Ohio State’s football coach, Jim Tressel, apologized on March 14, 2011, for not finding “the ones to partner with” in deciding what to do about the claims sent by a whistle-blower in an e-mail that warned about Ohio State football players selling OSU memorabilia. Coach Tressel’s partner should have been an attorney for Ohio State.
First, let me disclose that I, as an alumnus, have the utmost respect for the honesty and integrity of my alma mater’s football coach. But we can all learn how to reduce legal and reputational risks that may result from receiving claims from a whistle blower.
Generally, no one has a duty to investigate or report something that you learn from a whistle blower unless you have a fiduciary duty. Whether you have a fiduciary duty to an organization depends upon your relationship to the organization and whether the relationship creates such a duty. Being in any of the following four relationships results in a fiduciary duty:
- Director or member of the governing board, you have a duty to speak when an ordinarily prudent person in a like position and under similar circumstances would speak.
- Officer, you have a duty to speak when an ordinarily prudent person in a like position and under similar circumstances would speak.
- In an expert or professional relationship, such as a lawyer, accountant, auditor, tax advisor, investment banker, etc., you have a duty to speak when an ordinarily prudent expert in your profession under similar circumstances would speak.
- ERISA fiduciary, you have the duty to act for the exclusive purpose of providing benefits to participants and their beneficiaries with the care, skill, prudence and diligence under the prevailing circumstances that a prudent man acting in a like capacity and familiar with such matters would act.
In addition, fiduciary duties can be created by contract, including both the expressed terms of an employment agreement, as well as those implied, such as agreeing to abide by an organization’s employment policies or its governing documents.
Even if someone has a fiduciary duty, a recipient of a whistle blower’s claim does not have a duty to investigate or report the claim unless the fiduciary has reason to believe that:
- The whistle blower is reliable
- The claim, if true, is material.
Because reliability and materiality are questions of both fact and law, after the adoption in Sarbanes Oxley of sanctions against CEOs and CFOs for failing to report certain claims to governing boards and outside auditors, the American Bar Association amended its disciplinary rules governing lawyers to create a process for someone affiliated with an organization to satisfy any fiduciary duty he or she may have with respect to a whistle-blower’s claim. The process is to report the claim to an attorney for the organization.
Under the ABA’s amended rule, if the recipient reports the claim to a lawyer for the organization, the burden shifts to the lawyer. Under the ABA amended rule, the lawyer receiving a claim is to proceed as is reasonably necessary in the best interest of the organization. If the lawyer can reasonably conclude under the circumstances that there may be a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer must proceed as is reasonably necessary in the best interest of the organization. This includes, if warranted by the circumstances, reporting the matter to the highest authority that can act on behalf of the organization.
What I like best about Coach Tressel is that he is a teaching coach. I am sure he wants all of us to learn from his situation. If you become aware of a possible claim regarding a violation of a legal obligation to the organization or its constituents, or a violation of law that might be imputed to the corporation or its constituents, report it to an attorney for the organization. The organization's attorney should be your, as well as Coach Tressel's, partner for making these decisions.