Industry Innovators Presents: Cyber Innovators 2018

The flagship cyber event from the financial capital of the world

On October 4, 2018, The New York City Economic Development Corporation, the Government of Israel Economic Mission to North America, Team8, LeumiTech, Israel Discount Bank, Jefferies Group, Shiboleth LLP, Playground, SOSA, Mazars, and Bizzabo, presented an exclusive NYC event, “Cyber Innovators 2018,” which featured presentations from the global thought leaders in the cyber industry to an invite-only audience comprised of venture capital, family office and angel investors, as well as leaders from the New York City cyber technology ecosystem.

The timing of the event coincided with the New York City Economic Development Corporation’s (NYC EDC) unveiling of its plans to transform New York City into a global leader of cybersecurity innovation and talent to combat one of the world’s greatest threats. Cyber NYC, the City’s initiative to grow the cybersecurity sector, leverages a roster of world-renowned partners to launch a Global Cyber Center, an innovation hub for startups, initiatives to fuel commercialization and research, and new talent pipelines to train the cyber workforce of the future. SOSA, one of the organizers of Cyber Innovators 2018, was selected to establish a center of gravity for the industry with a state-of-the-art center in Chelsea which will bring together an international community of corporations, investors, startups, and talent to foster collaboration and innovation in New York City’s growing cybersecurity ecosystem. Guy Franklin, General Manager of SOSA NYC said “NYC is the financial capital of the world and as such, requires to be the cyber capital of the world to meet daily threats. That’s the goal of Cyber NYC.”

Ana Arino, the Chief Strategy Officer of the NYC EDC, kicked off the presentations for the evening and described the EDC’s role in developing NYC tech and job creation. “From an industry perspective, we (NYC EDC) have been committed for a very long time to tech in particular” said Ms. Arino. “One reason for our success and growth is that we have committed ourselves to making New York City a home for international companies that want to grow here.”

Cybersecurity is becoming a growing challenge for any company that maintains customer data, especially businesses in the financial services sector. New York City is home to one of the highest concentrations of financial services companies as well as to one of the largest workforces in the country. Global demand for cybersecurity services is surging. In the first 10 months of 2017, venture capitalists invested $1.2 billion in cybersecurity firms based in the New York metro area, four times the total investment in 2016. The City of New York is investing $30 million to grow its cybersecurity ecosystem.

Nadav Zafrir, Co-Founder and CEO of Team8, delivered the Keynote presentation for Cyber Innovators, and spoke on the impact of hyperconnectivity on the evolving cyber threat, sharing his perspective on how organizations can rethink their approach to building resilience in the face of increasingly sophisticated and effective attackers.

“Team8 is honored to participate in the Cyber Innovators 2018 Event with the broader New York City community.” said Zafrir. “In the age of hyperconnectivity and the increasing role of collaboration in standard business practice, a proactive and collaborative approach between enterprise, government, innovators and academia will help secure our collective future. We look forward to being a part of this important cooperation.”

Dave Smithers, Chief Information Officer and Chief Operating Officer of Israel Discount Bank spoke from the point of view of a major financial institution and discussed how Artificial Intelligence (AI) and Machine Learning (ML) will help prevent future cyber-attacks on financial institutions.

Inon Elroy, Economic Minister to the Government of Israel’s Mission to North America, also delivered a presentation on the role of Israeli companies as global leaders in the cyber security economy.

In addition to the keynotes, three young companies in the cyber industry, (i) L7 Defense, (ii) IDRRA, and (iii) Team8’s Blockchain Concept Company (name yet to be announced) made presentations highlighting their business concepts and respective commercial solutions to cyber security threats, including the use of Artificial Information (AI). The presenting companies fielded questions from a panel comprised of Wilson Lin, Vice President, Lead for Cyber NYC and FinTech at the NYC EDC, and Lluis Pedragosa, Chief Financial Officer for Team8.

Cyber Innovators 2018 distinguishes itself from other NYC cyber events through its exclusive investor-focused audience and its world class presenters. “Cyber Innovators 2018 is making meaningful connections between capital and thought leadership by exposing active technology investors to the leading cyber company thinkers on the globe,” said Alon Harnoy, Managing Partner of Shiboleth NYC.

Playground founder Guy Poreh added, “The startups presenting are in very exciting and innovative spaces, surrounded by great founders. The investor-oriented portion of the event
provides the opportunity for these companies to get excellent exposure with our amazing audience.”

Industry Innovators has provided sophisticated investors early access to rock star companies that have gone on to become huge successes.

New York’s Sexual Harassment Laws – What Employers Need to Know

By Alexander Bau, Esq. and Danielle Comanducci, Esq.

In the wake of the Time’s Up and #MeToo movements, both New York State and New York City passed new laws implementing stronger protections against sexual harassment. New York employers now must update their policies and agreements, conduct mandatory sexual harassment training, and provide employees with additional information about sexual harassment. For all New York employers, taking affirmative steps to comply with these new laws should be a top priority. Below is a summary of these new requirements and the key steps employers must take.

