Recently, the New Jersey Supreme Court suspended an attorney for making indecent proposals to at least four female clients in exchange for discounted legal fees or free legal work.  His defense, in part, was that he was “joking;” his office atmosphere was “relaxed,” allowing for conversations regarding very personal subjects; and that he never intended to insult or demean any clients.  Nevertheless, the four women who complained believed he was offering discounted legal fees in exchange for sexual favors.  Again.  To quote an ESPN football commentator, “Come on, man!”

Please do not misunderstand.  I enjoy a good joke as much (maybe more) as the next person.  In fact, I used to get a bit hacked off when I would walk in an office, and the guys would stop telling what was probably a funny joke because it was slightly off-color – out of fear of offending me.

But, really, it is past time for all attorneys (and professionals) to exercise what the military refers to as “situational awareness.”  Most people do not come to an attorneys’ office for stand-up comedy.  What might seem funny outside the office (or not funny but might result in a slap in a face in a bar), is simply not appropriate in the context of a legal consultation.  Does a state Supreme Court actually have to tell people that?

Perhaps the biggest joke is the imposition of “sensitivity training” before the attorney in question can return to practice.  Have any of you ever sat through a “sensitivity training” class?  Red lights; yellow lights; and green lights are simply not practical training tools when a person, such as an attorney or any other professional, deals with highly emotional situations such as the filing of a lawsuit; a divorce; or bankruptcy.

So, please tell me a good joke at one of the receptions at the Annual Meeting (my rules – must be funny; and I cannot have heard it before), but PLEASE do not try to joke about sexual favors to your clients.  They probably will not think it is funny.

Link to the original article: http://www.law.com/jsp/article.jsp?id=1202464064588&Lawyers_Indecent_Proposals_to_Female_Clients_Bring_OneYear_Suspension

According to Chairwoman Mary Schapiro, the case against Goldman Sachs was just the tip of the S.E.C.’s enforcement iceberg.  The following article quotes Chairwoman Schapiro telling reporters that investors have not seen the bulk of cases brought by the S.E.C. and that the S.E.C. has investigations “in the pipeline across products, across institutions”.  While not surprising in light of the recent extensive financial and regulatory reform signed by President Obama on July 21st, Chairwoman Schapiro’s comments are confirmation that the S.E.C. will continue to seek accountability for the 2008 disruptions in the financial and real estate markets.
 

 http://www.starnewsonline.com/article/20100721/ZNYT01/7213011/-1/search10?Title=S-E-C-Pursuing-More-Cases-Tied-to-Financial-Crisis

So, in light of the much publicized Human Growth Hormone (HGH) positive test result for rugby player, Terry Newton, earlier this year, Bud Selig has implemented HGH testing for minor league baseball players. Recall that the Commish can unilaterally impose such testing as Minor League baseball players are not represented by a collective bargaining group like their Major League counterparts, the MLBPA. The random testing will fall under the existing Minor League Drug Prevention and Treatment Program, under which forty-nine Minor League players have been suspended in 2010. None of these suspensions were made for HGH use.

Testing will be done by the National Center for Drug Free Sport, which currently collects all urine samples for the Minor League. Blood samples will be taken from the non-dominant arm of the respective player. Testing will be performed by Sports Medicine Research and Testing Lab in Utah.

Current penalties for performance enhancing substances (PEDS) will apply to HGH as well: fifty game ban for the first positive result, one hundred game ban for the second positive result, and, finally, a third positive result could mean a permanent suspension from both the Minor and Major Leagues.

Shirley Sherrod, head of the Department of Agriculture’s rural development office in Georgia, was forced to resign earlier this week after a two-and-a-half minute video clip emerged over the weekend which suggested that she had discriminated against a white farmer 24 years ago.   The National Association for the Advancement of Colored People (NAACP) released a statement late Monday condemning the remarks Sherrod made at a NAACP luncheon earlier this year.  The news came a week after the NAACP and the Tea Party movement became embroiled in accusations of racism and bigotry after a high-ranking Tea Party spokesperson was expelled after he published a blog about slavery that was deemed to be racist.
 
