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Companies Should Be Careful When Working With a Private Investigator

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By Casey C. Sullivan, Esq. on October 13, 2016 3:57 PM

The company is being accused of wrongdoing. Charges of sexual harassment, regulatory noncompliance, or unfair trade practices have been levied. Litigation has started, or is on the horizon.

Should you turn to a private investigator to help prepare? A private dick can help you find out key facts, Sam Spade style. But they can also land companies in hot water, as a recent lawsuit against Uber illustrates.

The Overreaching Private Eye

Uber's private eye-inspired headache came after the company was accused of violating antitrust laws. Uber, not known for its timidity in firing back against critics (its founder, Travis Kalanick, once threatened to release personal information Uber had on a critical journalist), the company hired a private investigation company, Ergo, to look into the plaintiff and his lawyer.

Ergo didn't limit itself to the facts at issue in the lawsuit, however. According to Inside Counsel:

Ergo called and emailed Meyer's and Schmidt's acquaintances and colleagues under false pretenses and inquired about their most personal information, including issues relating to their employment, finances, family life and motivation for bringing the suit, none of which was actually relevant to the issues in the underlying action.

That investigation was eventually discovered and lead to discovery and depositions based on Ergo's (and Uber's) overreaching, including the deposition of company executives.

Uber's Three Major Mistakes

Uber and Ergo made three major mistakes that left them on the wrong side of the law, or at least of S.D.N.Y. Judge Jed S. Rakoff. First, Uber said that its investigation was to see if the plaintiff posed a safety threat to Kalanick. That might help justify their snooping, but it meant that Uber couldn't claim that the investigatory documents were privileged work product, since the work wasn't done in anticipation of litigation.

Secondly, Uber didn't act to make sure its hired investors weren't misrepresenting themselves. New York State Rules of Professional Conduct, and the ABA Model Rules more generally, both hold attorneys accountable for supervising their non-lawyer assistants and forbid dishonest, fraudulent, deceitful, or misrepresentative behavior by attorneys.

Finally, despite hiring investigators, Uber didn't do much investigation itself. It turns out that Ergo's investigators weren't properly licensed under New York law.

Learning From Uber's Mistakes

So here are the takeaways for in-house attorneys: companies can certainly employ and retain investigators. But, in order to reduce risk, those investigations should be limited to the subject of litigation; investigators should be thoroughly vetted and their work supervised to make sure that they are not creating violations that can later be ascribed to the company.

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