A. Employers must update their sexual harassment policies

Starting October 9, 2018, all New York State employers must have updated written sexual harassment policies in place. These updated policies must contain the following key components:

• A statement prohibiting sexual harassment;
• Examples of prohibited conduct;
• Information concerning federal and state sexual harassment laws and a statement that there may be additional applicable laws;
• A standard complaint form;
• The procedure for the timely and confidential investigation of complaints;
• A statement informing employees of their rights of redress and available forums for adjudicating claims administratively and judicially;
• A statement that sexual harassment is a form of employee misconduct and that sanctions will be enforced against individuals engaging in sexual harassment and against supervisory management who knowingly allow such behavior to continue; and
• A statement that retaliation against individuals who complain of sexual harassment or who testify or assist in any proceedings is unlawful.

The policy must be provided to employees in writing. The New York State has released a draft model sexual harassment prevention guidance and sexual harassment prevention policy. Employers can adopt this policy or adopt an equivalent one of their own as long as it complies with the required disclosures. In addition to the model policy, New York State has also released a draft model complaint form that employers can share with their employees. The model sexual harassment prevention policy and model complaint form are currently in draft form. New York State is currently reviewing the comments received from the public and finalized versions of these documents are expected to be released in the near future.

B. Employers must conduct mandatory sexual harassment training

Both New York State and New York City passed laws mandating sexual harassment training.

Starting on October 9, 2018, all New York State employers must provide interactive sexual harassment prevention training to all New York State employees on an annual basis. New York State employers will have until October 8, 2019 to conduct that training (however, all state contractors must submit an affirmation that they have a sexual harassment policy and that they have trained all of their employees by January 1, 2019). Such training must include the following topics:

• An explanation of sexual harassment;
• Examples of conduct that would constitute unlawful sexual harassment;
• Information concerning the federal and state laws concerning sexual harassment and remedies available to victims; and
• Information concerning employees’ rights of redress and forums for adjudicating complaints.

There are additional training requirements for New York City employers. Starting on April 1, 2019, all New York City employers with 15 or more employees (including interns) must provide interactive sexual harassment prevention training annually to all employees, including supervisory and managerial employees, and within 90 days of an employee’s initial hire. New York City employers are required to keep records of all trainings, including signed acknowledgements, for a period of 3 years. The New York City training programs must also:

• Include training on bystander intervention;
• Provide an explanation of sexual harassment as a form of unlawful discrimination under federal, state and New York City law;
• Give details about the internal complaint process and state that the complaint process is available through the NYCCHR, the NYS Division of Human Rights and the Equal Employment Opportunity Commission (including providing contact information);
• Explain that retaliation is prohibited;
• Provide specific responsibilities of supervisory and managerial employees in the prevention of sexual harassment and retaliation, and measures that such management employees may take to appropriately address sexual harassment complaints.

Both New York State and New York City laws require that the training be “interactive.” While not defined under the New York State law, under the New York City law the term “interactive training” means “participatory teaching whereby the trainee is engaged in a trainer-trainee interaction, use of audio-visuals, computer or online training program or other participatory forms of training as determined by the commission.” However, such “interactive training” is not required to be live.

New York State has released a draft model sexual harassment prevention training and a set of minimum standards for sexual harassment prevention training. New York State is currently reviewing the comments received from the public and finalized versions of these materials are expected to be released in the near future. New York City will also develop a model training programs which employers may use or adopt their own.

C. New York City employers must display a new anti-sexual harassment poster and distribute a fact sheet to employees

Since September 6, 2018, all New York City employers must: (1) Display a new anti-sexual harassment poster created by the NYC Commission on Human Rights (“NYCCHR”) in a conspicuous location in their workplace (in English and Spanish); and (2) distribute to all new hires the fact sheet created by the NYCCHR to all new hires (or include it in their employee handbook). Both the poster and informational fact sheet are available on NYCCHR’s website.

D. Employers must revise their employment and severance/settlement agreements

Since July 11, 2018, with limited exceptions, employment contracts can no longer require that employees submit sexual harassment claims to mandatory binding arbitration. In addition, employers cannot include non-disclosure provisions in severance/settlement agreements that relate to sexual harassment claims unless the inclusion of such a provision is the employee’s preference (in such case, the employee must be given 21 days to decide whether they want to consent to the inclusion of such a provision and 7 days thereafter to change their mind and revoke such consent).

E. Employers can now be liable for the sexual harassment of certain non-employees

Under the New York State Human Rights Law employers may now be liable for the sexual harassment of non- employees (i.e. contractors, subcontractors, vendors, consultants, or any other person providing services in the workplace) if the employer, its agents, or supervisors knew or should have known that the nonemployee was subject to sexual harassment in the employer’s workplace, and failed to take appropriate corrective action.

F. New York City Employers can be liable for sexual harassment regardless of the size of the employer

New York City has expanded protection against sexual harassment to all employees and interns in New York City (regardless of the size of their employer) and has extended the statute of limitations for sexual harassment claims from 1 year to 3 years.

G. Employer takeaways

Employers should be proactive and review their existing sexual harassment prevention policies and implement a plan and schedule for the mandatory employee training. They should also review their agreements with employees and revise them as necessary to comply with the new laws. Navigating these new requirements can appear daunting and it is recommended that employers consult with an employment attorney in connection with implementing these changes.

For further information please contact Alexander Bau at SashaB@shiboleth.com and Danielle Comanducci at DanielleC@shiboleth.com.

Trump’s Nomination of Brett Kavanaugh to the Supreme Court: Is this the end of Abortion Rights and Same Sex Marriage?

