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In-house Counsel Conflict Of Interest

As this important article explains, "in-house counsel must be cautious of potential conflicts of interest when representing both the employer and the employee."

California Court of Appeal, Third District holds in-house attorney may be liable for malpractice for failing to warn employee about conflict of interest.

December 4 2013, Authors: Barry Leigh Weissman and Nora A. Valenza-Frost

The California Court of Appeal, Third District, in Yanez v. Plummer, 2013 WL 5915639, Cal. Ct. App. 3d Dist., No. C070726 (Nov. 5, 2013) recently held that a former employee deposed in connection with a co-worker’s personal injury suit may pursue malpractice claims against in-house counsel who failed to disclose the conflict of interest created by counsel’s dual representation of the employer-railroad and the employee.

In a co-workers personal injury lawsuit against their employer, employee Michael Yanez was deposed as the only witness to his co-workers accident. Shortly after the incident, Yanez provided two statements, one stating he did not witness the accident, and one stating he did. Brian Plummer was retained to defend both the employer and the employee. While preparing for the deposition with Plummer “Yanez expressed concern about his job because his deposition testimony was likely to be unfavorable to [his employer].” Plummer told Yanez that as an employee, Plummer was his attorney for the deposition and as long as Yanez told the truth, his job would not be affected. Yanez testified he did not witness the accident, and Plummer failed to question him as to why his two statements following the accident conflicted. As a result, Yanez was found to be in violation of the company policy against honesty and fired.

Yanez sued Plummer for malpractice, breach of fiduciary duty and fraud. Since the employer and the employee occupied adverse positions, and Plummer neither informed Yanez about conflicts with his employer nor obtained his written consent, Plummer may be in violation of the California State Bar Rules of Professional Conduct prohibiting concurrent representation of conflicting interests without each client’s informed consent. Moreover, since Plummer did not allow Yanez to explain his discrepancy at his deposition, Plummer may be found to be the “but for” cause of Yanez’s termination.

The Court of Appeal was very clear that this case does not create “a new rule stating that an attorney for an employer may never represent an employee at the same time” but that, “summary judgment evidence here shows a conflict between the employer and the employee, and the employer’s lawyer representing both the employer and the employee (to the employee’s detriment) without obtaining the employee’s informed written consent.” Thus, in-house counsel must be cautious of potential conflicts of interest when representing both the employer and the employee.

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