United States: Ethical Issues In Employment Law

Last Updated: November 19 2001
Article by Thomas D Rees Esq

I. INTRODUCTION

The topic of ethical issues in employment law practice divides into two subtopics:

  1. What ethical rules govern lawyers in the practice of employment law?
  2. Since most employment lawyers are also employers or employees, what ethical issues arise in lawyers’ handling of employment matters within the lawyers’ own offices?

Both areas of law are undergoing significant development in Pennsylvania and elsewhere.

 

II. ETHICAL ISSUES IN EMPLOYMENT PRACTICE

A. Overview

1. Ethical issues in employment practice divide into two subcategories:

  1. Ethical issues that arise in a lawyer’s decision to undertake or continue a representation.
  2. Ethical issues that arise during employment litigation.

2. The Pennsylvania Rules of Professional Conduct apply to practice within Pennsylvania courts and the federal courts in Pennsylvania (e.g., F.R.Civ.P. E.D. Pa. 83.6(IV)(B)).

3. A lawyer may not represent a client, and must withdraw from the representation of a client, if the representation will result in violation of the Rules of Professional Conduct or other law. Rule 1.16(a); Bayges v. Southeastern Pennsylvania Transportation Authority, 887 F. Supp. 108 (E.D. Pa. 1995).

B. Participation in a Client’s Personnel Actions

In DeStefano v. Henry Michell Company, 2000 WL 433993 (E. D. Pa.), the Eastern District of Pennsylvania dismissed a complaint against a law firm for aiding and abetting discrimination on the basis of the law firm’s transmittal of a letter on behalf of the employer that terminated plaintiff’s employment. The Court held that (1) liability under 43 P.S. § 955(e) did not arise solely from the scope of a law firm’s agency relationship; (2) the law firm had not intended to aid the client’s discriminatory behavior; (3) the law firm had not shared a common purpose with the client to retaliate against the plaintiff.

C. Undertaking or Continuing Representation

1. Rule 1.7(a) – Direct conflict of interest

a. Rule 1.7(a) provides:

A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

    1. the lawyer reasonably believes that the representation will not adversely affect the relationship with the other client; and
    2. each client consents after consultation.

b. Rule 1.7(a) articulates the general rule that loyalty to a client prohibits a lawyer from undertaking a representation directly adverse to that client without that client's consent. It should be self-evident that a lawyer may not represent two opposing parties in the same litigation. But Rule 1.7 also covers many less obvious conflicts. Thus, a lawyer ordinarily may not act as an advocate against an entity represented by the lawyer in another matter, even if the two matters are wholly unrelated. On the other hand, simultaneous representations in unrelated matters for clients whose interests are only generally adverse, such as competing economic enterprises, does not require consent of the respective clients. But see Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241, 602 A.2d 1277 (1992). See generally, Comment to Rule 1.7.

c. A client may consent to representation notwithstanding a conflict. However, under both Rule 1.7(a) and Rule 1.7(b), when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for the client’s agreement to the conflicting representation and cannot provide representation on the basis of the client's consent. (The lawyer considering the conflicting representation only has to analyze the conflict as would a disinterested lawyer; the lawyer need not seek an opinion from a disinterested lawyer.) When more than one client is involved, the lawyer has to resolve conflict issues as to each client. At times, it may be impossible to make the disclosure necessary to obtain consent. See Comment to Rule 1.7(a); in these circumstances, a lawyer must refuse the conflicting representation. As a practical matter, consents under Rule 1.7(a) are difficult to obtain.

d. Although Rule 1.7(a) does not require written consent, it is vitally important to document consent by obtaining the client’s consent in writing after the lawyer makes a full written disclosure of the adverse representation and the basis for the reasonable belief that the adverse representation will not affect the relationship with the other client.

2. Rule 1.7(b) – Indirect conflict of interest

a. Rule 1.7(b) provides:

A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:

    1. the lawyer reasonably believes that the representation will not be adversely affected; and
    2. the client consents after full disclosure and consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

b. Rule 1.7(b) applies where a lawyer is constrained not to consider, recommend, or carry out an appropriate course of action because of the lawyer's other responsibilities or interests. As with Rule 1.7(a), the lawyer has to evaluate conflicting obligations from the viewpoint of a disinterested lawyer. See Comment, Rule 1.7 and the above discussion of Rule 1.7(a).