By Alon Harnoy, Esq. and Maxine Wiesenfeld, Intern

On July 9, 2018, President Donald Trump announced his nominee selection for the vacant seat in the Supreme Court, which recently became open following Justice Anthony Kennedy’s announcement that he would be stepping down. His nominee, Brett Kavanaugh, Yale College and Yale Law School graduate. He was an aide to President George W. Bush, is a Federal Appeals Judge and has worked with various legal groups.

Following this appointment, a lengthy process must take place to confirm his place on the bench. Kavanaugh will need to go through an interview-like confirmation process with the Senate Judiciary Committee. The Committee then votes on whether to put him through to the Senate and the Senate will then vote on his appointment.  If there is a majority vote in the Senate, he will then be approved and appointed. This process, however, does not happen overnight. It can take weeks and even months for a nominee to go through the steps to becoming an officially appointed Justice, and sometimes they are not approved in which case the President then has to put forth a new nominee.

The big question that many in the Country are asking has to do with Kavanaugh’s political affiliations and how this will have an effect on the Supreme Court decisions that would be put out. Brett Kavanaugh is known to be a strong conservative, as one can see through his past work and writings. The worry of many is that he may shift opinions of the Supreme Court to be more conservative and possibly infringe on rights that have already been granted in the past. Some of the main concerns that people fear is the possibility of limiting abortion rights, and overturning Roe v. Wade, or otherwise limiting the decision of Obergefell v. Hodges, which recognizes the marriages of same sex couples, among similar concerns.

The next question that one may ask is whether Kavanaugh will be confirmed by the Senate, and if so, whether it would be before or after the upcoming midterm Congressional elections.  Recall that after the sudden death of the famously conservative Supreme Court Justice Anton Scalia during President Obama’s second term, Republican Senate Majority Leader Mitch McConnell blocked former President Obama’s Supreme Court nomination of Merrick Garland.  Ultimately Garland was not appointed during Obama’s term, and President Trump instead chose Gorsuch as his nominee, a selection which was eventually confirmed.

Whether and when Kavanaugh will be appointed, while we are seeing much fear among Americans, there are indicators that this should not be too much of a worry.

In terms of legal doctrine, it is important to look at the legal issue of “stare decisis”. Stare decisis is Latin for “to stand by things decided.”  Courts cite to stare decisis when an issue has been previously brought to the court and a ruling already issued. According to the Supreme Court, stare decisis “promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.” In practice, the Supreme Court will usually defer to its previous decisions even if the soundness of the decision is in doubt. A benefit of this rigidity is that a court need not continuously reevaluate the legal underpinnings of past decisions and accepted doctrines.

Sometimes, however, a landmark Supreme Court case does not follow precedent. Sometimes, this is a good thing, for example, Brown v. Board of Education overturning the ruling in Plessy v. Ferguson. Plessy v. Ferguson ruled that having a separate education system for blacks and whites was constitutional, as long as they were receiving the same education, in other words, separate but equal. Brown v. Board of Education, however, ruled that this segregation was not constitutional and was therefore not a precedent to be followed. Although this is an example in which a precedent case was overturned for a positive reason, many are fearful that cases involving abortion rights, such as Roe v. Wade have the potential to be overturned with this new Supreme Court nominee.  While Supreme Court cases do get overturned, Roe v. Wade is a case that was decided over forty years ago and has really changed our society to one that is more accepting of abortion and the right of privacy when it comes to situations like these. It can be seen, however, that in certain times, although a precedent may be followed, the Justices may bend them at the margins in one way or another. An example of this is seen in Planned Parenthood v. Casey, where the right to privacy set forth in Roe v. Wade was followed, but the Court decided that certain regulations involving abortion are permissible – for example requiring a minor to receive consent from a parent prior to receiving an abortion or requiring certain record keeping and filing requirements at abortion clinics. In this case specifically, the undue burden test was employed to determine whether a certain requirement for an abortion would cause an obstacle for the woman to get an abortion in the proper time before the fetus would become what was determined to be a viable fetus. This is something that many people believe to be unfair or to be bending the ideals from Roe v. Wade in a way. What is clear, however, is that the main decision from years and years ago is something that although may sometimes be altered is not something that this new potential Justice would necessarily overturn completely, rather possibly interpret a precedent narrowly while not completely overturning it. This is something that should also be thought about when discussion issues that arise in the Court surrounding LGBTQ rights. Similarly to Roe v. Wade, decisions giving more rights to LGBTQ people have changed the way our country works and has made it in some ways a more accepting and more accessible place. This has become the way of life in the United States. This too, is something else that will most likely not be something one could overturn completely.

Polls show voters oppose overturning Roe v. Wade by two-to-one margins. But virtually unfettered access to abortion is a similarly unpopular position. Polls have consistently shown that Americans prefer some restrictions on abortion rights and a 2017 survey found nearly six in ten people backing a ban on abortion after 20 weeks with exceptions if the life of the mother is in jeopardy.

Therefore, should Kavanaugh be appointed to the Supreme Court, the fundamental principles of cases such as Roe v. Wade, and Obergefell v. Hodges, which have set legal foundations protecting the dignity and respect of our private lives, are unlikely to overturned completely.

Will The Recent Masterpiece Cakeshop v Colorado Civil Rights Commission Have a Lasting Impact on Future Cases Involving LGBTQ Rights?

