LOOSE LIPS SINK SHIPS

& TORPEDOING ONESELF!

(a Corplaw Commentary)

by Barry J. Lipson

A CORPLAW COMMENTARY

LOOSE LIPS SINK SHIPS

& TORPEDOING ONESELF!
by Barry J. Lipson
Whether one is being compromised by a Mata Hari;
confidently consulting counsel while in flight; talking
on a cell phone while walking in public; sending,
receiving & erasing e-mails, tweets and text messages;
making notations; throwing out shredded papers;
suffering from a case of foot-in-mouth disease; or
otherwise leaving a trail of evidence, Loose Lips Sink
Ships. But help is available, if you have
a friend in need . . ..
Have you ever (or more than once a day) been confronted with those who are so confident that they
can say, write, type and transmit whatever they want with impunity and without negative consequences?
Whose guiding principles are "say it like it is" and/or "speak first, think later?" Who believe that with the
defeat of the AXIS well over a half-century ago, and with the First Amendment to the U.S. Constitution,
and the American Civil Liberties Union, to protect their "freedom of speech," loose lips no longer sink
ships and anything goes? What about one who Tweets whatever notions enter his head? What about a
entrepreneur who, for example, after buying up from varies sources all the rights, trade secrets and know
how to a new class of technologies, such as "cold fusion," announces to the press that he is doing this "to
control the price and source of electric power?" I have! -- and Ive even met legal counsel who find "no
problem" with their clients acting in this manner. While I do not advocate prevarication, I do believe in
"thinking before speaking;" and that "no words may be actually worth a thousand extra days of freedom
with family and friends." Thus, our cold fusion tycoon may be better advised not to speak at all of his
presumably lawful acquisitions of this class of technologies; or, at the most, in consultation with his "spin
doctors," or better yet his lawyers, honestly announce that his "new cold fusion enterprise will produce
electricity at a fraction of the cost of traditional methods."
Mata Hari (born Margaretha Geertruida Zelle), a Dutch exotic dancer
and courtesan, is traditionally the prime example of the Femme Fatale,
vamping secrets from fallible menfolk. As a citizen of a neutral nation, the
Netherlands, she could freely cross the combatants borders. She was accused
of being a double agent. Apparently, she felt being thought of as a spy made
her appear to be more exotic, and she did, reportedly only once, admitted to
being a French agent. Mata Hari, did not commit hari-kari (as her stage name
might imply), but in 1917 was executed by the French as a German spy.

But stinkers and tinkees oops! --sinkers and sinkees, come all shapes, sizes, sexes and
vocations. Those that unintentionally and unwittingly torpedo others, and those who unthinkingly or
unwittingly torpedo themselves. Before we visit with the more traditional non-military, non-governmental
commercial variants, lets commune with one of the latter, a self-torpedo-doer (a torpedoer), now
retired U.S. District Judge Thomas Penfield Jackson of Microsoft fame. His stormy waters seemed to
have started back in 1991, when he was the Judge on the DC Mayor Marion Barry Case, and shared at
Harvard Law School his unhappiness over some of his jurors who would not vote to convict, even
though he had never seen a stronger government case. While the U.S. Court of Appeals for the District
of Columbia majority refrained from reprimanding Jackson, a strongly worded dissent advised: "It is
worth noting that the district court judge could have recused himself in this case.... The recusal option
was a compelling one."
Then in a moment of pique, Judge Jackson, again loosely lipped, made extra-judicial
comments, this time using a reporter to challenge the U.S. Court of Appeals in one of its earlier
Microsoft decisions: "What I want to do is confront the Court of Appeals with an established factual
record which is a fait accompli. . . . [P]art of the inspiration for doing that is that I take mild offense at
their reversal of my preliminary injunction in the consent-decree case, where they went ahead and made
up about ninety percent of the facts on their own."1 The next thing, what do you know, the Court of
Appeals is chastising Jackson for other extra-judicial comments,2 which included his loose lipped
comments equating the loose lipped conduct of Microsoft to the loose lipped conduct of drug traffickers,
who are repeatedly caught as a result of telephone wiretaps 'they never figure out that they shouldn't
be saying certain things on the phone'."3 He was also annoyed with Microsofts trial tactics, such as
leaving out from an evidentiary video used to demonstrate how user friendly Windows was to the
installation of a competitive Browser, the complicated aspects of that installation, and faking that the
installation automatically left a button/icon to this competitive Browser on the Windows Desktop.
According to the Court of Appeals, his loose lipped extra-judicial comments to the Press included
analogizing Microsoft to [defeated] Japan at the end of World War II; his story about the mule [like
"stubborn mules who should be walloped with a two-by-four" to get its attention] -- all of these out-of
court remarks and others, plus the Judge's evident efforts to please the press, would give a reasonable,
informed observer cause to question his impartiality in ordering the company split in two.... We believe,
therefore, that the District Judge's interviews with reporters created an appearance that he was not acting
impartially, as the Code of Conduct and . Section 455(a) of the Judicial Code requires judges to recuse
themselves when their impartiality might reasonably be questioned. 28 U.S.C. 455(a).
The Appellate Court, however, did not set aside the existing Findings of Fact or Conclusions of
Law (except insofar as specific findings are clearly erroneous or legal conclusions are incorrect), as we
have carefully reviewed the entire record and discern no basis to suppose that actual bias infected his
factual findings. The most serious judicial misconduct occurred near or during the remedial stage. It is
therefore commensurate that our remedy focus on that stage of the case.

