Ethical Considerations for Media Advocacy or Why Martha Stewart Should Matter to You

Ethical Considerations for Media Advocacy or Why Martha Stewart Should Matter to You

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Legal news has become big business. From legal trade publications to Court TV to general media outlets such as national television, radio and newspapers, there are many sources eager to provide information to feed the public's seemingly insatiable appetite for legal news. And the public surely loves news about big failures, i.e., bankruptcy cases. When the news media needs information about a pending bankruptcy case, they turn to you‹the lawyers, financial advisors, investment bankers and other players in major cases. Sometimes they seek comment from professionals representing parties in the case; sometimes they ask professionals who are not involved in the case to comment on it. So when the New York Times comes a' callin', and you envision your name in that newspaper of record, and the fame and marketing benefits that may ensue, are you free to proceed? As this is an ethics column, it will come as no surprise that the answer is no. There are first ethical considerations and guidelines to be consulted, and even conflict searches to be done, especially for lawyers. There are also some practical and common-sense considerations to be weighed.

Let us begin with media coverage of cases that you are actively involved in on behalf of a client, as distinct from those where you may be asked to comment as an outside "expert." Most judges read the newspapers, watch television and listen to the radio. Ethics and common sense thus collide on a relatively indisputable proposition: Before you open your mouth, you need to recognize that what you say to a reporter about your case may be read, seen or heard by the judge presiding over your case. You don't need a particular ethical rule to understand you may be treading in dangerous territory, but there is one nevertheless. Model Rule of Professional Conduct 3.6(a) states that a lawyer participating or having participated in a litigation shall not make an extrajudicial statement that will have "a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter."2 In Gentile v. State Bar of Nevada, the U.S. Supreme Court held that the "substantial likelihood" test properly balances the protection of attorneys' free speech rights with the avoidance of "two principal evils: (1) comments that are likely to influence the actual outcome of the trial, and (2) comments that are likely to prejudice the jury venire, even if an untainted panel can ultimately be found." 501 U.S. 1030, 1075 (1991).3 Because jury cases rarely, if ever, occur in a bankruptcy context, the principal question of whether Gentile is applicable is whether the comments you make in the press "are likely to influence" your trier of fact.

As a courtroom advocate, I feel somewhat conflicted by that formulation of the rule, but I believe that in the bankruptcy context, and considering the very important (and potentially conflicting) duty of zealous advocacy (see Model Rule 1.3), it can be reconciled in favor of public comment (subject to other guidelines and cautions to be discussed below) in most circumstances. The key is to separate motive from effect. I want to influence the judge, whether the statements I make are in court or in the press. I would have trouble believing anyone who denied that a motive in speaking to the press about a pending case in which the person is involved is not to influence the judge. (There may be other motives, of course, like self-aggrandizement and marketing.) But I also believe that our judges are not likely to be influenced by what we say in the press, because they too are bound by ethical rules requiring that their decisions be based on what is presented on the record in the courtroom. See Model Code of Judicial Conduct, Canon 3 (2000). Indeed, a judge who relies on extrajudicial sources as a basis of decision-making is supposed to recuse himself or herself. See In re Owens Corning, 2004 WL 1940769, at *12-13 (D. Del. Feb. 2, 2004). Thus, I would make the media advocacy decision based on other considerations and guidelines and would not be discouraged by a rule that prohibits public comment "likely" to influence a judge, especially where zealous advocacy weighs heavily in favor of utilizing the media (for example, a story on your case is going to appear whether you comment or not). In the bankruptcy context, given the sophistication of the courts, the general flood of media to which a judge is exposed, and the judges' ethical duty (and likely common sense) to base decisions on what occurs in the courtroom, I believe that Model Rule 3.6 and the gloss put on that rule by the Gentile case are not likely to be construed as prohibiting public comment in most cases.

So you want to talk, but have you cleared it with your client? "What?" you ask, "Why should the client have anything to say about it?" There are at least two reasons. First, if you go on record (or even off the record) as an advocate, you should treat your client relationship as you would if you were appearing in court. If you would normally get client approval for briefs and positions in a case (as you should), it should be no different when you advocate the case in the media. Second, many clients (especially those that are publicly traded) have very strict rules and policies about appearing in the press.4 The likelihood that you will be identified by name, and as a representative of a particular client, means that you will be putting your client's name in the media. If you do not check in advance, you may find yourself with a former client.5

Now, don't forget to run a conflicts search. This is more important where you are sought for comment in a case in which you are not already involved for a client. When you are already involved, you've presumably already cleared conflicts. Generally, you should treat public statements in support of one client as a potential conflict, the same as you would with positions in the court. The rules against adversity to current clients are as applicable to adversity in the media as they are in the courthouse. In either case, you are speaking in a representative capacity. Model Rule 1.7 states that "[a] lawyer shall not represent a client if the representation of that client will be directly adverse to another client." Model Rule 1.7(a).