By Alon Harnoy, Esq. and Maxine Wiesenfeld, Intern 

On June 4th, 2018 The United States Supreme Court came to a 7-2 decision that made some raise their eyebrows. The decision was in favor of Jack Phillips, a talented baker and owner of Masterpiece Bakeshop, who in 2012 opted not to bake a cake for the wedding of Charlie Craig and Dave Mullins, a homosexual couple. Phillips claimed that he would not make a cake for their wedding due to his religious beliefs as he felt that creating this cake would have him be involved in and endorsing the wedding celebration, something that his religion prohibits. He added as well that at the time, marriage of homosexual couples was illegal in the state of Colorado which was another reason he chose not to make the cake for the celebration. The couple filed a discrimination claim against Phillips saying they were denied the access to services due to their sexual orientation.  The Colorado Civil Rights Commission, in acting pursuant to the Colorado Anti-Discrimination Act, found that Phillips’s actions were prohibited and required him to stop discriminating against same-sex couples by not providing the same services to them as he would to a heterosexual couple. In addition, they also required him to hold staff training on the Public Accommodations policies of the Colorado Anti-Discrimination Act, change company policies to comply with this and to provide quarterly reports for a two year period listing people who were denied services, why they were denied services and the remedial actions taking for those cases. The decision made by the Colorado Civil Rights Commission was subsequently affirmed in the US Court of Appeals.

On June 4th, 2018, the Supreme Court overturned the US Court of Appeals, ruling in favor of the Colorado baker, Jack Phillips, opining that he was treated unjustly by the Colorado Civil Rights Commission, noting that such Commission showed elements of a clear and impermissible hostility toward the sincere religious beliefs moti­vating his objection.  The case presents difficult questions as to the proper reconciliation of at least two principles. The first is the authority of a State and its governmental entities to pro­tect the rights and dignity of gay persons who are, or wish to be, married but who face discrimination when they seek goods or services. The second is the right of all persons to exercise fundamental freedoms under the First Amend­ment, as applied to the States through the Fourteenth Amendment.  In other words, we have a clash of two freedoms, the freedom of speech and the free exercise of religion.  Refusal to sell just an ordinary cake to a gay couple is prohibited, but the additional elements of use of artistic skill to design of a cake with words or images celebrating the marriage that have religious significance to the baker, bring about the concern over free exercise of religion, that the Supreme Court ultimately held in favor of the baker.

The Supreme Court contrasted other cases in which the Colorado Civil Rights Division gave storekeepers latitude to decline to create specific messages the store­keeper considered offensive, concluding on at least three occasions that a baker acted lawfully in declining to create cakes with decorations that demeaned gay persons or gay marriages.

In writing her dissent, Justice Ruth Bader Ginsberg (with Justice Sotomayor joining such dissent) says that what made the prior bakers’ experience in refusing offensive messages different from that of current Phillips case, is that in the prior case the customer wanted the use of explicit forms of expression and messages on the cakes, while in the current case there is no mention of an explicit message or expression, so the customers just wanted a specific good – namely wedding cake. The dissent, therefore argues that the way in which the Colorado Civil Rights Commission treated Phillip’s situation was just and a good application of the Colorado Anti-Discrimination Act. This raises questions over whether this wedding cake would be considered a form of artistic expression, one that Phillips has the right to refuse to create based on his religious beliefs or just an ordinary wedding cake where Phillips cannot refuse.

The majority opinion, ruling in Phillip’s favor, would suggest that this is something covered by his freedom of expression, as seen furthermore in Justice Gorsuch’s concurrence in which he eloquently states, “It is no more appropriate for the United States Supreme Court to tell Mr. Phillips that a wedding cake is just like any other—without regard to the religious significance his faith may attach to it—than it would be for the Court to suggest that for all persons sacramental bread is just bread or a kippah is just a cap.” Justice Ginsburg, in the dissent, however furthers the stance that the messaging of the cake that was requested of Phillips was not the issue, rather, “Craig and Mullins were denied service based on an aspect of their identity that the State chose to grant vigorous protection from discrimination.” The question here now is, will this decision sit as a precedent for future cases of its kind, or is this a different situation? There are arguments on both ends of this issue.

There are various reasons one may argue that this case will have an impact on the future of cases dealing with LGBTQ discrimination and perhaps was not a specific unique situation.

  • This was not the first time Phillips turned away customers based on sexual orientation. When conducting their investigations, the Colorado Civil Rights Commission found that this was not the only situation in which Phillips denied services to a customer due to sexual orientation. It was discovered that on various other occasions he opted not to make celebratory wedding cakes for same-sex couples due to his held belief that he could not partake in what was against his religion. This being a repeated issue can have an impact on future situations as it is seen that some may say that action was not taken multiple times.
  • The decision made by the Colorado Civil Rights Commission should have been a reasonable application to the Colorado Anti-Discrimination Act. It is stated in the Colorado Anti-Discrimination Act that “It is a discriminatory practice and unlawful for a person, directly or indirectly, to refuse, withhold from, or deny to an individual or a group, because of disability, race, creed, color, sex, sexual orientation, marital status, national origin, or ancestry, the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of a place of public accommodation.” Colo. Rev. Stat. §24–34–601(2)(a) (2017).” According to this Act and according to the dissent of this case, the actions made by Phillips to deny this couple a cake should have been seen as a violation of the Act and therefore the actions taken by the Commission should have been seen as reasonable. Because these rules were not held to be applied justifiably, future cases of the like may then be decided similarly as this could set an example.
  • Services were denied to a gay couple. Although Phillips claimed both that the couple was denied services because it interfered with both his religion and the law at the time for a homosexual couple to get married, the fact still stands that they were a homosexual couple and he felt that he could not provide the services. The outcome of this case, some may argue, that the baker’s freedom of religion and expression took priority over the couple’s right to services.