How to Torpedo Oneself

But enough second-guessing the Judiciary. How can we apply
these lessons to our to every day life? So far we have learned of
drug traffickers and business personnel torpedoing themselves through looselipped use of telephones, and of a Judge through similar loose-lipped use of the press. Let us now

learn more about "How to Torpedo Oneself, directly from the antics of the experts, Q.T. LePlum, LaPlume
LePlum, Counselor DeNerdo, Plum Industries, and Deltron, Inc.:
1) Mr. Q.T. LePlum, the deceased founder of Plum Industries, was to commercial
outdoor plumbing, as Mr. Crapper was to domestic indoor plumbing. Being the industry leader that he was,
he had felt compelled to vocally and vociferously advocate "cooperation not competition" at every trade
association meeting and industry social function he attended, whether or not his plum pudding was on the
menu.
2) Ms. LaPlume LePlum, Q.T.'s granddaughter, and a real, though pleasantly plump,
Q.T. herself, faithfully followed in Q.T.'s footsteps. In her capacity as Sales Manager for Plum Industries, she
called Mr. Cool, her counterpart at Deltron, Inc. She advised him, on the Q.T., that she had already asked
their industry counterparts "to lay off" her favorite "plum" plumbing accounts, and would appreciate his
cooperation also; assuring him that she "knew how to return the favor."
A subsequent industry-wide investigation by the Antitrust Division of the United States
Department of Justice uncovered notations of Ms. LePlum's telephone conversations, together with copies of
some of Q.T.'s trade association speeches, in the files of her competitors. A Justice Department economic
evaluation showed further that certain accounts that previously had been pursued by all industry members,
were now unquestionably "plum" accounts of Plum and Deltron.
3) Mr. Cool, Deltron's sales manager, upon hanging up from Ms. LePlum, realizing
that she was "plum out of plumb," and not being "plum crazy" himself, contacted Deltron's Antitrust
Counsel Post Haste. Antitrust Counsel Haste advised him to stay away from her hasty pudding, to
have no further conversations with Ms. LePlum or her counterparts at competing companies, and to
compete vigorously for her "plum" accounts. Mr. Haste then immediately telephoned his old law school
classmate and Plum's general counsel, Dinty DeNerdo (sometimes called Dinky in law school),
acquainted him with Ms. LePlum's conversation, informed him that Deltron would not be complying with
Ms. LePlum's request, and notified him that he would be hastily posting to Plum a letter confirming
Deltron's policy of strict compliance with the Antitrust laws. He then suggested to Dinty, a/k/a Dinky,
that he take the necessary antitrust compliance steps to clean Plum's house and keep Plum out of the stew.
4) Dinty was mad at how badly his old law school chum had treated him. He knew he
had a beef against Hasty, but did not see how his client was in the stew. Besides turning a deep
shade of plum with a visibly fuming plume, Dinky DeNerdo did nothing. He was not about to start the
pot boiling on any "hasty pudding," plum or otherwise. Nor was he willing to face a fuming LaPlume . . .
When the post arrived containing Hastys letter, Dinty still knew not what to do, asking himself:
What more to do, what more to do, what moore to do, Dinty? Still more concerned about confronting
Ms. LePlum, and sensing that his management would not want him to make prunes out of plums, or vice
versa, he decided to take immediate decisive action. He, thereupon, shredded this critical (and critical)
postal communication post haste. Thereafter, Dinty thought of it no more, and, indeed, he "plum forgot
about it."
Mr. Haste had admirably protected his post. His file memorandum of his conversation with Plum's
general counsel, and his file copy of the confirmatory letter, produced by Deltron pursuant to a Civil
Investigative Demand from the Antitrust Division of the U.S. Justice Department, together with the fact that
Deltron had not laid off the so-called Plum accounts, convinced that Antitrust Division not to prosecute
Deltron civilly or criminally. Thus, Mr. Cool, with all due haste, had hitched Deltron to the right post, and
had therefore be treated most civilly.
But Plum was not so fortunate. The telephone notations, memoranda, speeches and "personal" notes

