Payment of Private Counsel Fees Under the Department of Justice Representation Program

Opinion

Payment of Private Counsel Fees Under the Department of Justice Representation Program

W h e th e r fee sta te m e n ts su b m itted to th e g o v e rn m e m by p riv a te counsel retain ed to rep re sen t a g o v e rn m e n t e m p lo y e e m ay be disclosed to the public w ith o u t v iolating ap p licab le eth ical sta n d a rd s d e p e n d s upon the facts o f each case.

T h e g o v e rn m e n t’s p ra c tic e o f p ay in g som e fees and expenses c h a rg e d by p riv a te counsel but not p ay in g o th e rs d o es n ot p resent a substantial eth ical question, as long as the p ra c tic e is c learly u n d e rsto o d by the em p lo y ee-clien ts and th eir p riv a te atto rn ey s.

F ebruary 7, 1980

M E M O R A N D U M O P IN IO N F O R T H E A S S IST A N T A T T O R N E Y G E N E R A L , C IV IL D IV IS IO N

W hen a governm ent em ployee is sued personally for som ething he did or om itted to do in the course o f his employm ent, he can usually turn to the Civil Division for help. T he Civil Division will assign one o f its ow n attorneys to defend him, or in some circum stances it may recom m end that he retain private counsel at governm ent expense.1 The conditions under w hich private counsel may be retained are set forth generally in the so-called “ Representation G uidelines.” See 28 C.F.R. §§ 50.15, 50.16. In the usual case, the precise term s and conditions of any fee agreem ent betw een private counsel and the G overnm ent are described in a w ritten contract signed by the Assistant A ttorney G en­ eral and the participating firm. As a m atter o f billing practice, the Civil Division requires all private attorneys participating in the representation program to submit m onthly fee statem ents to the Civil Division that describe in detail the services for w hich they seek compensation. T he attorneys have com plied with this requirem ent in the way that attorneys usually com ply with the demands o f an impecunious client w ho questions a fee: they have furnished the Civil Division w ith actual time records or other relatively raw and explicit descriptions o f how they spent their time.

1 In a series o f recent opinions rendered at the request o f the Civil Division, this O ffice has discussed the legal basis for the practice o f using governm ent attorneys and private attorneys to provide governm ent em ployees w ith free legal representation to p rotect their personal interests in civil litigation. G iven the perplexing questions that have been generated by those opinions and the practices they authorize, we express no view , for purposes o f this opinion, on the question w hether these practices o u g h t to be modified.

388 Because o f the large am ount of money that is being paid out in fees under the representation program , the Civil Division has determ ined that the public has a legitimate interest in knowing how this money is being spent. A ccordingly, the Civil Division has made available to the public much o f the relevant information. It has disclosed: (1) the iden­ tity o f each law firm participating in the program ; (2) the aggregate amount paid annually to each law firm under the program ; and (3) the basic terms o f the standard fee arrangement, including the agreed hourly rate. M oreover, despite the objection o f some o f the participat­ ing firms, the Civil Division has given some thought to the possibility o f releasing additional information, including the detailed records and descriptions of the services rendered by the participating firms. You have requested our views regarding the ethical aspects of such an undertaking. Is there anything in the Code o f Professional Responsibil­ ity that would prevent the Civil Division from disclosing information of that sort? 2 You have asked a second question that involves a related problem. On occasion, the Civil Division declines to pay for some o f the services for which firms seek compensation. F o r example, it will usually decline to pay for services rendered in connection with a counterclaim or ancillary “affirm ative” litigation. It may also decline to pay certain extraneous expenses (e.g., “entertainm ent” expenses). As a m atter of policy, the Civil Division has never refused to pay for services ren­ dered in connection with the developm ent o f an actual defense that was asserted in litigation, even though the defense may appear in retrospect to have been a waste o f time and therefore not “ reasonably necessitated by the defense” within the meaning o f the fee agreem ent. But because the decision concerning payment vel non may carry some potential for influencing the attorneys in the conduct o f their representation, and because the Canons generally require attorneys to exercise independent professional judgm ent on behalf o f their clients w ithout regard to eco­