On the other hand, there are many valid reasons that the outcome of this case will not set a precedent for future cases dealing with LGBTQ rights.

  • The focus of this case was not so much the explicit actions of Phillips, but rather how the Commission treated him. This case focused on the decision that the Colorado Civil Rights Commission treated Phillips unfairly when coming to their decision that he would have to serve all customers regardless of their sexual orientation, change company policies, have staff training and provide the quarterly reports of customers who were denied services. The Court found that this was the main issue at hand and that the Commission was violating Phillip’s rights of religion. This case can potentially be seen as a religious tolerance case and less of a LGBTQ rights case. Therefore, this case should not be precedent for future LGBTQ rights cases but rather discussed in the sense of a religious tolerance case.
  • Did not create a right to discrimination based on sexual orientation. In the majority opinion, Justice Kennedy states, “Our society has come to the recognition that gay persons and gay couples cannot be treated as social outcasts or as inferior in dignity and worth. For that reason the laws and the Constitution can, and in some instances must, protect them in the exercise of their civil rights. The exercise of their freedom on terms equal to others must be given great weight and respect by the courts. At the same time, the religious and philosophical objections to gay marriage are protected views and in some instances protected forms of expression”. It is stated numerous times throughout the opinion that this dealt with the freedom of religion. The case did not state anywhere that discrimination against those with a certain sexual orientation should be permissible. This is yet another reason that this case should not serve as a model for future cases that deal with discrimination against LGBTQ people.
  • This should hopefully not be an issue that arises in the future. In the opinion, Justice Kennedy explicitly says that in the future cases like this should not be an issue because bodies of legislation such as in this case, the Colorado Civil Rights Commission should be acting with a greater sense of religious tolerance and be more understanding of religion and beliefs held by people. Justice Kennedy held that issues of this type should not be dealt with in the way the Commission did, but rather through religious tolerance. Because of this, this should not hold as a precedent case as a situation in which someone is treated in a certain way due to religious intolerance should not occur.

This article has been featured on Ynet (in Hebrew) – see link below:

https://www.ynet.co.il/articles/0,7340,L-5295250,00.html

 

THE TRUMP/MICHAEL COHEN PARADOX —- ATTORNEY – CLIENT CONFIDENTIALITY: PRIVILEGE OR PERIL?

By Hon. Martin E. Ritholtz & Alon Harnoy, Esq.[1]

July 9, 2018

ORIGINS

The importance of confidentiality can be traced all the way back to the saged advice of King Solomon in Proverbs (chapter 25,verse 9), where he cautioned: “…do not reveal another’s confidence.”

The special confidential relationship between attorney and client, popularly known as the “attorney-client privilege,” has been historically linked to the reign of Queen Elizabeth I. In the words of John Henry Wigmore, a renowned expert and author on the laws of evidence, “The policy of the privilege has been plainly grounded…In order to promote freedom of consultation of legal advisors by clients, the apprehension of compelled disclosure by the legal advisors must be removed, and hence the law must prohibit such disclosure except on the client’s consent.”

Nevertheless, the modern day law of attorney-client privilege, which is the product of judicial decisions, statutes, and rules of professional conduct, has carved out exceptions that, under certain circumstances, can potentially eliminate any confidentiality protections.

DILEMMA

Suppose a client seeks the confidential opinion of an attorney as to whether a certain proposed transaction is legal, and upon adhering to the advice of counsel the client entered into the transaction, however, the transaction is subsequently challenged as being illegal. Can the confidential communications which served as the basis of the transaction, later be subject to a subpoena or warrant, when a legal claim or disciplinary charge alleges complicity of the lawyer in the client’s conduct, or other misconduct of the lawyer involving representation of the client?

In effect, the paradox is: the attorney-client privilege encourages full, unfettered disclosure, yet, it would appear that such confidentiality is not guaranteed; and a good faith opinion, in a distinctly gray situation, can possibly be turned into a nightmare experience. In other words, is attorney-client confidentiality a privilege or a peril? Is this dilemma exacerbated in a high-profile case, such as the Trump/Michael Cohen dynamic?

THE TRUMP/MICHAEL COHEN SCENARIO

As reported, on April 9, 2018, the F.B.I. raided and seized the business records, emails and documents of President Trump’s personal attorney, Michael D. Cohen, relating to several topics, including the payment of $130,000 in hush money to Stephanie A. Gregory Clifford, popularly known as Stormy Daniels, a pornographic film actress. The seized documents include several high-profile clients such as Sean Hannity of Fox news.