3. Comment

Rule 1.7’s prohibitions against present conflicts of interest are explicit; possibly because of the explicit nature, few reported employment law cases deal with these rules. Rule 1.7(a) applies when two clients of a lawyer are on opposite sides in the matter in which the attorney advised them. See, e.g., Ragan Henry Broadcast Group, Inc. v. Hughes, 1992 WL 151308 (E.D. Pa.). Rule 1.7(b) applies when one lawyer may represent multiple parties in a litigation (e.g., where an employment lawyer represents an employer and key employees who are sued in an employment claim). In this situation, the lawyer should explain the implications of the common representation, the advantages and the risks involved, and should obtain written consent from each client.

4. Joint defenses

If a lawyer cannot predict the outcome of a common representation, the lawyer may recommend that each party aligned on the same side retain separate counsel. In this situation, a Joint Defense Agreement can allow the parties to share defense materials without waiving the privilege attaching to use and disclosure of these materials. A sample Joint Defense Agreement for non-compete litigation is attached as Appendix A. The parties never used this Joint Defense Agreement, since counsel for the corporate defendant agreed to take over the defense of all parties.

5. Indemnification

a. Where a lawyer represents an individual employee who is named in an employment claim, the lawyer should request indemnification from the corporate defendant. Pennsylvania corporate law generally provides for indemnification of employees named in lawsuits if allowed by the corporate by-laws, if an individual is sued by reason of the fact that the individual was a representative of the corporation. 15 Pa. C.S. § 1741. The indemnification covers both liabilities to opposing parties and legal fees. There is an absolute right to indemnity if the defense of the litigation is successful.

b. The rules governing indemnity are subject to a number of limitations, including the following:

    1. To qualify for indemnity, the individual must have acted in good faith and in a manner that the individual reasonably believed to be in, or not opposed to, the best interests of the corporation;
    2. Indemnity may not be provided if the individual has violated a law, committed a crime, or acted in a manner opposed to the best interests of the corporation;
    3. The corporation may advance the defense expenses on receipt of an undertaking by the individual to repay the corporation if it is determined that the individual is not qualified to be indemnified.

c. It has been the author’s experience that corporate employers are not necessarily willing to commit to indemnify employees in either employment discrimination cases or in cases involving alleged taking of trade secrets or violation of restrictive covenants. An indemnification application places the lawyer representing an individual defendant in some difficulty, because the interests of the individual and corporate defendants become adverse, and the individual client may begin to rely on indemnification as a means of payment for the lawyer, when indemnification is by no means certain.

6. Rule 1.9(a) – Conflicts of interest: former clients

a. Rule 1.9(a) provides:

A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after a full disclosure of the circumstances and consultation.

  1. An analysis of a potential violation of Rule 1.9(a) focuses on whether the prior and present matters are substantially related, whether the clients have materially adverse interests, and whether the clients consent after consultation. Henry v. Delaware River Joint Toll Bridge Commission, 2001 WL 1003224, *1 (E.D. Pa. 2001); James v. Teleflex, Inc., 1999 WL 98559, *3 (E.D. Pa. 1999). The critical test in reported cases is almost always whether the prior and present matters are "substantially related" – there would be little ground for dispute if the clients consented after consultation or the parties’ interests were not adverse.
  2. In determining the presence of a "substantial relationship", a court will consider the following three factors: (1) the nature of the present lawsuit against the former client; (2) the nature and scope of the prior representation at issue; and (3) whether in the course of the prior representation, the client might have disclosed to the attorney confidences which could be relevant or possibly detrimental to the former client in the present action. See Henry v. Delaware River Joint Toll Bridge Commission, supra.

