In his recent article in City-Journal, Northwestern University Law Professor John McGinnis hypothesizes that recent and impressive technological advances will have an increasingly disruptive impact on the legal profession.  McGinnis notes that “law schools are in crisis,” “solo practitioners have been hurting for a decade,” “attorney job growth has been flat,” and “the going rate for associates, even at the best firms, has stagnated since 2007.”  Though the economic downturn has certainly played a part in the current state of the legal industry, the advances in information technology will be the determining factor in the future.  McGinnis predicts that “five key areas of law now face encroachment by this machine intelligence.”  

The first, e-discovery, is already well on its way to changing (and limiting) opportunities for some lawyers.  Most notably, junior litigation associates used to be profit centers for big firms by spending late nights and weekends on hefty document review projects.  With predictive coding, the speed and accuracy of this work is improved and the need for bodies in the office is decreasing.  

The second key area is legal research, which as McGinnis notes, has largely “depended on typing in the right specific keywords.”  As computer technology improves, machine intelligence will be able to recognize concepts rather than just words with the result being more efficient research limiting lawyers’ “traditionally enjoyed leverage over the laity.”

McGinnis’ third area, legal forms, is already replacing many of the tasks traditionally performed by solo practitioners and small firms: trusts, estates, basic corporate documents, etc.  Businesses like Legal Zoom and Kiiac specialize in drafting estate documents and contracts, while “Nevada’s secretary of state has pioneered online registration for small businesses, which can comply with regulations by following the steps of simple computer programs.”  

McGinnis also predicts computers may one-day play a stronger role in a fourth traditional lawyer task: drafting briefs and memos in simple litigation.  Though McGinnis notes “an experienced lawyer could easily shape a computer generated draft into a more polished product” there’s no denying that “once programs start being useful, they get more effective over time.”  Ultimately, computers may be playing the role of entry-level associate in some cases.  

Finally, McGinnis hypothesizes that computers will bring “moneyball” to law.  The term “moneyball”, made famous by Michael Lewis’ bestselling book about the change in baseball statistics and analytics, generally refers to a method of predicting results based on raw data and statistics.  For lawyers, the use of “moneyball” in the law means that computers predict a client’s chance of success in litigation, as opposed to a lawyer’s hunch or gut feeling. To some extent, legal moneyball is already in place.  Legal support companies already track numerous statistics about potential jurors and past jury verdicts in forums across the country. The question is, how much progress can be made using legal moneyball?

Right or wrong, McGinnis raises some interesting points about the changing role of computers and technology in the law.  In a world where lawyers are constantly competing with each other for the next case and the next deal, perhaps the most successful lawyers will be those that are prepared to compete with and for the best legal technology.  Indeed, as MIT’s Eric Brynjolfsson and Andrew McAfee have advised in their recent book Race Against the Machine, “The key to winning the race is not to compete against machines, but to compete with machines.”

You can read the entirety of McGinnis’ article here. 

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An administrative law judge (“ALJ”) writing on behalf of the National Labor Relations Board (“NLRB”) reviewed the social media/on line communications policy of The Kroger Co. of Michigan, a retail grocery chain, in the context of an unfair labor practices complaint.  In the decision issued on April 22, 2014, the ALJ ruled that portions of Kroger’s policy were unlawfully broad and in violation of Section 7 of the National Labor Relations Act.

 What was the offending language?

If you identify yourself as an associate of the Company and publish any work-related information online, you must use this disclaimer: “The postings on this site are my own and do not necessarily represent the postings, strategies or opinions of The Kroger Co. family of stores.”

It is fairly common for employers to establish policies requiring that employees use disclaimers of this nature when posting on line.  The ALJ, however, stated that “there is no question but that this rule implicates much Section 7 activitiy.  While not all work-related information is potentially protected by Section 7, a great deal of it is.”

