NYCLA Opinion: In Certain Circumstances, 'Dissemblance' By Attorney-Supervised Investigators Is Permissible to Gather Evidence

Ethical prohibitions impact the common practice of almost every active trademark lawyer regarding his or her use of private investigators to collect information from third parties. However, the scope of permissible conduct is not always clearly defined. For instance, when a search report reveals one possible bar to your client's adoption of the mark, such as a nine-year-old federal registration by an individual who does not appear to have a Web site, can you or your investigator contact this person and devise some plausible explanation for the reason that you want to know if the mark is still in use? Or if you discover that a company appears to be infringing your client's trademark, can you send someone pretending to be a customer, but who asks all sorts of questions relevant to proving infringement that the ordinary consumer is highly unlikely to raise? Does it matter if the person you or your investigator makes contact with is a low-level sales clerk or the owner of the company?

Ethics rules governing these issues are found in the Model Rules of Professional Conduct, which apply in the vast majority of states. These rules specifically prohibit a lawyer (or anyone acting on the lawyer's behalf) from making a false statement of material fact to any third party. Model Rule 4.1 (the 'Honesty Rule'). Further, lawyers are prohibited from communicating with any third party that the lawyer knows is represented by counsel. Model Rule 4.2 (the 'Ex Parte Contact Rule'). The New Jersey version of the Model Rules goes further and applies the Ex Parte Contact Rule to any third party that the lawyer, with reasonable diligence (including asking that individual), should know is represented by counsel. In order to avoid any ambiguities, the New Jersey version of the Model Rules makes clear that any member of a company's control group is deemed represented by company counsel, including former employees, unless they specifically disavow the company's representation.

New York is one of the few remaining Model Code states, but DR 1-102(A)(3), 7-102(A)(5) and 7-104(A)(1) are essentially equivalent to the Honesty Rule and the Ex Parte Contact Rule as applied outside of the state of New Jersey.

Increasing Awareness of Ethically Prohibited Practices

Prior to 1995, most trademark lawyers presumed that those types of investigations presented no ethical issues. The practice was so well accepted that many investigators began their reports with statements such as, 'Using a suitable ruse ' ' Over the last 10 years, as this issue has actually been litigated in several cases, the trademark bar has become increasingly aware that certain types of investigations may in fact be ethically prohibited. Notably, there
is a split in authority as to whether a 'suitable ruse' may be used by investigators. For example, there are several cases where evidence obtained through dissemblance has been excluded by the court. See e.g., Midwest Motor Sports, Inc. v. Arctic Cat Sales, Inc., 144 F. Supp. 2d 1147 (D.S.D. 2001) (finding a violation of the no-contact rule and granting motion to exclude evidence obtained by private investigators who posed as customers and made secret audiotapes and noting that attorneys could have obtained information through formal procedures, such as a motion to compel); In re Wood, 526 N.W.2d 513, 514 (Wisc. 2005) (finding a violation of the rule against misrepresentation when attorney hired an investigator to pose as a former client in order to obtain a document, which could have been obtained by subpoena); Allen v. Int'l Truck & Engine, 2006 U.S. Dist. LEXIS 63720 at *25-26 (S.D. Ind. 2006) (finding a violation of the rule against contacting represented parties and suppressing evidence obtained by investigator). There are also cases where dissemblance has been permitted where the investigator contacted low-level sales clerks and/or obtained information that was publicly available. See e.g., A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 2002 U.S. Dist. LEXIS 16323, at *30, No. 96 Civ. 9721 (S.D.N.Y. Sept. 3, 2002) (holding that the use of an investigator was not an unfair invasion of privacy where the investigator used a false name and posed as a buyer, his actions conformed to those of a business person in the fashion industry, and he did not gain access to any non-public information); The Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., 2005 U.S. Dist. LEXIS 2143, at *2-3, No. 04 Civ. 5002 (S.D.N.Y. Feb. 14, 2005) (rejecting defendants' argument that evidence obtained by investigator in copyright infringement action should be excluded as a violation of ethical rules because 'it is not an end-run around the attorney/client privilege if investigators merely recorded the normal business routine rather than interviewing employees or tricking them into making statements that they otherwise would not have made') (citing Gidatex v. Campaniello Imports, Ltd., 82 F. Supp. 2d 119, 122 (S.D.N.Y. 1999)); Nikon, Inc. v. Ikon Corp., 803 F. Supp. 910, 921-922 (S.D.N.Y. 1992) (allowing introduction of investigators' interviews with non-party sales clerks to demonstrate passing-off and actual confusion among consumers); Louis Vuitton S.A. v. Spencer Handbags Corp., 597 F. Supp. 1186, 1188, aff'd, 765 F.2d 966 (2d Cir. 1985) (E.D.N.Y. 1984) (affirming permanent injunction issued after considering secretly recorded videotape of defendants' principals meeting with undercover investigator hired by plaintiff to discuss counterfeiting scheme).

