Hiring a Private Investigator

A Practice Note providing an overview of key considerations when hiring a private investigator. This Note discusses the reasons why attorneys hire private investigators, the risks involved with using them, privilege issues, ethical considerations, and due diligence that counsel should perform before hiring a private investigator.

Reasons for Hiring a Private Investigator

Attorneys hire private investigators to collect information and evidence concerning:

• Parties, potential witnesses, and jurors in litigation matters.
• Employee misconduct involving allegations of fraud, theft, sexual harassment, and information leaks.
• An internal investigation into other employee, officer, director, or agent misconduct.
• Intellectual property (IP) infringement.
• Contract compliance.
• Asset location and ownership (for example, to collect on a judgment).
• Due diligence before entering into a merger, acquisition, or commercial contract.

Companies use investigation results to make decisions about:

• Hiring or terminating an employee.
• Entering into a transaction.
• Sending a cease and desist letter.
• Filing a litigation.
• Whether to conduct a more extensive internal investigation.

Risks of Hiring a Private Investigator

Although private investigators provide a useful service, hiring one may expose an attorney or a company to several risks, including:

• Direct liability for:
  • the negligent hiring or inadequate supervision of an investigator committing misconduct during the investigation (see Noble v. Sears, Roebuck & Co., 33 Cal. App. 3d 654 (1973)); or
  • violations of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, if consumer reports are improperly obtained or used.
• Vicarious liability for acts committed by the private investigator, including the torts of invasion of privacy, trespass, and assault (see King v. Loessin, 572 S.W.2d 87 (Tex. Civ. App. 1978)).
• A court’s order to disclose an investigation’s results during litigation.
• Disciplinary action for an ethics violation (see Ethical Considerations).
• Evidentiary sanctions in a litigation (see Evidentiary Sanctions for Unethical Conduct).

Privilege Issues

There is no common law private investigator-client privilege or private investigator work product doctrine (see Ubiquiti Networks, Inc. v. Kozumi USA Corp., 295 F.R.D. 517, 525 (N.D. Fl. 2013)). However, some states have enacted statutes prohibiting a private investigator’s disclosure of information acquired on a client’s behalf except when required by law, including:

• California (see Cal. Bus. & Prof. Code § 7539).
• Massachusetts (see M.G.L.A. 147 § 28).
• New York (see N.Y. Gen. Bus. Law § 82).
• Pennsylvania (see PA ST 22 P.S. § 24).
• Michigan (see M.C.L.A § 338.840).

Under certain circumstances, investigation results may be protected from disclosure under:

• The attorney-client privilege (see U.S. v. Kovel, 296 F.2d 918 (1961)).
• The attorney work product doctrine (see U.S. v. Nobles, 422 U.S. 225, 238-39 (1975)).

The attorney-client privilege protects from disclosure to third parties confidential attorney-client communications that relate to legal advice. The attorney work product doctrine protects from disclosure to third parties documents and tangible things that a party or its representative prepares in anticipation of litigation.

To help protect investigation results from disclosure, in-house counsel should hire a private investigator through its outside counsel who may assert that any information obtained in an investigation is protected by either the attorney-client privilege or the work product doctrine, if the investigator is retained in anticipation of litigation. To make this demonstration, outside counsel should:

• Document that the investigation’s subject relates to contemplated litigation before retaining an investigator.
• State in any letter to or contract with the investigator sent at the engagement’s outset that the attorney has commissioned the investigation in advance of litigation, and the investigator may not disclose confidential information to any third party.
• Make explicit in all written instructions to the investigator that the attorney intends to use the information obtained from the investigation in contemplated litigation.
• Clearly mark all privileged and work product-protected documents created during the investigation as “Attorney-Client Privileged Communication” or “Attorney Work Product” and “Prepared at counsel’s direction.”

Ethical Considerations

Private investigators use a variety of techniques to obtain evidence and information that may raise ethical issues for hiring attorneys under the American Bar Association’s Model Rules of Professional Conduct (ABA Model Rules). These include contacting parties and witnesses and using a pretext during an investigation.

This Note refers to the ABA Model Rules, which do not set a national ethics standard but rather provide the basic framework for the standards of professional conduct applied across the country. Since the ABA Model Rules can be modified at the state level, counsel should refer and adhere to their state’s version of the ABA Model Rules when considering whether attorney conduct may result in an ethics violation.

Contacting a Represented Party During an Investigation

A lawyer representing a client may not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter without consent from the represented person’s attorney or a court order (ABA Model Rule 4.2). If an investigator contacts a represented party during an investigation, the hiring attorney cannot escape responsibility for that wrongdoing simply by asserting that an agent committed the ethical violation (ABA Model Rule 5.3).

