Transcript Terminating an In-House Attorney

Terminating an In-House
Attorney
Employment Law and Litigation Group
New York, NY October 5, 2012
Prepared by Bruce Brafman
Copyright 2012
Terminating an In-House Attorney
• Why is it so difficult to terminate an in-house
attorney?
• Uniqueness of Attorneys
Licensed
Ethical Obligation to the Bar, Courts, SEC and
other Administrative Agencies
Attorney-Client Privilege
Subject to Malpractice Suit
Client Right to Choose Own Attorney
Terminating an In-House Attorney
• Difficulty in Evaluating an Attorney?
Practicing law subjective
- When is a win a win?
- When is a loss a loss?
Solitary nature of legal work
How to evaluate attorney as part of legal team on
a major case?
Elusiveness of measuring effectiveness
Terminating an In-House Attorney
• You are not the only evaluator of attorney
performance. Possible differing views:
Supervising attorneys
The General Counsel
Clients
Senior Management
Inside attorneys
Other supervising attorneys
Outside counsel
Governmental agencies
Unions (if practicing in labor area)
Terminating an In-House Attorney
• Measuring Attorney Performance
Written work product
Research
Advocacy
Negotiation skills
Knowledge of business/business skills
Ability of utilize inside resources (paralegals,
attorneys, etc) and outside counsel
Judgment
Terminating an In-House Attorney
• Measuring Attorney Performance
Ethics/character
Judgment
Initiative
Ability to handle multiple projects
Quality of advice
Work ethic
Interpersonal skills/emotional intelligence
Ability to work in a hierarchy
Courtesy
Terminating an In-House Attorney
• Factors to Consider in Terminating an Attorney
 Have you established clear performance criteria?
 Have you provided feedback on these criteria at regular
intervals?
 Have you provided all necessary training for successful job
performance?
 Have you performed a 360 degree performance evaluation?
 Have you given the attorney an adequate period to remediate
performance?
 Have you documented poor performance? Is it shareable?
 Have you gained support from GC and senior management to
terminate?
 Have you been fair?
Terminating an In-House Attorney
• Ameliorating the Termination
Finding opportunities outside legal department
Aligning separation with a reduction in force
Providing separation pay in exchange for a release
Terminating the In-House Attorney
Legal Considerations
•
Client-Lawyer Relationship
Rule 1.6 Confidentiality Of Information (ABA Model Rules)
(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives
informed consent, the disclosure is impliedly authorized in order to carry out the representation or the
disclosure is permitted by paragraph (b).
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer
reasonably believes necessary:
(1) to prevent reasonably certain death or substantial bodily harm;
(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in
substantial injury to the financial interest or property of another and in furtherance of which
the client has used or is using the lawyer's services;
(3) to prevent, mitigate or rectify substantial injury to the financial interests or property of
another that is reasonably certain to result or has resulted from the client's commission of a
crime or fraud in furtherance of which the client has used the lawyer's services;
(4) to secure legal advice about the lawyer's compliance with these Rules;
(5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer
and the client, to establish a defense to a criminal charge or civil claim against the lawyer based
upon conduct in which the client was involved, or to respond to allegations in any proceeding
concerning the lawyer's representation of the client;
(6) to comply with other law or a court order; or
(7) to detect and resolve conflicts of interest arising from the lawyer’s change of employment or
from changes in the composition or ownership of a firm, but only if the revealed information
would not compromise the attorney-client privilege or otherwise prejudice the client.
(c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or
unauthorized access to, information relating to the representation of a client.
Terminating the In-House Attorney
Legal Considerations
•
Client-Lawyer Relationship
Rule 1.7 Conflict Of Interest: Current Clients (ABA Model Rules)
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation
involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially
limited by the lawyer's responsibilities to another client, a former client or a third person or by a
personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer
may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and
diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against
another client represented by the lawyer in the same litigation or other proceeding before a
tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
Terminating the In-House Attorney
Legal Considerations
•
•
Client-Lawyer Relationship
Rule 1.13 Organization As Client (ABA Model Rules)
(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.
(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in
action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the
organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury
to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer
reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher
authority in the organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the
organization as determined by applicable law.
(c) Except as provided in paragraph (d), if
(1) despite the lawyer's efforts in accordance with paragraph (b) the highest authority that can act on behalf of the
organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a
violation of law, and
(2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization,
then the lawyer may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if
and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.
d) Paragraph (c) shall not apply with respect to information relating to a lawyer's representation of an organization to investigate an
alleged violation of law, or to defend the organization or an officer, employee or other constituent associated with the organization
against a claim arising out of an alleged violation of law.
(e) A lawyer who reasonably believes that he or she has been discharged because of the lawyer's actions taken pursuant to paragraphs
(b) or (c), or who withdraws under circumstances that require or permit the lawyer to take action under either of those paragraphs,
shall proceed as the lawyer reasonably believes necessary to assure that the organization's highest authority is informed of the lawyer's
discharge or withdrawal.
(f) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain
the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the
constituents with whom the lawyer is dealing.
(g) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other
constituents, subject to the provisions of Rule 1.7. If the organization's consent to the dual representation is required by Rule 1.7, the
consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the
shareholders.