2 Y our question assumes that this D epartm ent has discretion to w ithhold this inform ation under the Freedom o f Inform ation A ct (F O IA ). W e express no view on that question, except to say in passing that there is probably a rough congruence betw een the relevant ethical concerns and the relevant F O IA considerations. If there is a solid ethical reason for delaying o r denying disclosure in a particular case, an exem ption from m andatory disclosure may be available under FO IA . Likewise, y our question assumes that there is no statutory bar to disclosure and that the Civil Division is legally free to disclose this inform ation if it can do so ethically. Because this inform ation relates to financial m atters and in some instances may reveal m ethods of professional operation not ordinarily made public in the course o f the attorney-client relationship, som e consideration ought to be given to the applicability in this context o f 18 U.S.C. § 1905, w hich bars public disclosure o f certain kinds of confidential business inform ation that com es into the hands o f governm ent officers by virtue o f reports and o th e r submissions from the private sector. T he recent decision in Chrysler v. Brown, 441 U.S. 281 (1979), is obviously relevant here, as will be the position taken by the G overnm ent regarding the scope and applicability o f § 190S on the rem and in that case. T h ere is very little legislative history relevant to § 1905. W e express no firm view regarding its applicability in this context. W e should say, how ever, that in o ur opinion there is a substantial question w h eth er C ongress intended this statute to subject governm ent officers to crim inal liability for disclosing to the public the am ount o f public m oney expended under governm ent co n tracts o r the nature o f the services provided the G overnm ent in return.

389 nomic o r o ther pressures exerted by third parties, you have asked w hether this practice o f paying some fees and expenses and not paying others, presents any ethical difficulty. O ur views on both questions are set forth below.

I. The Ethics of Disclosure T he attorneys them selves have suggested that public disclosure o f the detailed billing inform ation may violate Canon 4 o f the Code. Canon 4 requires all attorneys to preserve the “confidences” and “secrets” of their clients. T he attorneys have argued that the fee statements submit­ ted to the Civil Division under the representation program do indeed contain the “confidences” and “secrets” o f the em ployee-defendants and that these “confidences” and “secrets” must be preserved. W e have three observations to make on this point: First, to the extent, if any, that these billing materials do contain “confidences” o r “secrets” within the scope o f Canon 4, we think this D epartm ent should preserve those confidences or secrets and should not disclose them publicly w ithout the consent o f the employees. We recognize that these em ployees are not the “clients” o f this D epart­ m e n t W e cannot say that public disclosure o f their confidences or secrets by the Civil Division w ould violate the letter o f the relevant disciplinary rules. But we think that disclosure would be inconsistent w ith the spirit o f Canon 4 and w ith the purposes o f the representation program itself. T he w hole purpose o f that program is to provide gov­ ernm ent employees w ith legal representation, and one o f the essential characteristics o f legal representation is that it protects the client’s interests by preserving his confidences and secrets. If the Civil Division w ere representing these people directly, Canon 4 w ould prevent it from disclosing their confidences or secrets.3 It seems to us that the practice should be the same w hen the Civil Division chooses to provide repre­ sentation indirectly. In both cases the purpose o f the exercise is to protect interests o f governm ent em ployees, not to expose their confi­ dences and secrets to the public.4

