Presentation on theme: "Terminating an In-House Attorney Employment Law and Litigation Group New York, NY October 5, 2012 Prepared by Bruce Brafman Copyright 2012."— Presentation transcript:
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 lawyers 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. 1 st 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) 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) 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 clients 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 Intl, 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 attorneys 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