It was subsequently determined that the edited clip of Sherrod's speech did not include the portion of the speech in which she said the episode had taught her the importance of overcoming personal prejudices.  Sherrod has since received an apology from the administration and the NAACP, and she has been offered another job with the Department of Agriculture.  This incident has sparked a national conversation about politics and race.  It also highlights how words taken out of context can be construed incorrectly.  What is the lesson to be learned from this experience?  How can those lessons positively impact the diversification of the legal profession?  How can those lessons positively impact your law firm?  Is your firm discussing this event?  If yes, are these discussions helping your firms diversity efforts?"

Full story at MSNBC, FOX News.

While Congress is not usually our venue of interest, we did find the headline about Representative Charles Rangel interesting.  We would like to hear from our members what differences and similarities they believe exist between the various rules of ethics applied to attorneys in the various states and the rules of ethics applied to members of Congress.  Should the rules applied to attorneys be stricter or more lenient?  In what ways do you think the public policies advanced by rules of ethics for attorneys are or are not advanced by the rules of ethics for members of Congress?

Apparently RIM/Blackberry has blasted back at Steve Jobs for dragging it into the antennae controversy.  Jobs stated in a press conference that Blackberries essentially have the same problems as the iPhone with antennae reception.  If this isn’t true, I wonder if Apple and/or Jobs is open to a defamation claim or intentional interference with business relations.

http://www.cnbc.com//id/15840232?video=1547190135&play=1

I recently read an article that discussed a growing trend in jury trials:  allowing jurors to ask questions of witnesses.  The article indicates that allowing jurors to ask questions of witnesses while on the stand is a favored trend because it helps jurors feel more like they are a part of the process and likely reduces deliberation time because jurors spend less time in deliberations speculating about unanswered questions.

The article set out a simple process.  Once counsel concludes their examination, the jury is asked by the judge if they have any questions.  Any questions are written down by the jurors and passed to the Court Deputy who hands them to the Judge.  The Judge determines if it is a question that at least on its face appears proper.  The Judge then asks Counsel if they have any objection.  If there is no objection the question is asked.  If there is an objection the Court rules the objection and makes the call whether to ask the question.

Well as fate would have it, I lived the experience of allowing jurors to ask questions in a recent wrongful death trial.  The process followed was very similar to that outlined in the article with the exception the Court at times tried to clarify the question and did allow follow up by Counsel. 

During four days of evidence, there were about a dozen questions. Only two were rejected by the Court as improper.  In the case of an improper question the Court simply did not ask the question without any explanation as to why the question was not asked.  There were no questions asked that were objected to by one side but not the other.

The overall experience was positive especially since the jury returned a defense verdict, but I have to say I am not sure any time was saved during deliberations since it still took the jury six hours to return their verdict.  In sitting and listening to the Court ask the questions posed by the jury it dawned on me how much the Court could, by how it asks the question, rephrases the question or by asking its own follow up question, influence a jury.

For future reference if you are comfortable with your judge I see no reason to oppose allowing the jury to ask questions of witnesses especially since it will likely happen anyway.  I would however, make sure  the process of how the questions will be asked is clear including if there is to be any clarification that Counsel have input in the clarification of the question and that any follow up questions come only from counsel.  The only other suggestion I might offer is that the jury be advised, when they are instructed they can ask questions, that if a question they pose is not asked it is because under the rules of evidence the question cannot be answered or some other general reason why the question was not asked.

If anyone would like to share their experience with jury questions please do, I would like to know how others feel about this apparent growing trend in jury trials.

The judicial system will be busy creating new law concerning the phenomenon of jurors texting, tweeting and googling while serving on the jury.  Creating new jury instructions is the easy part.  Enforcing such instructions and deciding what to do when a juror does not follow them or what to do with a trial that is tainted because of the same, is the real daunting task.  One thing is clear, courts across the country are moving towards banning all electronic communications from the jury.
 
For example, in late January this year, the Judicial Conference released to the federal judiciary a model jury instruction which has been coined the “Twitter instruction” that states:
 
“You may not communicate with anyone about the case on your cell phone, through e-mail, Blackberry, iPhone, text messaging, or on Twitter, through any blog or website, through any internet chat room, or by way of any other social networking websites, including Facebook, My Space, LinkedIn and YouTube.”
 