The ALJ conceded that an employer has a legitimate interest in stopping unauthorized employees from speaking on behalf of the company and even from being perceived as speaking on behalf of the company.  He determined that in evaluating the employer policy, it was necessary to consider what the risk is that, in the absence of a disclaimer, section 7 activity, i.e. discussing the terms and conditions of employment, would be mistaken for employer sanctioned speech.  The ALJ concluded that a disclaimer is problematic under the Act if it is likely to chill legitimate and protected employee speech.

In striking down the disclaimer language the ALJ stated that “Given the breadth of online communications to which the rule applies, it would be extremely burdensome to have to post the disclaimer in each instance or on each new page, and this would have a reasonable tendency to chill Section 7 activity in this regard.”  The Decision itself is worth the read in that it gives startling insight into the reasoning of at least this one ALJ.

This blog was originally posted on May 10 on the Employment Law Business Guide. Click here to read the original entry.  

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LinkedIn has been recognized by numerous sources as a useful tool for marketing and networking within the legal community.  The social networking site has nevertheless recently raised the concerns of a number of state bar associations, including Florida and New York.  LinkedIn counsel recently met with Florida Bar Association officials to address the Florida bar’s concerns regarding the social networking site’s use of descriptors such as professional "specialties" and third party recommendations.  While Florida may have among the most stringent advertising rules in the country, the Florida bar’s expressed concerns  have echoed questions across the country pertaining to the regulation of attorney advertising generally, the need to prohibit false or misleading claims about attorneys or the services they render, and how those rules operate in a world of social media.  State bar associations across the United States are making every attempt to keep up with the constantly evolving social media age and the fundamental changes respecting the methods by which how attorneys may advertise.  With such attempts, the state bars are seeking a balance between protecting their lawyer members and the lawyers’ potential clients.   But some argue such protection is overbroad, and imposed at the cost of an attorney’s first amendment rights.  Indeed, one Florida law firm has filed a federal lawsuit against the Florida State Bar alleging violations of the firm’s First Amendment rights.  

Some attorneys may not fully appreciate the ethical limitations imposed on attorney advertising, as some aspects of social media may require closer examination regardless of where you practice.  For example, do “professional specialties” mean an attorney is board certified by a particular state? Could it be perceived that way by a potential client? When does a third party recommendation equate to an unethical endorsement of an attorney’s skills?  Even a cursory consideration of these questions shows why LinkedIn might be willing to discuss the concerns of state bar associations and to work with those state bars  to ensure appropriate mechanisms are in place which would allow attorneys to have informational content in their profile useful to advertise their practice, but at the same time do so in compliance with the ethical rules of their state, while also allowing them to monitor and revise that content..  As attorneys continue to use and expand their use of social media, it is important to remember the standard advertising rules apply, even though the media may be ever changing. 
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In today’s connected society, it’s difficult to escape the necessity of joining the world of social media networking. For attorneys, social media may provide fast, easy, and economical means of reaching clients and potential clients and advertising their services. “Victory in court today! Contact me for a free consultation,” and “Just won a million dollar verdict! Tell your friends to check me out,” are examples of common social media postings utilized by attorneys to spread the word of their success and appeal to clients. But are such postings subject to the Rules of Professional Conduct regarding advertising? This was the issue recently decided by The State Bar of California Standing Committee on Professional Responsibility and Conduct.

The Rules of Professional Conduct and the Business and Professions Code place numerous requirements and restrictions on attorney advertisements and communications. Rule 1-400 of the Rules of Professional Conduct entitled “Advertising and Solicitation” provides detailed requirements with which attorney advertising must comply. However, despite its title, it speaks in terms of “communications” rather than specifically “advertisements.”  The rule defines a “communication” as “any message or offer made…for professional employment…directed to any former, present, or prospective client.”  Furthermore, the Business and Professions Code defines an advertisement as any “communication…that solicits employment of legal services.” Therefore, when it comes to social media postings, because such postings are technically communications, they must be carefully analyzed to ensure that the rules are complied with. Despite the fact that these rules do not specifically refer to Facebook or Twitter postings, “there is little doubt that the restrictions [of the rules] indeed apply to computer-based communications.” (The State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Opinion no. 2012-186.) In light of the foregoing, it was determined by the Standing Committee that the real issue when determining whether a Facebook or Twitter posting constitutes a communication within the meaning of the rules is whether the statement “concern[s] the availability of professional employment” of an attorney. (Rule 1-400(A).)

