Valassis v. Samelson

Citations: 143 F.R.D. 118; 1992 U.S. Dist. LEXIS 10078; 1992 WL 158720Docket: No. 91-CV-74029

Court: District Court, E.D. Michigan; July 2, 1992; Federal District Court

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The Court granted Plaintiff George Valassis's motion to use and interview Mary Baer while denying Defendant Randon Samelson's motion for a protective order. The dispute arose from a series of partnerships between Valassis and Samelson in the 1980s that deteriorated, leading to lawsuits filed by Valassis against Samelson and related parties in 1991. Baer, a former employee of Samelson Development Corporation, worked in various accounting roles until April 1991, when she joined Franklin Management Company, which Valassis partly owns. Baer agreed to assist Valassis by providing information and reviewing documents related to the case. Samelson opposed this on the grounds that it would violate Michigan's professional conduct rules and risk misappropriation of trade secrets. The Court assessed these concerns under Rule 4.2 of the Model Rules of Professional Conduct, which restricts communications about the representation subject with a party known to be represented by counsel, aiming to protect the integrity of attorney-client relationships and prevent exploitation of unrepresented parties.

Rule 4.2 does not explicitly restrict attorneys from contacting former employees of an opposing corporate party. According to ABA Formal Opinion 91-359, the American Bar Association Committee determined that Rule 4.2 does not apply to former employees, including those in managerial positions. The Committee acknowledged arguments for extending Rule 4.2 coverage to former employees but emphasized that the text of the Rule does not support such an extension. They expressed a reluctance to limit discovery based on a broad interpretation of the Rule. Consequently, attorneys may communicate with unrepresented former employees of a corporate party without the consent of the corporation’s lawyer.

The judicial interpretation of Rule 4.2 regarding former employees is divided. The majority of courts have ruled that Rule 4.2 does not apply to any former employee, as illustrated in cases such as In re Domestic Air Transportation Antitrust Litigation and Shearson Lehman Brothers, while a minority of courts have allowed such communications with certain conditions. The disagreement largely centers on the Comment to Rule 4.2, which specifies that communication is prohibited with individuals who hold managerial responsibility or whose actions could be imputed to the organization. Since a former employee no longer holds managerial responsibility and cannot make statements that constitute the organization’s admissions, they fall outside the scope of Rule 4.2’s restrictions.

Courts addressing the application of Rule 4.2 have focused on the 'imputed to the organization' language in its Comment, interpreting it to include all relevant employees—past or present—without temporal limitation. Courts that support applying Rule 4.2 to former managerial employees cite this interpretation, as seen in cases like Curley and PPG Industries. Conversely, courts opposing this view argue that including former employees contradicts the Rule's policy, as noted in Hanntz and Action Air, or suggest alternative meanings of 'imputed' that exclude former employees, as seen in Polycast and DuBois. Some courts follow the ABA Formal Opinion, which restricts Rule 4.2 to current employees. These opposing interpretations struggle to justify why a former employee's actions, which may be imputed to the organization, do not fall under the Comment's plain language. The courts' difficulties stem from concentrating on the Comment without first interpreting the underlying Rule. A Comment serves to explain a Rule and does not expand its scope. Rule 4.2 specifies that attorneys cannot communicate with a party about the subject of representation, necessitating clarity on who constitutes a party in organizational contexts. Within an organization, the definition of 'party' encompasses employees and agents connected to the organization, but the Comment limits this to specific types of agents: managerial employees, those whose actions can be imputed to the organization, and those whose admissions would be binding at trial. Thus, an individual's role as an agent is crucial to determining their status as a party under Rule 4.2.

A court must first establish if an individual is an agent of an organization before assessing their classification under Rule 4.2. The language in the Comment regarding the attribution of acts to the organization primarily pertains to non-managerial employees whose actions could be attributed to the organization under respondeat superior for liability purposes. For instance, a truck driver may not be a managerial employee but can still have their actions imputed to the organization in civil or criminal contexts. In this case, Ms. Baer does not have an agency relationship with Samelson, as there is no evidence of her current connection to her former employer, and she is presently affiliated with Valassis, positioning her as an adverse party. Consequently, she is not subject to Rule 4.2. Samelson's brief acknowledges that Valassis may interview Ms. Baer without objection, but contends that her involvement in reviewing documents equates to recruiting her as an expert for Valassis. Samelson references cases where experts who possessed confidential information from one organization were barred from working for an adversary. However, this situation differs because Ms. Baer does not possess privileged information like the experts in those cases. Instead, she has a wide range of information, of which only a part may be privileged, distinguishing her circumstances from those of the aforementioned experts.

