Pretext: An Essential Recognized Investigative Technique

Recently the media reported on a $1.8 million verdict in an invasion of privacy lawsuit in Cook County, Illinois.  The plaintiff, involved in litigation against her former employer, became the subject of a private investigation by a detective agency hired by her former employer, a defendant in the action.  Some of the facts are like a movie featuring the “Keystone Cops.”

Reports from the Chicago Tribune and the ABA Journal related how a private investigator held the plaintiff’s residence under surveillance, during which time the investigator was observed discarding papers in the trash can of the subject’s neighbor.  The neighbor alerted the father of the plaintiff of what was observed and a “dumpster dive” of the trash can by the father revealed an envelope which identified Probe International.

What followed were discovery proceedings, a jury trial and information that the plaintiff’s telephone call records of over 700 calls in 2005 had been obtained by her former employer, the defendant.  In a scenario, not unlike the Hewlett-Packard fiasco seems the private investigative firm contracted to a third-party vendor called Discover to obtain the plaintiff’s phone records by “pretexting.”  Although pretexting for telephone information may not have been illegal at the time it took place it is now!  This litigation eventually resulted in a verdict on the invasion of privacy claim of intrusion on seclusion of $65,000 in compensatory damages and $1,750,000 in punitive damages.

Media reports such as the one above serve as examples by lawmakers to propose legislation to ban the use of pretexting by investigators.  However, professional investigators, as well as law enforcement, need to be able to utilize this tool for lawful investigations.

Fortunately, in a resolution the International Association of Security & Investigative Regulators, an association of State and Provincial regulators in the U.S. and Canada, they state:

“Be it resolved that IASIR recognizes the common practice of pretext as an investigative tool in lawful investigations by both public law enforcement and licensed private investigators and security practitioners.”

In the section below, experts in corporate security defend pretexting and other forms of subterfuge.*

“Pretexting sounds like a bad word, but it’s not,” said R. Mark Halligan, a Chicago attorney who chairs the American Bar Association committee on trade secrets. “It simply means that a person represents himself in such a manner that the person that is suspected of a crime makes a certain admission or makes certain statements the investigator would not otherwise have obtained.

Halligan said he thinks that ferreting out trade-secret theft or unauthorized disclosure of proprietary information could merit some forms of deception.

For example, a client once hired him to find out whether a former employee who was starting a rival business planned to illegally copy the firm’s manufacturing techniques. Halligan hired an investigator who befriended the former employee at a trade show and worked to develop a relationship. After several weeks, the two men went on a fishing trip together, during which the former employee offered the investigator a job with his new firm and revealed that he had his former employers’ trade secrets. The company used that information to sue the former employee with the investigator as the star witness.

Investigative & Security Professionals for Legislative Action are concerned that anti-pretexting, security breach, ID theft, and social security ban legislation may cause Congress to ban all forms of pretexting, wiping out a key tool of investigators.

“If you were to outlaw pretexting, an unintended consequence would be outlawing the use of undercover investigators to detect theft in the workplace or seek out identities of drug dealers,” said Bruce Hulme, now the director of government affairs for ISPLA.

“Undercover investigation (involves use of) pretense, subterfuge or pretext. To locate a suspect, one might use a subterfuge rather than identify oneself as an investigator,” he said. “Pretexting is a recognized investigative tool used by both public and private sectors in law enforcement and public safety.”   -  *San Francisco Chronicle – Sept. 12, 2006

Although a pretext inherently involves some level of deception, courts have generally found that using a pretext to gather basic information about suspected wrongful activities does not violate the ethical rules against misrepresentation. A New Jersey court found no violation of its equivalent of Model Rule 8.4(c) when the plaintiff’s attorneys and their agents contacted the defendants’ sales representatives to purchase items bearing the name and likeness of John Lennon to show violation of a prior consent order. Apple Corps Ltd. v. Int’l Collectors Soc’y, 15 F. Supp. 2d 456 (D.N.J. 1998). In this case, the court found that although Rule 8.4(c) was not explicitly limited to material misrepresentations, it simply did not cover misrepresentations of identity or purpose while gathering evidence. The New Jersey court reasoned that courts, ethics committees and grievance committees do not condemn such behavior when engaged in by undercover agents in criminal cases or discrimination testers in civil cases. Additionally, the court found that Rule 8.4(c) should be read in conjunction with Rule 4.1, which prohibits misrepresentations of material fact, and consequently interpreted Rule 8.4(c) as targeted only at “grave misconduct.”

In another case involving comparable facts, a New York court similarly declined to exclude evidence obtained by undercover investigators because “hiring investigators to pose as consumers is an accepted investigative technique, not a misrepresentation.” Gidatex, S.r.L. v. Campaniello Imp’s, Ltd. 82 F. Supp. 2d. 119 (S.D.N.Y. 1999). The court found that New York’s Rule 8.4(c) sought to protect parties from being tricked. The court found no violation of the rule because the investigators did not interview the salespeople or trick them into making statements they would not otherwise have made as part of the transaction.