For example, a Facebook posting stating, “Case finally won! Celebrating tonight,” does not seek employment by the attorney. Whatever the attorney’s subjective intent when making the statement, it does not constitute a communication for purposes of the rules. In contrast, the statement “Victory in court today! My client is delighted. Contact me for a free consultation,” suggests the availability of professional employment and is therefore subject to the rules. This statement furthermore violates Rule 1-400(E), Standard 2 by containing a client testimonial (“[m]y client is delighted!”) without an express disclaimer.

Any social media posting that seeks professional employment and is therefore subject to the rules must comply with the advertising requirements that apply to such communications. Rule 1-400, Standard 5 requires that the communication bears the word “advertisement” or “newsletter”, or other words to that effect. Additionally, any such communication must be retained by the attorney for two years; this rule has been specifically extended to include “electronic media” by Rule 1-400(F). 

While the social media outlets may provide personalized, informal contact with friends and business contacts, it should be remembered by all attorneys that the informal arena does not relieve the attorney of his or her ethical obligations. So, before you press “send” on your tweet, don’t forget to check your statements to ensure they are in compliance with the Rules of Professional Conduct.

*This was originally posted on May 7 on Jampol Zimet LLP’s Insurance Defense Blog. Read the original post here

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Authority without accountability is dangerous. Accountability without authority is agonizing. Such agony is manifest in two ediscovery sanction awards making the rounds recently. Peerless has commentators warning us not to pass to the buck to our ediscovery vendor. While Branhaven has raised questions of how much outside counsel can rely on their client when certifying discovery responses (in addition to reaching questionable conclusions re PDF vs. TIFF productions).

The commentary on both cases has been excellent. Much it has focused, understandably, on the division of responsibility – who is accountable for what. Outside counsel, it seems, can trust only themselves – not the vendor (Peerless); not their own client (Branhaven). Nor, of course, can anyone rely on custodians to comply with hold instructions (as we learned in Samsung), let alone self-collect

In holding the parties accountable both rulings suggest some implicit assumptions about authority that are worth exploring. Specifically, Branhaven assumes that outside counsel will, if she chooses, have visibility into a client’s efforts to assemble documents; while Peerless assumes that a domestic party can supervise document collection efforts at a foreign affiliate. 

In Branhaven, outside counsel appears to have little idea as to what his client, Branhaven, was actually doing. Counsel forwarded requests for production to Branhaven. Counsel then certified written responses to requests representing that responsive documents would be produced. Counsel based his certification on his “understanding” that Branhaven was assembling the responsive documents. But, as the District Court in Maryland found and sanctioned, Branhaven’s effort in identifying and assembling responsive documents was lacking. In what appears to be a first, the court also sanctioned outside counsel for failure to make a “reasonable inquiry” into his client’s process and progress—or lack thereof, as it turned out.

I don’t know enough about the specific facts underlying Branhaven to pass judgment on counsel’s behavior. But I do feel a general sympathy for outside counsel whose queries are met with “we’re handling it”—whatever “it” happens to be. Further inquiry may be required as a matter of professional necessity. But pressing in-house counsel for additional information is risky from the perspective of positional power and relationship maintenance. 

Many in-house counsel are under enormous pressure to keep costs down and are therefore inclined to do as much work themselves as they can manage. Discussions with outside counsel about that work are just another cost to be avoided. Further, many in-house counsel are offended at the thought of outside counsel questioning their work, judgment, process, etc. because….well, because being the boss can go to one’s head (sorry if I am shocking anyone’s delicate sensibilities here). Finally, regardless of the motivation, what can outside counsel really do if in-house counsel is not inclined to share? There are options, few of them good – e.g., quit, send CYA memos.

