Blame Email Disclaimers on Judge Harmon?
posted by Dave Hoffman
The Economist has a fun blurb on email disclaimers — the ones that boldly state that the email you’ve just received creates no legal relationship, offers no advice, and generally isn’t worth the paper it isn’t printed on. The blurb argues that such disclaimers are “are mostly, legally speaking, pointless. Lawyers and experts on internet policy say no court case has ever turned on the presence or absence of such an automatic e-mail footer in America, the most litigious of rich countries.” Why, then, do they exist? Because lawyers are lemmings, and “once something has become a legal habit it has a tendency to stick.” Also, of course, the marginal cost to each sender of adding a pointless disclaimer is basically zero.
But inefficient social movements presumably need some kind of push to get off the ground, even if they fly off a cliff. I hypothesize that Judge Harmon’s highly publicized secondary actors decision in the Enron litigation from 2002 provided the launching pad. In that decision, as you may recall, Judge Harmon said that law firms (and accountants, and consultants) could be exposed to securities liability as a primary violator of 10b-5 if they, with requisite scienter, created a document that (when routed to the public) turned to be misleading. I remember being in practice after that decision came out, and the firm was quite concerned to create disclaimers for all documents that went out the door to try to react to the decision’s potential scope. Indeed, we know that one result of the decision (and others like it) was to push firms to move from general to limited partnership models. So perhaps it also influenced email practices.
How about it? For those of you in practice in the mid-1990s, can you reach into your archives and check for email disclaimers? If not, we’ll call my theory a winner. If so, we need to find some new explanation. [AJ Sutter, I'm talking to you.]
May 16, 2011 at 10:52 am
Posted in: Behavioral Law and Economics, Law Practice
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Responses (11)
shg - May 16, 2011 at 11:09 am
No, I think you pretty much nailed it. Lawyers are lemmings (as is the law, I might add) and the marginal cost is zero. We all wait for the idiot judge who rules against a lawyer for lack of a footer, all the while believing that it’s total nonsense.
But since it costs nothing to cover up, there’s just no good reason not to include these stupid footers.
A.J. Sutter - May 16, 2011 at 12:25 pm
I don’t have any archives handy from the firm I was at during 1999-2000 (I was at companies before & after), but I’m pretty sure there weren’t any automated disclaimers on emails. As I recall, the meme at the time was automated confidentiality legends (“if you saw this and weren’t supposed to, please forget about it” stuff), which I also thought were pretty dumb.
Jamie - May 16, 2011 at 12:54 pm
Not a lawyer, but the CFO and in house counsel at the company I worked for from 1997-2000 started inserting disclaimers at some point, so people were doing it then.
I remember asking them about it, thinking there was nothing legally binding about it, and they agreed. They were hoping people would think it was if an email was somehow misdirected.
NMissC (Tom Freeland) - May 16, 2011 at 2:09 pm
I remember this as beginning with worries about misdirected emails sometime in the mid-nineties, and certainly before 2000.
Unfortunately, my archive of emails easily at hand only goes back to 2003.
Jim Maloney - May 16, 2011 at 2:12 pm
If lawyers are lemmings, then judges are stoats.
If courts are like castles, then rules are like moats.
Disclaimers, though useless, are frequently used,
And law, so abusive, is often abused.
Big H - May 17, 2011 at 10:52 am
Nice poem Jimmy Malone. By the way, do you know how much these footers cost American companies every year? Also, imagine all those poor souls reviewing documents how sick and tired they must be of these footers.
mark - May 17, 2011 at 2:28 pm
Our email system only goes back as far as summer 01 but I found examples of disclaimers in the 2001 emails I still have. Here is one I found from a July 01 email from a CO firm:
STATEMENT OF CONFIDENTIALITY & DISCLAIMER
The information contained in this e-mail message is attorney privileged and confidential information, intended only for the use of the individual or entity named above. If the reader of this message is not the intended
recipient, you are hereby notified that any dissemination, distribution or copy of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone [number redacted] or reply by e-mail and delete or discard the message. Thank you.
