EXAM NO. ___________ Prof. Brant

Legal Profession December 12, 1996

GRADE POSTING: If you do not wish to have your grade posted (by exam number) in this course, please place an X by your number on the exam and blue books.

1. What you may bring into the examination:

A. Your textbook,

B. Your statutory supplement (the Blue Book),

C. Your class notes,

D. Any outlines or study materials that you played a substantial part in preparing.

2. Canned briefs, Gilberts, Emmanuals, Nutshells & the like may not be brought into the final examination room.

3. Three hours will be allotted for the examination. Blue books will not be passed out for the first 30 minutes. This time should be spent reading and thinking about the question before you begin writing your response. You may use scratch paper to begin outlining your answer during this initial 30 minute period.

4. There will be one essay question on the final examination.

5. In answering the essay question, you should rely upon case law from the textbook and handouts, our class discussions, and EITHER the ABA's Model Rules OR the Model Code of Professional Responsibility. You will not be expected to use both the Code and the Rules in your answer.

6. There is no presumption that use of a case name results from knowledge of its contents. Discuss and analyze any case law you plan to use in your answer.

7. Write on only one side of each page in the blue books.

Allen McClung, an in-house attorney for TRW Corporation, was called into his CEO's office one morning and told that a confidential and important problem required his attention. The CEO, Rob Rickover, told Allen that there were some "unfortunate allegations" involving sexual harassment. The alleged harasser was Victor Von Beeson, the Vice-President for Financial Affairs. Rickover told McClung to do a thorough, but delicate investigation of the matter, and to keep his findings "close to the vest."

McClung began his investigation with Von Beeson's secretary -- Holly Golightly. Holly was reluctant to talk at first, but McClung assured her that she could rely on his discretion. Holly then conceded that Von Beeson had been harassing her for months, and that she had been afraid to report his conduct to anyone. She described the harassment in detail, and identified a witness and various confidants among the clerical staff. McClung asked if Von Beeson ever threatened her and she said "oh no, but I know how much influence he has in the firm. I was sure they'd fire me if I told on him."

McClung then confronted Von Beeson, who was much amused and confirmed Holly's story in its entirety. Von Beeson told McClung that he was a fool, and that TRW would never take any action against him. He suggested that McClung find something more useful to do than "chase red herrings," and gave McClung a file containing his tax records, telling him to fill out the proper forms on his most recent sales of TRW stock. He also mentioned that his 17 year old daughter had been charged with driving under the influence last week, and if McClung took care of her, Von Beeson would "forget about the first part of this conversation."

McClung took the DUI case, and did the tax work as well, figuring it was safest not to antagonize Von Beeson any more than necessary. He then interviewed various clerical personnel, all of whom confirmed that Holly had indeed complained of harassment from Von Beeson. The single eyewitness to the harassment was Susie Somerville, a chatty mailroom attendant. After confirming Holly's version of events, Susie said to McClung: "You know, I'm a careful person. I keep files on everybody. I even make copies of some of the memo's I deliver, if I think it's information I should have. Especially minutes of Director's meetings -- those are always in special envelopes and I'm careful to open them without leaving any trace. I plan to keep this job for a good long time, and I figure the more I know, the safer I am." McClung assured Susie that he wouldn't tell a soul about her "insurance policies," as she called them.

While finishing up the tax assignment for Von Beeson, McClung noticed that several of the Vice-President's most recent trades appeared to correlate with meetings of the Board of Directors. McClung checked the minutes of these Board meetings, and concluded that six out of seven of Von Beeson's most recent trades in TRW stock had been based on inside information that had not yet been publicly disclosed, in violation of the Securities and Exchange Act. McClung carefully documented Von Beeson's insider trades in his memo to the CEO, and recommended that TRW "severely discipline" Von Beeson for his misdeeds. He also told them about Susie's habit of copying minutes of Directors' meetings. The TRW Board responded swiftly to McClung's memo. They fired Susie for violating company policies having to do with proper handling of sensitive and confidential company documents and they fired Holly and McClung, claiming a need to "downsize."

McClung was furious. He filed a wrongful discharge action against TRW, and went out for a drink with an old friend from law school, Jerry Bainbridge. McClung told Jerry about the sexual harassment at TRW, identifying Von Beeson as the culprit. He also mentioned some details about Von Beeson's insider trading. He said that TRW had fired the only eyewitness to the sexual harassment on "some dummied up pretext or another."

The following week, Jerry shared McClung's story with his new girlfriend, who was a junior attorney at the Securities and Exchange Commission (" SEC"). Shortly thereafter, McClung got a call from an SEC investigator, who asked him a variety of questions about insider trading at TRW. At this point McClung got very nervous and told the SEC that his information was privileged. The SEC issued a subpoena, ordering McClung to turn over his interview notes with "any TRW employee" involving insider trading, as well as any reports he had prepared for TRW management on the subject. McClung refused to cooperate.

About a month later, McClung was hired as an associate by Hart & Wechsler, a mid-sized, general practice firm. Unbenownst to McClung, one of the partners at Hart & Wechsler (H & W) was then representing Holly in her sexual harassment suit against TRW. TRW found out about this before McClung did, and moved to disqualify H & W on conflict of interest grounds. The trial court granted this motion, and Holly had to hire a new firm -- MacGregor & Moriarity (M & M) to finish her case. M & M asked H & W to turn over their files on Holly, but H & W refused, saying they never shared files after a conflicts disqualification. Holly appealed to McClung, who turned over his interview notes with both Von Beeson and Holly to M & M.

At Holly's sexual harassment trial, Victor Von Beeson denied everything. So did the clerical workers that had talked to McClung. The attorney from M & M was intimidated by Von Beeson and decided not to cross examine him. Susie confirmed Holly's version of events, but was attacked on cross-examination as a disgruntled worker who had been fired for misconduct. When Holly took the stand, she testified that she had gotten death threats from Victor during the time she had worked for him, and that these threats had left her too frightened to complain to anyone at the firm. Holly was a sympathetic witness, and the jury returned a verdict of $25,000.

H & W promptly filed an attorney's lien, seeking to recover 1/3 of Holly's judgment, as per their original agreement with her. Holly thought this was dreadful, and filed a malpractice suit against H & W, in which she alleged that if they hadn't been so incompetent as to get themselves disqualified, her recovery would have been "at least $200,000." Susie then turned up in McClung's office, and asked him to represent her in a shareholder's derivative suit against TRW for numerous breaches of fiduciary duty that she had carefully chronicled in her files. McClung accepted the representation.

Discuss and resolve all issues.