A similar dynamic exists between affiliated entities. In Peerless, the vendor on whom too much reliance was placed was responsible for collecting documents from defendant’s non-party, Chinese affiliate. The Northern District of Illinois sanctioned the defendant, Crimson for having an insufficient basis to support its assertion that all responsive documents in the possession of its non-party, Chinese affiliate, Sycamore, had been produced.

The Peerless court had previously ruled that defendant Crimson was able to obtain documents from Sycamore and must therefore do so. Crimson subsequently produced documents provided by Sycamore via a vendor. In conjunction with the production, Crimson represented that all responsive documents had been turned over. The court, however, was unimpressed with Crimson’s “hands-off approach” to managing discovery at Sycamore. Rather than passive recipients of their foreign affiliate’s documents, the court found that Sycamore had a duty to directly “contact individuals at Sycamore and play a role in obtaining discovery.”

Again, I don’t pretend to know the particulars of Peerless. But I possess considerable sympathy for a domestic entity that is responsible for collecting documents from a foreign affiliate. Affiliates do not always play nice with each other. A request for assistance can run into (a) company politics, sibling rivalries, internecine conflicts, etc., (b) a genuine sense of we work at different companies, don’t tell me what to do, (c) busy people who have no time or incentive to worry about your problem, (d) a colorable conclusion that this ediscovery stuff is a bit daft; or (e) all of the above. 

The challenges are only more daunting when the affiliate is in a different country where geographic distance, language barriers, cultural differences, and variations in IT infrastructure are only the most obvious obstacles. These dynamics can become particularly untenable when the requesting entity is a small subsidiary of a large, foreign parent from whom the documents are needed. What is a domestic, in-house attorney supposed to do when a VIP at the mothership proves unresponsive to pleas for assistance? There are options; few of them good – e.g., CYA memos; try to go above the VIP.

I am not suggesting that either case was wrongly decided. Courts also face authority constraints. Their power is often limited to those who appear before them – i.e., lawyers and the parties they represent. It is unsurprising who was held accountable in Branhaven and Peerless. But it is still unsettling. Those of us who remain unconvinced of our own omnipotence can easily imagine ourselves in either position regardless of our experience, effort, acuity, etc. 

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Trade secrets are aspects of your company that, if discovered/used by a competitor, could significantly impact your bottom line or your ability to compete in the marketplace.  Recently, a federal court in Colorado held that even something that appears to be publicly known – in this case, a business’s Myspace® profiles and “friends” lists – can be trade secrets.  It is, so far, the only court known to do so.

In this post, I will explore the trade secrets misappropriation claims related to the plaintiff’s social networks within a larger antitrust and unfair competition case.

Plaintiff Regas Christou owns several trendy nightclubs in Denver. Each club has an online presence, including a Myspace site. Defendant Bradley Roulier is a former employee of Christou.  One of Roulier’s responsibilities as an employee of Christou was to develop the social networking profiles for Christou’s clubs.

In 2003, while still employed by Christou, Roulier founded Beatport, an online marketplace for downloading electronic dance music. Christou lent Roulier money to establish Beatport, and promoted and advertised for Beatport on his nightclub websites.  By 2005 Beatport was a commercial success as theonline source for electronic dance music.  Roulier entered into negotiations to buy one of Christou’s clubs, but instead, while the negotiations were ongoing, opened his own competing club, Beta, in 2008. Christou, on behalf of himself and his nightclubs, alleges in his lawsuit that Roulier used his ability to control DJs, through Beatport, to coerce them to play only at Beta and not at any of Christou’s clubs.  Christou’s lawsuit makes numerous antitrust and unfair competition claims against Roulier, Beatport and Beta, in addition to the trade secrets misappropriation claim.  The defendants made a motion to dismiss all of Christou’s, et al.’s, claims.

