When Your Witness Is a Former Employee

It's Monday morning. You are sitting at your desk sipping your third cup of coffee and reading your e-mails when you learn that your company has been sued. Later, as you flip through the pages of the complaint, you discover to your dismay that one of your key witnesses will be a vice president who left the company three years ago. You have not spoken to him since.

In an era when employees change jobs frequently, your most important witness is often a former employee. At best, a former employee may be ambivalent toward your company. At worst, he or she may be downright hostile. Should you contact a former employee? If so, what should you tell him? You may need his cooperation, but the ethics rules limit what you can do to obtain it.

What to Do First

You can and should contact your former employee, and the sooner you do this the better. Undoubtedly, the plaintiff's lawyer will try to contact him. A former employee, particularly one who is disenchanted with his former employer, can be a goldmine for your adversary. The ethics rules do not prohibit your opposing counsel from informally interviewing your former employees. Most jurisdictions have adopted the ABA Model Rules of Professional Conduct, including Model Rule 4.2, which states:

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 lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.

In 1991 the ABA Committee on Ethics and Professional Responsibility issued a Formal Opinion clarifying that Model Rule 4.2 does not bar ex parte communication with an adversary's former employees. See ABA Standing Comm. on Ethics and Professional Responsibility, Formal Op. 91-359 (1991).

In 2002, the ABA issued a revised comment to Model Rule 4.2, again clarifying that the rule is not intended to bar this practice. Today, most courts agree that it is not improper for opposing counsel to contact a former employee of an organizational party, as long as counsel does not ask that person about privileged information. See Bryant v. Yorktowne Cabinetry, Inc., 538 F. Supp. 2d 948 (W.D. Va. 2008).

Step Two

Once you reach your former employee, you should not instruct him to refrain from speaking with opposing counsel. While this is tempting, it is also unethical. Model Rule 3.4(f) provides that a lawyer shall not “request a person other than a client to refrain from voluntarily giving relevant information to another party unless the person is a relative or employee or other agent of the client.” You can tell the person that he will probably receive a call from opposing counsel requesting an interview. And you can tell him that he has a choice: He can agree to an interview, or he can refuse. Fischbach v. Founders Court Inc., 1996 U.S. Dist. LEXIS 8256 at *4 (M.D.N.C. May 16, 1996); North Carolina State Bar v. Graves, 274 S.E.2d 396, 399 (N.C. Ct. App. 1981).

Can you go further by, for example, asking the former employee to allow you or your outside counsel to be present for any interview by opposing counsel? Generally, the courts frown upon any overt attempt to discourage a witness from speaking with opposing counsel. Several courts have held that it is improper for a lawyer to “instruct” or “advise” a witness not to speak to an adversary unless counsel is present. See Gregory v. United States, 369 F.2d 185, 188 (D.C. Cir. 1966); State v. Mussehl, 408 N.W.2d 844, 847 (Minn. 1987); State v. Ben, 798 P.2d 650, 654 (Ore. 1990); State v. Hofstetter, 878 P.2d 474, 480-81 (Wash. Ct. App. 1994). However, a lawyer may “request” to be present for an interview. See Mussehl at 408 N.W.2d at 847; Fischbach, 1996 U.S. Dist. LEXIS at *5; State v. Simmons, 203 N.W.2d 887, 892 (Wis. 1973). There is a fine line separating an instruction from a request. You can stay on the permissible side of this line by explaining to your former employee that he can accept or reject your request. See Hofstetter, 878 P.2d at 482.

What to Do About Counsel

Your former employee may ask that the company's outside counsel represent him, particularly if he is likely to be deposed. Should you offer to arrange for your company's outside counsel to represent him? In criminal investigations a former employee invariably must have separate counsel, because there is almost always a conflict between him and the company. The former employee may accuse the company of wrongdoing, or may become a target of the investigation. By contrast, in civil cases there is usually no such conflict. In most cases your counsel can simultaneously represent both the company and the witness. See Guillen v. City of Chicago, 956 F. Supp. 1416, 1422-27 (N.D. Ill. 1997); Bonner v. Guccione, 1997
WL 91070 at *2 (S.D.N.Y. March 3, 1997); D.S. Magazines, Inc. v. Warner Publisher Services, Inc., 623 F. Supp. 624,
625 (S.D.N.Y. 1985); United States v. Occidental Chemical Corp., 606 F. Supp. 1470, 1474 (W.D.N.Y. 1985); Aspgren v. Montgomery Ward & Co., 1984 U.S. Dist. LEXIS 21892 at *4-6 (N.D. Ill. Nov. 19, 1984), clarified, 1984 U.S. Dist. Lexis 20927 (Dec. 27, 1984).