3 T h e general question w h eth er a go v em m en i law yer is ev er perm itted o r required by law o r the ethics o f his profession to disclose em barrassing, detrim ental, o r incrim inating inform ation concerning fellow em ployees w h o com e for legal advice o r professional help is a com plex one. T here are many different circum stances in w hich th e issue can arise, and the answ er can differ from case to case. We think it clear, ho w ev er, that w hen an atto rn ey from th e C ivil Division is assigned to appear as the atto rn ey o f reco rd for a governm ent em ployee w h o has been sued personally in a civil case, the atto rn ey 's d u ty under the C o d e (and therefore under departm ental regulations) is to preserve the confidences and secrets o f the client. See. e.g.. O pinion 73-1 o f the Professional E thics Com m ittee, Federal B ar A ssociation, 32 Fed. B. J. 71 (1973); A B A C om m , on E thics and Professional Responsibil­ ity, Inform al O p. 14)3 (1978). T h a t has been the traditional view o f this Office. 4 T h e basic justification for any discretionary disclosure o f the billing inform ation, including disclo­ sure o f any actual confidences o r secrets, is that disclosure will enable the public to m onitor the expenditure o f g o vernm ent resources. But g o vernm ent resources are expended w hen C ivil Division atto rn ey s provide representation directly. T h e only econom ic difference betw een direct representation and indirect representation is the difference betw een paying a salary and paying a fee. It is difficult to see h o w that difference can perm it the preservation o f secrets in the one case and require disclosure in the other.

390 Second, Canon 4 is designed to protect clients, not attorneys. If a client has no objection to a disclosure o f billing information, his attor­ ney has no reason to resist disclosure insofar as Canon 4 is concerned. Therein lies a possible solution to your problem. Most o f these employ­ ees will ultimately have no interest w hatever in preserving the confi­ dentiality o f the great bulk o f the billing information in question here. If they are requested at the proper time to review these docum ents with an eye to identifying those parts, if any, that record the substance o f confidential attorney-client com munications o r secret m atters that would be embarrassing or dam aging to their interests if disclosed, they may well be in a position to approve the disclosure o f all the rest. W e are not suggesting that they be asked to “ w aive” their right to protect embarrassing confidences or secrets, only that they be asked to review the relevant materials and separate the wheat from the chaff.5 T he ultimate substantive question, o f course, is w hether these docu­ ments do in fact contain “confidences” or “secrets” falling within the scope o f Canon 4. O ur reluctant conclusion is that this question cannot be answered categorically. It must be answered on a case-by-case basis after an examination o f each docum ent in light o f all the facts o f each case. We realize that this conclusion is an aw kw ard one from an administrative standpoint, but we see no way around it. W e will elabo­ rate briefly. Canon 4 protects tw o categories o f information against nonconsen- sual disclosure: (1) inform ation within the scope o f the evidentiary privilege for confidential com m unications between attorney and client (as defined by local law); and (2) a broader category o f “secret” information gained by an attorney from w hatever source “ in the profes­ sional relationship,” the disclosure o f w hich would be detrim ental to, or contrary to the wishes of, the client. Inform ation relevant to the nature and scope o f professional services rendered by an attorney for a client does not invariably fall into either o f these categories; and in o u r .view there are many circum stances in w hich it may be disclosed for any proper purpose w ithout raising ethical questions. This is frequently true with respect to services o f the kind that are o f concern to the Civil Division here, i.e., services rendered by attorneys o f record in actual litigation. T he point is a simple one. D uring litigation a great deal o f information about the client’s affairs, the scope o f the attorney’s em­ ployment, and the services rendered by him in the course o f the case is disclosed publicly as a m atter o f course; and m uch o f the undisclosed detail can be revealed, at least by the end o f the case, w ithout betraying the substance o f any privileged com m unication and w ithout disclosing

* W h eth er at this late date their willingness to undertake such a review in good faith could be m ade a precondition to final reim bursem ent o f th eir attorneys is a question that depends entirely on an interpretation o f the co n tracts betw een the atto rn ey s and the C ivil Division. W e express no firm view on that question. W ith respect to future contracts, it may w ell be that som e thought should be given to establishing explicitly, by con tract, a review pro ced u re o f this kind.