If you get to the point of concluding that your statements to news media are not substantially likely to influence the court's decision making, are consistent with your duties as a zealous advocate, are not proscribed by client policy and are not otherwise a conflict of interest with another client, are you then free to speak openly? Technically yes, but you still might want to consider how best to speak with the media. Do you want to be "on the record," meaning your words can be quoted and attributed to you, or might you prefer to speak "not for attribution," meaning your words can be quoted and attributed to a "source close to the case" for example, but not specifically to you, or is it better to speak "off the record," meaning that no quoting, identification or attribution may be made at all? See Duffy, John T., "How to Cut It as a Spokesman, Establish Ground Rules with Media Before the Interview," The Conn. L. Trib., Oct. 22, 2001, at 22. These well-developed protocols are usually followed by press media. If you choose to appear on radio or television, you have no choice but to be fully "on the record."

The choice is really a matter of strategy. Just be aware of the pitfalls of "on-the-record" communications, whether it be press, radio or television. When you are "on the record," as when you address the court, you have got to react quickly to questions you may not anticipate, and you will be "bound" in the sense that once you say it, you can't take it back. But a mistake made with the media may sting far more than a misstatement in court. In court, a misstatement may or may not be material to the decision, and will be part of a longer, full transcript. In the media, your mistake could be the headline. Either of the other approaches to media communications is likely to be safer, and better able to serve client interests. Indeed, some reporters will permit a background discussion, and then ask for permission to quote something you said during that time when you could speak in a less guarded manner. You've already made the comments, but you have the luxury of controlling whether it gets printed or not (and to consider again the wisdom of doing so).6

With all these rules, especially for lawyers, is it better to simply refrain from making any statements to the press? This was in fact the traditional rule for lawyers. See Gentile, at 1066 (noting that the Canon of Professional Ethics allowed extrajudicial statements only in "extreme" circumstances). However, as judicial proceedings and media coverage have evolved, it is probably unwise, and against the interests of zealous advocacy, to adhere rigidly to any rule or policy of non-communication with the media. The question of whether you advocate in the media should be considered on a case-by-case basis. In some cases, a lawyer's failure to make a public statement could arguably violate the zealous advocacy principles. The commentary to Model Rule 1.3 states that "[a] lawyer should act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client's behalf."7 Model Rule 1.3 cmt. 1. In Gentile, the Supreme Court recognized that an attorney's duties "do not begin inside the courtroom door" and may include "attempt[s] to demonstrate in the court of public opinion that the client does not deserve to be tried." Gentile, 501 U.S. at 1043. The plurality in Gentile went even further, recognizing that sometimes advocacy in the press is necessary to protect a client's rights:

A profession which takes just pride in [the American judicial] traditions may consider them disserved if lawyers use their skills and insight to make untested allegations in the press instead of in the courtroom. But constraints of professional responsibility and societal disapproval will act as sufficient safeguards in most cases. And in some circumstances press comment is necessary to protect the rights of the client and prevent abuse of the courts."
Gentile at 1058.

There are also "vital social interests served by the free dissemination of information about events having legal consequences and about legal proceedings themselves." Model Rule 3.6, cmt. 1. These include the right to know about the conduct of judicial proceedings, and the subject matter of judicial proceedings implicating important questions of public policy. Id. In the bankruptcy arena, the public interest can surely be served by greater dissemination of information and, in particular, information that educates the public about the benefits of a well-run bankruptcy process. Too often, especially recently, the media focus on bankruptcy has been negative, with outsized attention paid to the bad acts of pre-bankruptcy management, or the post-bankruptcy fees associated with mega-cases. The public would benefit from a few bankruptcy success stories as well as the positive effects that flow from judges and professionals working together to preserve and enhance businesses, and to save jobs from being lost. That good work goes on all the time, but it is practically ignored by the media.

Where does Martha Stewart fit in, and why do you need to know about her prosecution? There is another angle/danger to media advocacy that emerged in her case. As is by now well-known, federal prosecutors alleged that Stewart sold shares of ImClone stock after receiving a tip from her broker that Sam Waksal, ImClone's founder and CEO, had dumped his own stock. See United States v. Stewart, 2004 WL 360898, at *12-13 (S.D.N.Y. Feb. 27, 2004). Stewart's lawyers countered by making statements to the press that the stock was sold under a pre-existing stop-loss order and not pursuant to any insider tips. Id. at 5. Prosecutors eventually chose not to bring any insider trading charges against Stewart. The principal charges against her involved obstruction of justice, essentially lying to government investigators in order to cover up the truth of the reasons for the sale. But they also charged her with securities fraud, claiming that her lawyer's press statements concerning her sale of ImClone stock were motivated to illegally prop up the stock price of her own company, Martha Stewart Living Omnimedia. Id. at 2. Other attorneys for Stewart later stated to the press that Stewart had not committed any wrongdoing, and suggested that Stewart was being used as a "'test case'" to expand the boundaries of what is illegal on Wall Street" and to "'divert attention'" from the government's non-prosecution of Kenneth Lay and Bernie Ebbers. Smith, Greg D., "Martha Hit, Then Quits," N.Y. Daily News, June 5, 2003, at 5.8

