The Yates Memo’s Illusory “Extraordinary Circumstances” Exception

| Sara Alpert Lawson

Many of us in the white collar defense bar have written and spoken about the changes wrought by the Yates Memo, but one issue not receiving much attention is the “extraordinary circumstances” exception to the Yates Memo’s application. What is this “extraordinary circumstances” exception?

According to the Memo, “absent extraordinary circumstances, the United States should not release claims related to the liability of individuals based on corporate settlement releases.” This is the much discussed elimination of all-encompassing corporate settlement releases. But the Memo states that there may be “extraordinary circumstances” which justify a corporate settlement that includes releases for the relevant individuals. “Any such release of ... civil liability due to extraordinary circumstances must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney.”

The Memo doesn’t describe what constitutes “extraordinary circumstances.” If you are an individual facing a civil claim by the government, along with the company you work(ed) for, or a lawyer representing such an individual, you probably want to know what are the extraordinary circumstances that could justify a global release and keep you from being named as a settling individual in a government press release.

Unfortunately, the government has taken a very restrictive view of what might constitute “extraordinary circumstances,” to the point where the exception may become non-existent. In the case of Dr. Kenneth Rice, not even his death during the investigation was extraordinary enough to wrap up his liability within the corporate settlement.

The only cases that I am aware of that have qualified for the exception are cases in which the government had reached a settlement in principle before the Memo was issued, suggesting that the government is applying the exception to justify its prior agreements but may not be so willing to do so on a going-forward basis. (I would love to hear from you if you have successfully used the “extraordinary circumstances” exception to obtain a release for your client’s individual exposure within a global settlement post-Yates.)

Time will tell whether, in practice, the government gives some force to the “extraordinary circumstances” exception and, in the right case, permits releases in corporate resolutions as to individuals, or whether it effectively reads the exception out of the Yates Memo entirely.

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