The fact that the US attorney’s office in Manhattan  obtained  a search warrant acting on a referral from Special Counsel, Robert Mueller, and authorized the FBI to conduct such a raid, has stirred an immense amount of controversy regarding the doctrine of attorney-client privilege and the duty of confidentiality owed by an attorney tohis or her client. Senior Federal District Judge for the Southern District of New York, Kimba M. Wood, appointed Barbara S. Jones, a former federal judge, as a special master to review the materials seized from the office and residence of Mr. Cohen, acquiescing to his request that an independent party review the material before the federal prosecutors can gain access to it. The special master has been tasked with the job of assessing whether the documents include any confidential communications between Michael Cohen and his clients, including President Trump.

Trump and the Trump Organization intervened and were also granted access to review the material, alleging attorney-client privilege. On June 4, Jones submitted an initial report, that out of 639 total items consisting of 12,543 pages contained in eight boxes of hard copy materials, the Cohen and Trump attorneys identified seventeen items they believed to be privileged, of which Jones agreed with them on fourteen items, and rejected the claim of attorney-client privilege on the other three. Furthermore, out of 291,770 items contained in two phones and an iPad, Jones found that 148 items are privileged, and that seven items are highly personal. An amended report was filed on June 15, which tweaked the initial report. On June 22, Judge Wood determined that only eight items of communication, out of 292,226 seized by the FBI were protected by attorney-client privilege. In essence, it appears that, at this stage, only a fraction of the documents seized from Cohen qualified for attorney-client privilege protection. Cohen, by his most recent attorney, Todd Harrison, filed a letter on June 25 contending that 12,061 out of over 4 million documents, text messages and emails are protected by attorney-client privilege. Although the Trump Organization counsel Alan Futeras requested an extension to July 11 to review 22,000 documents recently received, Judge Wood ordered that the review be completed by July 5.

It has been reported that the prosecution may be looking into establishing a case that President Trump sought Michael Cohen’s legal advice regarding the Stormy Daniels affair for an illegal purpose: to evade federal campaign –finance laws. President Trump tweeted that indeed no form of campaign contribution had been used to pay off Ms. Daniels. Nevertheless, Daniels’ attorney, Michael Avenatti, alleges that Victor Vekselberg, a Russian oligarch close to President Vladimir Putin, is the real source of the hush money, raising flags as to an alleged illegal purpose.

There are many in the legal community who are flabbergasted by the perceived attack on the sacrosanct shelter of attorney-client privilege, in the guise of an apparently sanctioned seizure of privileged communications. They question whether such a warrant would have been issued, if this were not such a high-profile case, involving the President. In fact, on May 4, Senior Federal Judge T.S. Ellis III of the Eastern District of Virginia, overseeing the criminal case against Paul Manafort, President Trump’s former campaign manager, expressed skepticism regarding Special Counsel Robert Mueller’s wide-ranging tactics. In the words of Judge Ellis: “What you really care about is what information Mr. Manafort could give you that would reflect on Mr. Trump or lead to his prosecution or impeachment.” In a 31-page decision issued on June 26, Judge Ellis reflected on the dangers of special prosecutions in general . “Although this case will continue, those involved should be sensitive to the danger unleashed when political disagreements are transformed into partisan prosecutions.” He also noted, “To provide a special counsel with a large budget and to tell him or her to find crimes allows a special counsel to pursue his or her targets without the usual time and budget constraints facing ordinary prosecutors, encouraging substantial elements of the public to conclude that the special counsel is being deployed as a political weapon.” The same could easily be said regarding the Michael Cohen investigation.As a retired New York State Supreme Court Justice, who for many years dealt with delicate issues of attorney-client privilege, I join those who express deep concern regarding a perceived dangerous precedent, and slippery slope, weakening the institution of attorney-client privilege.

What then is the law of the case?

ATTORNEY-CLIENT PRIVILEGE IN A NUTSHELL

The attorney-client privilege applicable to the Trump/Cohen investigation can be found in Rule 1.6 of the American Bar Association (ABA) Model Rules of Conduct, Rule 1.6 of the New York Rules of Professional Conduct, Rules 501 and 502 of the Federal Rules of Evidence, and to a certain extent, Section 4503 of the New York, Civil Practice Law and Rules (CPLR). The fundamental principle, underlying the privilege, is that, in the absence of the client’s informed consent, the lawyer must not reveal information relating to the representation. This contributes to the trust that is the hallmark of the lawyer-client relationship.

The law carves out a few exceptions to the privilege. For example, neither party can use the privilege in order to commit a crime or perpetrate a fraud.  Furthermore, non-legal communications, e.g. relating to business matters, do not qualify for the privilege.

An extreme example of a lawyer’s duty to maintain client confidence under the most trying circumstances, involved two upstate New York attorneys, Frank Armani and Francis Belge. While representing a murder suspect, they learned from their client of two other murders he had committed, and where he dumped the bodies. They did not reveal the location of the bodies. After the client later confessed at trial to the other murders, only then did they reveal their previous knowledge, and were reviled in the court of public opinion for withholding the information. However, in the legal community, as noted in People v. Belge, 372 NYS 2d 798, they were lauded for their zeal with which they had protected their client’s rights.

On the other hand, the prosecution alleging a crime/fraud exception must show that there is “probable cause to believe that a crime or fraud has been committed and that the communications were in furtherance thereof”. The crime/fraud exception applies when the attorney’s advice is used to further a crime. U.S. Supreme Court Justice Benjamin N. Cardozo, in Clark v. United States, 289 U.S. 1(1933) stated that “a client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. He must let the truth be told.”

