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Law360 (May 27, 2020, 5:45 PM EDT )
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| Margaret Meyers |
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| Daniel Zinman |
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| Lee Richards |
In a public statement issued on March 23, the co-directors of the Division of Enforcement at the U.S. Securities and Exchange Commission's declared that the SEC "is committing substantial resources to ensuring that our Main Street investors are not victims of fraud or illegal practices in these unprecedented market and economic conditions."
More recently, they held a town hall meeting in which they urged their staff lawyers to continue their work despite the burdens imposed by the COVID-19 crisis.
However, senior officials at the SEC have not announced procedures for how staff and defense lawyers should conduct arguably the most critical part of the division's work — witness interviews and testimony.
Neither has the U.S. Department of Justice given public guidance on how interviews by prosecutors will proceed. Internal investigation interviews, less likely to be delayed by the lockdown, have proceeded with lawyers on both sides making good faith decisions about how the interviews will proceed.
This situation leaves open a variety of issues and opportunities for those defending witnesses before the commission, the DOJ, and during internal investigations.
These issues may become particularly acute if, as some have predicted, the COVID-19 crisis leads to a spate of new SEC, DOJ and internal investigations, including, for example, investigations into the recent spike in corporate insider stock sales, fraud in the application for the Coronavirus Aid, Relief and Economic Security Act, or CARES, Act loans, and corporate accounting and disclosures.
Defense counsel need to consider a range of issues before agreeing to proceed with a remote interview, including counsel's ability to fully assess and prepare the client, the client's potential exposure, and the consequences of delay or refusal to proceed with the interview.
But assuming the client and defense counsel agree to go forward, the remote interview option leaves open a variety of issues and opportunities for those defending witnesses before the SEC, the DOJ and during internal investigations.
Use of Documents
Remote interviews raise practical issues regarding the use of documents and how best to share them with witnesses. While there are many options to consider, defense counsel must, at a minimum, ensure that clients are given an opportunity carefully to review documents in their entirety before answering questions and/or authenticating them.
There have been recent anecdotal instances where regulators have held multi-page documents up to the camera, affording witnesses only brief glimpses at them, and then proceeded to pose questions based on those documents.
Absent unusual circumstances, perhaps where witnesses have no exposure and the deposition topics are uncontroversial and not likely to be contested, defense counsel should not agree to that procedure for a variety of reasons, starting with the client's inability to review the entire document.
The most sensible option, which is being adopted in remote internal investigation interviews, is to request copies of documents in advance of interviews or testimony. This approach provides the obvious advantage of being able to review with, and prepare your client on, them before the interview takes place — thereby obtaining significant insight into the interviewer's thinking.
If a prosecutor or regulator is unwilling to proceed in this fashion, the parties could agree that copies of documents will be delivered in hard copy format to the witness and separately to counsel ib advance of the interview, and that the package containing the exhibits will be opened on camera by both the client and counsel at the instruction of the government.
Another option involves videoconferencing services such as Webex and Zoom that allow screen sharing, or certain court reporting services that allow parties to mark and introduce exhibits on screen in real time.
In advance of testimony, the government can upload its exhibits, and then show and/or mark them during the interview. The documents will then be shared at that time with the witness and counsel.
This approach requires counsel and the witness to familiarize themselves with the relevant technology in advance of testimony, as navigating through exhibits, and back and forth between them, may not be straightforward.
An additional option is for the prosecutor or regulator to send exhibits electronically during testimony. Each exhibit can be emailed one-by-one to the witness and counsel as they are shown. Alternatively, an electronic binder of all exhibits can be shared. If testimony will involve reviewing documents side by side, or toggling back and forth between them, this approach could be ineffective without the presence of split or multiple screens.
Interacting With the Client
Remote questioning also presents unique challenges — and temptations — for communications between defense counsel and their clients. Physical distance makes it difficult for counsel to read a client's body language and react in real time during testimony.
For this reason, counsel may be tempted to establish a separate means of communicating with the client during the interview, for instance, by sending emails or text messages. But counsel who engage in surreptitious communications with clients during remote questioning are proceeding into risky, potentially unethical territory.
While the SEC's enforcement manual permits a testifying witness to consult privately with counsel and to receive advice from counsel "before, during and after the testimony," this language in no way permits counsel to coach a client while a question is pending.[1] Needless to say, SEC staff, DOJ prosecutors, and counsel conducting internal investigation interviews would react extremely negatively to covert coaching during an interview or testimony.
The most relevant civil rule prohibits a defense attorney from communicating with her client during testimony while a question is pending. Federal Rule of Civil Procedure 30(c)(2) requires objections to be stated concisely in a nonargumentative and nonsuggestive manner, and prohibits defense counsel from instructing the witness not to answer except when necessary to preserve a privilege, enforce a court-ordered limitation, or seek judicial relief to terminate or limit the deposition.
Beyond those exceptions, defense counsel may not instruct or influence their clients once testimony has begun.[2] Further, the Local Civil Rules applicable in the U.S. District Courts for the Southern and Eastern Districts of New York provide that defense counsel may not initiate a private conference with her client "while a deposition question is pending," except to determine whether a privilege should be asserted.[3]
Even if defense counsel and the witness were disciplined and confined their messages to the moments between an answer and the next question, if that were even possible, such communications still would be potentially improper unless counsel informed the questioner that she was consulting with her client.