There are no nationwide jury instructions for state courts.  Each state adopts its own set of jury instructions.
 
On September 1, 2009, the Michigan Supreme Court imposed a new rule that will require all judges to instruct jurors that use of any handheld device such as iPhones or Blackberrys while in the jury box or during deliberations is impermissible.  As follows, when such devices are banned, communications such as tweets on Twitter, Google searches, Facebooking and text messages by jurors during trial will come to a halt for Michigan jurors and those jurors in jurisdictions with similar instructions. 
 
Michigan’s new rule arrives in the wake of an influx of recent cases in which jurors have blogged, posted Tweets, sent text messages or updated their Facebook during trials, resulting in the dismissal of jurors, mistrials and angry judges.  These results will keep the courts busy creating law for years to come. Specifically, when these mishaps occur should a mistrial be granted?  Should the offending juror be excluded?  To date, courts have really gone either way with these issues.
 
For example, in March 2009, during a Florida drug trial it was discovered that nine jurors were ignoring the judge’s instructions and conducting Google research on the defendant, checking legal terms and uncovering evidence that was excluded at trial.  The result, the judge declared a mistrial.  Further, in Florida, a Miami-Dade Court Judge declared a mistrial in May 2009 in a civil fraud case after a company executive witness texted his superior on the stand during a side bar conference.  
 
In contrast, in Pennsylvania, a mistrial was not declared although called for, when a juror was discovered tweeting and publishing trial updates on Facebook in the prosecution of a former Pennsylvania state senator convicted of graft.  In Arkansas, a judge in April 2009 ruled that there was no mistrial when a juror’s Twitter posting stated, “just gave away TWELVE MILLION DOLLARS of somebody else’s money.”  The judge upheld the $12.6 million dollar verdict finding that the tweets were not improper although done in poor taste. 
 
Jurors are supposed to deliberate cases based on evidence presented at trial in the courtroom and not based on independent research via the web.  Those rules are clear.  However, how far can a juror go and what standard will the courts use to determine when a juror has gone so far as to taint the whole process.  This has yet to be developed into a consistent body of law and this new area of law is ripe for development.

Thomas J. Welk and Jason R. Sutton, of Boyce, Greenfield, Pashby, & Welk LLP, were recently successful in sustaining an injunction prohibiting a competing manufacturer from using a manufacturing line for a period of two years in Raven Industries, Inc. v. Clark Lee and Integra Plastics, Inc., 2010 SD 49 (S.D. June 16, 2010).  In this case, Raven brought suit against a former engineer for Raven named Lee, and a competitor named Integra, who hired Lee.  While at Raven, Lee signed two non-disclosure agreements.  After going to work at Integra, Lee replicated Raven’s unique manufacturing line.

Raven sued Lee for breach of the non-disclosure agreements.  Raven sued Integra for tortiously inducing breach of the non-disclosure agreements and for engaging in unfair competition.  Raven only sought injunctive relief.

There were a couple of noteworthy procedural issues in this case.  At the summary judgment stage, Lee and Integra argued that Raven’s claims were preempted the Uniform Trade Secrets Act.  Although the trial court denied summary judgment, it did not directly address this argument.  Lee and Integra never again raised the issue even though there was elaborate briefing and proposed findings of fact and conclusions of law for this nine-day court trial.  On a matter of first impression, the South Dakota Supreme Court held that the denial of summary judgment without any further argument on the issue was sufficient to preserve the issue for appeal.

The other interesting procedural aspect of the case related to Supreme Court’s jurisdiction.  Lee and Integra filed a timely notice of appeal of the original permanent injunction but failed to file a notice of appeal for a later, modified permanent injunction.  Raven argued that the modified permanent injunction became final, which mooted the appeal of the original permanent injunction.  The Supreme Court construed the original notice of appeal to include the modified notice of appeal so that it continued to have jurisdiction over the appeal.

From a substantive stand point, the noteworthy portion of the case relates to the enforceability of employer-employee non-disclosure agreements.  Under South Dakota law, non-disclosure agreements are enforceable even if the information does not rise to the level of a trade secret.  On a matter of first impression, the Court concluded that the employer must only engage in reasonable efforts to maintain the secrecy of its information at issue rather than have absolutely secrecy as argued by Lee and Integra.  Raven’s manufacturing line had been viewed by third parties but the trial court found that Raven’s polices as to confidentiality to be reasonable.