and correspondence from the files of Plum's competitors; the telephone company's records; and the
government's economic evaluation, were more than enough to prove to the jury that Plum and its competitors
(except Deltron) were way "off plumb." Due to the stiff fines and bad publicity received by Plum, and the
incarceration of Plum personnel, Deltron was able to properly plunder Plum's plushest and plumpest plum
plumbing accounts, while peripherally perusing Plum's promptly plummeting prospects. When Ms.
LaPlume LePlum finally left Federal prison, her plumage was plummeting, and she was more a dried
shrunken prune than a pleasantly plump sugarplum (no more was she a "Q.T."). And for Dinty DeNerdo?
He's now a dinky DeFuncto!"
5) Mr. LosVargas, chief financial officer of Deltron, spent weekends in Las Vegas and
the Bahamas with the company's in-house and outside accountants, discussing various questionable tax
strategies. Copies of the in-house accountants handwritten notes setting forth the content of these
discussions were uncovered in a subsequent Internal Revenue Service investigation with the assistance of a
disgruntled ex-employee, a secretary LosVargas had fired for tardiness.
6) Mr. O'Hare, Deltron's President, explored with his Chicago banker the banking and
legal ramifications of certain past financial manipulations. Midway through these discussions, President
OHare thought he may be saying too much, but nonetheless continued. In the subsequent criminal
prosecution his banker, under oath, was forced to reveal their entire content. It turned out that these
discussions should have been stopped before they began!
7) Mr. Chedwick, a machine shop supervisor for Deltron, advised his boss by tweet and
e-mail that: "CONDITIONS IN THE MACHINE SHOP ARE SO ANTIQUATED THAT UNLESS THERE ARE DRASTIC
CHANGES, LIMBS WILL FLY AND DEATHS ARE ALMOST A CERTAINTY" [137 Characters with spaces]. His
boss promptly deleted all he could and made sure that Chedwick did likewise. This observation was
subsequently brought to light through discovery in personal injury litigation, after computer experts were
able to retrieve it from the hard drive of the receiver (but they could have also done so from the hard drive of
the sender).
8) Dr. Tarasi, director of safety for Deltron, after a fiery explosion, blurted out to the
press: "Oh my God, we killed three men -- If we only had checked for gas . . . ." While the weight of the
evidence seemed to be that the explosion was not due to gas, a multi-million dollar verdict was handed down
against Deltron.
9) Mr. Olsen, Deltron's manager of industry relations, confided to associate company
legal counsel, on British Air Flight 007, that Deltron had passed off Chinese-origin porcelain as High
Quality British China and Chinaware. Mr. Bond, who occupied the seat immediately behind them on that
flight, so testified for the Government at the subsequent criminal trial, where Deltron was convicted. And
why Agent 007 was on Flight 007? He had been shadowing Olsen and heard him making the flight
reservations on his cell phone during a walk through China Town in San Francisco. When next he was
flirting with Miss Moneypenny with her fair porcelain skin, James, sipped from the fine China teacup she
had just poured for him, and quipped: Were you made in China? These days, you know, everything else is
except China!
While all of the foregoing are hypothetical examples, they portray true-to-life situations where "loose
lips (or fingers) sank ships," and the businesses involved did, indeed, "torpedo" themselves. Each of these
examples has happened, or could very well happen in your areas of responsibility. Naturally, all names have
been changed to protect the imprudent. Keep these scenarios handy!

