The following New Jersey appeal was recently decided by the New Jersey Supreme Court dealing with an employer’s ability to select and retain defense attorneys for its employees during a grand jury investigation of the company.
IMO Grand Jury Investigation, ? N.J. ?, 2009 N.J. LEXIS ? (November 23, 2009) — Order denying disqualification affirmed. “Confronted with a grand jury inquiry that commanded the testimony of several of its employees, an employer elected to provide and pay for counsel to those employees for purposes of that investigation.
Fearing that having individual employees/grand jury witnesses represented by counsel retained and compensated by the putative target of the grand jury inquiry violated several of the Rules of Professional Conduct, the State moved to disqualify those counsel…. Harmonizing RPC 1.8(f), RPC 1.7(a)(2), and RPC 5.4(c) results in a salutary, yet practical principle: a lawyer may represent a client but accept payment, directly or indirectly, from a third party provided each of six conditions is satisfied
Those conditions are: (1) the informed consent of the client is secured; (2) the third-party payer is prohibited from, in any way, directing, regulating or interfering with the lawyer’s professional judgment in representing the client and the lawyer-client relationship remains sacrosanct; (3) there is no current attorney-client relationship between the lawyer and the third-party payer; (4) the lawyer is prohibited from communicating with the third-party payer concerning the substance of the representation of the client, which includes redaction of details from any billings submitted to the third-party payer; and (5) the third-party payer pays all such invoices within the regular course of its business, consistent with the manner, speed and frequency it pays its own counsel.
The final condition is that the third-party payer shall not be relieved of its continuing obligation to pay without leave of court brought on prior written notice to the lawyer and the client. In this application, the third-party payer shall bear the burden of proving that its obligation should cease. If a third-party payer fails to pay an employee’s legal fees and expenses when due, the employee shall have the right, via a summary action, for an order to show cause….
In sum, through the combined product of the good faith of an employer, the diligence of competent counsel and the exercise of a trial court’s supervisory authority, the net result of the company’s retention and payment of counsel for its employees complies with the Rules of Professional Conduct. For these reasons, the trial court properly denied the State’s motion to disqualify counsel.” (Lawrence S. Lustberg for respondent attorneys; Richard A. Rafanello for company; Nicholas C. Harbist for amicus curiae ACDL-NJ)
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