THE DILEMMA ACCENTUATED

It was previously noted that there is a dilemma where  a lawyer  renders a  legal opinion regarding a transaction that turns out to be illegal, and the attorney-client privilege is in jeopardy, since an allegation of complicity of the lawyer in the client’s illegal conduct, might serve as a basis to raid the privilege.

This dilemma is accentuated, as has been noted by legal scholars, in that there is a conflict between the rules of professional responsibility and criminal law, in their respective definitions of lawyers’ complicity in their clients’ crimes. Under the rules of professional responsibility, a lawyer is exonerated for advising a client in committing a crime if the lawyer acted in good faith. However, the criminal law incriminates the same lawyer of aiding and abetting the client’s crime even if the lawyer believed the conduct in question was legal. As a result of this conflict, professional rules, under these circumstances, would not allow the alleged good faith complicity of the attorney to be the basis for a subpoena or warrant invading the privilege, while the same conduct would be deemed criminal under criminal law, and might very well serve as a basis for an exception to the attorney-client privilege.

CONCLUSION

Attorney-client privilege forms the bulwark of the legal profession, in as much as the clients are encouraged to communicate with their respective attorneys with candor, and enables them to obtain legal advice in a confidential manner. The present state of affairs casts a shadow on the attorney-client privilege, and presents a classic dilemma whether such form of confidentiality remains a privilege or, having been become imperiled, has now become a liability.

This form of communication presents a two-way street between the attorney and his client. The Trump/Michael Cohen drama is bound to impact both the attorney and the client to reassess their actions. It discourages the attorney from freely selecting the kind of clients and cases he or she may be interested in, while on the other hand, it may impede full and fair disclosure of facts and circumstances with which the client should provide the attorney, in order to obtain the best possible legal advice.

[1] Hon. Martin E. Ritholtz is a Retired Justice of the New York State Supreme Court and is Special Counsel to Shiboleth LLP.  Alon Harnoy is the Managing Partner of Shiboleth LLP.   Law Clerk, Divya Suwasini, helped research and write this article.

An abridged version of this article appeared  in the Opinion Section of the Jerusalem Post on July 7, 2018.

Managing Partner Alon Harnoy Gives Presentation at Event Hosted by China General Chamber of Commerce

Managing Partner Alon Harnoy recently spoke at an event hosted by China General Chamber of Commerce (CGCC) on May 30, 2018 in connection with global partnership and innovation within China and Israel. The event featured additional presentations from Eran Nitzan, Minister of Economic Affairs for the Israel Ministry of Finance at the Embassy of Israel in Washington, D.C., Uri Levin, President and CEO of IDB New York, Adiv Baruch, Chairman of the Israeli Export and International Cooperation Institute, and Shanqing Zhou, Economic and Commercial Counsellor of Consulate General of China in New York. Please see the below link for more information on the event (be sure to scroll down on the homepage for full article) as well as an article feature in China Today (found on page 2 below).

CGCC Hosted “Global Partnership & Global Innovation: China and Israel”

 

A Guide to Serving Process by Mail on Defendants Located Outside of the U.S. Pursuant to the Hague Service Convention

By Hon. Martin E Ritholtz, Daniel S. Goldstein, Esq. and Joshua Levin-Epstein, Esq.

In a rapidly changing and interconnected world, legal problems without passports proliferate and increasingly challenge New York attorneys, who find themselves embroiled in cases requiring the resolution of conflicts that extend beyond borders.  Having to serve process of a New York lawsuit on Defendants located outside of the country, for example, can be fraught with difficulties.  This article provides guidance on serving process of a New York lawsuit through postal channels in accordance with Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (the “Convention”).[1]

The United States and many other leading international economies are signatories to the Convention, a multinational treaty “intended to provide a simpler way to serve process abroad, to assure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad.”[2]  Where service of process is made in a foreign country that is a signatory of the Convention, compliance with the procedures of the Convention is mandatory.[3]

The treaty requires each signatory state to establish a Central Authority that receives international service requests and thereafter serves documents by a method prescribed by the internal law of the receiving state.  The use of the Central Authority, however, is not the only method of service under the Convention.[4]  For example, Article 8 permits service through diplomatic and consular agents.  Likewise, pursuant to Article 10 of the Convention:

Provided the State of destination does not object, the present Convention shall not interfere with –

  1. a) the freedom to send judicial documents, by postal channels, directly to persons abroad,
  1. b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination,
  1. c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination

For years, American courts were divided over whether the phrase “the freedom to send judicial documents” in Article 10(a) includes within its meaning the freedom to effect service of judicial documents, as specified by Articles (b) and (c).[5]  This division led to conflicting case law in which the permissibility of international service of process by mail has varied by court, by state, and by appellate department within the state.

Until June 2016, this split existed within the New York Appellate Division.  The First Department (and Third Department until 2012) interpreted the word “send” in Article 10(a) to authorize something other than effecting service, such as the transmittal of notices and legal documents, but not the service of process that initiates a lawsuit and secures jurisdiction over an adversary party.[6]  In contrast, the Second, Third and Fourth Departments interpreted the word “send” in Article 10(a) as including service of process and permitting service of process by regular mail when the State of destination does not object.[7]

Although New York’s Court of Appeals never addressed the issue, in Mutual Benefits Offshore. v. Zeltser, 140 A.D.3d 444 (1st Dep’t 2016), the First Department joined the Second, Third and Fourth Departments to hold that service of process by mail is not prohibited under the Convention.  See Mutual Benefits Offshore. v. Zeltser, 140 A.D.3d 444 (1st Dep’t 2016) (noting the different interpretations of Article 10(a) that had been adopted by New York State’s appellate departments and, for the first time, aligning the appellate departments).