The two year period of time for the injunction was selected because the CEO for Integra testified that was the period of time required to replicate the manufacturing line without Lee.

Click here for the opinion

Two recent FCPA enforcement developments exemplify the government’s view that foreign corruption is a national security risk warranting increased scrutiny.

First, the newly established FCPA unit at the Securities and Exchange Commission is investigating companies in the pharmaceutical and energy industries that do business in nations designated as state sponsors of terrorism. The purpose of the investigation is to determine whether any of the companies’ operations were used to support terrorist activities in Cuba, Iran, Sudan and Syria.

Second, the Criminal Division’s Fraud Section has sent letters in recent weeks to a number of pharmaceutical companies asking about payments made to foreign officials in several nations, beyond those designated as state sponsors of terrorism. This development follows the justice department’s announcement of its own general probe into the pharmaceutical and medical device industry in November 2009.

These two investigations reflect a policy judgment that corruption is a national security issue. The government is now looking at international corporations, including those in the pharmaceutical and medical device industry, as the gatekeepers for business activity that can be used to finance terrorist activities. Moreover, the Department’s anticorruption efforts reflect an acceptance that poor governance, including corruption, has pernicious effects on development and stabilization.

These two developments are the latest manifestation of the trend in intensified FCPA enforcement targeting the pharmaceutical industry. In a speech on November 12, 2009, to the Tenth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum, Lanny A. Breuer, Assistant Attorney General of DOJ’s Criminal Division, warned that “[o]ur focus and resolve in the FCPA will not abate, and we will be intensely focused on rooting out foreign bribery in your industry. That will mean investigation and, if warranted, prosecution of corporations to be sure, but also investigation and prosecution of senior executives.”

Breuer highlighted some of the key factors that increase FCPA liability risks for the pharmaceutical industry. First, he noted that “close to $100 billion, or roughly one-third, of total sales for [U.S. pharmaceutical companies] were generated outside the United States, where health systems are regulated, operated and financed by government entities to a significantly greater degree than in the United States” – thereby resulting in substantial interaction with foreign government officials to manufacture and market pharmaceutical products. Second, he highlighted the problem presented by interacting with foreign health care systems: “under certain circumstances and in certain countries, nearly every aspect of the approval, manufacture, import, export, pricing, sales and marketing of a drug product in a foreign country will involve a ‘foreign official’ within the meaning of the FCPA.” Third, he cited “fierce industry competition and the closed nature of many public formularies.”

Based on these factors, pharmaceutical companies must establish and implement internal controls that govern “routine” interactions with foreign officials throughout the entire product life cycle. Aggressive FCPA enforcement creates not only back-end, e.g., distribution, but also front-end, e.g., preclinical and R&D, compliance challenges for pharmaceutical management teams that may not be accustomed to focus on anything other the scientific process. The government will closely scrutinize contacts with foreign officials throughout the entire regulatory process, including: research and development, filing patents, manufacturing, registration, price fixing, licensing of professionals and establishments, selection of essential medicines, procurement, distribution, inspection of establishments, prescription, dispensing, pharmacovigilance and marketing and sales.

Some core activities implicating FCPA concerns include:

• Engaging the services of health care professionals
• Post-marketing studies and other clinical studies
• Sponsoring health care professionals to attend meetings and events
• Gifts and entertainment
• Visits to company facilities and other travel
• Sponsorship and grants
• Political contributions
• Facilitating payments
• Actions by and payments to agents, consultants, joint-venture partners, distributors and other third party representatives
• “hospitality” payments

FCPA enforcement is no longer only about “leveling the playing field” of corporate opportunities. Given the government’s treatment of corruption as a national security issue, business leaders must ensure that company proceeds do not finance illicit payments which can be used to sponsor terrorism or otherwise be seen as degrading the national security interests of the United States. With the dramatic increase in FCPA penalties against senior corporate executives, corporate executives must protect themselves and their companies by conducting the appropriate due diligence and implementing the necessary internal controls to identify and remediate the danger of FCPA violations.