How Can a Public List Be Considered a Trade Secret?
According to Christou, et al., Roulier and the other defendants misappropriated plaintiffs’ log-in information for the clubs’ profiles on Myspace; lists of plaintiffs’ Myspace “friends”; lists of cell phone numbers and email addresses for DJs, agents, and promoters; and customer lists.  In analyzing whether to dismiss plaintiffs’ claims, the court looked to the eight factors used by many courts to determine whether trade secrets exist.

Roulier, et al., argued that a list of Myspace “friends” cannot, by definition, be a trade secret because it is broadcast to the world.  But the court noted that Christou, et al., had limited the access to the Myspace profiles, via passwords, to prevent access by anyone other than those personnel requiring access.  (Related post: How Much Secrecy is “Required” to Protect Trade Secrets?)  The court noted that social networking “friends” are more than simple lists of potential customers.

When a user of a social network “friends” a business, such as one of Christou’s nightclubs, that user allows the business access to the user’s personal information, including interests, preferences, contact information, and a built-in means of contact.  Like a customer list, the friends are a database of contact information for people (customers) who are already confirmed to be interested in one or more businesses (Christou, et al.’s nightclubs).

The court determined that the trade secret is not merely the friends’ names, but also their email addresses, their permission to be contacted, and the ability to notify them and promote directly to them via their Myspace accounts.  This information, according to the court, simply cannot be compiled from publicly-available sources.  The court found that Christou, et al., expended at least some effort and cost to develop the social networking aspect of its business (operating nightclubs) and the list of friends.

Lastly, the court considered whether Roulier, et al., could easily duplicate the list of friends.  The court found that any effort to duplicate Christou, et al.’s friends list would be theoretically possible, but time-consuming and costly, as it would require Roulier, et al., to individually contact each of the thousands of friends and ask for permission to “friend” them.

In sum, the court concluded that a business’s online lists of friends can be a trade secret.  Since this decision came in the context of the defendants’ motion to dismiss the claim before trial, the court did not conclude that Christou, et al., had proven that the friends list is a trade secret, but only that Roulier, et al., had not proven that the list could not be a trade secret.  Thus, the court allowed the claim to proceed.

What do you think – should a company’s social media “friends” list be considered a trade secret?

*This post can be found here on "The IP Blog," originally posted on August 1, 2012 by Walter E. Judge, Jr.*   

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Insurance Coverage and Cyber Crimes

Posted on September 13, 2012 07:56 by Brenda K. Wallrichs

A recent report indicated there have been almost 200 high profile data breaches this year, resulting in the exposure of over 13 million records.  Among the information released was social security numbers, bank account numbers, patient and medical information, and other personal data.  In addition to these large scale breaches, breaches on a smaller scale occur daily, from employees accessing and misusing electronic information stored by their employers to students utilizing Facebook posts to bully.  These breaches clearly raise privacy concerns and cause headaches and in some cases heartache for the individuals whose information was disseminated.  But the breaches also create serious liabilities for the entities that were entrusted to secure the information and for the persons who accessed it.

An emerging and evolving issue concerning data breaches and other cyber crimes is the availability of insurance coverage for the persons bearing responsibility for the release and improper use of the information.  Courts struggle with applying traditional CGL policies to cyber losses, and insurers are responding with a variety of new products.  The availability of coverage, both under traditional policies and under more recently developed policies, is a topic that will be discussed at the DRI Insurance Law Committee’s Insurance Coverage and Practice Symposium.  Please join us in New York City, December 6-7, for more discussion about this topic.

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Ethics 20/20: The Impact of Technology

Posted on August 30, 2012 03:19 by J. Logan Murphy

Every day, we see the impact of technology on the practice of law. Blogs, social networking, electronically stored information, and other legal resources create enormous economies and unprecedented depth in our field. But with these advantages come unrecognized perils. The transparency and mobility of electronic information creates significant risks to clients, unless properly controlled. As part of the project to rein in technology in the practice of law, the American Bar Association launched an ambitious multi-year project called Ethics 20/20. One of the major goals of Ethics 20/20 was to modernize the rules of ethics and bring them into congruence with the state of technology.