A FRIEND IN NEED . . .
To sum up, you now have some inkling of what can go wrong and what can go right, and may have
the feeling that most go "wronger" than "righter!" It is also becoming quite evident that Loose Lips [Do]
Sink Ships; and you should not be surprised to learn that the loosest lips are found at trade
associations! Thus, in the foregoing nine scenarios, loose lipped personnel certainly did torpedo
themselves, leaving their companies' ships plummeting and their companies' waters cluttered with the
flotsam and jetsam of their imprudence. The tenth scenario, however, plays out differently:
10) Mr. Mather had been Dell Deltronskys Boy Friday, doing all his bidding, but
without any real authority. DD was the last of the Deltronskys to retire. Upon his retirement, Mr. Mather
succeeded him as Chief Marketing Executive for Deltron, reporting directly to the Senior Vice President.
Before continuing what appeared to Mr. Mather as his predecessor's questionable mass marketing practices,
he consulted with a friend in need privately, to see if his perception of a massive mass marketing mess was
perceptive, and, if so, to get the proper tools to clean up the mass mess. He inquired about the propriety of his
predecessor's practices, baring his soul, and about methods of lawfully doing his new job, while increasing
market share, and followed the comprehensive counsel received. Yes, there was subsequent antitrust
litigation, but the content of his conversations with his friend in need, his knowledgeable legal counsel,
remained confidential and privileged, and the allegations of price fixing, monopolization and attempted
monopolization remind unproven.
As you will remember, in the first four scenarios, Q.T. LePlum, the founder of Plum Industries,
stressed cooperation not competition whenever he could; his granddaughter, Ms. LaPlume LePlum, as
Plums Sales Manager, through every means at her disposal, persuaded most of her competitors not to sell to
her Plum accounts; Mr. Cool, Deltrons Sales Manager, did not succumb to Ms. LaPlumes ample charms,
but instead sought the assistance of legal counsel; Deltrons friend in need, Post Haste, Esq., built a
record to protect Deltron and Mr. Cool; and Plums attorney, Dinty DeNerdo, Esq., did nothing
constructive, but instead left his client to simmer in their own stew. Thus, the old World War caution that
"loose lips sink ships" is 100% application throughout this opening "quartet." While the Plum people all
"sang" grossly off key while their Titanic sank, thanks to good and steady steering by legal counsel (and a
"real cool" Mr. Cool), Deltron's ship remained solidly afloat.
Regretfully, such was not Deltrons situations in scenarios five through nine, where the not so
unsinkable Deltron received five direct torpedo hits. First, the IRS retrieved questionable tax strategy
information Deltrons Chief Financial officer had shared with his accountants, through the aid of a
disgruntled ex-employee; followed by Deltrons banker testifying under oath to after the fact discussions
he had had with Deltrons President OHare, concerning past financial manipulations; the reconstruction
during discovery from the hard drive, by the other sides computer experts, of the Machine Shop
Supervisors deleted e-mail highlighting flying limbs; the Safety Directors probably erroneous oral
exclamation accepting guilt after a fiery explosion (which was the basis for a large jury verdict against
Deltron); and an overheard indiscreet conversation on an airplane between the Industry Relations Manager
and Deltrons associate company legal counsel, disclosing past criminal acts, leading to trial and conviction,
which consultation was not privileged as it was held in public.
However, as we have just seen in the tenth scenarios, Mr. Mather, like Mr. Cool, had a "friend in
need," his lawyer, with whom he had had truly confidential discussions, not aiding any future crimes, and
was able to thereby resolve sensitive legal questions without the fear of having his confidences breached,
provided, of course, that he and his attorney knew "the rules of the game" and played "according to Hoyle."