By retaining counsel for your former employee, you can prevent opposing counsel from conducting an informal interview. Model Rule 4.2 prohibits a lawyer from communicating with a person who is represented by counsel without his lawyer's consent. Although lawyers sometimes complain when an adversary shields a former employee from internal interviews by retaining counsel, most courts have been unsympathetic to this argument. See In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 658 F.2d 1355, 1361 (9th Cir. 1981); Guillen, 956 F. Supp. at 1424 n.8; Occidental Chemical, 606 F. Supp. at 1476; Aspgren, 1984 U.S. Dist. Lexis at *4.

If you plan to provide legal representation to your former employee, it is important that you obtain his consent to the representation. Your outside counsel represents the company. He or she does not represent a former employee unless and until the former employee has consented to this arrangement. See Brown v. St. Joseph County, 148 F.R.D. 246, 250-51 (N.D. Ind. 1993). Your former employee and outside counsel should document their agreement by signing a formal retention letter. Even if there are no actual conflicts, your counsel should explain the potential hazards of joint representation to both the company and the former employee, and obtain their consent to joint representation. See Guillen, 956 F. Supp. at 1426-27.

If the former employee does not ask for legal representation, you probably should not offer it. The anti-solicitation rules prohibit a lawyer from offering to provide legal representation, at least in some circumstances. See Model Rule 7.3. At least two courts have held that a company's outside counsel created an appearance of impropriety by offering to represent a company's former employees free of charge. See Occidental Chemical, 606 F. Supp. at 1477; Aspgren, 1984 U.S. Dist. LEXIS 21892 at *6-15. As the court reasoned in Aspgren, such an offer encourages former employees “to seize on the opportunity of free representation without evaluating the advantages of independent counsel. Because the deponent might feel pressure to get representation for the deposition, the offer can become coercive.” Id. at *11.

Compensation

Unfortunately, most former employees, especially those who are now working for someone else, expect to be compensated for their time. Model Rule 3.4 states that a lawyer shall not “falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law.” However, in a 1996 informal opinion, the ABA concluded that this rule permits a party to compensate a witness for time spent preparing to testify, “as long as it is made clear to the witness that the payment is not being made for the substance or efficacy of the witness's testimony, and is being made solely for the purpose of compensating the witness for the time the witness has lost ' ” ABA Standing Comm. on Ethics and Professional Responsibility, Formal Op. 96-402 (1996). Since then, many state ethics committees have adopted a similar rule. See Compensating Fact Witnesses, 184 F.R.D. 425, 426 n. 4 (1999) (listing states). However, at least two states ' Pennsylvania and New Jersey ' do not permit a lawyer to compensate a fact witness for time spent testifying or preparing to testify. See Pennsylvania Bar Association Comm. on Legal Ethics and Prof'l. Responsibility, Informal Op. 95-126A (1995); In re PMD Enterprises, Inc. 215 F. Supp. 2d 519, 529 (D.N.J. 2002). Therefore, before agreeing to such an arrangement, be sure to consult the local ethics rules and related case law.

Of course, the fact that you can compensate a former employee does not mean that you should. One of the disadvantages of doing so is that your opposing counsel will cross-examine the person about this financial arrangement. But, there are some former employees who stubbornly refuse to spend time with you or your outside counsel unless they are paid. If you are forced to choose between paying a witness to prepare for this deposition and allowing him to testify without preparation, the former is usually preferable to the later. Nevertheless, unless your former employee demands compensation, you should not offer it.