The Gidatex Holding

Notwithstanding the split in authority, most trademark counsel took comfort in the holding of the Gidatex case where Judge Shira A. Scheindlin of the Southern District of New York denied a motion to exclude evidence gathered as the result of contacts by the plaintiff's investigator both before and after the filing of the complaint: 'Although [counsel's] conduct technically satisfies the three-part test generally used to determine whether counsel has violated the disciplinary rules, I conclude that he did not violate the rules because his actions simply do not represent the type of conduct prohibited by the rules.' Gidatex v. Campaniello Imports, Ltd., 82 F. Supp. 2d 119, 126 (S.D.N.Y. 1999). Significantly, however, the Gidatex holding is very limited and does not address such conduct in the context of trademark clearance. Gidatex also did not involve contact with a member of the control group, but low-level sales clerks. Finally, this holding is limited to whether the evidence collected by the investigator was admissible and not whether the conduct was a violation of the ethical rules. See Id. at 126 ('The Second Circuit Court of Appeals has ruled that a court is not obligated to exclude evidence even if it finds that counsel obtained the evidence by violating ethical rules.').

Recent events have made clear, however, the serious ramifications facing a lawyer who uses such tactics inappropriately. In 2006 it came to light that Hewlett-Packard executives retained outside investigators who had used 'pretexting,' or posing as someone else, to obtain phone records of reporters and board members suspected of involvement in press leaks. High-ranking company officials faced criminal charges and the company paid a multi-million dollar settlement to resolve civil claims filed by the California attorney general. The HP debacle also directly led to the enactment of legislation criminalizing pretexting in order to gain access to telephone records (federal law already banned pretexting to obtain financial records). The Telephone Records and Privacy Protection Act of 2006 provides for the imposition of criminal penalties on anyone who pretends to be someone else, or otherwise employs fraudulent tactics, to persuade phone companies to hand over what is supposed to be confidential data about customers' calling habits. This criminalization of certain investigative conduct by business people, who do not even work under any codified rules of ethics, certainly grabbed the attention of the legal community. In particular, those attorneys who routinely employ investigators were forced to consider, head-on, whether investigatory ruses, which may elicit information not disseminated in a company's normal course of business, are a violation of their ethical obligations.

NYCLA Opinion

In the face of these concerns, an unknown lawyer or law firm requested an ethical opinion from the New York County Lawyer's Association as to 'under what circumstances, if any, is it ethically permissible for a non-government lawyer to utilize the services of and supervise an investigator if the lawyer knows that dissemblance [i.e., a 'suitable ruse'] will be employed by the investigator?' On May 23, 2007, the Association gave its formal opinion, which appears to be the first ever to address this issue as it applies to intellectual property matters. NYCLA Committee on Professional Ethics Formal Opinion, No. 737, May 23, 2007.

The opinion begins by defining dissemblance as 'misstatements as to identity and purpose made solely for gathering evidence.' Thus, to the extent that some have argued that such misstatements are not truly 'misstatements of material facts,' this definition clarifies that these statements are misstatements that are otherwise prohibited by the Model Code. The opinion then surveys cases both in and outside of New York, examines the conduct approved by a number of courts, and comes to a conclusion which the association believes 'is most consistent with the overall purposes of the Disciplinary Rules and conforms to professional norms and societal expectations.' The holding of the opinion is quite narrow: Under certain exceptional circumstances, dissemblance by a non-attorney investigator supervised by an attorney is ethically permissible:

Non-government attorneys may therefore in our view ethically supervise non-attorney investigators employing a limited amount of dissemblance in some strictly limited circumstances where: (i) either (a) the investigation is a violation of civil rights or intellectual property rights and the lawyer believes in good faith that such violation is taking place or will take place imminently or (b) the dissemblance is expressly authorized by law; and (ii) the evidence sought is not reasonably available through other lawful means; and (iii) the lawyer's conduct and the investigator's conduct that the lawyer is supervising do not otherwise violate the Code (including, but not limited to, DR 7-104, the 'no contact' rule) or applicable law; and (iv) the dissemblance does not unlawfully or unethically violate the rights of third parties. Moreover, the investigator must be instructed not to elicit information protected by the attorney-client privilege. NYCLA Committee on Professional Ethics Formal Opinion, No. 737 at 5-6, May 23, 2007. (emphasis added.)

