Lawyers in Federal Court; Major Case Affirms Right to Have Company Pay Legal Fees for Employees

The right to have a lawyer defend a person against federal criminal charges was affirmed yesterday in a major ruling issued by the United States Court of Appeals for the Second Circuit. The case, United States v. Stein, affirmed a decision by a District Judge who dismissed all charges because the prosecutors violated the Sixth Amendment rights of company employees who wanted the company to pay their legal fees. This case is a major development, in that it assures both companies and their employees that it is appropriate to have the employer pay the worker’s attorneys.

It has been a standard practice for many years for large companies to pay the defense fees for its high ranking employees. Many companies are regularly investigated, and operate in areas where the law is not always clear. Few people would agree to take high-ranking positions in such companies if they anticipated having to pay huge legal fees every time the company comes under scrutiny. As a result, most companies agree to indemnify the defense expenses for their employees. This is important in that getting qualified counsel is a very expensive proposition, especially when the investigation is far-flung and results in the defense attorney having to cull through millions of documents in order to properly advise his or her client.

About 7 years ago the Department of Justice (DOJ) began taking the position that companies which pay the legal fees for their employees are less deserving of a break when it came to resolving potential criminal charges. In 2004, the massive accounting firm KPMG was under investigation. The company then worked out its own deal through which no charges would be brought (although KPMG agreed to pay over $450 million in fines, etc.) but DOJ then indicted 13 employees.Under pressure from DOJ, the company restricted its usual practice of paying the legal fees for its employees under investigation who actually got indicted. The case was massive, and the attorneys for the defendants pointed out there was no way they could ever get paid unless the company adhered to its usual practice of indemnifying legal expenses.

The District Judge agreed with the defendants. He found that DOJ pressure was the reason the company changed its usual practice of paying legal fees. He determined that there was no way to put the clients back into their previous status, and that dismissing the indictment was the only remedy. The prosecutors appealed, and yesterday the Court of Appeals agreed that the dismissal was appropriate.

This case is based on the idea under the Sixth Amendment that a person is entitled to get the lawyer of his or her choosing in order to defend against criminal charges. When the government forces a company to change its usual practice of indemnifying for legal expenses, that is the same as government action that infringes on the constitutional right to counsel of one’s own choice.