While New York’s appellate departments were in line as of June 2016, the disagreement as to the interpretation of Article 10(a) of the Convention remained in other states and in federal circuit courts as well.[8]

THE UNITED STATES SUPREME COURT RESOLVES THE CIRCUIT SPLIT

On May 22, 2017, the United States Supreme Court resolved the disagreement as to the interpretation of Article 10(a) of the Hague Service Convention.

In Water Splash Inc. v. Menon, 137 S.Ct. 1504 (2017), plaintiff-petitioner Water Splash, a Texas corporation, sued defendant-respondent Menon, a former employee residing in Canada, in state court in Texas.  Water Splash commenced the action by serving Menon with process via postal channels.  After obtaining a default judgment against Menon, Menon appealed, arguing that service of process by mail does not comport with the requirements of the Hague Service Convention.  The Supreme Court acknowledged the broader conflict among courts as to whether the Convention permits service through postal channels, and granted certiorari.

After analyzing the treaty’s drafting history, taking account of foreign courts’ interpretation of the treaty, and applying “traditional tools of treaty interpretation,” the Supreme Court held that Article 10(a) of the Convention indeed encompasses service of process by mail.  Water Splash thus resolves the longstanding disagreement in the lower U.S. courts and clears the way for international service of process by mail under the Convention.

ADDITIONAL CONDITIONS for SERVING PROCESS THROUGH POSTAL CHANNELS

To be clear, the Court’s holding in Water Splash does not mean that the Convention “authorizes” service by mail in all cases.  “Article 10(a) simply provides that, as long as the receiving state does not object, the Convention does not ‘interfere with . . . the freedom’ to serve documents through postal channels. In other words . . . service by mail is permissible if two conditions are met: first, the receiving state has not objected to service by mail; and second, service by mail is authorized under otherwise-applicable law.”[9]

 Thus, to determine whether service of process by mail is authorized on a case by case basis, it is first necessary to confirm that the receiving state has not objected to Article 10(a).  The objections and declarations of the Convention’s participating countries are available using the Convention’s website.  Objectors to Article 10(a) include China,[10] Germany,[11] Switzerland[12] and Mexico,[13] among others, meaning that service by mail in those countries is not authorized by Water Splash.   Comparably, the State of Israel asserted objections to Articles 10(b) and (c) and specifically declared thereunder that it will “effect the service of judicial documents only through the Directorate of Courts.”  Yet, because Israel has not objected to Article 10(a), the Water Splash decision would now appear to open defendants located in Israel to service of process in U.S. courts by mail.

In addition to being authorized by the receiving State, service by mail must also be authorized “under otherwise-applicable law,” meaning by the jurisdiction hearing the suit.  If the case is commenced in federal court, this means service of process by mail must comport with the Federal Rules of Civil Procedure or other controlling statute on the service of process in that case.[14]  In New York, service of process by mail, with certain exceptions, is not generally authorized by the CPLR (for example, it could be directed by an order of the Court under Article 3).  Thus, absent a court order under Article 3 of the CPLR, service of process in New York in most cases will need to comport with New York Business Corporation Law § 307, New York Vehicle and Traffic Law § 253, or other authorizing New York statutes.

______________________

[1] Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638.

[2]  New York State Thruway Auth. v. Fenech, 94 A.D.3d 17 (3d Dep’t 2012)

[3] Morgenthau v. Avion Res. Ltd., 11 N.Y.3d 383, 390 (2008)

[4] Sbarro Inc. v. Tukdan Holdings, Inc., 32 Misc. 3d 217, 218 (Sup. Ct. Suffolk County 2011)

[5] Brockmeyer v. May, 383 F.3d 798 (9th Cir. 2004)

[6] New York State Thruway Auth. v. Fenech, 94 A.D.3d 17, 19 (3d Dep’t 2012)

[7] Id.; Sbarro Inc. v. Tukdan Holdings, Inc., 32 Misc. 3d 217, 219 (Sup. Ct. Suffolk County 2011).

[8] New York State Thruway Auth. v. Fenech, 94 A.D.3d 17, 19-20 (3d Dep’t 2012)

[9] Water Splash Inc. v. Menon, 137 S.Ct. 1504, 1513 (2017)

[10] Sulzer Mixpac AG v. Medenstar Indus. Co., 312 F.R.D. 329 (S.D.N.Y. 2015)

[11] PATS Aircraft, LLC v. Vedder Munich GmbH, 197 F. Supp. 3d 663 (D. Del. 2016)

[12] In re Bernard L. Madoff Inv. Sec. LLC, 418 B.R. 75 (Bankr. S.D.N.Y. 2009)

[13] Forth v. Carnival Corp., 12-cv-23770, 2013 WL 1840373 (S.D. Fla. May 1, 2013)

[14] Brockmeyer v. May, 383 F.3d 798, 804 (9th Cir. 2004)