It is important to note the practical implications of this holding:

1) Using a suitable ruse is only permitted where the attorney believes that infringing conduct is occurring or about to occur and the information sought is not obtainable through other means (i.e., subpoena). Thus, the use of suitable ruse to gain information relevant to clearance of a new mark is not within the limited exception to the Honesty Rule since there is no implication of infringing conduct;

2) This limited exception to the Honesty Rule applies only to private investigators retained by an attorney. The attorney (and presumably any law firm employee) may not, however, use dissemblance themselves even if all the conditions of the opinion are satisfied;

3) While it may be acceptable to use a suitable ruse to gather evidence of infringement, the lawyer and the lawyer's investigator are still obliged to comply with the Ex Parte Contact Rule. It is often contended that this rule does not apply, however, unless the attorney expressly knows that the third party has counsel. The New Jersey version of the Model rules directly rejects this argument. But even in other jurisdictions, one should proceed with caution. Most lawyers when contacting a third-party witness would automatically begin by asking if the witness is represented by counsel. Common sense suggests that this same level of caution is appropriate when contacting a potentially adverse party to gather evidence of infringement; and

4) It is good practice to give your investigator written guidelines about whom should be contacted and the types of questions that can be asked. In particular, the investigator should be instructed not to elicit information protected by the attorney-client privilege. In the event that the investigator goes beyond the bounds of what you've instructed, should there be adverse consequences, such written guidelines will help show that the investigator was properly supervised by you and unilaterally exceeded the authorized scope of the investigation.

Overall, the opinion raises almost more questions than it answers. The trademark bar would be well-served if one of the various intellectual property associations, such as INTA, issued a more detailed opinion addressing these specific issues, such as what, if anything, an attorney must do to ascertain if a third party is represented prior to engaging an investigator and whether there are circumstances under which it is permissible to use dissemblance to gain information in connection with clearance of a new mark.

Stephen W. Feingold is chair of the Day Pitney Trademark, Copyright, Advertising & Internet Group and practices out of the firm's New York office. He can be reached at 212-297-5800, or by e-mail at [email protected]. Rebecca L. Griffith, also resident in New York, is an associate in the Group and specializes in litigation. She can be reached at 212-297-5800, or by e-mail at [email protected].

Ethical prohibitions impact the common practice of almost every active trademark lawyer regarding his or her use of private investigators to collect information from third parties. However, the scope of permissible conduct is not always clearly defined. For instance, when a search report reveals one possible bar to your client's adoption of the mark, such as a nine-year-old federal registration by an individual who does not appear to have a Web site, can you or your investigator contact this person and devise some plausible explanation for the reason that you want to know if the mark is still in use? Or if you discover that a company appears to be infringing your client's trademark, can you send someone pretending to be a customer, but who asks all sorts of questions relevant to proving infringement that the ordinary consumer is highly unlikely to raise? Does it matter if the person you or your investigator makes contact with is a low-level sales clerk or the owner of the company?

Ethics rules governing these issues are found in the Model Rules of Professional Conduct, which apply in the vast majority of states. These rules specifically prohibit a lawyer (or anyone acting on the lawyer's behalf) from making a false statement of material fact to any third party. Model Rule 4.1 (the 'Honesty Rule'). Further, lawyers are prohibited from communicating with any third party that the lawyer knows is represented by counsel. Model Rule 4.2 (the 'Ex Parte Contact Rule'). The New Jersey version of the Model Rules goes further and applies the Ex Parte Contact Rule to any third party that the lawyer, with reasonable diligence (including asking that individual), should know is represented by counsel. In order to avoid any ambiguities, the New Jersey version of the Model Rules makes clear that any member of a company's control group is deemed represented by company counsel, including former employees, unless they specifically disavow the company's representation.

New York is one of the few remaining Model Code states, but DR 1-102(A)(3), 7-102(A)(5) and 7-104(A)(1) are essentially equivalent to the Honesty Rule and the Ex Parte Contact Rule as applied outside of the state of New Jersey.

