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Corporate Counsel Conflict

What happens when an in-house tries to play both sides?

The Perils of In-House Counsel Simultaneously Representing Company and Employee

11/6/2013 by Jeff Lewis http://www.jdsupra.com/

In Yanez v. Plummer (Nov. 5, 2013, C07026), the Third Appellate District issued an opinion highlighting the perils for an in-house lawyer who simultaneously represents the company and an employee.  Union Pacific fired Michael Yanez for dishonesty, citing a discrepancy between a statement that Yanez wrote and a deposition answer Yanez gave in a lawsuit concerning a co-employee’s on the job injury.  At that deposition, Union Pacific in-house counsel, Brian Plummer, represented both Union Pacific and Yanez.  Yanez met with Plummer prior to the deposition.  During this preparation session, Yanez told Plummer he was worried about how his testimony might hurt Union Pacific and may affect Yanez’ job.  Yanez asked Plummer who would protect Yanez at deposition.  Plummer indicated that he would be Yanez’ attorney at deposition.  Yanez’ conflicting deposition testimony led to Yanez’ termination by Union Pacific.  In the ensuing lawsuit, Yanez alleged malpractice, fraud and breach of fiduciary duty against Plummer.  Plummer successfully argued on a motion for summary judgment that Yanez could not establish the causation element of the claims against Plummer.

On appeal, the Yanez court observed that at the time of the deposition, Yanez and Union Pacific had adverse interests.  Yanez witnessed unsafe working conditions that may have contributed to his co-worker’s injuries and was about to so testify at deposition.  Plummer never disclosed to Yanez this conflict of interest nor did Plummer obtain Yanez’ written waiver of the conflict.  Moreover, at the deposition, Plummer asked questions of Yanez that portrayed Yanez in an unfavorable light in order to protect the interests of Union Pacific in avoiding liability for the injuries.  That testimony elicited by Plummer was later used as the basis to fire Yanez.  The Yanez court ultimately ruled that Plummer’s failure to obtain Yanez’ written consent created a triable issue of fact precluding summary judgment of claims against Plummer.  (State Bar Rules Prof. Conduct, rule 3-310(c).)

The lessons of this situation for in-house counsel are two fold:  First, anytime an attorney represents multiple clients simultaneously, the potential for conflicts always exist.  A conflict and waiver explaining the potential conflicts of interest, the risks of concurrent representation as well as the impact of the representation on privileged communications should always be obtained from all clients.  Second, although not specifically addressed in the Yanez opinion, when an in house attorney represents a company employee, and an actual conflict of interest is presented, Rule 3-310(f) is also implicated.  Rule 3-310(f) provides, in pertinent part:

A member shall not accept compensation for representing a client from one other than the client unless:  (1) There is no interference with the member’s independence of professional judgment or with the client-lawyer relationship;

In the Yanez case, in house counsel could not simultaneously accept compensation from Union Pacific and also render independent professional judgment on Yanez’ behalf.  Even with an informed consent and waiver obtained under Rule 3-310(c), the in house attorney should have recognized that his independent judgment would be impaired by the conflict and, under Rule 3-310(f), declined the representation of Yanez.

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