391 any other “secret” that carries real potential for embarrassment to the client. Consider the following example: An attorney is retained to defend a tort case. He spends one hour interview ing the client, one hour prepar­ ing and filing an answer to the com plaint, tw o hours researching the applicability o f the relevant statute o f limitations, 30 minutes preparing a motion for summary judgm ent, six hours sitting in the courthouse, and 15 minutes arguing and winning the motion. It is possible that all of that information can be disclosed publicly at the end o f the case w ithout betraying any privileged com m unication,6 and because so much o f the relevant information is publicly available anyway, it is extrem ely unlikely that any other “secrets” relevant to the nature and scope o f the services perform ed w ould be em barrassing or harmful to the client if disclosed. W hen the w orld already knows that the attorney filed a motion for summary judgm ent on the client’s behalf, it does not hurt or embarrass the client for the w orld to learn that the attorney spent 30 minutes preparing that motion. On the other hand, it is clear that inform ation protected by Canon 4 can find its w ay into billing records. T he classic example is the diary entry that records the substance o f a confidential communication: “Ten- m inute conference with client concerning possible divorce ” M ore fre­ quently, a billing record may contain a description o f actions taken by the attorney on the client’s behalf that should remain “secret” if the client’s interests are to be served. F o r example, if a defense attorney records in his diary that he has just spent tw o hours researching and

6 T h e attorney-client privilege pro tects the confidentiality o f inform ation obtained by the attorney from confidential com m unications w ith his client. G enerally speaking, it does not protect information obtained from o th er sources. Inform ation about the nature o f the services rendered by an attorney for a client is generated by the atto rn ey himself. He does not obtain it from his client, and he can often disclose it w ithout betraying the substance o f anything his client told him. T hat is the reason for the traditional view that an atto rn ey can “ usually” o r “o rd in arily ” disclose the nature o f the services he perform s for his client (e.g., 5 hours deposing piaintiff, 20 hours preparing for trial) w ithout disclosing anything p rotected by the privilege. See. e.g., Behrens v. Hironimus. 170 F.2d 627, 628 (4th Cir. 1948); 2 Louisell & M ueller, Federal E vidence 540-41 (1978). M oreover, the fact that the atto rn ey may at som e later d ate com m unicate inform ation concerning the nature o f his services to his client (in a bill, for exam ple) does not make the inform ation itself privileged. T h e m odern view is that th e privilege extends to confidential com m unications from a tto rn ey to client, ju st as it extends to confidential com m unications from client to attorney; but the privilege pro tects the confidentiality o f communications, not facts themselves. If a.i attorney believes that the sky is blue and advises his client to that effect, th e privilege prevents him from betraying his advice, but it does not prevent him from giving the sam e ad v ice—com m unicating the same fact—to the w orld at large. If the fact in the mind o f the atto rn ey is accessible to exam ination and disclosure before its com m unication to the client, it remains accessible afterw ards, though o f course there can be no dem and for disclosure o f the com m unication itself. See 2 Louisell Sl M ueller, Federal Evidence 540 (1978). T h e traditional interpretation o f the ethical d u ty o f an a tto rney to preserve the confidences o f his client w as tied to this concept o f privilege. T hus it w as th o ught that an attorney could ethically disclose the nature o f services rendered for a client, since that inform ation is not acquired by the a tto rn ey from a confidential com m unication w ith the client and may be otherw ise accessible to exam ination and disclosure w ithout betraying anything that passed betw een attorney and client. ABA Com m , on Professional E thics and G rievances, Form al Op. 154 (1936). T his view o f the ethical obligation does not, o f course, take into account the expanded scope o f the disciplinary rules, w hich pro tect, not only confidential com m unications, but “secrets" obtained from any source in the profes­ sional relationship.

