Transcript Ethics: What Industry wants from Regulators

Ethics: What Industry wants from
Regulators
NABCA Legal Symposium
Alexandria, VA
March 16, 2015
Panelists
• K. Kristann Carey, Esq., Vice President and
Associate General Counsel, Beer Division,
Constellation Brands, Inc.
• Teri Quimby, Esq., Administrative Commissioner,
Michigan Liquor Control Commission
• Thomas B. Mason, Esq., Partner, Harris, Wiltshire
& Grannis LLP
Objective
• To identify, analyze and attempt to resolve the
ethical tensions faced when seeking advanced
advice from regulators:
– When is it necessary to seek advice of someone within
government?
– How do you go about seeking advice,
• what level of disclosure should/must you give,
• Who may/must you contact and why, and
• Is informal v. formal advice preferred?
– Who may/may not give you advice,
• under what circumstances, and
• what are the limitations?
What makes our industry different?
•
Prohibition/Repeal of Prohibition: Tax and temperance, Licensing
•
Highly regulated industry, lots of compliance “hoops” to go through
•
Varying liquor codes from state to state, regulated by differently structured
agencies
•
Agency strives to regulate industry, collect revenue and serve the best interests of
and protect consumers.
•
Industry desires to be compliant, work within the boundaries of the law and
regulations
•
Want to feel we are working in tandem with the state, that you can rely on us and
we can rely on you toward effective regulation and our common goal of
compliance and safe consumption.
Matrix of Control State Agencies
State
Alabama
Commission
Director
X
Idaho
In-House Legal
Attorney Gen’l
X
X
X
Iowa
X
X
Maine
X
X
Michigan
X
X
Mississippi
X
X
Montana
X
X
N. Hampshire
X
X
N. Carolina
X
Ohio
X
X
X
Oregon
X
X
Pennsylvania
X
X
Utah
X
X
Vermont
X
X
Virginia
X
W. Virginia
X
Wyoming
X
X
X
X
ABA Model Rules - Rule 4.2
Communication With Person Represented By
Counsel • In representing a client, a lawyer shall not
communicate about the subject of the
representation with a person 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 to do so by law or a court
order.
Rule 4.2 - Comment
•
•
•
•
•
[1] This Rule contributes to the proper functioning of the legal system by protecting a person who has chosen to be
represented by a lawyer in a matter against possible overreaching by other lawyers who are participating in the matter,
interference by those lawyers with the client-lawyer relationship and the uncounselled disclosure of information relating to
the representation.
[2] This Rule applies to communications with any person who is represented by counsel concerning the matter to which the
communication relates.
[3] The Rule applies even though the represented person initiates or consents to the communication. A lawyer must
immediately terminate communication with a person if, after commencing communication, the lawyer learns that the
person is one with whom communication is not permitted by this Rule.
[4] This Rule does not prohibit communication with a represented person, or an employee or agent of such a person,
concerning matters outside the representation. For example, the existence of a controversy between a government agency
and a private party, or between two organizations, does not prohibit a lawyer for either from communicating with
nonlawyer representatives of the other regarding a separate matter. Nor does this Rule preclude communication with a
represented person who is seeking advice from a lawyer who is not otherwise representing a client in the matter. A lawyer
may not make a communication prohibited by this Rule through the acts of another. See Rule 8.4(a). Parties to a matter may
communicate directly with each other, and a lawyer is not prohibited from advising a client concerning a communication
that the client is legally entitled to make. Also, a lawyer having independent justification or legal authorization for
communicating with a represented person is permitted to do so.
[5] Communications authorized by law may include communications by a lawyer on behalf of a client who is exercising a
constitutional or other legal right to communicate with the government. Communications authorized by law may also
include investigative activities of lawyers representing governmental entities, directly or through investigative agents, prior
to the commencement of criminal or civil enforcement proceedings. When communicating with the accused in a criminal
matter, a government lawyer must comply with this Rule in addition to honoring the constitutional rights of the accused.
The fact that a communication does not violate a state or federal constitutional right is insufficient to establish that the
communication is permissible under this Rule…[Emphasis Added]
Other Model Rules & Considerations
Rule 1.3: Diligence –
“A lawyer shall act with reasonable diligence and promptness in
representing a client.”
