An Ethical Rabbit Hole: Model Rule 4.4, Intentional Interference With Former Employee Non-disclosure Agreements and the Threat of Disqualification, Part Ii

• Publication year: 2021

90 Nebraska L. Rev. 141. An Ethical Rabbit Hole: Model Rule 4.4, Intentional Interference with Former Employee Non-Disclosure Agreements and the Threat of Disqualification, Part II

Maura Irene Strassberg(fn*)

An Ethical Rabbit Hole: Model Rule 4.4, Intentional Interference with Former Employee Non-Disclosure Agreements and the Threat of Disqualification, Part II

TABLE OF CONTENTS

I. Introduction...............................................................................................................................142

II. Breach of the Non-Disclosure Agreement........................................................................145
A.Lack of Consideration..........................................................................................................................145
B.Contract Language: Coverage and Enforceability .........................................................................147
1.Trade Secrets.........................................................................................................................................148
i.Contract Language.................................................................................................................................148
ii.Public Policy.........................................................................................................................................151
2.Knowledge Integral to Employee Skills and Abilities.................................................................153
3.Other Confidential Commercial Information................................................................................157
i.Contract Language and Application ...............................................................................................157
ii.Public Policy........................................................................................................................................159
4.Employer Conduct, General and Trivial Information, and Events.............................................166
i.Language..............................................................................................................................................168
ii.Public Policy.........................................................................................................................................169
iii.Agency-Based Duty of Confidentiality ............................................................................................171
iv.Court Control .......................................................................................................................................174
C.Breach and Other Fact Specific Defenses ....................................................................................176
D.Privilege ................................................................................................................................................176
E.Summary ...............................................................................................................................................179

III. Is It Unethical? .......................................................................................................................181
A. Disqualification Cases ........................................................................................................................182
B. Should Intentional Contract Interference be Understood to Violate Model Rule 4.4?............. 187

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I. INTRODUCTION

Can a lawyer be disqualified from representation simply because they have had an informal conversation with a former employee with a non-disclosure agreement? A few years ago,(fn1) lead counsel for plaintiffs in a major class-action suit faced just such a threat. A former employee of the defendant corporation, not previously identified during several years of discovery, contacted a journalist writing about the case with important new information about wrongful acts taken by the corporation. The journalist passed the employee's name to plaintiffs' counsel and when counsel spoke with the former employee, startling new information came to light. A subsequent request for documents related to the disclosure revealed to the defendant that there was an undisclosed employee source of information about the corporation, and defendant demanded the name of the former employee. Upon discovering that the former employee had signed a nondisclosure agreement (NDA), defendant claimed that the information in question was confidential business information, that its disclosure outside of formal discovery violated the NDA, and that counsel's conduct was unethical. In particular, counsel was alleged to have violated Model Rule of Professional Conduct 4.4,(fn2) which prohibits using a method of obtaining evidence that violates the rights of third parties,(fn3) by interfering with the non-disclosure contract. This claim of unethical conduct then formed the basis for a motion to disqualify counsel from representation in this major class-action suit, a case that had been pursued on a contingency basis for several years.

While vigorously opposing the disqualification on the merits at considerable expense, counsel offered not to use the evidence revealed by the former employee in order to avoid any suggestion of impropriety. There was no disqualification in the end, possibly because counsel had asked about the possibility of an NDA and the former employee had forgotten that any such agreement had been signed, but it was quite a scare. What if counsel had not asked, or the employee had remembered? Would counsel have been disqualified? What if the evidence given up had been central to the case?

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With employer use of non-disclosure agreements proliferating, the threat of an ethics violation, loss of evidence, and disqualification could well be enough to discourage lawyers from engaging in informal discovery with any former employees, because they may be known to have signed an NDA, others because they merely might have signed such an agreement. However, is there really any possibility that it is unethical to informally communicate with a former employee with an NDA, known or unknown, and could this possibly justify disqualification anyway? Since Model Rule 4.4 only makes conduct that violates the rights of third parties unethical, the legitimacy of such conduct will depend on whether it violates the substantive law of contract and tort. This "piggybacking" of ethical rules on substantive law is widespread in the Model Rules and, ordinarily, it is both efficient and effective to make ethical standards rest upon substantive law.(fn4) However, when substantive law is itself both unsettled and controversial, this technique creates what I call an "ethical rabbit hole, a long and tangled detour into the law producing an uncertain answer."(fn5) That is precisely the situation created by the scenario I have just described.

Whether or not a lawyer can be found to have acted unethically in violation of Model Rule 4.4 initially depends upon whether the lawyer would be liable for intentional interference with the NDA between the former employee and their employer. In part, this is a matter of tort law, and in Part I of this Article, published separately at 89 NEB. L. Rev. (forthcoming June 2011), I evaluated the possible application of this quite complex tort to a lawyer's informal communication with such a former employee for the purpose of obtaining information relevant to proposed or pending litigation. What emerged from this evaluation was a sense that only in a few jurisdictions and with the best facts could we have confidence that a lawyer would not be liable for intentional interference with contract as a matter of tort law.(fn6) However, since a breach of an enforceable contract is required before any tort liability can attach, this ethical rabbit hole also includes a detour through contract law as well.

In this second part of the Article, I consider the likelihood that an employee NDA would be interpreted to cover various kinds of information that might be relevant to litigation. While the scope of coverage depends initially upon the language of the agreement, there are good arguments to suggest that various public policy considerations could limit the enforceability of NDAs in this context. However, courts have thus far had limited opportunities to evaluate the public policy implications

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of NDAs used to block informal discovery, and what results there are have been quite mixed.(fn7) As a result, it is almost impossible to predict in advance whether a particular NDA will be found to be unenforceable.

With the possibility that some NDA contracts might be found both enforceable and breached in this scenario, the question of whether a lawyer's connection to such a breach is unethical moves from the arena of substantive law to ethics itself. If tort and contract law actually does extend this far, at least in some jurisdictions, should we embrace the limits thereby imposed on lawyers and make them our own? If we do rubberstamp such tort law in the ethical rules, it provides opposing counsel with a very simple and potent threat. Without opposing counsel ever actually litigating either the tortiousness of the conduct or the enforceability of the contract, and without ever making an ethical complaint, the opposing party can move to disqualify the lawyer on the mere possibility that a lawyer may have violated Model Rule...