392 preparing a motion to dismiss the com plaint for insufficiency o f process, that information should not be disclosed to the other side prior to the filing of the motion, since prem ature disclosure would deprive the client o f a legitimate tactical advantage in the litigation. We think it would be not only unprofessional but also unethical for an attorney to make a prem ature disclosure o f that sort, absent some adequate justifi­ cation. The disclosure would trench on Canon 4 and on Canons 6 and 7 as w ell.7 We can summarize our views on the question o f disclosure in the following way. It is unlikely that very much o f this billing information discloses the substance o f privileged communications o r any other “secrets” that would be embarrassing or detrim ental to any o f these employees if disclosed, but the ethical and policy questions that would be presented by a disclosure o f any given docum ent cannot be an­ swered w ithout examining that docum ent and determ ining w hether in fact it contains confidential or secret m atter protected by the Canon. The administrative difficulty o f attem pting to make that sort o f determ i­ nation in each case is obvious, and it is com pounded by the fact that the determination probably cannot be made prudently w ithout consulta­ tion with the attorney and the employee whose interests are at stake. T here is no litmus test. T he significance of a billing docum ent to a client depends on w hat the client’s interests are and on all the other facts and circumstances o f the case. T he unfortunate truth is that he and his attorney are the ones w ho understand those interests and those facts best. This brings us to the suggestion that we have already made. A t the end o f each o f these cases the Civil Division will be in a position to submit all the relevant billing records to the employee-client and to request that he determ ine w hether, in the light of: (1) the disposition o f the case; and (2) any liabilities or embarrassments that may yet be his, the records reveal anything that would be detrim ental to his interests if disclosed. T he objectionable parts can be redacted. T he rest can be disclosed w ithout provoking ethical concerns.8

7 Loss o f advantage in the litigation in w hich services are rendered is not o f course the only sort o f harm that can result from untimely disclosure o f professional services. F o r exam ple, if a corporate client is subject to regulation by an agency before w hich an atto rn ey practices, the very fact that the attorney has been retained by the client and has perform ed services for the client could, if know n to the agency, direct the agency’s attention to the client's affairs, causing expense and inconvenience; and there may be circum stances in w hich the atto rn ey could not ethically disclose inform ation o f that sort w ithout adequate justification. See O pinion No. 58, Com m ittee on Legal Ethics, D istrict o f C olum bia Bar. 8 In registering their objection to disclosure o f these materials, the attorneys have made at least three argum ents not

393 II. Paying Some Fees and Expenses but Not Others

W e think that the practice o f paying some fees and expenses but not others presents no substantial ethical question. W e are assuming o f course that in all o f these cases the clients as well as their attorneys, after full disclosure o f the D epartm ent’s potentially conflicting interest, w ere made to understand w hat is stated explicitly in the fee contract itself: (1) that the clients and their attorneys are entirely free to deter­ mine what sort o f legal services ought to be perform ed on the client’s behalf; (2) that this D epartm ent will pay for some o f those services, but it may not pay for others; and (3) that if a client wants his attorney to render legal services for w hich the D epartm ent will not pay, he and his attorney must reach their ow n understanding regarding the fee, if any, that the attorney will charge. As long as all o f these points are under­ stood by the parties in interest, the fee arrangem ent is not unethical, in our view. A close analogy to this sort o f arrangem ent can be found in the private sector. It is quite com m on for liability insurance carriers to agree to pay for legal services reasonably necessitated by the defense of claims against their policyholders, even though the interest o f the carrier and the interests o f the policyholder are rarely identical. M ore­ over, it is usually made quite clear that the carrier will pay for some kinds o f services, but not others (e.g., the carrier usually will not pay for services rendered in connection w ith a counterclaim ). F or both o f