Financial Inducements

While most states permit you to pay a witness an hourly fee for his or her time, you cannot offer him any other financial inducements to testify. See State v. Solvent Chemical Co., 166 F.R.D. 284, 289 (W.D.N.Y. 1996). You also must not create even the appearance that you are paying the witness for his testimony. For example, you should not offer to pay a fee on the eve of a former employee's deposition. See Solvent, 166 F.R.D. at 290. Both the hourly rate and the total amount of the fee must be reasonable. See ABA Formal Op. 96-402. If the former employee now runs his own consulting business, he should be paid his regular hourly rate. See Prasad v. MML Investor Services, Inc., 2004 WL 1151735 at *7 (S.D.N.Y. May 24, 2004). Otherwise, he should be paid a fee that is reasonable based on all of the relevant circumstances, such as his relevant experience and the complexity of the assignment. See ABA Formal Op. 96-402; Centennial Management Services, Inc. v. AXA Re Vie, 193 F.R.D. 671, 680 (D. Kan. 2000). Once you agree on the hourly rate, you or your outside counsel should supervise the former employee to ensure that the total amount of time he expends preparing to testify is reasonable. See Centennial Management, 193 F.R.D. at 680.

If you must pay a fee to your former employee, he and your company should sign a written consulting agreement. The agreement should reiterate that your company is paying the former employee a fee to compensate him for his time. It should instruct the former employee that he should not allow the fee to influence the substance of his testimony. Of course, this fee agreement will be discoverable and you should instruct your former employee to testify candidly about it at his deposition.

Conclusion

A former employee can be a pivotal witness for your company. Fortunately, the ethics rules permit you to help your former employee by alleviating some of the hardships of testifying. If a former employee wants counsel, you can provide it. If he wants to be compensated for his time, you can do that, as long as the fee is reasonable. But you cannot discourage him from cooperating with your opposing counsel, if he chooses to do so.

Linda L. Listrom is a senior partner in Jenner & Block's Chicago office. Ms. Listrom, a fellow in the American College of Trial Lawyers, focuses on complex commercial litigation. A member of the firm's Litigation Department and its Business Litigation Practice, she co-chairs the firm's Defense and Aerospace Industry Practice. She may be reached at [email protected].

It's Monday morning. You are sitting at your desk sipping your third cup of coffee and reading your e-mails when you learn that your company has been sued. Later, as you flip through the pages of the complaint, you discover to your dismay that one of your key witnesses will be a vice president who left the company three years ago. You have not spoken to him since.

In an era when employees change jobs frequently, your most important witness is often a former employee. At best, a former employee may be ambivalent toward your company. At worst, he or she may be downright hostile. Should you contact a former employee? If so, what should you tell him? You may need his cooperation, but the ethics rules limit what you can do to obtain it.

What to Do First

You can and should contact your former employee, and the sooner you do this the better. Undoubtedly, the plaintiff's lawyer will try to contact him. A former employee, particularly one who is disenchanted with his former employer, can be a goldmine for your adversary. The ethics rules do not prohibit your opposing counsel from informally interviewing your former employees. Most jurisdictions have adopted the ABA Model Rules of Professional Conduct, including Model Rule 4.2, which states:

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 lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.

In 1991 the ABA Committee on Ethics and Professional Responsibility issued a Formal Opinion clarifying that Model Rule 4.2 does not bar ex parte communication with an adversary's former employees. See ABA Standing Comm. on Ethics and Professional Responsibility, Formal Op. 91-359 (1991).

In 2002, the ABA issued a revised comment to Model Rule 4.2, again clarifying that the rule is not intended to bar this practice. Today, most courts agree that it is not improper for opposing counsel to contact a former employee of an organizational party, as long as counsel does not ask that person about privileged information. See Bryant v. Yorktowne Cabinetry, Inc. , 538 F. Supp. 2d 948 (W.D. Va. 2008).

Step Two

Once you reach your former employee, you should not instruct him to refrain from speaking with opposing counsel. While this is tempting, it is also unethical. Model Rule 3.4(f) provides that a lawyer shall not “request a person other than a client to refrain from voluntarily giving relevant information to another party unless the person is a relative or employee or other agent of the client.” You can tell the person that he will probably receive a call from opposing counsel requesting an interview. And you can tell him that he has a choice: He can agree to an interview, or he can refuse. Fischbach v. Founders Court Inc., 1996 U.S. Dist. LEXIS 8256 at *4 (M.D.N.C. May 16, 1996); North Carolina State Bar v. Graves , 274 S.E.2d 396, 399 (N.C. Ct. App. 1981).

