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In-House Counsel - Represent Employee, Risk Malpractice

Depositions of employees arise all the time. As in-house counsel, are you representing these employees at the deposition? What are your ethical obligations if you do?

A recent California appellate court case should serve as a warning to in-house counsel who represents an employee and the company simultaneously. Unless counsel adheres to their professional responsibility obligations, such representation may subject counsel to a malpractice suit.

The case is Yanez v. Plummer. In that case, Yanez sued his former employer for wrongful discharge and its in-house counsel, Brian Plummer, for malpractice, breach of fiduciary duty and fraud.

Yanez was being deposed regarding a co-employee's on-the-job injury. He had previously written two prior statements concerning the circumstances of the injury, with the second one indicating that he had seen the co-worker fall. Just prior to the deposition, Yanez expressed concern about his job to Plummer because his deposition testimony was likely to be unfavorable to the company, and he asked Plummer who would "protect" him. Plummer responded that Yanez was a company employee and Plummer was his attorney for the deposition, and as long as Yanez told the truth in the deposition, Yanez's job would not be affected. Plummer never told Yanez about any conflict of interest involving Plummer representing the company and Yanez at the deposition.

During the deposition, Plummer represented both Yanez and the company. The co-worker's attorney elicited testimony from Yanez that he had not seen the incident but was aware of it shortly after it occurred. Plummer then questioned Yanez, confirming that he had not seen the accident, and pointed out the inconsistency with Yanez's second written statement. Yanez mentioned he had worded his second statement wrong, but Plummer did not ask him to explain or have him clarify what was misstated.

Yanez was then fired for dishonesty for the discrepancy between his second statement and his deposition testimony.

He sued the employer for wrongful discharge and Plummer for malpractice, breach of fiduciary duty and fraud. On the causes of action against Plummer, the trial court ruled in Plummer's favor.

The appellate court reversed.

"But For" Test

Yanez argued that Plummer's conduct caused him to be fired. Plummer, on the other hand, contended that his conduct was not the cause of Yanez's termination.

The Court first noted that in a legal malpractice action where, as in this case, there is a combination of causes, none of which is sufficient without the others to have caused the harm, the test for causation is the "but for" test, that is, but for the defendant's conduct, the harm would not have occurred.

Evidence of Professional Conduct Violations

In evaluating whether Plummer's actions were the cause of Yanez's firing, the Court looked to California's rules of professional conduct.

Under State Bar Rules of Professional Conduct, rule 3-310(C), without the informed written consent of each client, a lawyer representing more than one client shall not (1) accept representation of more than one client in a matter in which the interests of the clients potentially conflict, or (2) accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict.

The Court noted that there existed a conflict between the company and Yanez, who was aware of unsafe conditions that may have led to the injury of his co-worker, exposing the company to potential liability. Further, Yanez presented evidence that Plummer did not inform him about conflicts with the company or obtain his written consent to represent him despite such conflicts, in direct violation of rule 3-310(C).

Plummer's violation of this rule did not prove malpractice or the fiduciary breach on its own. "Violation of the State Bar Rules of Professional Conduct prohibiting concurrent representation of conflicting interests without each client's informed written consent constitutes evidence of malpractice liability and breach of fiduciary duty but does not, standing alone, prove the malpractice or the fiduciary breach," wrote Judge Butz.

The Court did find, however, that Yanez had created a triable issue of fact sufficient to overcome summary judgment, as to whether Plummer's conduct during the deposition, and highlighting the discrepancy of Yanez's statements, caused Yanez's termination. The matter will therefore proceed to trial, with a jury to decide the issue.

Not a "Rule for All Seasons"

The Court rejected Plummer's assertion that it was creating a "rule for all seasons" that an attorney for an employer may never represent an employee at the same time. Clarifying that it was simply applying well-recognized rules of professional conduct to the conflict of interest in this case, the Court rejected the notion that it was creating any kind of new rule.

The Take-Away

According to this opinion, in-house counsel is not per se prohibited from simultaneously representing an employee and an employer. However, as in any instance involving multiple clients, counsel should review the rules of professional conduct before embarking on a path of dual representation. Under California conflict of interest rules, the obligation to decline representation or obtain informed written consent arises upon an actual conflict or potential conflict.

Under the ABA model rule 1.7, which has been adopted by many states, a concurrent conflict of interest exists if the representation of one client will be directly adverse to another, or 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 third person, or by a personal interest of a lawyer. The ABA model rules permit representation notwithstanding the conflict, if certain conditions are met, including obtaining the informed consent of each affected client, confirmed in writing.

Given that the potential for conflict is likely to arise whenever an attorney seeks to represent both an employee and employer, obtaining the informed written consent of all parties is advised.

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