsible for deciding how "accounting issues" were to be reported on financial statements.

Mr. Elles' co-defendant, Carter's former President, Joseph Pacifica, has similarly objected to the admission of statements he made to counsel during Carter's internal investigation.

This case highlights a critical dynamic concerning internal corporate investigations. Corporate employees who cooperate in such investigations do so at their own peril. The corporation will ultimately decide whether to assert or to waive privilege. And where, as here, the corporation decides to waive privilege, an individual employee who is incriminated by information over which privilege is waived has little recourse or ability to stop the damage. Our rule, therefore, for corporate employees deciding whether to participate in an internal investigation is caveat speaker.

October 22, 2012

Purdue Executives Continue Battle Against Broad Application of Medicare Exclusion Statute

1030718_people_2.jpgOn October 15, 2012, three former Purdue Frederick Company executives filed a Petition for Rehearing En Banc before the U.S. Court of Appeals for the District of Columbia Circuit. (Click here to view a copy of the petition: Petition for Rehearing En Banc.pdf). The petition is the latest chapter in the saga of these three former executives who pled guilty to misdemeanor misbranding under the "responsible corporate officer" doctrine in connection with the plea of Purdue to felony misbranding of the drug OxyContin. The Office of Inspector General ("OIG) for the U.S. Department of Health and Human Services subsequently excluded these individuals from participation in all Federal health care programs under its permissive exclusion authority set forth at 42 U.S.C. § 1320a-7(b)(1) and (3) for 20 years. During their various challenges to their exclusions, the executives have successfully reduced the length of the exclusion from 20 years to 12 years, which is cold comfort since the exclusion effectively ends all of their careers in the health care arena.

In July, a three-judge D.C. Circuit panel held in Friedman v. Sebelius that section 1320a-7(b)(1) authorizes the OIG to exclude from Federal health care programs an individual convicted of a misdemeanor "if the conduct underlying that conviction is factually related to fraud." The specific statutory section at issue in the case is section 1320a-7(b)(1), which provides that the Secretary of HHS may exclude any individual that has been convicted of a criminal offense consisting of a misdemeanor relating to fraud. The specific issue before the D.C. Circuit was whether the phrase "misdemeanor relating to fraud" in section 1320a-7(b)(1) refers to a generic criminal offense or to the facts underlying the particular defendant's conviction.

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October 8, 2012

Twelve Steps to Insider Trading

292292_alcoholics_anonymous.jpgUsing information learned from a fellow Alcoholics Anonymous ("AA") member to make money in the stock market may be morally dubious. Should it be a federal crime, however? A recent case in the Eastern District of Pennsylvania, United States v. McGee, Crim. No. 12-236, deals with this very question.

The defendant, Timothy McGee, was a member of AA. He and a senior executive of Philadelphia Consolidated Holding Corporation ("PHYL") formed a close personal relationship while attending AA meetings, whereby they shared confidences in their struggles with alcoholism. The senior PHYL executive revealed to McGee that he was under a great deal of stress due to the pending acquisition of PHYL. McGee then purchased shares of PHYL which he sold for a $292,128.00 profit after the acquisition was announced. McGee was indicted for insider trading.

There are two bases for insider trading. The first is the classic situation where a corporate insider trades in securities using material, nonpublic information he or she obtains as a result of his or her insider position. The second, the misappropriation theory, occurs when an outsider, who has a "duty of loyalty and confidentiality" to an inside source of nonpublic information, uses information learned from that insider to trade in securities. Determining the existence of such "a duty of loyalty and confidentiality" is tricky. To help define when such "duty of loyalty and confidentiality" exists, the SEC promulgated Rule 10b5-2, codified at 17 C.F.R. 240.10b-5. According to Rule 10b5-2(b)(1) and (2), such duty arises where there is an agreement to keep the information confidential, and/or when the parties have a "history, pattern or practice of sharing confidences, such that the recipient of the information knows or reasonably should know that the person communicating the material nonpublic information expects that the recipient will maintain its confidentiality." In order to prove a violation of the misappropriation theory, the government must prove that the defendant knew that his conduct was unlawful.