Terminating the In-House Attorney
Legal Considerations
• In-House Counsel – No Cause of Action for
Retaliatory Discharge
Balla v. Gambro, 584 N.E.2d 104 (Ill. Sup. Ct. 1991) –
 GC reported adulterated kidney dialyzers (non-FDA
compliant) to President of company
 GC fired shortly thereafter
 After termination, GC notified FDA of tainted product
 In order to uphold the special attorney-client relationship,
GC had no cause of action for retaliatory discharge. See also,
Wise v. Consolidated Edison Co. of New York, 282 App.Div.2d
335 (N.Y. Sup. Ct., App. Div. 1st Dept. 2001)
Terminating the In-House Attorney
Legal Considerations
•
In-House Counsel Permitted Retaliatory Discharge Cause of Action – Defined
Circumstances but not Permitted to Use Confidential Information
 General Dynamics v. Superior Court, 876 P.2d 487 (Cal. Sup. Ct. 1994)
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In-House attorney alleges that he was terminated for investigating employee drug use; insistence upon an
investigation into bugging of office, and advise relating to non-compliance with the FLSA
Cal. Supreme Court found a limited cause of action where a) mandatory attorney duty to disclose confidential
information (avoid suborning perjury, destroying evidence) or b) non-attorney would have cause of action and
there is an exception in confidentiality rules ( disclosure permitted to prevent the commission of a criminal
act)
However, “where elements of a wrongful discharge in violation of fundamental public policy claim cannot , for
reasons peculiar to the particular case, be fully established without breaching the attorney-client privilege, the
suit must be dismissed in the interest of preserving the privilege.” Id. at 503-4
 GTE Products Corp. v. Stewart, 653 N.E.2d 161 (Mass. 1995)
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GC alleged constructive discharge in retaliation for attempt to convince GTE to warn the public about safety
risks of three product lines and for his insistence on compliance with laws involving disposal of hazardous
waste
Mass. Supreme Court agrees with General Dynamics decision – attorney may not prove a retaliatory discharge
claim disclosing client’s secrets unless permitted by a disciplinary rule (Mass. has very limited exceptions)
Case was dismissed on more mundane grounds of inability to state a prima facie case of constructive
discharge
Terminating the In-House Attorney
Legal Considerations
•
In-House Attorney –Can Bring Retaliatory Discharge Action and Can Use Confidential Information to Prove Claim
 Burkhart v Semitool, Inc., 5 P.3d 1031 (Mont. Sup. Ct. 2000)
 In-house attorney brought wrongful discharge claim for retaliatory discharge related to
refusal to file fraudulent patent claim
 Montana Sup. Ct. finds cause of action under state wrongful discharge statute
 Citing Model Rule 1.6 – lawyer may reveal confidential information, “to the extent
[he]believes reasonably necessary to establish an employment-related claim…”
 Client can be protected through sealed record, protective orders, in camera proceedings,
limited admissibility, etc.
 Crews v. Buckman Laboratories Int’l, Inc., 78 S.W.3d 852 (Tenn. Sup. Ct. 2002)
 In-house attorney terminated for reporting unauthorized practice of law by general
counsel
 Attorney permitted to bring retaliatory discharge claim and use confidential information
(lawyer should seek protective order to preserve information)
 First case to allow permissive disclosure v. mandatory disclosure under rules
 Burkhart and Crews followed by Spratley v. State Farm Mut. Auto Ins. Co., 78
P.3d 603 (Utah Sup. Ct. 2003)
Terminating the In-House Attorney
Legal Considerations
• Right to Bring Claims under Anti-Discrimination Laws See Kachmar v. Sungard Data Systems – 109 F.3d 173
(3d Cir.1997) (right of discharged counsel to proceed
under Title VII, judicial measure can protect
confidential information); Whittlesey v Union Carbide
Corp., 742 F.2d 724 (2d Cir.1984) (chief employment
counsel protected under ADEA, front-pay award
affirmed)
• Right for Attorney to Serve as Class Representative Schaefer v. GE (2008 WL 2001244, D.Conn.) ) (attorney
may serve as class representative reserving right to
reconsider based on use of confidential information),
but see New York City Bar Ethics. Op. 1994-1
Terminating the In-House Attorney
Legal Considerations
 Whistleblower Protections
 State – Parker v. M&T Chemical, 566 A.2d 315 (N.J. Super. Ct., App. Div 1989) – In house
attorneys are employees under NJ whistleblower statute and can sue for retaliatory
discharge
 Sarbanes-Oxley Act required SEC to issue attorney conduct rules – duty to report:
 Material violations of federal or state securities law, material breach of fiduciary duty or
similar violation of federal or state law must be reported to:
 Chief legal officer
 If no response by CLO report to audit committee, disinterested directors but if none
established, the board of directors
 Alternative report to legal compliance committee, if established
 Confidential information may be revealed
 To prevent substantial injury to issuer or investors
 To prevent issuer from committing perjury in an SEC administrative proceeding or
investigation that is likely to perpetrate a fraud on the SEC
 To rectify consequences of a material violation by the issuer causing substantial
injury to the financial interest or property of the issuer or investors in furtherance
of which the attorneys’ services were used
 SEC rules supplement state ethics rules
Terminating the In-House Attorney
Legal Considerations
• Sarbanes Oxley Whistleblower Protections
Employees including attorneys cannot be
discharged, demoted, threatened or harassed for:
 Assisting in an investigation
 Assisting in a proceeding against the employer/public
company
 relating to a
Sarbanes-Oxley violation, SEC violation, fraud against
shareholders
Remedies include reinstatement, back pay, special
damages, reimbursement of attorney’s fees
Terminating the In-House Attorney
• Conclusions
 In the post-Enron Sarbanes-Oxley business environment expect that
more in-house attorneys will be able to sue their employers
 Given new model ABA rules expect that more courts will permit
attorneys to use confidential information to prosecute lawsuits
 Balla, General Dynamics and GTE decisions, with limited right to sue,
may be relics
 When terminating an in-house attorney think whether or not they are
whistleblowers and the types of information that may be revealed in
the course of a lawsuit
 Make sure you have taken appropriate measure to preserve the
attorney-client privilege
 Contemplate immediate protective orders – courts seem receptive to
issuing such orders
 Consider alternatives to termination – buy outs, reductions in force,
transfers to the business side