Judge Jed Rakoff’s decision issued on July 25th in the Meyer v. Kalanick case pending in the Southern District of New York serves as a reminder of the ethical rule that as an attorney, the actions of your investigator are imputed to you. See ABA Model Rules of Professional Responsibility Rule 8.4(a). In a rebuke of Uber Technologies Inc. (“Uber”), Judge Rakoff criticized the company and its in-house counsel for allowing an investigative firm they had hired to use “blatantly fraudulent and arguably criminal” methods to gather information on their adversary and his attorney. Judge Rakoff’s ruling illustrates the importance of vetting your outside investigators and properly overseeing their work.

The lawsuit is an antitrust class action filed against Uber’s founder, Travis Kalanick, by Uber customer Spencer Meyer, to which Uber was later added as a co-defendant. The claim centers on Uber’s so-called “surge pricing,” which Meyer alleges is anti-competitive. Uber’s General Counsel directed that an investigation be conducted to “find out a little more about this plaintiff” – a task that was delegated to Uber’s Chief Security Officer and subsequently to one of his lieutenants. The request resulted in the hiring of Global Precision Research LLC, also known as Ergo, to conduct a “reputational” investigation of the plaintiff.

The plaintiff became aware of the investigation after Ergo’s investigator contacted a former colleague of the plaintiff’s lawyer to ask about the lawyer’s character. Suspicious of the claim that Ergo – which advertises itself as a business intelligence and investigations firm – was researching a report “profiling up-and-coming labor lawyers” as the investigator had claimed, the former colleague told Meyer’s attorney about the approach.

The plaintiff alleged that: (i) Ergo committed a criminal misdemeanor by operating without a New York State private investigator’s license; (ii) Ergo knowingly misrepresented itself and “used false pretenses” in an attempt to gain the trust of the plaintiff’s colleagues and personal acquaintances; and (iii) the Ergo investigator managing the project recorded telephone conversations without consent – a criminal offense in Connecticut and New Hampshire, where the recipients of the calls were based. The plaintiff requested that the Court enter an order which would: (i) prohibit the defendants from using the fruits of the Ergo investigation; (ii) preclude the defendants from conducting any improper background investigations; and (iii) require the defendants to reimburse plaintiff’s attorneys’ fees and costs relating to issues arising from the Ergo matter.

Judge Rakoff’s ruling

Judge Rakoff agreed with the plaintiff’s assertions, stating that he was troubled by this “dismal incident.” Regarding the objective of the investigation, Judge Rakoff wrote in the opinion that the Court was “profoundly skeptical” of Uber’s claims at the hearing that the investigation had been conducted to protect its CEO from a potential security threat. He made clear that he believed “the purpose of the investigation was to try to unearth derogatory personal information about Mr. Meyer and his counsel that could then be used to try to intimidate them or to prejudice the Court against them.”

The Court explicitly rejected the notion that investigators working on behalf of a party in litigation may make misrepresentations to advance that party’s interests. Judge Rakoff, citing Rule 5.3 of New York’s Rules of Professional Conduct, stated that lawyers need to “adequately supervise non-lawyers retained to do work for lawyers in order to ensure that the non-lawyers do not engage in actions that would be a violation of the Rules if a lawyer performed them.” The Court stated that lawyers cannot ethically make false statements of fact or engage in any conduct which involves dishonesty, fraud, deceit or misrepresentation. See New York Rules of Professional Conduct Rules 4.1 and 8.4(c)[1]. Therefore, if counsel is prohibited by the ethical rules from making misrepresentations, false statements, or committing acts of fraud or deceit, any investigator retained by counsel is also prohibited from engaging in such wrongful conduct.

Uber and the plaintiff reached an out-of-court settlement whereby Uber agreed to pay an undisclosed amount for the litigation costs related to issues arising from the Ergo investigation and therefore, the Court did not have to decide on the issue of sanctions. Judge Rakoff noted that if he had to rule on sanctions, the Court would have had to determine if “Uber acted with at least, wanton disregard for its ethical and legal obligations.”

Considerations when hiring an investigator

Hiring investigators routinely yields results that are actionable and admissible, as opposed to punishable. It is important, however, to know who you are hiring and to ensure that their investigative methods are legal and align with ethical rules for lawyers and those of your organization. Unethical or unlawful conduct by an investigator risks vitiating the attorney-client privilege and, in egregious cases, may even result in sanctions by your bar association. Choosing reputable investigators and ensuring that they understand and respect relevant laws will protect you from potential damage to your case and, as importantly, your reputation.

Conduct your due diligence and make sure you can answer the following questions:

• Is the investigator licensed in the jurisdiction where the investigation will be conducted? Conducting investigations without a license is a criminal misdemeanor in most states, and as Judge Rakoff observed, “The failure to obey licensing laws … raises serious questions about [an investigator’s overall] commitment to legal compliance.”
• How does your investigator handle conflicts of interest? As a lawyer you would not act for a client if there were a conflict of interest, and under Rules of Professional Conduct the same standards apply to non-lawyers under your supervision.
• Does the engagement letter with the investigator require them to act in compliance with all relevant laws and regulations?
• What is the investigator’s track record for conducting legal and ethical investigations? Has the investigator’s conduct ever been the subject of litigation, investigation or sanctions?
• Have you clearly communicated, verbally and in writing, the importance of conducting the investigation ethically and in compliance with all applicable laws?
• Will the investigator provide you with a clear, agreed-upon work plan that sets out the objectives and the methodology to be used? Will he/she communicate regularly with you as the investigation progresses?
• Have you searched for any negative references to the investigator in the public domain? Are there any reputable references that you can speak to regarding the investigator’s character and prior conduct?

Once the investigator is hired, it is your responsibility as a lawyer to ensure that he/she acts within the bounds of the law and your own professional standards. In Judge Rakoff’s ruling, he cited the New York Rules of Professional Conduct, though he could have equally referenced the American Bar Association’s Model Rules in asserting that attorneys have an obligation to adequately supervise their agents, including investigators.[2]

Hiring an investigator who understands legal and ethical boundaries, and is transparent about the work he/she does, will help ensure that your investigation produces actionable information, and not an investigation into your investigation.

[1] While Judge Rakoff cited to the New York Rules of Professional Conduct, the relevant rules in the American Bar Association’s Model Rules of Professional Conduct contain similar language.

[2] For further information, see the ABA Model Rules of Professional Responsibility, particularly Rule 5.3 on Responsibilities Regarding Non-Lawyer Assistance, Rules 8.3(a) and 8.3(c) on Misconduct, and Rule 4.4 on Respect for Rights of Third Persons.