Increasing Awareness of Ethically Prohibited Practices

Prior to 1995, most trademark lawyers presumed that those types of investigations presented no ethical issues. The practice was so well accepted that many investigators began their reports with statements such as, 'Using a suitable ruse ' ' Over the last 10 years, as this issue has actually been litigated in several cases, the trademark bar has become increasingly aware that certain types of investigations may in fact be ethically prohibited. Notably, there
is a split in authority as to whether a 'suitable ruse' may be used by investigators. For example, there are several cases where evidence obtained through dissemblance has been excluded by the court. See e.g., Midwest Motor Sports, Inc. v. Arctic Cat Sales, Inc ., 144 F. Supp. 2d 1147 (D.S.D. 2001) (finding a violation of the no-contact rule and granting motion to exclude evidence obtained by private investigators who posed as customers and made secret audiotapes and noting that attorneys could have obtained information through formal procedures, such as a motion to compel); In re Wood, 526 N.W.2d 513, 514 (Wisc. 2005) (finding a violation of the rule against misrepresentation when attorney hired an investigator to pose as a former client in order to obtain a document, which could have been obtained by subpoena); Allen v. Int'l Truck & Engine, 2006 U.S. Dist. LEXIS 63720 at *25-26 (S.D. Ind. 2006) (finding a violation of the rule against contacting represented parties and suppressing evidence obtained by investigator). There are also cases where dissemblance has been permitted where the investigator contacted low-level sales clerks and/or obtained information that was publicly available. See e.g., A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 2002 U.S. Dist. LEXIS 16323, at *30, No. 96 Civ. 9721 (S.D.N.Y. Sept. 3, 2002) (holding that the use of an investigator was not an unfair invasion of privacy where the investigator used a false name and posed as a buyer, his actions conformed to those of a business person in the fashion industry, and he did not gain access to any non-public information); The Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., 2005 U.S. Dist. LEXIS 2143, at *2-3, No. 04 Civ. 5002 (S.D.N.Y. Feb. 14, 2005) (rejecting defendants' argument that evidence obtained by investigator in copyright infringement action should be excluded as a violation of ethical rules because 'it is not an end-run around the attorney/client privilege if investigators merely recorded the normal business routine rather than interviewing employees or tricking them into making statements that they otherwise would not have made') (citing Gidatex v. Campaniello Imports, Ltd ., 82 F. Supp. 2d 119, 122 (S.D.N.Y. 1999)); Nikon, Inc. v. Ikon Corp ., 803 F. Supp. 910, 921-922 (S.D.N.Y. 1992) (allowing introduction of investigators' interviews with non-party sales clerks to demonstrate passing-off and actual confusion among consumers); Louis Vuitton S.A. v. Spencer Handbags Corp ., 597 F. Supp. 1186, 1188, aff'd , 765 F.2d 966 (2d Cir. 1985) (E.D.N.Y. 1984) (affirming permanent injunction issued after considering secretly recorded videotape of defendants' principals meeting with undercover investigator hired by plaintiff to discuss counterfeiting scheme).

The Gidatex Holding

Notwithstanding the split in authority, most trademark counsel took comfort in the holding of the Gidatex case where Judge Shira A. Scheindlin of the Southern District of New York denied a motion to exclude evidence gathered as the result of contacts by the plaintiff's investigator both before and after the filing of the complaint: 'Although [counsel's] conduct technically satisfies the three-part test generally used to determine whether counsel has violated the disciplinary rules, I conclude that he did not violate the rules because his actions simply do not represent the type of conduct prohibited by the rules.' Gidatex v. Campaniello Imports, Ltd ., 82 F. Supp. 2d 119, 126 (S.D.N.Y. 1999). Significantly, however, the Gidatex holding is very limited and does not address such conduct in the context of trademark clearance. Gidatex also did not involve contact with a member of the control group, but low-level sales clerks. Finally, this holding is limited to whether the evidence collected by the investigator was admissible and not whether the conduct was a violation of the ethical rules. See Id. at 126 ('The Second Circuit Court of Appeals has ruled that a court is not obligated to exclude evidence even if it finds that counsel obtained the evidence by violating ethical rules.').

Recent events have made clear, however, the serious ramifications facing a lawyer who uses such tactics inappropriately. In 2006 it came to light that Hewlett-Packard executives retained outside investigators who had used 'pretexting,' or posing as someone else, to obtain phone records of reporters and board members suspected of involvement in press leaks. High-ranking company officials faced criminal charges and the company paid a multi-million dollar settlement to resolve civil claims filed by the California attorney general. The HP debacle also directly led to the enactment of legislation criminalizing pretexting in order to gain access to telephone records (federal law already banned pretexting to obtain financial records). The Telephone Records and Privacy Protection Act of 2006 provides for the imposition of criminal penalties on anyone who pretends to be someone else, or otherwise employs fraudulent tactics, to persuade phone companies to hand over what is supposed to be confidential data about customers' calling habits. This criminalization of certain investigative conduct by business people, who do not even work under any codified rules of ethics, certainly grabbed the attention of the legal community. In particular, those attorneys who routinely employ investigators were forced to consider, head-on, whether investigatory ruses, which may elicit information not disseminated in a company's normal course of business, are a violation of their ethical obligations.