b. Cases: Former client and present client are adverse parties

  1. Henry v. Delaware River Joint Toll Bridge Commission, 2001 WL 1003224 (E.D. Pa.) – Law firm was disqualified from representing plaintiff in civil rights litigation over cancellation of retiree health benefits, where the individual lawyer for the plaintiff had previously worked for a firm that was general labor counsel to the defendant. In this previous firm, the individual attorney had represented the agency in employment litigation, including litigation similar to the case before the court; drafting of a revised employee manual, including provisions that affected the result in this case; providing general employment law advice, including advice on civil rights issues; and participating in confidential meetings, which included employment and personnel matters. Further, since the litigation raised issues of political discrimination, the lawyer’s knowledge of the agency board members’ confidential views was relevant. Under all the circumstances, the prior and present representations were "substantially related." Henry v. Delaware River Joint Toll Bridge Commission, supra, at 5.
  2. James v. Teleflex, Inc., 1999 WL 98559 (E.D. Pa.) – Law firm was disqualified from representing employee in litigation after law firm acquired another law firm whose clients included corporate defendant; the fact that the law firm terminated the attorney-client relationship with the corporate defendant was immaterial. The Court held that the firm had not properly screened the attorneys representing the different clients, under Rule 1.10(b).
  3. Rule 1.10(b) provides that when a lawyer becomes associated with a firm, the firm may not knowingly represent a person in the same or substantially related manner in which that lawyer, or the lawyer’s previous firm, had represented a client whose interests were materially adverse to the person, and about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(b) unless (a) the disqualified lawyer is screened from any participation or fee, and (b) written notice is given to the client to enable the client to ascertain compliance.

  4. Ragan Henry Broadcast Group, Inc. v. Hughes, 1992 WL 151308 (E.D. Pa.) – Where law firm had given advice to corporate CEO in business and personal decision-making, law firm could not represent corporation in litigation seeking declaratory judgment that termination was for cause.
  5. Guzewicz v. Eberle, 953 F. Supp. 108 (E.D. Pa. 1997) – The Court refused to disqualify a former corporate counsel from representing dissident stockholders. The Court held that, in order to disqualify the stockholder’s attorney, the corporate defendant had to show that the attorney knew information that was (a) confidential; (b) substantial; (c) unavailable to the client; (d) usable by the client to the defendant’s disadvantage. The corporate defendant also had to show that the action was (a) substantially related to matters concerning the matters in which the former counsel represented the corporation; and (b) against or adverse to the corporate defendants. A derivative action is not technically adverse to corporate defendants. Compare Imbesi v. Imbesi, 2001 WL 1346316 (E.D. Pa.), in which the Court disqualified defense counsel in litigation over corporate wrongdoing because defense counsel had previously advised plaintiff family members; and Universal Athletic Sales Co. v. American Gym, Recreational & Athletic Equipment Corporation, Inc., 357 F. Supp. 905 (W.D. Pa. 1973), in which the Court denied the discharged corporate president’s motion to disqualify the corporation’s defense counsel, although ex-president and corporation were at odds; there was no apparent breach of confidence or trust, and no crossclaims existed between corporation and ex-president.
  6. Wilson v. Civitell, 1996 WL 479663 (E.D. Pa.) – Solo practitioner who served as counsel for the plaintiff in divorce proceeding ending in 1992 could not defend against employment action brought by the individual in 1995; divorce proceeding dealt with support, visitation, custody and other issues; and the plaintiff claimed that some confidential information had been disclosed.
  7. Willig, Williams & Davidson v. Walters, 1993 WL 224723 (E.D. Pa.) – Law firm would not be disqualified from representing another law firm as plaintiff in an action against an ex-partner for interference with contractual relations and breach of contract, involving ex-partner’s solicitation of firm clients for a new practice. The ex-partner claimed that the litigation was "substantially related" to earlier litigation against a departing partner, which involved valuation of the departing partner’s interest in the firm and in referral fees from asbestos cases. In refusing to disqualify counsel, the Court held that the two matters were not substantially related, even though both matters dealt with valuation issues; that the earlier representation had been of the law firm, not the individual lawyer; and that the parties understood that no communications to the lawyer from individual partners could be deemed confidential. The ex-partner also claimed that a conflict arose because of the lawyer’s review of the firm’s partnership agreement for the partners jointly. The Court held that this prior representation was limited to questions of legal form, and had no relationship to the present dispute.
  8. Unisys Corporation v. Amperif Corporation, 1992 WL 210243 (E.D. Pa.) – Law firm would not be disqualified from pursuing patent infringement action against former client, when there was no similarity between the patent infringement and the law firm’s former representation of the client on labor law matters; the attorney responsible for the former client had left the law firm.
  9. Alexander v. City of Philadelphia, 1990 WL 35681 (E.D. Pa.) – Court refused to disqualify an attorney from representing two plaintiffs who challenged psychiatric examinations for police candidates on constitutional grounds, two years after the attorney had represented the Philadelphia Personnel Department on several personnel matters. The District Court analyzed the nature of these matters and concluded that, although the earlier matters dealt with employment discrimination, the earlier matters did not deal with psychiatric examinations. The Court therefore concluded that the second action, although of a similar type, was not "substantially related" to the attorney’s prior representation of the Philadelphia Personnel Department. 1990 WL 35681,*3.