w hen they submit these billing materials to the Civil Division, one w ould be hard put to conclude that these com m unications are for the purpose o f prom oting any “com m on interest” as betw een their clients and the U nited States w ithin the meaning o f the rule. It may be true that the U nited States has a general interest in providing legal representation for its em ployees, just as it has an interest in paying their salaries and in doing o th e r things that encourage people to enter governm ent service. But a dem and for paym ent o f a fee (w h eth er m ade directly o r th ro u g h an attorney) is a classic “a d v e rsa ria r demand. It does no m ore to prom ote a “com m on interest” as betw een the G overnm ent and a governm ent em ployee than w ould, say, a dem and for back salary. T hat it may be com m unicated to attorneys in the Civil Division w hile o th er attorneys in the Civil Division are representing the United States in the litigation out o f w hich the dem and arises is simply a com m entary on the peculiar w a y 'th e G overnm ent is forced to do business in these cases. T hat fact does not, in o u r view, enhance (or diminish) the privileged status o f w hat these materials contain. (2) Som e o f the attorneys have argued that these materials are “attorney w ork p roduct.” T here is authority that information contained in law firm statem ents may indeed, in proper circum stances, be regarded as “ attorney w ork p ro d u c t” and therefore privileged, at least for FO IA purposes. See Indian Law Resource Center v. Department o f Interior, A l l F. Supp. 144 (D .D .C . 1979). But our view o f the present case is that “w o rk -p ro d u ct” status o f these billing m aterials (if any) has no direct bearing on the ethical question o f discretionary disclosure. W h eth er o r not this inform ation was generated “ in anticipation o f litigation o r for trial,” w h eth er o r not it reflects the “ mental im pressions,” etc. o f these attorneys, the ethical question is simply w h eth er it discloses the confidences o r secrets o f the clients w ithin the meaning o f the Canon. T hat question turns upon the considerations discussed above. It does not turn upon Rule 26 o f the Federal Rules o f Civil Procedure. (3) Finally, some o f the attorneys have argued that discretionary disclosure o f these m aterials is prohibited by the Privacy A ct. W e have conferred w ith the Office o f Inform ation Law and Policy (O IL P ) on this question. T hey have expressed doubt that these records, w hich are filed and retrieved by the name o f the law firm that subm itted them, constitute a “system o f records” w ithin the meaning o f the A ct. See 5 U.S.C. § 552a(a)(5). M oreover, believing that there may be only a very slender basis for claim ing a FO IA exem ption for disclosure o f properly redacted billing m aterials at the end o f each case, O IL P is inclined to the view that the Privacy A ct is probably irrelevant anyw ay. It does not, o f course, forbid any disclosure that is m andated by F O IA . See 5 U.S.C. § 552a(b)(2).

394 these reasons, the tripartite fee arrangem ent harbors some potential for abuse, and it does in fact give rise to unethical conduct from time to time. But the traditional view has been that such an arrangem ent is not unethical in itself and that abuse can be avoided by firmly maintaining the principles that: (1) the attorney has the responsibility for acting solely in the interests o f his client, notw ithstanding the interests o f the com pany that pays his fee, see EC 5-23; and (2) the client must be free, and must be made to understand that he is free, to make other arrange­ ments, either with that attorney or with other attorneys, if it appears that services in addition to those paid by the com pany are necessary or desirable from his standpoint. Cf. D R 5 - 105(C). W e do have one suggestion regarding a technical point. T he standard contract that the Civil Division uses in the representation program is bilateral in form. It is a contract through which the D epartm ent o f Justice “retains” a private attorney to represent a governm ent em ­ ployee. It seems to us it would be helpful, both from the standpoint of the disclosure problem and from the standpoint o f preserving the inde­ pendence of private counsel, if this contract could be recast. Unless there is some reason to exclude the em ployee,9 he ought to be made a party; and the contract could then provide: (1) that he, the employee, has asked a private attorney to represent him, inasmuch as the D epart­ ment, for professional reasons, cannot; (2) that he and his attorney will determ ine w hat sort o f legal services need to be perform ed on his behalf; (3) that he and his attorney have entered into a collateral agreement with this D epartm ent regarding paym ent o f some, but per­ haps not all, o f the fees generated during the course o f this representa­ tion; (4) that if the employee and his attorney feel that services are desirable for w hich the D epartm ent will not pay, they must make their own arrangem ent regarding the fee; and (5) that he has entered into an agreem ent with this D epartm ent regarding the handling o f his confi­ dences and secrets and the disclosure o f billing information submitted to this D epartm ent by his attorney. M uch o f this is in the agreem ent already, but it seems to us that if the employee w ere inserted formally, it would be relatively easy to spell out the precise nature o f the rights and obligations o f all three parties and to deal directly with the sorts o f questions that have prom pted your ethical concerns.

John M. H arm on Assistant Attorney General Office o f L egal Counsel

9 W e have review ed past O ffice o f Legal Counsel opinions on the question o f the authority o f the D epartm ent to contract w ith private attorneys to provide legal representation for governm ent em ploy­ ees. W e are unaw are o f any legal consideration that requires the exclusion o f the employee.