SCRUPLES: Legal Ethics and Undercover Investigations

“Companies can often use secret shoppers or testers to conduct undercover investigations,” Ethox answered. “But whether a lawyer can counsel how to conduct an undercover investigation often depends on three things: the jurisdiction, the circumstances, and the manner in which the investigation is performed.”

“Why does the jurisdiction matter?” Paradox asked.

“The ABA Model Rules and the ethics rules in most states contain two provisions that may limit using testers,” Ethox said. “First, Model Rule 8.4(c) states that it is professional misconduct for a lawyer to engage in conduct that involves ‘dishonesty, fraud, deceit, or misrepresentation.’

“Second, Rule 8.4(a) states that it is professional misconduct for a lawyer to violate the rules ‘through the acts of another,’” Ethox said. “When combined, these two prohibitions may impede a lawyer who wants to counsel a client on how to conduct an undercover investigation.

“However,” Ethox continued, “a small group of states expressly allows lawyers to advise clients on secret-shopper activities. Most of these states—like Alaska, Florida, Iowa, Ohio, and Oregon—have modified their version of Rule 8.4 or its comment to expressly allow a lawyer to advise clients on covert investigations, at least in some circumstances.

“Wisconsin, meanwhile, has modified its Rule 4.1—which mandates truthfulness to third parties—to expressly allow certain investigative activities that might otherwise violate that rule, as well as Wisconsin Rule 8.4.

“In some other jurisdictions, ethics opinions or other guidance may allow lawyers to advise on covert investigations,” Ethox said, “but it is important to check the applicable law.”

“OK,” said Paradox, absorbing this information. “Why do the circumstances matter?”

“Often the ethics rules I mentioned or other laws specify what circumstances must exist for a lawyer to advise on a covert investigation,” Ethox answered. “At minimum, most jurisdictions require that the lawyer reasonably believe unlawful conduct is occurring and that an undercover investigation is necessary to confirm such conduct.

“New York County Lawyers’ Association Opinion 737 from 2007,” Ethox explained, “is an influential guide that offers four requirements that must be met before a nongovernmental lawyer may advise an investigator to use dissemblance to investigate potential wrongdoing.

“First,” Ethox said, “the investigation must relate to a violation of civil or intellectual property rights that the lawyer has a good-faith belief is taking place or will take place imminently, or the dissemblance must be expressly authorized by law.

“Second, the evidence must not be reasonably available through other lawful means.

“Third,” Ethox continued, paraphrasing Opinion 737, “the conduct of the supervising lawyer and investigator must not otherwise violate ethics rules or applicable law.

“And, fourth, the dissemblance must not unlawfully or unethically violate the rights of third parties,” Ethox finished.

“Wow,” Paradox said, “those conditions impose a pretty rigorous test.”

“I agree,” Ethox said. “That is why it is often best to choose a jurisdiction that expressly allows the undercover investigation.”

“OK,” Paradox agreed. “What about limitations on how the investigation is performed?”

“One major limitation is that the lawyer should not be directly involved in the subterfuge,” Ethox answered. “For example, Alaska expressly prohibits the lawyer’s direct participation.

“Also,” Ethox cautioned, “the client should use a reputable investigator, someone who knows the law in the jurisdiction and will stay within the bounds of the law.

“Particularly sensitive areas include recording or accessing communications between third parties,” Ethox continued, “or entering another’s property to take photographs or gather evidence.”

“I sure hope you can advise the client and me on such matters,” Paradox said.