Abdo v. Fitzsimmons

Background

This securities-fraud case involved the defendants’ proposed use of evidence concerning advice from lawyers. The defendants had pleaded advice of counsel as an affirmative defense, but their pretrial statement referred to that defense only briefly, and they had not proposed a jury instruction on it. The plaintiffs filed a motion in limine—a request to decide before trial whether certain evidence or arguments may be presented—seeking limits to prevent juror confusion and unfair prejudice.

The defendants argued that they should be allowed to introduce evidence of legal advice without limitation, even though they were not formally presenting an advice-of-counsel defense at trial. They contended that such evidence could help the jury decide whether they acted with scienter, meaning the fraudulent intent required for the securities-fraud claim.

Court’s analysis

The court explained that advice of counsel is not necessarily a separate defense. It may instead be evidence of good faith relevant to whether the defendant had the required fraudulent intent. Generally, however, a defendant relying on that evidence must show four things: the defendant fully disclosed the relevant facts to counsel; asked counsel whether the planned conduct was legal; received advice that the conduct was legal; and relied in good faith on that advice.

The court reasoned that an individual element usually has little or no relevance unless the other elements are also present. For example, advice is generally not relevant if the lawyers were given incomplete information, were not asked about the conduct at issue, advised that the conduct was illegal, or were not followed. Presenting only some elements could lead a jury to assume that lawyers approved the conduct when the defendant was not actually making that showing.

The court did not adopt an absolute rule barring every reference to lawyers. It stated that the ruling could be changed if the defendants made a good-faith proffer—a preliminary showing—demonstrating that they could satisfy the elements of a complete advice-of-counsel showing, or if particular evidence was relevant without causing confusion or unfair prejudice. The opinion states that, at the hearing, the defendants said they intended to make such a proffer and that the court invited them to do so in a motion seeking admission of the advice-of-counsel evidence.

Ruling and limits

The court granted the plaintiffs’ motion in limine. It ordered a limiting instruction before opening statements. It also limited the defendants’ references to lawyers during opening statements, closing arguments, and trial. Defense counsel may briefly and factually state that lawyers were involved, but may not argue or suggest that the lawyers communicated, directly or indirectly, that the defendants’ conduct was appropriate; that the defendants relied on anything the lawyers said or did, or failed to say or do; or that the lawyers should be disparaged, criticized, or blamed for their advice or lack of advice.

The court stated that these restrictions could be lifted with the court’s permission if defense counsel made a good-faith proffer that the defendants would present evidence satisfying the requirements for an advice-of-counsel showing. If the defendants crossed the line without presenting sufficient evidence, the court would give a curative instruction. The court ordered the parties to meet and confer about the proposed instructions and file a joint statement containing their proposals and arguments within 21 days.

Disposition

The court granted the plaintiffs’ motion in limine as described above. It did not finally decide whether any specific advice-of-counsel evidence would be admitted at trial, and it left open the possibility of modifying the ruling.