The lawyers' statements certainly appear to be within the proper ethical bounds for media advocacy, but what was likely not anticipated when the statements were made was the allegation that they were motivated to affect the price of Omnimedia stock, and therefore may have run afoul of the securities laws. Rule 10b-5, which appears to have been implicated in the Stewart prosecution, makes it a crime "to make any untrue statement of a material fact or to omit to state a material fact...or [t]o engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." The government's theory of security fraud appears to have been that Stewart lied to government investigators, and then repeated the lie in the press for the purpose of deceiving investors into holding, rather than dumping, Omnimedia stock. She was so important to Omnimedia as its CEO, it was argued, that any reasonable prospect she might go to jail would have a negative effect on Omnimedia's fortune.


[A]ppropriate caution would suggest at least a consultation with a knowledgeable securities lawyer before engaging in media advocacy about a publicly-traded corporation.

Judge Cedarbaum dismissed the securities fraud charges for lack of evidence (see Feb. 27, 2004, opinion cited above, at 10), but the basic theory and its chill remain. Bankruptcy cases often involve claims with dollar magnitudes that would be material in an accounting and reporting sense. Debt and equity-trading markets often continue for debtor entities after they file, and certainly can be active for creditor entities. Media coverage will undoubtedly reach purchasers and sellers of debt and equity, and therefore statements in the media may well have an effect on investment decisions and hence on the prices of securities. Thus, appropriate caution would suggest at least a consultation with a knowledgeable securities lawyer before engaging in media advocacy about a publicly-traded corporation. That is why Martha Stewart should matter to you. More than a nicely set dinner table, Martha Stewart now means that in any given case there may be an advocacy line that you should not cross in communicating with the media. One person's "spin" may be "deception" to another person...or to your government.


Footnotes

1 A substantial contribution to the research and preparation of this article was made by Paul Gunther, a bankruptcy associate in the New York office of Mayer, Brown, Rowe & Maw LLP, for which the author is grateful. As always, the views expressed herein are those of the author's, not ABI's, and the author takes full responsibility for them. Return to article

2 Bankruptcy cases are generally considered to be akin to litigation when applying the ethics rules. The key here is the potential influence on a judge presiding over a matter to be adjudicated, certainly an apt description of a standard bankruptcy case. Specific contested matters and adversary proceedings within bankruptcy cases are unquestionably treated as litigation. Return to article

3 In Gentile, the Supreme Court reviewed a disciplinary decision under Nevada Supreme Court Rule 177, a rule that it noted is "almost identical" to Model Rule 3.6. 501 U.S. at 1033. Comment 5 to Model Rule 3.6 provides a list of certain subjects about which attorneys are generally discouraged from making public statements due to their prejudicial effect. For example, the comment discourages public statements relating to the character, credibility, reputation, identity or expected testimony of a party or witness, the identity or nature of physical evidence to be presented and information likely to be inadmissible as evidence and posing a "substantial risk" of prejudicing a trial. Model Rule 3.6, Comment 5. Return to article

4 It is not uncommon for large companies to have press relations offices or outside media professionals through which all media contacts are funneled. Return to article

5 Nothing stops the media from taking statements you make to the court, orally or in writing, and attributing them to you and your client; neither do you run afoul of any ethical rule or client policy in that circumstance. Inasmuch as you are likely to have the client's approval for the position taken, the client should recognize the risk of media coverage and attribution in that situation. Return to article

6 There is a model rule that attempts to set forth permissible areas for media or other public discussion, but it does not seem terribly workable in a bankruptcy context. Model Rule 3.6(b) permits an attorney to make public statements concerning:

  1. the claim, offense or defense involved and, except when prohibited by law, the identity of the persons involved;
  2. information contained in a public record;
  3. that an investigation of a matter is in progress;
  4. the scheduling or result of any step in litigation;
  5. a request for assistance in obtaining evidence and information necessary thereto;
  6. a warning of danger concerning the behavior of a person involved, when there is reason to believe that there exists the likelihood of substantial harm to an individual or to the public interest...
Model Rule 3.6(b)(1)-(6). Return to article

7 Comment 5 to Model Rule 3.6 provides that a lawyer may make a public statement "required to protect a client from the substantial undue prejudicial effect of recent publicity not initiated by the lawyer or the lawyer's client." Model Rule 3.6, cmt. 5. However, such statement is "limited to such information as is necessary to mitigate the recent adverse publicity." Id. Comment 7 to Model Rule 3.6 adds that "extrajudicial statements that might otherwise raise a question under this rule may be permissible when they are made in response to statements made publicly by another party, another party's lawyer or third persons, where a reasonable lawyer would believe a public response is required in order to avoid prejudice to the lawyer's client." Model Rule 3.6, cmt. 7. Return to article

8 As this column goes to press, Ebbers has been indicted, and Martha Stewart was convicted on four counts. Return to article

Journal Date: 
Thursday, April 1, 2004