In McGee, the government contended that, as part of AA's tradition, AA members agree to keep information they share confidential. The government further contended that there existed a history of shared confidences between McGee and the insider. Thus, the government argued, McGee had a "duty of loyalty and confidentiality" to keep information learned form the insider confidential. McGee moved to dismiss, arguing that there existed no duty precluding him from trading on the information and that he did not know that he was breaking the law when he traded on the information. The court denied the motion and held that the jury would have to decide whether McGee's relationship with the corporate insider featured a "duty of loyalty and confidentiality" and whether the information about the acquisition was disclosed within the confines of that relationship.

October 7, 2012

A Day on Health Law: False Claims Act Update

Wednesday, October 10, 2012

1153096_man_with_microphone.jpgThe CLE Conference Center
Wanamaker Building, 10th Floor, Suite 1010, Philadelphia

Hosted by the Pennsylvania Bar Institute, this full day program addresses the latest hot topics in health law. David M. Lagaie, Dilworth Paxson Partner and Chair of the firm's White Collar practice will join a panel discussion of the most notable False Claims Act cases from the past year.

For additional information and to register, click here www.pbi.org. Simulcast available throughout the state. CLE Credits will be offered!

September 30, 2012

Excluding Evidence Under Rule 403--Is a Video Worth a Thousand Words?

683635_remote_control_1.jpgIs a video ever worth a thousand words? More to the point for this post, can a court commit error by failing to view videos offered by the prosecution before allowing the jury to see them? In a decision issued on September 18, the Third Circuit says yes.

In United States v. Cunningham, a case that originated from the Western District of Pennsylvania, the Third Circuit vacated the defendant's conviction and granted him a new trial because the trial court had allowed the jury to see videos after accepting the prosecution's description of the videos rather than actually viewing them. This, the appeals court panel unanimously ruled, was an abuse of discretion.

What kind of videos are we talking about? Graphic depictions of adults molesting prepubescent children, including, in the court's words, "the kind of highly reprehensible and offensive content that might lead a jury to convict because it thinks that the defendant is a bad person and deserves punishment, regardless of whether the defendant committed the charged crime."

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September 14, 2012

Banks Beware: SBA Will Begin Second Guessing Underwriting Decisions

by Matthew M. Maher

1258644_old_building.jpgSince the Small Business Jobs Act was passed in 2010, there has been a significant increase in both the number and the average size of Small Business Administration (SBA) loans. Yet while the SBA continues to encourage its national and regional lending partners to originate more SBA loans, two recent Advisory Memoranda issued by the SBA's Office of the Inspector General (OIG) make the invitation less palatable, as the SBA is about to apply much higher scrutiny to the underwriting practices of its lending partners. Indeed, the SBA loans is placing its lending partners on notice that, if these loans default, their underwriting decisions will be second-guessed and their ability to recover under the SBA's guarantee is not assured.

Historically, the SBA delegated underwriting decisions to its approved lenders and discouraged its loan specialists from second-guessing the lender's underwriters. In stark contrast, the proposed new policy will require the SBA to perform a "more extensive underwriting and eligibility review" that will factor heavily into whether the SBA will honor its guaranty on the defaulted loan.

The OIG's Advisory Memoranda, dated March 23, 2012 (Report No. 12-11R) and August 16, 2012 (Report No. 12-18), resulted from several audits of the SBA's National Guarantee Processing Center's (NGPC's) review of loan packages for early-defaulted loans of $500,000 or more. The first OIG memorandum concluded that the NGPC's limited, superficial review of lender underwriting was not consistent with statutory and regulatory authority, was contrary to SBA procedures, and had cost the SBA millions in guarantees that should not have been paid. The second OIG memorandum recommended, inter alia, that the NGPC strengthen its review process for high-dollar early-defaulted loans, in particular to verify compliance with SBA's repayment ability requirements.

The bottom line for banks that originate SBA loans is that from now on the SBA will look very closely at - and second guess - their underwriting decisions before honoring its guaranty.

September 14, 2012

Recent Ninth Circuit Decision Further Muddles Treatment of AWCs

by Robert Vaughan Cornish, Jr.

