## Facts

- African-American employees brought a pending workplace race-discrimination class action alleging a hostile work environment at an Indiana plant.
- While the case was pending, the employer’s general counsel, after consulting outside counsel, retained private investigators to conduct an undercover inquiry into workplace conditions and the legitimacy of the lawsuit.
- Investigators posed as plant employees and spoke with workers about matters related to the lawsuit; some contacts included named plaintiffs who were represented by counsel.
- Defense counsel and the employer received ongoing reports about the investigation, and outside counsel advised throughout.
- Outside counsel represented to the court that he and his firm were not involved in the investigation.
- Billing records later produced revealed substantial outside-counsel involvement in planning and supervising the investigation.
- Plaintiffs moved for sanctions, asserting improper ex parte communications with represented parties and misrepresentations to the court.

## Issues

1. Whether counsel violated the no-contact rule by using undercover investigators to communicate about the litigation with represented plaintiffs.
2. Whether counsel’s statements minimizing or denying involvement in the investigation warranted sanctions for lack of candor to the tribunal.
3. What sanctions were appropriate given the nature of the conduct and the showing of prejudice.

## Decision

- The court granted the sanctions motion in part.
- The court found the covert investigative approach created improper attorney-attributed communications with represented parties and raised serious ethics concerns.
- The court also found counsel’s lack of candor regarding their role in the investigation supported sanctions.
- The court imposed targeted sanctions, including monetary sanctions/fee shifting tied to the misconduct.
- The court declined to impose the most severe remedies sought (such as dispositive sanctions or broad evidentiary exclusions) and allowed the discrimination case to proceed.

## Legal Principles

- A lawyer may not evade the no-contact rule by communicating “through” an investigator or other intermediary about the subject of a matter with a person known (or effectively treated) as represented in that matter.
- During pending litigation, an “internal investigation” that functions as litigation-related evidence gathering must be structured to avoid ex parte contacts with represented employees/parties absent opposing counsel’s consent or court authorization.
- Material misstatements or omissions to the court about counsel’s involvement in potentially improper investigative conduct may warrant sanctions under the court’s inherent authority and professional-duty rules governing candor.
- Sanctions should be tailored to the misconduct; courts may require a meaningful showing of prejudice before imposing severe evidentiary or case-dispositive remedies.

## Conclusion

The court sanctioned defense-side counsel and/or the employer for conducting and concealing a covert investigation that resulted in improper contacts with represented plaintiffs and for misleading representations about counsel’s role, but limited relief largely to monetary and corrective measures rather than merits-determinative sanctions.


Allen v. Int’l Truck & Engine Corp., No. 1:02-cv-0902-RLY-TAB, 2006 WL 2578896 (S.D. Ind. Sept. 6, 2006)