c. Cases: Former client and present client are competitors

  1. In Maritrans GP Inc, v. Pepper, Hamilton & Scheetz, 529 Pa. 241, 602 A.2d 1277 (1992), the Pennsylvania Supreme Court established guidelines for legal representation of economic competitors:
  2. "Whether a fiduciary can later represent competitors or whether a law firm can later represent competitors of its former client is a matter that must be decided from case to case and depends on a number of factors. One factor is the extent to which the fiduciary was involved in its former client's affairs. The greater the involvement, the greater the danger that confidences (where such exist) will be revealed." [1286]

  3. In Maritrans, the Pennsylvania Supreme Court enjoined a law firm from representing a former client's competitors because of the law firm's extensive involvement in the former client's affairs as both labor and corporate counsel and the firm's extensive knowledge of sensitive client information. The Supreme Court analyzed the law firm's fiduciary duty to the client and held that a law firm's conduct could be actionable even without violating a Rule of Professional Conduct.

The Hyman Companies, Inc. v. Brozost, 964 F. Supp. 168 (E.D. Pa. 1997) – The District Court enjoined a lawyer from using confidential information acquired during the lawyer’s prior service as in-house counsel for a competitor. The Court refused to enjoin the attorney from working for the competitor, but enjoined the attorney from representing the competitor in negotiating for the rental of stores in shopping centers. The Court preliminarily enjoined the lawyer from handling any lease negotiations on which the lawyer worked for his previous employer; from handling any negotiation for any retail space that the past and present employers were competing for; and from disclosing any information regarding his former employer’s retail leases. 964 F. Supp. at 175. In granting a permanent injunction, the Court expanded the relief to prohibit the lawyer from handling lease negotiations for retail space within a mall or other area where the former employer occupied space and wanted to continue occupying the space. The Hyman Companies, Inc. v. Brozost, 119 F. Supp.2d 499 (E.D. Pa. 2000).

d. Confidential information

Rickards v. CertainTeed Corp., 1995 WL 120231 (E.D. Pa.) – Plaintiff’s attorney was not disqualified as a result of having deposed a former client (and current employee of defendant) on behalf of an ex-employee, although former client had communicated confidential information about substantially related matters to attorney in seeking advice from attorney. Attorney would be prohibited from cross-examining his former client at trial, however.

D. Ethical Issues in the Conduct of Employment Litigation

1. Rule 3.7

a. Rule 3.7 provides as follows:

(1) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness except where: (a) the testimony relates to an uncontested issue; (b) the testimony relates to the nature and value of legal services rendered in the case; or (c) disqualification of the lawyer would work substantial hardship on the client.