At its most recent meeting, the ABA passed multiple resolutions amending the Model Rules of Professional Responsibility to reflect the evolution of technology in the practice of law. This article provides a brief overview of those amendments. Those who are more interested in the details of the amendments can click here to read the reports online.


Confidentiality When Using Computers
Resolution 105A makes changes to help lawyers understand how to protect client confidences when using new technology, including cloud computing, tablets, and smartphones. Though small, one of the most significant changes is included in Comment 6 to Rule 1.1 (Competence). The Rule now includes a requirement that “a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology.” No longer can attorneys simply ignore developments in favor of staid methods of practice. To be competent, an attorney must work effectively with technology and keep alert to technological improvements and changes.

The amendment to Rule 1.6 (Confidentiality of Information) is probably the largest and most impactful rule change related to confidentiality. Now, Rule 1.6(c) requires attorneys to “make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating the representation of a client.” The comments make it clear that attorneys are required to utilize reasonable safeguards to protect confidential information. These changes are geared toward the protection of electronic data, especially given the innumerable bits of sensitive information flying around every day.


Using Technology for Marketing
Resolution 105B was designed to help lawyers understand how the principles of attorney advertising already incorporated into the Rules are affected by the growth of Internet-based marketing and social networking. This particular resolution accomplishes three main goals. First, changes to Rule 1.18 offer guidance on how to market online without inadvertently forming an attorney-client relationship. Recent cases have demonstrated confusion on behalf of the general public regarding whether an attorney-client relationship is formed when the potential client emails the attorney or fills out a communication form on the attorney’s website. The amendments to Comment 2 of Rule 1.18 address the concern by stating that a person becomes a prospective client by “consulting” with a lawyer. While the existence of a consultation depends on the circumstances, the Comment eliminates potential passive liability to prospective clients. A consultation “does not occur if a person provides information to a lawyer in response to advertising that merely describes the lawyer’s education, experience, areas of practice, and contact information, or provides legal information of general interest.” But, if the lawyer actively invites information about a possible representation, the lawyer is probably stuck with a prospective client.

Second, the Rules contain a prohibition against paying others for a “recommendation,” and this Resolution modifies that prohibition to account for online lead generation services through chances to Comment 5 of Rule 7.2. Lawyers may now pay others for generating client leads, as long as the Internet-based lead generator does not “recommend” the lawyer. The lawyer is also responsible for the representations of the lead generator, with Comment 5 placing the onus on attorneys to ensure that the lead generator is not making statements that are inconsistent with the rules.

Finally, amendments to Rule 7.3 assist attorneys in determining when communications on the Internet, particularly through social networking sites, may constitute a “solicitation.” Only a “target communication initiated by the lawyer” directed to a “specific person” that “offers to provide” legal services is a solicitation. Communications to the general public, including Internet banners, are not solicitations, so feel free to jump on that Facebook advertising spot.


Outsourcing
Lawyers have been slow to adopt the economies of scale that outsourcing can provide, in part because of the perceived ethical dilemmas presented in outsourcing. Outsourcing can endanger confidential client information and presents a quandary over legal work being performed by attorneys not licensed in the United States. Resolution 105C encourages attorneys to ensure the efficiency, competence, and ethics of any outsourcing process. An entirely new comment is added to Rule 1.1, requiring the informed consent of the client to contract with any lawyer outside of the lawyer’s own firm. And, lest we forget, lawyers are always charged with supervising non-lawyers; that requirement does not abate simply because work is being outsourced to a foreign country. Comments 1 and 3 to Rule 5.3 incorporate this concept and apply the general rule to all non-lawyers outside of the lawyer’s own firm. The basic gist of the changes in Rule 105C is to encourage lawyers to keep a sharp eye on professionals hired from outside their own firm, and to work closely with clients in determining the proper scope of outside contracting and supervision. No surprise there—constant communication with the client is a harbinger of a durable and responsible attorney-client relationship.