836705_wallstreetbroadway.jpgEntities and individuals subject to discipline or review by the SEC, CFTC or self-regulatory organizations such as FINRA or the NFA are sometimes faced with the classic Hobson's Choice of settling allegations of misconduct under what is called an "Acceptance Waiver & Consent" or AWC. Notwithstanding one's desire to settle such matters and the truth regarding such allegations, AWCs often recite the facts as they were originally pled or recited by the regulatory body in its original submission that commenced the proceedings. These AWCs tend to find their way into related civil litigation, whether in court, arbitration or before other administrative bodies, for a variety of purposes. AWCs have been submitted as evidence of prior conduct, knowledge of prior conduct or the proclivity to engage in similar conduct.

A recent decision by the United States Court of Appeals for the Ninth Circuit, United States v. Bailey, No. 11-50132 (9th Cir., August 27, 2012), addressed the admissibility of AWCs in criminal proceedings and determined that AWCs are not admissible to demonstrate intent and knowledge of wrongful conduct. In Bailey, the SEC sought to introduce an AWC concerning violations of federal securities laws as evidence of knowledge of the defendant's criminal conduct. The District Court below permitted the AWC to be admitted into evidence at the defendant's trial for criminal violations of federal securities laws. The defendant was convicted and subsequently appealed, arguing that the admission of the AWC was prejudicial. The Ninth Circuit agreed. Of particular importance was the Court's recitation as to why AWCs should generally not be admitted as evidence of knowledge of wrongful conduct:

A defendant may settle a case for a variety of reasons. He may have committed the conduct alleged in the complaint [upon which the AWC is based] or he may not have - but having settled the claim, there is no way to know. Admitting prior conduct charged but settled with no admission of liability is not probative of whether defendant committed the prior conduct, much less whether he committed the conduct in question. There is no logical relevancy to admitting this type of evidence.

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September 6, 2012

Handle With Care: Level Of Protection Afforded To Communications Between Attorneys And Their Experts Is Still Up In The Air

334225_press_conference.jpgThe Pennsylvania Supreme Court will determine the scope of the work product protection afforded to communications between a party's attorney and trial expert witnesses. By order dated August 31, 2012, the Court granted the petition of Sodexho Management, Inc., Sodexho Operations, LLC and Linda J. Lawrence to review the Superior Court's en banc decision in Barrick v. Holy Spirit Hospital of the Sisters of Christian Charity to determine the following specific issue: "Whether the Superior Court's interpretation of Pa. R.C.P. No. 4003.3 improperly provides absolute work product protection to all communications between a party's counsel and their trial expert?"

The Supreme Court's decision to grant review in Barrick follows on the heels of the decision by a nine-judge en banc panel of the Superior Court to reverse both the trial court and a Superior Court three-judge panel finding that such communications were discoverable. The Superior Court's en banc held, in part, that any mental impressions or legal analyses contained within correspondence between a hospital patient's counsel and the patient's expert witness physician fell within the attorney work-product doctrine and, accordingly, were not discoverable.

Interestingly, although the Superior Court's en banc decision held that the correspondence at issue was not discoverable under the Pennsylvania Rules of Civil Procedure pursuant to both Pa. R.C.P. 4003.3 and Pa. R.C.P. 4003.5, the Supreme Court limited the issue to be decided to the scope of work product protection under Pa. R.C.P. 4003.3. Pa R.C.P. 4003.3 provides work product protections to "the mental impressions of a party's attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories." The rule also addresses the work product protections afforded to a party's representative who is not the party's attorney providing that "discovery shall not include disclosure of his or her mental impressions, conclusions or opinions respecting the value or merit of a claim or defense or respecting strategy or tactics."

As Judge Bowes correctly pointed out in his concurring and dissenting opinion in the Superior Court's en banc decision, Pa. R.C.P. 4003.3 does not provide a blanket prohibition against the disclosure of an attorney's correspondence generally, or communication with an expert specifically. Consequently, it seems likely that the Pennsylvania Supreme Court will find that there is no absolute work product protection to all such communications. It remains to be seen, however, whether the Court will carve out specifically defined categories of communications, thereby providing concrete guidance for attorneys and their experts.

Until the Pennsylvania Supreme Court issues its decision in Barrick and provides further guidance on the scope of the attorney work product, parties, their attorneys, and retained experts are well served by operating under the assumption that the work product does not protect all of their communications.