If an attorney does not properly supervise the investigator or provide detailed instructions to the investigator, the attorney may unwittingly violate the ABA Model Rules if the investigator speaks with a represented party. An attorney should inform the investigator of anyone the attorney knows is represented by another attorney and tell the investigator not to contact the represented person unless instructed to do so.

Using a Pretext During an Investigation

Another type of investigator conduct that may expose an attorney to an ethics violation is when an investigator uses a pretext during the investigation. Pretexting involves disguising one’s true identity or purpose when contacting a witness for confidential or privileged information. For example, when investigating suspected trademark infringement, an investigator may pose as an ordinary consumer to purchase samples of infringing products from a potential defendant.

If an investigator obtains information from pretexting, the supervising attorney may face disciplinary action for violating ABA Model Rules 4.1, 5.3, and 8.4.

Under ABA Model Rule 4.1, an attorney may not make a false statement of material fact or law to a third party while representing a client. Even if the attorney is not making the false statement, ABA Model Rule 8.4 prohibits an attorney from inducing another person, such as a private investigator, to engage in deception. If the investigator independently engages in deceptive behavior, the attorney may still be held responsible under ABA Model Rule 5.3, which requires an attorney to supervise any nonlawyer employees or independent contractors and holds the attorney responsible for their activities. Accordingly, neither in-house counsel nor outside counsel may ask an investigator to do something that the attorney is prohibited from doing.

When Pretexting is Permitted

The courts do not apply a universal rule when deciding whether the investigative use of pretexting amounts to an ethical violation. However, some jurisdictions permit the use of pretexting in limited circumstances. For example, in New York, a non-government attorney may supervise an investigator using deception when:

• Either the investigation is of a violation of civil rights or intellectual property rights and the lawyer believes in good faith that the violation is taking place or is likely to take place imminently or the law expressly authorizes deception.
• The evidence sought is not reasonably and readily available by other lawful means.
• The lawyer’s conduct and the investigator’s conduct that the lawyer is supervising do not otherwise violate the New York Lawyer’s Code of Professional Responsibility or applicable law.
• The deception does not unlawfully or unethically violate the rights of third parties.

(NYCLA Committee on Professional Ethics, Formal Opinion No. 737 (5/23/07).)

To avoid ethical transgressions when hiring and working with a private investigator, counsel should consult the ABA Model Rules as well as applicable local rules and ethics opinions to understand the limits of acceptable investigative techniques.

Evidentiary Sanctions for Unethical Conduct

Attorneys that violate the ABA Model Rules not only face potential disciplinary action, but also risk the exclusion of evidence presented at trial in a federal litigation if that evidence is obtained from unethical conduct (see Midwest Motor Sports v. Arctic Cat Sales, Inc., 347 F.3d 693 (8th Cir. 2003)). However, a court is not obligated to exclude evidence even if it finds that an attorney obtained the evidence by violating ethical rules (see U.S. v. Hammad, 858 F.2d 834, 842 (2d Cir. 1988) (suppression of evidence obtained by violating ethical rules is subject to the district court’s discretion)).

Investigator Due Diligence

Because the consequences of hiring the wrong investigator can be significant, counsel should carefully review a private investigator’s background and qualifications, including the investigator’s:

• License status. Most states require that private investigators are licensed.
• Liability insurance coverage. Even if an investigator has an appropriate amount of insurance coverage, counsel should require indemnification from the investigator in the retainer agreement.
• Years of experience.
• Prior law enforcement experience.
• Areas of specialization.
• Investigative practices to ensure that the investigator conducts investigations ethically.
• Delivery of work product. Some investigators prepare a written report at the end of an investigation. Others may deliver an oral report to the hiring attorney to protect information from disclosure to third parties. Depending on the investigation’s nature, a private investigator also may deliver to a client photographs, film or video surveillance footage, audio recordings of witness interviews, recorded telephone conversations, or tangible evidence, such as counterfeit products in an IP enforcement investigation or altered accounting records in an internal fraud investigation.
• Client references.
• Willingness to appear as a witness in court proceedings, if necessary.

Depending on the investigation’s nature, an investigator’s relationship with law enforcement agencies can be important. Many investigators are retired law enforcement personnel that maintain connections with their former departments or agencies. These relationships can be particularly helpful when law enforcement involvement becomes necessary (for example, when investigating counterfeiters, it may become necessary to perform a raid on the premises where counterfeit merchandise is manufactured).