RISKVUE ARCHIVE | RISK BITES

Representing Multiple Parties In Employment Cases: Get It In Writing

By Sara A. Simmons, Esq. and Robert A. Zaletel, Esq.

Employees that perceive themselves as victims of wrongful employment practices such as discrimination, harassment, wrongful discharge often sue not only the employer, but management personnel and co-workers as well. When faced with such a suit, the employer and/or its insurance carrier must decide whether single counsel can or should represent both the employer and the employee defendants. Perhaps the most critical factor in making this decision is an informed written consent requirement that is one of many recent amendments to the ABA Model Rules of Professional Conduct adopted in 2002 and which is presently being considered for adoption by 43 states.

An attorney who is asked to represent both corporate and individual defendants in the same case faces ethical and practical considerations. If ethical rules concerning attorney conflicts of interest are violated, the consequences can be severe. In some cases, the employer can be compelled to find a new attorney if counsel is disqualified from further representation. In less extreme situations, the attorney may find that friction between the employer and the employee defendants hampers an effective joint defense of the case. The key is for carrier, employer and counsel to confront these issues at the outset, and obtain informed written consent to the joint representation from all defendants.

Initial Disclosure To Employee

An employer that receives notice of an actual or potential wrongful employment practice claim may perform an internal investigation before counsel is contacted or a lawsuit is filed. In some cases, however, a lawsuit is the employer’s first notice of the claim. Regardless of the circumstances, as soon as counsel contacts company personnel, he or she should advise the personnel that he or she represents the employer. If the employer’s interests are adverse to any employee’s, any conflict may be waived by obtaining the informed written consent of each affected employee and the employer. (ABA Model Rules of Professional Conduct, Revised Model Rule1.13 (organization as client) and Revised Model Rule 1.7, and comparable state law (see, e.g., California Rules of Professional Conduct, Rule 3:600 (D).)

Is There A Conflict Of Interest?

There are advantages to having one counsel represent all defendants. Generally, single counsel representation streamlines and reduces overall litigation costs. It also contributes to continuity of discovery, assists in maintaining attorney-client relationships, may prevent intra-company disputes, prevents cross-complaints, and promotes early resolution of claims and litigation. Further, joint representation usually results in a unified defense strategy that leads to reduced settlements and verdicts.

Notwithstanding the benefits of joint representation, it must be determined whether the advantages of single counsel outweigh any potential or actual conflicts of interest which cannot be overcome. This determination requires an analysis of the facts, claims and legal theories advanced in the lawsuit, as well as potential defenses. Generally, where employer and employee interests are aligned (e.g., if the facts support the conclusion that the employee did not engage in any inappropriate conduct and the employer will advance that defense), joint representation is appropriate and beneficial. Further, where an individual is being sued for actions that are clearly within the course and scope of employment, a joint defense often is economically desirable. This is because some states require the employer to indemnify its employees for any costs arising out of the employee’s performance of their duties, including fees or costs the employee incurs in defending a lawsuit. (See, e.g., California Labor Code § 2802, 15 Pa.C.S.A. § 7718, New York Bus.Corp., § 722(a).)

However, in some states, the employer may have no obligation to indemnify a manager or employee who commits a wrongful employment practice since such conduct is not considered to be within the course and scope of employment. This may be the case even if the act occurred during work hours. In such cases, joint representation is not generally practicable nor feasible in light of the constraints of the ABA Model Rules and comparable state rules.

Even if an employer concludes that an employee defendant acted outside the course and scope of employment, refusing to provide a defense to that employee is a risky approach. This is particularly true in states such as California, where the employer is held strictly liable for harassment by its supervisors. In some states, however, if an employee is ultimately held not liable for any wrongdoing, the employer may be required to indemnify the employee for all incurred defense fees and costs.

Written Consent To Joint Representation Required

Besides the practical issues discussed above, ethical mandates govern joint representation. Revised Model Rule 1.7, ABA Model Rules of Professional Conduct, and many comparable state rules, now requires that counsel obtain the informed written consent of all of the involved parties for joint representation. The revised requirement is worded as follows:

Rule 1.7 Conflict of Interest: Current Clients

(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.

Accordingly, if counsel determines that there is a concurrent conflict of interest between the employer and the employee, he or shel may not undertake joint representation unless each of the clients gives their respective written informed consent. Concurrent conflicts exist if the representation of any client would be directly adverse to another client or the representation of one client would be detrimentally affected by the joint representation.

Joint representation also triggers ethical rules concerning acceptance of attorneys’ fees from anyone other than the client. The newly revised ABA Model Rules of Professional Conduct, and many comparable state rules, now provide that whenever an employer and/or carrier will be paying an employee’s attorneys’ fees and costs, the lawyer must explain to the employee who is paying such costs and the written informed consent of both the employee and the employer must be obtained.

Parameters Of Requisite Written Consent

When counsel determines that it is appropriate to represent both the employer and the employee, a joint representation letter must be sent to both defendants. Because “informed consent” is required, the letter should explain the potential ramifications of joint representation. Written consent for the joint representation must then be obtained.

If there are no apparent initial conflicts, the letter must state that counsel does not perceive any conflicts of interest between the employer and the employees at present, but that conflicts could arise. Counsel should then provide specific examples of potential conflicts. For example, a conflict could arise if all clients do not agree to an aggregate settlement.

The letter should also disclose that all parties will have to consent in writing to any aggregate settlement. Moreover, at least in California, the letter should explain that all communications among co-defendants are subject to the attorney-client privilege, but that such privilege is waived in the event there is a later dispute between the employer and the employee. The employee(s) should be advised that he or she has the option to seek independent legal advice concerning joint representation. Lastly, any reservation of rights as to indemnity or defense must be explicitly set forth.

Future Conflicts

If a conflict of interest does not arise until after joint representation has commenced, whether the attorney may continue representing either the employer or an individual employee is governed by revised Model Rule 1.9, ABA Model Rules of Professional Conduct, and comparable state rules. The rule now provides that where the interests of the two parties are materially adverse, a lawyer who has previously represented a client in a matter shall not thereafter represent another party in the same or a substantially related matter unless the former client gives informed written consent. The rule also states that a lawyer shall not use confidential information obtained from a former client to the former client’s disadvantage.

Both future conflicts and potential disqualification resulting from such conflicts may be addressed at the outset of joint representation either by waiver or by stipulation. Conflicts that may arise in the future may be waived if the client reasonably understands the material risks that the waiver entails. General, open-ended waivers typically do not satisfy the informed consent requirement. (Revised Model Rules 1.7 and 1.9). The employer and the employee(s) should provide written acknowledgment and acceptance of the waiver. However, notwithstanding the ABA Model Rules, the rules governing perspective waivers may vary by jurisdiction.

Conclusion

Representation of both employer and employee defendants by single counsel in wrongful employment practices cases can be advantageous, streamlined, and economical. The newly amended ABA Model Rules of Professional Conduct, and their counterpart state rules, however, have a added a new dimension to such joint representation — the requirement of obtaining the written informed consent of all client defendants. This requirement applies where even a potential for conflict exists. Failure to obtain the required consent in such situations can not only seriously hamper defense of the case, but also can result in later disqualification of counsel. 

ABOUT THE AUTHORS

Sara A. Simmons, sole proprietor of the San Francisco firm of Law Offices of Sara A. Simmons, specializes in multi-party representation and litigation in multiple fields, including aviation, construction liability and employment law.

Robert A. Zaletel, a partner in the San Francisco firm of McQuaid, Metzler, Bedford and Van Zandt, specializes in litigation with an emphasis on employer representation in employment law.

riskVue | The webzine for risk management professionals
May 2003