Consider this: if the interview were in person, the questioner would see when the witness was consulting with counsel, and the questioner could assess based on the circumstances whether to permit the consultation or to object to it. When the dialogue takes place on a separate, unseen platform, however, it assumes a deceptive nature. Importantly, if the government later learned of the communications, it would severely damage the government's view of the attorney's and her client's credibility.
Moreover, to the extent the government later were to seek discovery of the attorney-client communications, any messages not demonstrably shared during a break in the testimony likely would not be privileged.
This situation arose in Ngai v. Old Navy, in the U.S. District Court for the District of New Jersey, when the plaintiff's counsel conducted a video conference deposition of an Old Navy employee in which the deponent, her lawyer, and the deposing attorney were all in separate locations.
During the deposition, the deponent's lawyer sent her client numerous text messages — a fact discovered when the lawyer mistakenly sent a text message meant for her client to the deposing attorney stating "[you are] doing fine."
After the plaintiff sought discovery of the text messages, the court noted that it was "not clear that any of the messages were sent during breaks" and held that all messages exchanged between the deponent and her counsel after the deposition began were not protected by the attorney-client privilege. In so holding, the court expressly stated that it could not condone the "surreptitious nature of the communication."
For the same reason, defense counsel also should make sure that their clients are not consulting notes or writing on documents during remote interviews. Questioners will ask for copies once they discover that this is happening, and the privilege will not apply.
Defense counsel would be wise to resist the temptation to take advantage of the multitude of ways to communicate covertly with their clients during remote testimony. Instead, counsel should fall back on the tried and true methods of defending and supporting a client during interviews and testimony, whether it is in person or otherwise. Ask clarifying questions to the extent permitted by the government, and, during on-the-record testimony, lodge clear and concise objections. In addition, counsel should request frequent breaks to check in with clients in an entirely separate video or telephonic breakout room, while remembering to mute the main video room.
Interacting With the Government
The distance created by remote questioning necessarily limits defense counsel's ability to interact with government lawyers in real time as they do in person. It will make it more difficult to develop a rapport with those lawyers, to gain their trust, and to influence their thinking as the questioning proceeds.
The opportunity to catch opposing counsel in the hallway to make a point or ask a question is obviously lost. In remote interviews, there are little or no opportunities for off-the-record observations, and no occasions to shape the government's understanding about what has been or is about to be said.
At the same time, the formality of remote testimony may serve to shield the client somewhat from overbearing or aggressive questioning. It limits the interviewer's ability to pile on with rapid-fire questions from multiple questioners, as sometimes happens when multiple prosecutors and agents are in the same room. The cumbersome quality of remote examination regarding documents limits the questioner's ability to delve deeply into particular documents or use multiple documents to build a case as questioning proceeds.
Questioning over video systems also will make it difficult for clients to answer before the question is completed, thereby forcing clients to take their time and giving them a greater chance to think before they answer. In short, remote testimony may help clients to follow some of our most basic instructions.
Reading the Room
While the logistics of managing remote interviews and testimony will need to be worked out (particularly when SEC and DOJ activity ramps back up), something is surely lost when counsel, clients, and questioners are not in the same room. Counsel's ability to read the reactions of SEC and DOJ lawyers — and to assess how the client is doing — is obviously limited when proceedings are remote.
One cannot overestimate the important effect of body language and facial expressions on counsel's judgment and behavior. In addition, the rhythm of the questions and answers, and even nuanced tones of voice, may be altered significantly when delivered remotely. And counsel's ability to comment informally during interviews and testimony, as is sometimes permitted, will be stunted.
To mitigate these challenges, defense counsel may wish to invoke the remote nature of the interview as good reason to ask the government (outside the presence of the witness) to provide more feedback during breaks or just after the interview than they otherwise might do.
All of this will require significant adjustments in how defense counsel interact with and advocate for their clients before the government. In the end, even with such adjustments, much will be lost if defense counsel are not able to read the room.
Margaret Meyers and Daniel Zinman are partners, and Lee Richards is a founding partner, at Richards Kibbe & Orbe LLP.
Partners David Massey and Jamie Schafer contributed to this article.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Indeed, in a series of speeches in 2011, then-Director of Enforcement Robert Khuzami spoke about inappropriate conduct of defense counsel during testimony, including signaling to witnesses during testimony and making inappropriate speaking objections designed to guide an answer. See https://www.sec.gov/news/speech/2011/spch060111rk.htm.
[2] See, e.g., Phillips v. Mfrs. Hanover Trust Co.
, No. 92-cv-8527, 1994 WL 116078, at *4 (S.D.N.Y. Mar. 29, 1994) ("[I]t is not counsel's place to interrupt if a question is perceived to be potentially unclear to the witness. Rather, the witness should make the determination as to whether a question is clear and answer to the best of his or her ability."); Morales v. Zondo, Inc. , 204 F.R.D. 50, 54 (S.D.N.Y. 2001) (sanctioning attorney where "private consultations with the witness, instructions not to answer, instructions how to answer, colloquies, interruptions, and ad hominem attacks disrupted the examination").[3] Gavrity v. City of New York
, No. 12-cv-6004, 2014 WL 4678027, at *2 (E.D.N.Y. Sept. 19, 2014) ("The rules of this Court do not prohibit "discussions between counsel and client during a deposition other than when a question is pending.").For a reprint of this article, please contact reprints@law360.com.