NYCLA Opinion

In the face of these concerns, an unknown lawyer or law firm requested an ethical opinion from the New York County Lawyer's Association as to 'under what circumstances, if any, is it ethically permissible for a non-government lawyer to utilize the services of and supervise an investigator if the lawyer knows that dissemblance [i.e., a 'suitable ruse'] will be employed by the investigator?' On May 23, 2007, the Association gave its formal opinion, which appears to be the first ever to address this issue as it applies to intellectual property matters. NYCLA Committee on Professional Ethics Formal Opinion, No. 737, May 23, 2007.

The opinion begins by defining dissemblance as 'misstatements as to identity and purpose made solely for gathering evidence.' Thus, to the extent that some have argued that such misstatements are not truly 'misstatements of material facts,' this definition clarifies that these statements are misstatements that are otherwise prohibited by the Model Code. The opinion then surveys cases both in and outside of New York, examines the conduct approved by a number of courts, and comes to a conclusion which the association believes 'is most consistent with the overall purposes of the Disciplinary Rules and conforms to professional norms and societal expectations.' The holding of the opinion is quite narrow: Under certain exceptional circumstances, dissemblance by a non-attorney investigator supervised by an attorney is ethically permissible:

Non-government attorneys may therefore in our view ethically supervise non-attorney investigators employing a limited amount of dissemblance in some strictly limited circumstances where: (i) either (a) the investigation is a violation of civil rights or intellectual property rights and the lawyer believes in good faith that such violation is taking place or will take place imminently or (b) the dissemblance is expressly authorized by law; and (ii) the evidence sought is not reasonably available through other lawful means; and (iii) the lawyer's conduct and the investigator's conduct that the lawyer is supervising do not otherwise violate the Code (including, but not limited to, DR 7-104, the 'no contact' rule) or applicable law; and (iv) the dissemblance does not unlawfully or unethically violate the rights of third parties. Moreover, the investigator must be instructed not to elicit information protected by the attorney-client privilege. NYCLA Committee on Professional Ethics Formal Opinion, No. 737 at 5-6, May 23, 2007. (emphasis added.)

It is important to note the practical implications of this holding:

1) Using a suitable ruse is only permitted where the attorney believes that infringing conduct is occurring or about to occur and the information sought is not obtainable through other means (i.e., subpoena). Thus, the use of suitable ruse to gain information relevant to clearance of a new mark is not within the limited exception to the Honesty Rule since there is no implication of infringing conduct;

2) This limited exception to the Honesty Rule applies only to private investigators retained by an attorney. The attorney (and presumably any law firm employee) may not, however, use dissemblance themselves even if all the conditions of the opinion are satisfied;

3) While it may be acceptable to use a suitable ruse to gather evidence of infringement, the lawyer and the lawyer's investigator are still obliged to comply with the Ex Parte Contact Rule. It is often contended that this rule does not apply, however, unless the attorney expressly knows that the third party has counsel. The New Jersey version of the Model rules directly rejects this argument. But even in other jurisdictions, one should proceed with caution. Most lawyers when contacting a third-party witness would automatically begin by asking if the witness is represented by counsel. Common sense suggests that this same level of caution is appropriate when contacting a potentially adverse party to gather evidence of infringement; and

4) It is good practice to give your investigator written guidelines about whom should be contacted and the types of questions that can be asked. In particular, the investigator should be instructed not to elicit information protected by the attorney-client privilege. In the event that the investigator goes beyond the bounds of what you've instructed, should there be adverse consequences, such written guidelines will help show that the investigator was properly supervised by you and unilaterally exceeded the authorized scope of the investigation.

Overall, the opinion raises almost more questions than it answers. The trademark bar would be well-served if one of the various intellectual property associations, such as INTA, issued a more detailed opinion addressing these specific issues, such as what, if anything, an attorney must do to ascertain if a third party is represented prior to engaging an investigator and whether there are circumstances under which it is permissible to use dissemblance to gain information in connection with clearance of a new mark.

Stephen W. Feingold is chair of the Day Pitney Trademark, Copyright, Advertising & Internet Group and practices out of the firm's New York office. He can be reached at 212-297-5800, or by e-mail at [email protected]. Rebecca L. Griffith, also resident in New York, is an associate in the Group and specializes in litigation. She can be reached at 212-297-5800, or by e-mail at [email protected].