That is, they knew how to lawfully and properly engage in, conduct and treat such communications.
The reason that Mr. Mather fared so much better than his boss's boss, President O'Hare, in discussing
probable past criminal activity, is because of the time-honored "attorney-client privilege," which permits, and
indeed encourages, confidential discussions between an attorney and his or her client. Thus, while
government investigators and litigants in private lawsuits can discover the contents of the client's
communications with his or her co-worker, banker, accountant, fellow industry member, and best friend, or
even usually a lawyer's communications with someone else's lawyer, the client's communications with his or
her own attorney, if properly handled, are normally privileged and undiscoverable.
This privilege covers the client seeking legal counsel with regard to current conduct or proposed
business plans, with regard to pending or potential civil litigation, and even with regard to a crime that has
been committed. The bottom line is that the client can have worthwhile and constructive discussions with his
or her lawyer that he or she cannot prudently and practically have with anyone else.
Then too, in situations where the client may be subject to legal proceedings because of some accident,
alleged act of negligence, or suspected or apparent failure to follow laws or regulations, the law provides a
degree of attorney-client privilege and/or attorney's work product protection, to investigations conducted by,
or under the direction of the client's attorney, that would not be available to investigations conducted by the
client's engineers, safety director or other lay personnel under the direction of a non-lawyer.
Well over a century ago, the United States Supreme Court4 stated the public policy considerations
behind the attorney-client privilege. The Court reiterated that communications between a client and his
attorney must be "safely and readily availed of" and "free from consequences of apprehension of disclosure."
Since then, it has been held that corporations are also entitled to this privilege.5
Thus, the United Sates Supreme Court found that the scope of the attorney-client privilege
encompasses "[m]iddle level -- and indeed lower level -- employees" who can "embroil the corporation in
serious legal difficulties," as prohibited conduct is "often difficult to distinguish from the gray zone of
socially acceptable and economically justifiable business conduct." The Supreme Court, therefore,
concluded that the broad application of this privilege to corporations is necessary in light of "the fast and
complicated array of regulatory legislation confronting the modern corporation," who must "constantly go to
lawyers to find out how to obey the law." This holding by the Supreme Court was based on the realization
that "compliance with the law" as applicable to corporations "is hardly an instinctive matter."6
However, for clients to avail themselves of the attorney-client privilege, the "rules of the game"
must be carefully followed. For example, "according to Hoyle," to protect and give widest application to
this privilege:
a) Spoken or written communications with legal counsel must be with the client's or the client's
company's own counsel, and not someone else's attorney, and must be truly confidential. Thus, no third
parties may be present or within earshot. This is why the lawyer's communications with a competitor's
attorney in the opening quartet, and the conversation with counsel on the airplane in the ninth situation,
were not privileged.
b) The contents of the privileged discussion or communication must not be disclosed to another,
either orally or in writing. Thus, the privilege will be lost by disclosing the contents of this discussion to
someone else, by copying a third party on written communications to or from the client's attorney, or by
sending a copy of the client's lawyer's written communications to a third party. Even throwing such a
communication in the trash, where it is retrieved by the F.B.I., or even by a "rag picker," has been held to
void this privilege.

c) If a company is involved, to help assure maximum coverage and scope for this privilege, top
management must specifically instruct all levels of employees to consult directly and confidentially with the
company's in house or outside legal counsel on all matters involving legal considerations or questions,
including any questions relating to legal compliance, or any questions that may arise as to the applicability of
various laws or legal considerations to any course of conduct or action.
d) While legal counsel may be consulted regarding a crime that has been committed, regarding
feasible practical alternate solutions to difficult problems, and regarding workable solutions that minimize
the legal risks involved, while achieving all or most of the lawful objectives, of a doubtful course of conduct,
privilege will not attach where the attorney is in fact participating in the planning or commission of a crime,
or is merely acting as a business advisor and not as a legal advisor. Therefore, it must be presumed that
there will be no privilege if, after discussion with legal counsel, the client actually commits the crime.
Thus, in engaging in confidential attorney-client consultations, it is most important that the attorney
not be a "DeNerdo," not do a dinky job, but instead he or she must be familiar with, understand and
explain to the client the applicable "rules of the game," while being willing and able to lawfully counsel on
difficult situations.
However, this valuable, practical and lawful tool, which is available for all business clients to use to
their advantage, will be lost if these rules are not clearly understood and carefully followed. But if this
privilege is used properly, prudently and practically, the attorney, as "a friend in need," will truly be "a friend
in deed." Indeed, as was done for Mr. Cool and Mr. Mather, the attorney may just be able to "stick in his
thumb and pull out a plum."
Please address your comments, questions and suggestions for future Corplaw Commentaries Columns on
marketing and business law, and other interesting subjects to Barry J. Lipson, Esquire, at
bjlipson@gmail.com .
Copyright 2001-2012 by Barry J. Lipson.
1

Emphasis added.
See U.S. v. Microsoft Corporation, Nos. 00-5212, 00-5213 (DC Cir, June 28, 2001), emphasis added.
3
See US v. Microsoft, US Brief, Nos. 00-5212, 00-5213 (DC Cir, January 2001); Joel Brinkley & Steve
Lohr, U.S. v. Microsoft 6 (2000); emphasis added.
4
Hunt v. Blackburn, 128 U.S. 464, 470 (1888).
5
See Upjohn Co. v. United States, 449 U.S. 383, 391-393 (1981); and Radiant Burners, Inc. v.
American Gas Assn., 320 F.2d 314 (7th Cir. 1963).
6
Upjohn, supra.
2