Can you go further by, for example, asking the former employee to allow you or your outside counsel to be present for any interview by opposing counsel? Generally, the courts frown upon any overt attempt to discourage a witness from speaking with opposing counsel. Several courts have held that it is improper for a lawyer to “instruct” or “advise” a witness not to speak to an adversary unless counsel is present. See Gregory v. United States , 369 F.2d 185, 188 (D.C. Cir. 1966); State v. Mussehl , 408 N.W.2d 844, 847 (Minn. 1987); State v. Ben , 798 P.2d 650, 654 (Ore. 1990); State v. Hofstetter , 878 P.2d 474, 480-81 (Wash. Ct. App. 1994). However, a lawyer may “request” to be present for an interview. See Mussehl at 408 N.W.2d at 847; Fischbach, 1996 U.S. Dist. LEXIS at *5; State v. Simmons , 203 N.W.2d 887, 892 (Wis. 1973). There is a fine line separating an instruction from a request. You can stay on the permissible side of this line by explaining to your former employee that he can accept or reject your request. See Hofstetter, 878 P.2d at 482.

What to Do About Counsel

Your former employee may ask that the company's outside counsel represent him, particularly if he is likely to be deposed. Should you offer to arrange for your company's outside counsel to represent him? In criminal investigations a former employee invariably must have separate counsel, because there is almost always a conflict between him and the company. The former employee may accuse the company of wrongdoing, or may become a target of the investigation. By contrast, in civil cases there is usually no such conflict. In most cases your counsel can simultaneously represent both the company and the witness. See Guillen v. City of Chicago , 956 F. Supp. 1416, 1422-27 (N.D. Ill. 1997); Bonner v. Guccione, 1997
WL 91070 at *2 (S.D.N.Y. March 3, 1997); D.S. Magazines, Inc. v. Warner Publisher Services, Inc. , 623 F. Supp. 624,
625 (S.D.N.Y. 1985); United States v. Occidental Chemical Corp. , 606 F. Supp. 1470, 1474 (W.D.N.Y. 1985); Aspgren v. Montgomery Ward & Co., 1984 U.S. Dist. LEXIS 21892 at *4-6 (N.D. Ill. Nov. 19, 1984), clarified, 1984 U.S. Dist. Lexis 20927 (Dec. 27, 1984).

By retaining counsel for your former employee, you can prevent opposing counsel from conducting an informal interview. Model Rule 4.2 prohibits a lawyer from communicating with a person who is represented by counsel without his lawyer's consent. Although lawyers sometimes complain when an adversary shields a former employee from internal interviews by retaining counsel, most courts have been unsympathetic to this argument. See In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 658 F.2d 1355, 1361 (9th Cir. 1981); Guillen, 956 F. Supp. at 1424 n.8; Occidental Chemical, 606 F. Supp. at 1476; Aspgren, 1984 U.S. Dist. Lexis at *4.

If you plan to provide legal representation to your former employee, it is important that you obtain his consent to the representation. Your outside counsel represents the company. He or she does not represent a former employee unless and until the former employee has consented to this arrangement. See Brown v. St. Joseph County , 148 F.R.D. 246, 250-51 (N.D. Ind. 1993). Your former employee and outside counsel should document their agreement by signing a formal retention letter. Even if there are no actual conflicts, your counsel should explain the potential hazards of joint representation to both the company and the former employee, and obtain their consent to joint representation. See Guillen, 956 F. Supp. at 1426-27.

If the former employee does not ask for legal representation, you probably should not offer it. The anti-solicitation rules prohibit a lawyer from offering to provide legal representation, at least in some circumstances. See Model Rule 7.3. At least two courts have held that a company's outside counsel created an appearance of impropriety by offering to represent a company's former employees free of charge. See Occidental Chemical, 606 F. Supp. at 1477; Aspgren, 1984 U.S. Dist. LEXIS 21892 at *6-15. As the court reasoned in Aspgren, such an offer encourages former employees “to seize on the opportunity of free representation without evaluating the advantages of independent counsel. Because the deponent might feel pressure to get representation for the deposition, the offer can become coercive.” Id. at *11.