Mobile Lawyers
A prevalent by-product of an informationally small, but geographically large, practice is the tendency of lawyers to move their practice. The world does indeed get smaller every year. No longer do lawyers move down the street; more and more, attorneys are moving their practice to different jurisdictions, and virtual law offices are sprouting in all states. The remaining resolutions that passed enable attorneys to establish a practice in another jurisdiction—subject to stringent information protection requirements—while pursuing admission in that jurisdiction. Resolutions 105D and 105E address the ABA Model Rule of Practice Pending Admission and the ABA Model Rule on Admission by Motion, respectively. With a few states signaling their intent to adopt a uniform bar exam, these model rules and their amendments continue the progress toward a more uniform practice of law. In case you have never encountered these model rules, or their state versions, their purpose is to allow experienced lawyers who have moved into a different jurisdiction to continue to practice while awaiting an expedited admission to the Bar. 

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As Congress Resets the Clock Until After the Elections, the Supreme Court Issues Significant Opinions Limiting Governmental Power to Restrict Commercial Speech

 
On July 9, 2012, President Obama signed into law the Food and Drug Administration Safety and Innovation Act giving the FDA two years to “issue guidance that describes Food and Drug Administration policy regarding the promotion, using the Internet (including social media), of medical products…”  The FDA has been studying this issue since 1996.  It has held numerous hearings, issued notices and guidance, and pursued countless enforcement actions based on on-line content.  Nonetheless, despite over 16 years of deliberations, the rules remain unclear.  In FDA’s defense, technology is a moving target and new media continues to evolve and revolutionize how society behaves and shares information.  However, the lack of clear guidance has significantly silenced the one voice with the most reliable scientific information concerning medical products - the manufacturer.  While it is not clear what guidance FDA will ultimately issue, it is clear that Congress has reset the clock for FDA to provide “guidance” until after the 2012 elections.  

Despite Vague Rules, Civil Penalties and Criminal Prosecutions Set New Records

On July 2, 2012, the Department of Justice announced its landmark $3 billion dollar settlement of civil and criminal charges with GlaxoSmithKline concerning, among other things, its promotion of products for uses not approved by the FDA.  Vague rules create an unfair playing field where regulatory agencies “interpret the rules as they see fit” and the risk to industry in defending protracted civil and criminal litigation includes exclusion from government programs, additional criminal prosecutions and, possibly, debarment (i.e. corporate death penalty of exclusion from marketing products).      

The Supreme Court is Increasingly Critical of Vague Regulations that Limit Speech

Meanwhile, over in the Supreme Court and barely audible in the din of recent Court rulings on immigration and healthcare, the Supreme Court issued decisions in two significant cases involving vague regulations applied to limit commercial speech.  In FCC vs. Fox, a case concerning broadcast content, the Supreme Court stated “[w]hen speech is involved, rigorous adherence to [due process] is necessary to ensure ambiguity [in the rules] does not chill protected speech.”  The Court went on to state that, “[a] statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.”  Also largely unreported was the Supreme Court’s opinion in Christopher v. SmithKline where the Court stated, “[deference to regulatory agencies] creates a risk that agencies will promulgate vague and open-ended regulations that they can later interpret as they see fit, thereby ‘frustrat[ing] the notice and predictability purposes of rulemaking.’”  

According to the Supreme Court: 
[i]t is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.  