A blanket prohibition on communication between a former employee and an opposing party’s attorney would unjustly restrict the employee's right to discuss her past employment. A more effective approach to balance open discovery and attorney-client privilege would be through a specific protective order that addresses only privileged information. 

The attorney-client privilege protects confidential communications between a client and their attorney, fostering candid discussions. This privilege allows clients, including corporations, to refuse testimony regarding these communications, and has been interpreted to extend to former employees, preventing them from disclosing privileged information. Valassis does not contest the applicability of this privilege to Ms. Baer. Additionally, Valassis's attorney is ethically bound by Rule 4.4 to refrain from seeking privileged information from Ms. Baer, which prohibits efforts to embarrass or burden others in the process of representation.

Valassis acknowledges that its attorneys cannot question Ms. Baer about privileged matters, but notes that the burden of proving what information is privileged lies with Samelson. If Samelson's attorney can establish that certain information in Ms. Baer's possession is privileged, the Court will issue an appropriate protective order.

Regarding misappropriation of trade secrets, Samelson argues that allowing Valassis's attorneys to speak with Ms. Baer could lead to such a tort. Michigan defines a trade secret as a confidential formula or process that has commercial value and is not publicly known. However, Samelson has not provided evidence that Ms. Baer had access to any trade secrets that would impose a common law duty of nondisclosure relevant to her potential assistance to Valassis. In his affidavit, Samelson claims that Ms. Baer was involved in sensitive and confidential communications while employed at SDC, but does not substantiate that this information constitutes a trade secret as legally defined.

Confidences and secrets known to Ms. Baer are directly related to the claims and defenses in the case and include the financial statuses of Samelson Development Company, Samelson Construction Company, and the general partners involved. Although some information may be protected by attorney-client privilege, it does not qualify as trade secrets under Michigan law, leading the Court to reject Samelson's characterization of this information as such. Even if considered trade secrets, discovery would not be denied if the information is relevant to the litigation, and a Stipulated Protective Order would limit its dissemination. Ms. Baer is permitted to communicate informally with Valassis's attorneys and assist in reviewing documents from Samelson, as she is no longer associated with Samelson and is not subject to Rule 4.2. However, she cannot disclose any attorney-client privileged information, nor can Valassis's attorneys inquire about it. Samelson provided no evidence that Ms. Baer possesses trade secrets, negating concerns of misappropriation. The Court ordered that the Plaintiff's Motion to interview Ms. Baer is granted, while the Defendant's Motion for a Protective Order is denied. Federal law governs attorney conduct in federal courts, aligned with the Michigan Rules of Professional Conduct, which are similar to the ABA Model Rules. The Court considers these rules as one for the purpose of this ruling, citing a majority position established post-1991 ABA Formal Opinion, despite conflicting decisions from other jurisdictions.

The drafters of the Rule may have been concerned that applying Rule 4.2 to all corporate agents would excessively restrict discovery for corporate parties. According to Federal Rule of Evidence 801(d)(2)(D), a corporate party requires that an individual be an 'agent or servant' of the organization to qualify. The Court clarifies that the terms 'admissions' and 'imputed' in the Comment are distinct; an employee's statement can be an admission for the organization, but that employee might not have acted in the disputed matter. Likewise, an individual's actions imputed to the organization may not involve statements that qualify as admissions if outside their agency scope. Organizations wishing to prevent ex parte communications from former employees can implement confidentiality agreements, which Samelson failed to do for Ms. Baer. The Court warns that attorney-client privilege does not extend indefinitely; it protects only communications, not the underlying facts. While clients are not compelled to reveal what they disclosed to their attorneys, they must disclose relevant facts they know, even if those facts were communicated to their attorney. Additionally, Valassis's counsel proposed negotiating a protective order for materials that Samelson could substantiate as privileged.