In Trademark Investigations, "Pretexting" is Not a Naughty Word

In the now-infamous Hewlett Packard spying scandal, the use of a common investigative tool, "pretexting," resulted in a series of unwelcome consequences. When it became public knowledge that private investigators had misrepresented their identities to solicit private documents, the chairwoman of the Hewlett Packard board of directors resigned, multiple criminal charges were brought against high-ranking company officials and the company paid a multi-million dollar settlement to resolve civil claims filed by the California Attorney General.

Gathering the necessary evidence for trademark litigation, prosecution or clearance often requires lawyers to hire private investigators to ascertain whether and how certain entities are making use of their clients’ trademarks. For obvious reasons, the investigator must usually use some form of a pretext to contact an investigation target. The fallout from the scandal at Hewlett Packard illustrates the importance of knowing what negative consequences a lawyer or his client risks in hiring a private investigator who will engage in pretexting to obtain evidence.

The term "pretexting" can refer to various investigative techniques. In the broadest sense, pretexting can include any conduct involving a pretense or falsehood. The Federal Trade Commission, however, defines pretexting more narrowly as the practice of acquiring someone’s personal information under false pretenses. Indeed, it was this narrow definition that was at the heart of the Hewlett Packard case, as the investigators had impersonated others in order to obtain the personal telephone records of certain journalists and board members. Trademark investigations, in contrast, usually do not require the solicitation of personal information. Nonetheless, even if an investigation involves pretexting only in the broad sense, a lawyer who conducts or directs investigative activity that includes pretexting risks several ethical violations and possible exclusion of the gathered evidence at trial.

A lawyer’s ethical obligations generally mirror those set forth in the American Bar Association’s Model Rules of Professional Conduct. The conduct acceptable under these rules varies by state because of variations in the actual text of the Model Rules adopted in each state and differences in judicial interpretations of the rules. The dearth of relevant case law in many jurisdictions also creates uncertainty as to how courts will apply the rules. Despite these limitations, several guiding principles can be highlighted.

Broadly speaking, when an investigator working for a lawyer uses a pretext to obtain information, questions arise as to the lawyer’s compliance with two key obligations under the Model Rules: (1) the duty of truthfulness and (2) the obligation to avoid communications with a represented party. The duty of truthfulness imposed by Model Rule 8.4(c) proscribes conduct involving dishonesty, fraud, deceit or misrepresentation. Model Rule 4.1 also prohibits a lawyer from knowingly making a false statement of material fact or law to a third person and from failing to disclose a material fact under certain circumstances. To protect the attorney-client relationship, Model Rule 4.2 generally prohibits a lawyer from communicating directly with a "represented" person without consent of that person’s lawyer. All of these rules apply with equal force to the lawyer and any non-lawyer working directly for that lawyer.

The Prohibition Against Deceptive Conduct

Although a pretext inherently involves some level of deception, courts have generally found that using a pretext to gather basic information about suspected wrongful activities does not violate the ethical rules against misrepresentation. A New Jersey court found no violation of its equivalent of Model Rule 8.4(c) when the plaintiff’s attorneys and their agents contacted the defendants’ sales representatives to purchase items bearing the name and likeness of John Lennon to show violation of a prior consent order. Apple Corps Ltd. v. Int’l Collectors Soc’y, 15 F. Supp. 2d 456 (D.N.J. 1998). In this case, the court found that although Rule 8.4(c) was not explicitly limited to material misrepresentations, it simply did not cover misrepresentations of identity or purpose while gathering evidence. The New Jersey court reasoned that courts, ethics committees and grievance committees do not condemn such behavior when engaged in by undercover agents in criminal cases or discrimination testers in civil cases. Additionally, the court found that Rule 8.4(c) should be read in conjunction with Rule 4.1, which prohibits misrepresentations of material fact, and consequently interpreted Rule 8.4(c) as targeted only at "grave misconduct."

In another case involving comparable facts, a New York court similarly declined to exclude evidence obtained by undercover investigators because "hiring investigators to pose as consumers is an accepted investigative technique, not a misrepresentation." Gidatex, S.r.L. v. Campaniello Imp’s, Ltd. 82 F. Supp. 2d. 119 (S.D.N.Y. 1999). The court found that New York’s Rule 8.4(c) sought to protect parties from being tricked. The court found no violation of the rule because the investigators did not interview the salespeople or trick them into making statements they would not otherwise have made as part of the transaction.