(2) A lawyer may act as advocate in a trial in which another lawyer in the lawyer’s firm is likely to be called as a witness, unless precluded from doing so by Rule 1.7 or Rule 1.9.

b. Cases:

(1) In Caplan v. Braverman, 876 F. Supp. 710 (E.D. Pa. 1995), the Eastern District refused to disqualify a law firm from representing a plaintiff in a Title VII discharge action against another law firm, although a partner in the law firm representing the plaintiff was a possible witness about conversations with one of the partners in the defendant law firm. The Court held that it was not certain that the attorney would be a witness, and that, if the attorney were a witness, another attorney in the law firm could represent the plaintiff. The Court refused to hold that the existence of a contingent fee agreement based on the outcome of the litigation created a conflict of interest between the individual attorney and his law firm.

(2) Morgan v. Rossi, 1998 WL 175604 (E.D. Pa.) – Court disqualified sheriff’s solicitor from representing sheriff in case, in which solicitor was likely to be a necessary witness on the process of deciding to dismiss the plaintiff.

(3) Stolp v. Sollas Corporation, 1997 WL 83750 (E.D. Pa.) – Court disqualified individual attorney from representing corporate defendant in wrongful discharge action, when attorney had drafted documents for corporate transactions, and was aware of decision to terminate plaintiff; others in attorney’s firm could handle the defense, however.

(4) Willig, Williams & Davidson v. Walters, 1993 WL 224723 (E.D. Pa.) – Attorney who reviewed partnership agreement for legality was not disqualified; Rule 3.7(a)(1) specifically allows testimony in this area. The Court allowed the motion to disqualify to be renewed if the attorney’s testimony became necessary on the existence or adequacy of consideration in the agreement.

(5) Before calling attorney as witness, risking possible disqualification under Rule 3.7, party should exhaust other avenues of discovery. See Anderson v. Reliance Standard Life Insurance Co., 1988 WL 80036 (E.D. Pa.).

(6) In Lennen v. John Eppler Machine Works, Inc., 1997 WL 566078 (E.D. Pa.), court prohibited a lawyer from using information in rebuttal to other information, thereby forestalling issue over violation of Rule 3.7.

3. Rule 4.2. Communication with person represented by counsel

a. Rule 4.2 provides as follows:

In representing a client, a lawyer shall not communicate about the subjects of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.

The Comment to Rule 4.2 states that Rule 4.2 prohibits communications by a lawyer for one party concerning the matter in controversy with persons having managerial responsibility on behalf of the organization; any other person whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability; or any individual whose statement constitutes an admission on the part of an organization.

b. Cases

(1) McCarthy v. SEPTA, 772 A.2d 987 (Pa. Super. 2001), reversing 44 Pa. D. & C.4th 358 (Phila. Co. 2000) – In this FELA case, the Pennsylvania Superior Court ordered a new trial and effectively reversed the trial court’s disqualification of plaintiff’s trial counsel in the middle of a jury trial for ex parte contacts with SEPTA employees. The Superior Court held that the trial court had failed to adduce evidence that the employees whom counsel contacted fit within the definition of Rule 4.2. Under the circumstances, the Superior Court held that the plaintiff had been denied her freely chosen counsel.

(2) University Patents Inc. v. Kligman, 737 F. Supp. 325 (E.D. Pa. 1990) – In this case, dealing with a right to a patent, the court refused to disqualify counsel although counsel had engaged in ex parte contacts with present and former employees of the University of Pennsylvania. The court held that Rule 4.2 prohibited ex parte communications with deans, trustees, department chairmen, and provost, but not former employees. See also, Action Air Freight, Inc. v. Pilot Air Freight Corp., 769 F. Supp. 899 (E.D. Pa. 1991), appeal dismissed, 961 F.2d 207 (3d Cir. 1992). But see Carter-Herman v. City of Philadelphia, 897 F. Supp. 899 (E.D. Pa. 1995), allowing counsel to interview non-managerial employees, but allowing such employees to refuse to be interviewed and to have own counsel present.

(3) Applying the test in the Comment to Rule 4.2, the Eastern District of Pennsylvania held that plaintiff’s counsel should not have contacted a captain of a barge in a personal injury action. See Belote v. Maritrans Operating Partners, L.P., 1998 WL 136523 (E.D. Pa.). The Court refused to disqualify counsel, but held that further actions might lead to mere severe sanctions.