Other trademark cases confirm by implication that gathering evidence under pretext does not violate the rules against misrepresentation. See, e.g., Louis Vuitton S.A. v. Spencer Handbags Corp., 765 F.2d 966 (2d Cir. 1985); Cartier v. Symbolix, 386 F. Supp. 2d 354 (S.D.N.Y. 2005); Phillip Morris USA Inc. v. Shalabi, 352 F. Supp. 2d 1067 (C.D. Cal. 2004); Weider Sports Equip. v. Fitness First, Inc., 912 F. Supp. 502 (D. Utah 1996). The decisions in these cases do not explicitly discuss possible violations of ethics rules against misrepresentation but simply accept and rely on evidence obtained under pretext. While in most cases the investigators simply posed as customers, Vuitton involved a relatively elaborate pretext with the investigator posing as a casino owner interested in funding a counterfeiting scheme to obtain evidence against distributors of counterfeit bags.

The principal lesson from this body of case law is that while some jurisdictions may be more flexible in their application of the governing ethical rules, an attorney should rarely direct the investigator to go beyond posing as a customer or other person with whom the target normally interacts. Discussions between the investigator and the target should be limited to matters that would normally be addressed in the transaction under investigation.

From the Anti-Counterfeiting & Enforcement section of the International Trademark Association: BE IT RESOLVED, that the International Trademark Association:

1. Endorses ethical and legal pretexting as an essential tool in investigating and combating trademark infringement and counterfeiting;
2. Urges governments not to prohibit private uses of pretext investigations in respect of potential trademark infringement and counterfeiting; and
3. Where such private pretext investigations are prohibited, urges governments to make an exception for pretext investigations for trademark infringement and counterfeiting.

BACKGROUND

In trademark infringement and counterfeiting cases, pretext investigations are commonly used and evidence gathered through such investigations generally has been accepted.  When such investigations involve lawyers, they are generally regulated by state rules governing lawyers’ conduct.

Pretext investigations in trademark cases occur generally when trademark owners and lawyers hire investigators to pose as consumers, purchasers, or counterfeiters to ascertain how the alleged infringer or counterfeiter presents himself to the consuming public or to ascertain the source of infringing or counterfeiting goods.  These investigative techniques are a reliable and efficient way to collect information on use or non-use of a trademark, gather information about trademark counterfeiting or infringement, ascertain information about an alleged infringer or counterfeiter, or learn information about a suspect’s representations to the public.

Pretext investigations may occur at any time including before or after litigation has started.  They may be crucial to establishing infringement or counterfeiting.  They may be used to gather evidence not otherwise discoverable, because the alleged infringer or counterfeiter would not cooperate.

In the course of such investigations, investigators may explicitly or implicitly misrepresent who they are, may misstate the purpose of their visit, questions or interviews, and may secretly tape record, photograph or videotape others during the visits (to the extent such secret recording is permitted by law).

Examples of such pretext investigations are:

• A brand owner suspects that its products are infringed upon or counterfeited and therefore hires private investigators to visit some stores or showrooms, speak to salespeople, determine who the owner of the store is and ascertain the scope of the infringing or counterfeit activity;
• Before or after commencing an action against an infringer or counterfeiter, a brand owner hires private investigators to take pictures of a store window displaying infringing or counterfeit goods, to buy infringing or counterfeit goods and to speak with sales representatives in order to assess how they present the products to consumers;
• Before or after commencing an action against an Internet infringer or counterfeiter, a brand owner hires private investigators to contact the online seller, exchange communication with the seller and purchase infringing or counterfeit goods to ultimately identify the seller and ascertain his or her domicile; or
• After commencing an action against an infringer or counterfeiter, discovery is difficult and a brand owner has difficulties getting the requested documentation.  The brand owner, therefore, hires an investigator to visit defendant’s stores, speak to defendant’s salespeople and record conversations with defendant’s low-level employees in order to gather evidence as to defendant’s representations to consumers regarding the infringing or counterfeit goods.

Use of pretexts extends well beyond the investigation of trademark infringement and counterfeiting cases:

• A ban on such use would make all in-plant and internal survey style undercover investigations illegal, for posing as either an employee or as one other than an investigator would be a pretext.
• All “sting” operations would be illegal and the use of pretense in attempting to track down the location of thieves and their illegally gotten gains taken from the clients of investigators would be a crime.
• Retail loss interrogations would be restricted as many recognized interrogation techniques involve subterfuge or some limited pretext when questioning a suspect.
• Retail testing operations or the use of “Mystery Shoppers” would be illegal, as operatives would be posing as customers.
• Investigators conducting surveillance, who are approached by a neighbor inquiring as to the reason for their presence, would be unable to use a simple pretext to explain their presence in order not to alert the subject of their surveillance.
• Simply using a pretense to determine whether or not a subject is at home or place of employment would be illegal.  Such practice is common in holding visual electronic surveillance of subjects in workers compensation claims and personal injury litigation.

Note: ISPLA member Roger H. Schmedlen of Loss Prevention Concepts, Ltd and Bruce Hulme, Director of Government Affairs for ISPLA contributed to this article.

For further information about Investigative & Security Professionals for Legislative Action go to: www.ISPLA.org

ISPLA relies on contributions from our colleagues in the investigative and security professions in order to continue our lobbying efforts in Washington.  Checks may be sent to ISPLA at 235 N. Pine Street, Lansing, MI 48933

Tags: ISPLA, laws, pretexting, private investigation

Category: Private Investigation