Supreme Court Holds that Even “False” Speech is Protected by the First Amendment

The Government has taken a number of approaches to avoid Due Process and First Amendment concerns.  Among the approaches is that any “suggest[ion] that [a] drug is safe and effective” for an off-label use is “false or misleading,” irrespective of the scientific support for the suggestion.  According to the Government, false and misleading statements are not protected by the First Amendment.  Yet, in US v. Alvarez, decided by the Supreme Court on June 28, 2012, the Court stated: “[t]he Court has never endorsed the categorical rule the Government advances: that false statements receive no First Amendment protection.”  Accordingly, even if the government declares “truthful” information to be “false,” the Supreme Court holding in Alvarez nonetheless extends Due Process and First Amendment protections to such speech. 

3 Things to Focus on: Compliance, Compliance, Compliance

Understanding the rules, educating the workforce, establishing robust oversight and vigilance in taking corrective measure have never been more urgent or complex, particularly in this evolving era of online communication. Companies who redouble their efforts to continually assess, implement, educate, enforce, correct and revise their compliance programs will be rewarded, or at least not be punished.  Those who do not, may find themselves operating under a government drafted Corporate Integrity Program.

STEPS TO TAKE:
Implement: A written policy based on your unique products and marketing.  Employees must be informed of the regulatory significance of online content that is attributed to the company and its products.
Educate: 
o Establish a regular program of education. 
o Employees must know when on-line content is personal and when it is attributable to the company. 
Enforce: Review online content.  Know what your employees and third parties are saying about your products.
Correct: Take immediate corrective action when inappropriate content is identified: remove it, request it be removed (if you do not control it), and renounce it. 
Reassess: As social media continues to evolve, take inventory of the social media technology and platforms that are being used and determine whether your compliance program fits. 
Ask:
  • what is the business interest the use advances;
  • does the use advance that business interest;
  • does the use comply with applicable law or require oversight; and
  • is the use covered by the Compliance Program?  If not, 
  • Revise: Compliance Program documents are a constant work-in-progress.  If you do have the review of your Social Media Compliance Program on your to-do list, you may stay ahead of the regulators.  If not, now is a good time. 
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In an earlier article, we discussed the danger posed to an impartial jury system by the “Googling Juror.” In his article titled “Lawyers’ Use of Internet to Influence Jurors” (New York Law Journal, 6/12/12), Michael Hoenig cautions that “the danger to fair trials posed by Internet-surfing jurors is exacerbated by lawyer ‘advertising’ of their prowess or success on websites, by publishing case-specific information on firm sites or blogs or other Internet outlets, and by skillfully weaving inaccurate, misleading or self-serving messages, and ‘depositing’ them where straying jurors can ‘find’ them.” 

Hoenig concludes that these can be purposeful stratagems or innocent puffing. He points out that despite First Amendment protections, courts can and should restrict prejudicial speech by attorneys. He cautions that lawyers must be diligent in reviewing whether their adversaries (or agents) might be depositing messages about case facts or party litigants, or extraneous, non-admissible information on websites, blogs or other internet locations with the expectation that a straying juror would find the information. Even if the specific facts of a case at trial are not discussed, prospective or sitting jurors can still peruse the attorney’s website, noting biographical information, the firm’s specialties, featured clients and the “war stories,” crusades or victories many firms describe. Hoenig believes that this information likely will be passed to other jurors.

Lawyers do have First Amendment rights to a wide range of speech but they are also subject to reasonable restrictions as officers of the court. Further, lawyers are bound by ethical rules. Rule 3.6 of the Model Rules of Professional Conduct prohibits an attorney from making an “extrajudicial statement that the lawyer knows or reasonably should know will be disseminated by means of public communication and will have a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter.” Rule 8.4 prohibits “conduct involving dishonesty, fraud, deceit or misrepresentation” and also states, “a lawyer or law firm shall not: (a) violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce to do so, or do so through the acts of another.”  The article discusses the facts of some of the cases that are emerging in this important area of the law. 

Thus, it is essential that trial counsel perform their own internet investigation concerning both the subject matter of their upcoming trials, and their adversaries' internet materials, to determine whether prejudicial information available to prospective jurors has been posted.

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