(4) Aside from disqualification, other sanctions under Rule 4.2 include prohibition against the use of evidence obtained through improper ex parte contact. See, e.g., Lennen v. Eppler Machine Works, Inc., 1997 WL 566078 (E.D. Pa.); Marinnie v. Nabisco Brands, Inc., 1993 WL 267453 (E.D. Pa.).

(5) In PPG Industries, Inc. v. BASF Corporation, 134 FRD 118 (W.D. Pa. 1990), a trade secret case, the Court held that defense counsel could meet with a former employee of the plaintiff regarding the trade secrets, provided that defense counsel advised the former employee not to disclose any confidential information.

4. Preservation of confidences

An attorney’s obligation to preserve confidences allowed a state employee to avoid liability for disclosing certain confidential information to his attorney in Department of Military and Veteran Affairs v. Civil Service Commission (Korenyi-Both), 719 A.2d 1134 (Pa. Cmwlth. 1998).

5. Sanctions

a. Rule 11

    1. Continuing to assert a time-barred Title VII claim warrants Rule 11 sanctions; where a monetary sanction and written reprimand would not be sufficient to deter similar misconduct, the court may refer the attorney to the Disciplinary Board of the Pennsylvania Supreme Court. Matthews v. Freedman, 128 FRD 194 (E. D. Pa. 1989), aff’d, 919 F.2d 135 (3d Cir. 1990).
    2. Where an employee persists in litigating a claim that has no merit, the attorney’s obligation is to withdraw, rather than face Rule 11 sanctions. Bayges v. Southeastern Pennsylvania Transportation Authority, 887 F. Supp. 108 (E. D. Pa. 1995).

b. 28 U.S.C. § 1927

Disqualification and imposition of attorney’s fees and costs under § 1927 is reserved for behavior of an egregious nature stamped by faith, and is violative of recognized standards in the conduct of litigation. See Comuso v. National Railroad Passenger Corp., 2000 WL 502707 (E.D. Pa.), appeal dismissed, mandamus denied, 267 F.3d 331 (3d Cir. 2001). (Court has inherent power to sanction attorney who engaged in profane outbursts, verbal assaults and threats to kill opposing counsel. The Court also referred counsel’s conduct to the Disciplinary Board and awarded the fees for preparation of the motion for sanctions against plaintiff’s counsel (2000 WL 1793400)). See also, e.g., Loftus v. Southeastern Pennsylvania Transportation Authority, 8 F. Supp.2d 458 (E.D. Pa. 1998), aff’d, 187 F.3d 626 (3d Cir. 1999), cert. denied, 120 S. Ct. 581 (2000) (court may assess counsel fees against the attorney under 28 U.S.C. § 1927 for continuing to assert meritless claims).

 

III. ETHICAL ISSUES IN LAW FIRM EMPLOYMENT

A. Supervisory Responsibility

Lawyers have an ethical responsibility to ensure that all lawyers in the firm conform to the Rules of Professional Conduct. Rule 5.1(a). Supervisory lawyers are responsible both for the conduct and work product of subordinate lawyers and non-lawyer assistants. (See Rule 5.1(b) and Rule 5.3). Lawyers also have specific responsibilities when moving from firm to firm; when discharging personnel; and when litigating their own separation. These course materials will strive to cover these issues, in a necessarily brief and summary fashion.

B. Moving From Firm to Firm / Business to Business

1. Rule 5.6 prohibits post-employment restrictions on a lawyer’s right to practice, except in the case of an agreement concerning benefits on the lawyer’s retirement. Among the divergent decisions on Rule 5.6 in recent years are the following:

a. Miller v. McNees, Wallace and Nurick, 118 Dauphin Co. L.R. 1 (1997), in which the Court of Common Pleas of Dauphin County invalidated a restrictive covenant which had no geographic limit, and which forfeited pension rights of lawyers who competed after forced retirement at age 70. The Court equated forced retirement to termination, and held that the covenant effectively prohibited the lawyer from practicing law and was unreasonable and against public policy, although the covenant complied with Rule 5.6.

