The legal ethics world is all in a fluster over a recent controversy involving Elon Musk, the world’s richest man. This means that readers at Ethics Alarms should be flustering too.
This is the story: An SEC attorney had interviewed Musk during the agency’s investigation of the Tesla CEO’s 2018 tweet claiming to have secured funding to potentially take the electric-vehicle maker private. The claim proved to be false, resulting in a settlement that required Musk to resign and also to pay 20 million dollars in fines. In 2019, Musk’s personal lawyer called the managing partner at Cooley, LLP, and demanded that the firm fire the SEC lawyer, who had left the agency to become as associate at the large firm that handles Tesla’s business. The targeted lawyer had no connection to Tesla’s legal work at the firm; the sole reason for the demand was revenge. Musk wanted him to lose his job because he was angry about their interaction at the SEC.
The case has similarities to the Coca-Cola incident Ethics Alarms discussed last year, in which the corporation wrote the law firms with which it did business and demanded, as a condition of continuing to receive Coke legal fees, that the firms meet the diversity and equity quotas dictated by the company’s general counsel in all of their work for all of their clients, not just Coke. The position here was and is that the demand by Coca-Cola was unethical, and for any law firm to accede to it would be a breach of legal ethics. (Coke quickly sent the GC off to another position in which he could indulge his social justice fetishes.)
Cooley refused to fire the attorney, who remains an associate at the firm. Musk, meanwhile, is carrying through on his threat. Since early December of 2020, Tesla has begun taking steps to replace Cooley in many matters. Musk’s rocket company, Space Exploration Technologies Corp. or SpaceX, has stopped using Cooley for regulatory work.
First of all, good for Cooley. The increasing trend of clients using their financial power to try to influence how law firms operate is a profound threat to justice and the legal system, and a sinister example of the business of law corrupting the profession of law. Of course, there is nothing wrong or unethical about a company choosing to employ a different law firm for any reason whatsoever. There is a great deal wrong with a company’s owner seeking personal vengeance on a lawyer who had only been doing his job. It’s not illegal, but the conduct is unethical—petty, mean-spirited, vicious and unjustifiable.
There is another legal ethics problem raised by the facts, however. Did you see it?
The story, which is hardly flattering to Musk and which has attracted plaudits for the law firm, was broken today by the Wall Street Journal. How did the Journal learn about it? The assumption is that someone at Cooley leaked it. But the demand from Tesla to its law firm was a client-lawyer communication, and legal ethics Rule 1.6, Confidentiality of Information, forbids a lawyer (or obviously a law firm) from revealing such communications to anyone without the client’s permission. Doing so to intentionally harm a client makes the breach even more serious. Now Tesla/Musk has a legitimate reason to drop Cooley; he and the company also have a valid ethics complaint and a lawsuit. Some of that $20 million may be coming back.
Or could it be that Musk had someone at Tesla leak the story? It would be the ideal way to send a message to other law firms that Musk won’t be bluffing when he says, “Do what I want, or else.”