Other trademark cases confirm by implication that gathering evidence under pretext does not violate the rules against misrepresentation. See, e.g., Louis Vuitton S.A. v. Spencer Handbags Corp., 765 F.2d 966 (2d Cir. 1985); Cartier v. Symbolix, 386 F. Supp. 2d 354 (S.D.N.Y. 2005); Phillip Morris USA Inc. v. Shalabi, 352 F. Supp. 2d 1067 (C.D. Cal. 2004); Weider Sports Equip. v. Fitness First, Inc., 912 F. Supp. 502 (D. Utah 1996). The decisions in these cases do not explicitly discuss possible violations of ethics rules against misrepresentation but simply accept and rely on evidence obtained under pretext. While in most cases the investigators simply posed as customers, Vuitton involved a relatively elaborate pretext with the investigator posing as a casino owner interested in funding a counterfeiting scheme to obtain evidence against distributors of counterfeit bags.

The principal lesson from this body of case law is that while some jurisdictions may be more flexible in their application of the governing ethical rules, an attorney should rarely direct the investigator to go beyond posing as a customer or other person with whom the target normally interacts. Discussions between the investigator and the target should be limited to matters that would normally be addressed in the transaction under investigation.

The Rule Against Contacting Represented Parties

The strict obligation to avoid all direct communications with a represented party requires more complex consideration. Although the communication issue is of greater concern once litigation has commenced, contact prior to the start of litigation may also pose problems. The main complexity with Model Rule 4.2 stems from the ambiguity regarding which individuals in an organization count as "represented parties." For example, New Jersey’s version of Rule 4.2 provides that only communications with the "organization’s litigation control group," that is, selected senior management employees, comprise the represented party not to be contacted. The Model Rule itself, and other states’ versions, simply do not elaborate on who comprises the "represented party." This lack of specificity has resulted in different interpretations as courts in various jurisdictions have announced a range of positions regarding which employees are within the given prohibited contact group.

For example, finding communications in violation of the South Dakota equivalent of Rule 4.2, a South Dakota court excluded at trial evidence of recordings made by a private investigator on visits to plaintiffs’ snowmobile stores. Midwest Motor Sports, Inc. v. Arctic Cat Sales, Inc., 144 F. Supp. 2d 1147 (D.S.D. 2001). In discussing whether a salesperson to whom the investigator spoke was a represented party within the meaning of Rule 4.2, the court noted the variety of tests that have emerged, from the "blanket" test making all employees a "represented party" to the "control group" test, which defines a "representative party" as only the most senior management officials. The test adopted by the South Dakota court covered the communication with the salesperson because the investigator attempted to elicit specific admissions from the employee that would have been offered against the corporation at trial.

In Gidatex, the New York court found that the sales representatives contacted by private investigators were "represented" parties under the applicable standard for Rule 4.2. However, the court found that the purpose of Rule 4.2 is to preserve the proper functioning of the attorney-client relationship and because the investigators simply posed as consumers, speaking to nominal parties in order to gather information on normal business routine, the policies underlying the rule were not pertinent. Consequently, the court found no real violation and denied the motion to exclude the evidence obtained by the investigators.

The standard for identifying who is a "represented party" varies from state to state. Thus what may be permissible in one state may be impermissible in another. Therefore, in deciding whether to engage an investigator who will operate under a pretext, an attorney should carefully evaluate the applicable "represented party" standard, the stage of the dispute, and the kind of information sought by the pretext. Typically, however, if only low-level employees are contacted and the conversation is limited to normal transaction banter, a violation of Rule 4.2 will not be grounds for sanctions or exclusion of the resulting evidence. If any uncertainty exists as to the identity of the individual being contacted, and litigation has commenced, a party could consider an ex parte discovery order prior to the investigation to ensure admissibility of the evidence subsequently obtained.

In sum, a lawyer should exercise caution when hiring an investigator likely to use pretexting in gathering information. In order to avoid possible violations of the applicable ethical rules against misrepresentation and contact with represented parties, any pretexting rarely should go beyond disguising the identity of the investigator and purpose of the contact. The investigator should focus contacts on nonmanagerial employees and limit any inquiry to information that would reasonably be likely to be shared with any member of the public with whom the target routinely interacts. Attention should also be paid to jurisdictional differences in the applicable ethical rules, as some states may allow for an expanded use of a pretext while in others the boundaries are unclear. Attorneys must be familiar with these parameters to enhance their clients’ use of gathered evidence at trial.