Compensation

Unfortunately, most former employees, especially those who are now working for someone else, expect to be compensated for their time. Model Rule 3.4 states that a lawyer shall not “falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law.” However, in a 1996 informal opinion, the ABA concluded that this rule permits a party to compensate a witness for time spent preparing to testify, “as long as it is made clear to the witness that the payment is not being made for the substance or efficacy of the witness's testimony, and is being made solely for the purpose of compensating the witness for the time the witness has lost ' ” ABA Standing Comm. on Ethics and Professional Responsibility, Formal Op. 96-402 (1996). Since then, many state ethics committees have adopted a similar rule. See Compensating Fact Witnesses, 184 F.R.D. 425, 426 n. 4 (1999) (listing states). However, at least two states ' Pennsylvania and New Jersey ' do not permit a lawyer to compensate a fact witness for time spent testifying or preparing to testify. See Pennsylvania Bar Association Comm. on Legal Ethics and Prof'l. Responsibility, Informal Op. 95-126A (1995); In re PMD Enterprises, Inc. 215 F. Supp. 2d 519, 529 (D.N.J. 2002). Therefore, before agreeing to such an arrangement, be sure to consult the local ethics rules and related case law.

Of course, the fact that you can compensate a former employee does not mean that you should. One of the disadvantages of doing so is that your opposing counsel will cross-examine the person about this financial arrangement. But, there are some former employees who stubbornly refuse to spend time with you or your outside counsel unless they are paid. If you are forced to choose between paying a witness to prepare for this deposition and allowing him to testify without preparation, the former is usually preferable to the later. Nevertheless, unless your former employee demands compensation, you should not offer it.

Financial Inducements

While most states permit you to pay a witness an hourly fee for his or her time, you cannot offer him any other financial inducements to testify. See State v. Solvent Chemical Co. , 166 F.R.D. 284, 289 (W.D.N.Y. 1996). You also must not create even the appearance that you are paying the witness for his testimony. For example, you should not offer to pay a fee on the eve of a former employee's deposition. See Solvent, 166 F.R.D. at 290. Both the hourly rate and the total amount of the fee must be reasonable. See ABA Formal Op. 96-402. If the former employee now runs his own consulting business, he should be paid his regular hourly rate. See Prasad v. MML Investor Services, Inc., 2004 WL 1151735 at *7 (S.D.N.Y. May 24, 2004). Otherwise, he should be paid a fee that is reasonable based on all of the relevant circumstances, such as his relevant experience and the complexity of the assignment. See ABA Formal Op. 96-402; Centennial Management Services, Inc. v. AXA Re Vie , 193 F.R.D. 671, 680 (D. Kan. 2000). Once you agree on the hourly rate, you or your outside counsel should supervise the former employee to ensure that the total amount of time he expends preparing to testify is reasonable. See Centennial Management, 193 F.R.D. at 680.

If you must pay a fee to your former employee, he and your company should sign a written consulting agreement. The agreement should reiterate that your company is paying the former employee a fee to compensate him for his time. It should instruct the former employee that he should not allow the fee to influence the substance of his testimony. Of course, this fee agreement will be discoverable and you should instruct your former employee to testify candidly about it at his deposition.

Conclusion

A former employee can be a pivotal witness for your company. Fortunately, the ethics rules permit you to help your former employee by alleviating some of the hardships of testifying. If a former employee wants counsel, you can provide it. If he wants to be compensated for his time, you can do that, as long as the fee is reasonable. But you cannot discourage him from cooperating with your opposing counsel, if he chooses to do so.

Linda L. Listrom is a senior partner in Jenner & Block's Chicago office. Ms. Listrom, a fellow in the American College of Trial Lawyers, focuses on complex commercial litigation. A member of the firm's Litigation Department and its Business Litigation Practice, she co-chairs the firm's Defense and Aerospace Industry Practice. She may be reached at [email protected].