Although this e-mail and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by [name of firm] for any loss or damage arising in any way from its use
This suggests that privilege waivers and liability for computer virus dissemination may have been motivating concerns.
I don’t recall any added fuss caused by Judge Harmon’s opinion. I recall tax lawyers getting very concerned post Sarbox and post the indictment of certain attorneys who worked for tax shelter promoters, and seeing tax advice disclaimers.
Ray Campbell - May 17, 2011 at 7:12 pm
I left Jenner & Block to start my company at the end of 1996, so my memories of practice have a clear finishing date. Lemming that I was, I had a disclaimer on my emails then, and I think they were common, if not yet ubiquitous.
A.J. Sutter - May 17, 2011 at 9:33 pm
I think that in the course of this thread the distinction between the types of disclaimers cited by Economist — “This e-mail does not create an attorney-client relationship,” “Any tax advice in this e-mail is not intended to be used for the purpose of avoiding penalties under the Internal Revenue Code,” etc. — and confidentiality/misdirection disclaimers has become somewhat blurred. If we recover that distinction, then my recollection is consistent with Dave’s hypothesis.
Jim Maloney - May 18, 2011 at 1:16 am
Thanks for pointing that out, A.J.: the blurring of the distinction was beginning to bother me. You are truly a stoat among us lemmings.
But I have a vague recollection of having seen the true disclaimers as to use by the intended recipient (as opposed to confidentiality/misdirection warnings) on incoming fax cover sheets and/or emails during the years (1995 through 1999) that I was practicing at one or another of two law firms. The vague aspect of my recollection is only an uncertainty as to the timing, i.e., whether it was shortly before or shortly after I went solo around 2000, but I’m reasonably sure it was before 2002. Importantly, I quite clearly recall that the first such true disclaimers as to use by the intended recipient were consistently related to tax advice even on communications that did not relate to tax law, but had been added because the sending firms’ practice included tax law. It is entirely possible that in some old files in my basement I have one or more of these faxes, so if I can find any I’ll scan it/them and post a link to the pdf of the evidence.
But even assuming, in the meantime, that my undocumented recollection is correct, and that tax firms were the innovators in inserting true disclaimers as to use by the intended recipient into faxes or emails somewhat before 2002, this is not a very deep moat around Dave’s hypothesis. It could very well be that the phenomenon was limited until the Enron decision, which then gave it the push it needed to become virtually ubiquitous.
And often (maybe even always) there are multiple causes to phenomena. The transition from fax to email as the dominant mode, which occurred right around that turn-of-the-millennium timeframe, made the cost of inserting longer disclaimers even cheaper. Paper and printer ink, after all, cost just a little (and there’s that aggregate effect of trivial instances), and lawyers are known to be miserly as well as lemmingly.
mark - May 18, 2011 at 1:19 pm
The tax disclaimer is linked to IRS regulations which were revised June 30 2005 as found here: http://www.irs.gov/pub/irs-pdf/pcir230.pdf
The regulation is Circular 230 originally published in 66 or so which set forth guidelines for acceptable tax law practice.
As I recall, in the 90s, tax shelters were distributing attorneys’ opinions as part of their investment solicitation. Being able to rely on an opinion more or less got the taxpayer off from criminal liability. The taxpayers were not the attorneys’ clients but argued they relied on them. Obviously, there was a financial incentive for attorneys to give those opinions even if, shall we say, aggressive. So the IRS tightened up the standards of what attorneys could do – basically, they could be perfect or face sanctions. The revised regs applied to any writing, including an email. To avoid both risks of liability to non-clients from reliance on inaccurate opinions, and also to avoid being barred from practicing before the IRS, tax attorneys have come to attach disclaimers to all written communications such as emails.
I don’t think has anything to do with that Enron decision.
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