b. Capozzi v. Latsha & Capozzi, P.C., 50 Pa. D. & C.4th 989 (Cumb. Co. 2001), in which the Court of Common Pleas of Cumberland County invalidated an oral agreement that limited the buyback price of the shares of a withdrawing shareholder to $5,000 if the shareholder competed with the firm. The Court held the ex-shareholder could not use Rule 5.6 to obtain affirmative relief in litigation against the firm. The Court held that as a matter of public policy, law firms that are professional corporations could enter into enforceable agreements that reasonably prevalued the shares of a departing shareholder who competes with the law firm. The Court held that the firm’s agreement was not enforceable because it contained no limitations on time and territory.

c. Thomas Lowry, P.C. v. Vaughan, 34 Pa. D. & C.4th 164 (Montg. Co. 1997), rev’d w/o reported opinion, Lowry v. Vaughan, 726 A.2d 420 (Pa. Super. 1998), in which the Court of Common Pleas of Montgomery County enforced a 12-month restriction against soliciting or accepting work from specified clients against a departing lawyer. The Court of Common Pleas held that the agreement did not restrict the attorney’s right to practice law, and therefore did not violate Rule 5.6. The Pennsylvania Superior Court reversed because of an arbitration/ mediation clause.

d. In In re LaBrum & Doak, 227 B.R. 391, 415 (Bankr. E.D. Pa. 1998), the United States Bankruptcy Court for the Eastern District of Pennsylvania held that recovery of hourly fees generated before a law firm’s dissolution did not violate Rule 5.6. The Court decided the case under the Pennsylvania Uniform Partnership Act, since the former firm’s partnership agreement did not address the issue.

e. New Jersey appellate courts have generally invalidated forfeiture provisions in attorney shareholder agreements, most recently in Apfel v. Budd Larner Gross Rosenbaum Greenberg & Sade, 324 N.J. Super. 133, 734 A.2d 808 (1999). The Apfel case contains a discussion of other key New Jersey appellate decisions.

2. Rule 1.9

In The Hyman Companies, Inc. v. Brozost, 964 F. Supp. 168 (E.D. Pa. 1997), the District Court enjoined a lawyer from using confidential information acquired while serving a former employer, in the absence of a restrictive covenant. The Court preliminarily enjoined the lawyer from handling any lease negotiations on which the lawyer worked for his previous employer; from handling any negotiation for any retail space that the past and present employers were competing for; and from disclosing any information regarding his former employer’s retail leases. 964 F. Supp. at 175. In granting a permanent injunction, the Court expanded the relief to prohibit the lawyer from handling lease negotiations for retail space within a mall or other area where the former employer occupied space and wanted to continue occupying the space. The Hyman Companies, Inc. v. Brozost, 119 F. Supp.2d 499 (E.D. Pa. 2000).

C. Preservation of Confidences

Rule 1.6 did not compel dismissal of civil rights action filed by former corporate counsel against corporate employer. Kachmar v. SunGuard Data Systems, Inc., 109 F.3d 173 (3d Cir. 1997).

D. Retaliation Against Subordinates Prohibited

In two cases, federal courts in Pennsylvania have held that a subordinate employee of a law firm has a right to assert a claim for wrongful discharge if the attorney/employer retaliates against the employee for raising ethical concerns, as follows:

  1. Paralegal stated a claim for wrongful discharge in violation of public policy in action for discharge and retaliation for notifying her employer’s lawyer in attorney disciplinary matter that the employer had submitted a backdated letter. Paralegal v. Lawyer, 783 F. Supp. 230 (E.D. Pa. 1992).
  2. Paralegal/secretary could state a claim for wrongful discharge for refusing to participate in fraudulent billing scheme; she could not state a claim for wrongful discharge for gratuitously revealing to clients and authorities that the attorney billed paralegal time as attorney time, without notice. Brown v. Hammond, 810 F. Supp. 644 (E.D. Pa. 1993).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Thomas D Rees Esq
 
In association with
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.