Rule 1.6: Confidentiality of Information –
“(a) A lawyer shall not reveal information relating to the
representation of a client unless the client gives informed consent, the
disclosure is impliedly authorized in order to carry out the representation or
the disclosure is permitted by paragraph (b).”
Rule 2.1: Advisor –
“In representing a client, a lawyer shall exercise independent
professional judgment and render candid advice. In rendering advice, a
lawyer may refer not only to law but to other considerations such as moral,
economic, social and political factors, that may be relevant to the client's
situation.”
Hypotheticals
1.
Trade practice – Jax Liquor Manufacturer wants to hire Lax Tasting
Company to conduct bar spending activities in Walla Walla bars.
Jax’s in house counsel, Max, is unsure whether the law would
allow his company to outsource its tasting events to an unlicensed
third party. Max wants to confirm it with the state ABC before
advising his client to engage in the activity. The ABC has not
advised the industry on this question before, at least not to Max’s
knowledge, although he knows other manufacturers are doing the
same thing. The ABC Board has been discussing this very issue
internally and the consensus among them is to allow outsourcing
but to hold the liquor manufacturer liable for any wrongdoing by
the non-licensed party. Max contacts ABC’s staff lawyer, Pax, to
discuss. What, if anything, can Pax tell Max about the proposed
rule-making and the proposed activity in general? What level of
information is Max required to disclose to Pax in order for Pax to
give an appropriate answer?
Hypotheticals (cont.)
2.
Licensure – The GRB Family Trust wants to acquire a cider mill and
licensed cidery. Based on their lawyer’s advice, they set up a complex
structure of different holding companies to acquire the business. At the
top of the ownership chain is the trust, its sole and lifetime beneficiary is
Joe’s grandmother, “Granny”. As the beneficiary, Granny has no official
voting rights. Granny’s son, Joe, is the trustee and votes all the shares
but everyone knows Granny is the family matriarch and no one, not even
Joe, would ever dare cross her. Joe asks his attorney, Jill, to parse
through the licensing requirements to complete the acquisition on time.
Joe tells Jill that his primary concern before signing the deal is to know
whether Granny must be fingerprinted, as it would disturb her greatly to
have to be printed (again). Jill informs Joe that anyone holding a direct or
indirect ownership interest in a license, must be fingerprinted. Joe asks
Jill to confirm this with the state ABC so there are no surprises after he
signs the deal. How should Jill proceed and what information
should/must she disclose to the agency about the proposed ownership
structure and Granny’s background?
Hypotheticals (cont.)
3.
Enforcement – Pending its investigation, the ABC Commission will likely
assess a substantial fine against and maybe even suspend Johnny’s liquor
license for a second charge of sale to minor within 6 months. Johnny
knows that he will have a real problem on his hand due to the Fantasy
Football gambling league he started, if he faces a full-blown investigation
because of this offense. He hires Slick Slippery, attorney-at-law, to
negotiate a settlement with the chair of the ABC Commission, before
ABC counsel’s office can investigate further and officially bring charges.
Johnny tells Slick that he will pay whatever it takes to avoid an
investigation, without giving Slick much explanation. Slick assures Johnny
he has the connections to get the job done and proceeds to contact the
Chairman, a non-attorney, to work out a deal. Can Slick contact the
Chairman, an old golf buddy, about this matter? Must he contact ABC
counsel? Does Slick have an obligation to question Johnny further about
the business before contacting the agency? What must Slick disclose
about Johnny’s business when contact is made?
Takeaways
•
That there should be open communication between the industry and the
regulators.
•
Beyond open communication, the agency’s interpretation of the law should be
shared with industry so that the regulators can have a reasonable expectation of
compliance and so that the industry can be guided in compliance.
•
That in a pending matter or in anticipation of a formal matter to be raised, contact
should be through counsel whenever possible and based on the appropriate
mutual disclosure. You have to give sufficient material information to have a
meaningful discussion of the issue.
•
That industry representatives and attorneys should “do their homework” before
making contact with the agency, to ensure you are asking informed, pointed
questions and not seeking general legal advice.
•
We must continue to build on our mutual trust and working relationship, and
strive for safe consumption.
Questions
Nicholas J. Bergman
Buchman Law Firm, LLP
10 East 40th Street, Suite 2110
New York, NY 10016
(212) 889-4220
[email protected]