Your Duty to Report Third-Party Illegal Conduct

Vol. 17 No. 1


Kari Loeser is compliance counsel for Jazz Pharmaceuticals in Palo Alto, California.

The role of an attorney is multifaceted and varied. You advise and counsel varied clients, including internal business units at corporations and individual stakeholders. The roles counsel is required to play include issue identification and risk mitigation. A unique and interesting problem arises when you discover an issue that does not involve your client, but rather, involves a competitor or other third party.

For example, what should an in-house lawyer for Pharmaceutical Company ABC do when she discovers that a direct competitor, Pharmaceutical Company XYZ, is engaging in business behaviors that directly contravene existing rules, regulations, or guidelines? Or, what should a criminal defense lawyer do when he discovers that a law enforcement official is withholding critical information from his client on an unrelated matter?

In both scenarios, remember that your primary ethical obligation and fiduciary duty is to your client. You should properly engage in fact-finding and determine the nature and severity of any problematic conduct. If, during the course of that fact-finding, you obtain valid and reliable information that a competitor or other actor is engaging in problematic or noncompliant behavior, different obligations are triggered.

Complete Accurate and Focused Fact-Finding for Your Client

Your primary obligation is effective and competent representation of your client. You should follow established protocol, processes, and procedures to investigate the scope and nature of your client’s involvement in possible wrongdoing. If the investigation does not reveal anything about your client, document and memorialize the findings.

Confirm Sources and Information About the Third Party’s Actions

Corporations and other actors may validly engage in appropriate and legal competitive actions. During an investigation, if valid, accurate, and detailed information comes to light about a third party’s inappropriate or potentially illegal behavior, you should consider the source. Speculation, assumptions, and hearsay would not be validated types of information. Direct knowledge and materials or information might be relevant.

Be Mindful of Defamation

During fact-finding, aim to be objective, factual, and unbiased. This unique situation should not fodder defamation or disparagement; rather, the goal is to determine if an independent obligation for reporting a third party is warranted.

Assess the Potential Violation of Law or Existing Industry Practices, Standards, or Guidelines

In many specialized industries, certain behaviors or practices do not necessarily rise to the level of a potential violation of law. For example, in the life science/pharmaceutical/biotechnology space, there are consensus-based industry practices or guidelines for behavior. One example is the Pharmaceutical Research and Manufacturer’s Association Code for Interactions with Healthcare Professionals (the PhRMA Code). In other practice areas, such as criminal law, constitutional rights are implicated if opposing counsel or third parties engage in unfair behaviors.

Determine the Best Course of Action

As a lawyer, you will need to assess, evaluate, and determine the best action steps. If you determine that no potential violation of law, guideline, or policy is at issue, then this scenario might be useful for internal training purposes. If you determine that a likely potential violation of law is at issue, you may need to take proactive steps and contact the applicable judicial, administrative, or corporate entity. If you determine that a likely potential violation of law is at issue, and your attempts to contact the third party are not successful, as a final resort, you may need to consider independently reporting through established programs or government hotlines.



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