Ethical challenges every in-house counsel must navigate

 A review of California's Rules of Professional Conduct and the State Bar Act might suggest that much of the regulatory framework targets private practice lawyers. By comparison, in-house counsel may receive comparatively less direct guidance. Even so, despite that relative scarcity, in-house counsel routinely face important recurring issues that warrant careful consideration.

Application and protection of the privilege

Just like any other lawyer, in-house counsel has a duty to protect confidential information. The most common way that protection comes up for in-house lawyers is by communicating with the attorney-client privilege in place. Accordingly, the lawyer may want to consider three primary questions: Whom can I speak with in a privileged context? What precautions should I take to preserve privilege? And what precautions should I take to ensure constituents understand that I do not represent them individually?

The privilege can potentially apply to a wide range of individuals. Three tests are generally determinative. Under the control group test, communication may be privileged when the other participant is either a corporate decision maker or can take part in deciding the issue the lawyer is advising about. Under the subject matter test, the primary issue is whether the communication is one directed at an issue that is within the scope of the employee's duties. And the primary purpose test simply looks at whether the purpose is to provide legal assistance. Indeed, a common issue with internal communications and the privilege relates to the purpose. Even if one of these tests is satisfied, communication may not be privileged if the lawyer is providing business advice, rather than legal advice, perhaps due to multiple hats worn within the company.

An example of this may be in determining whether minutes of a business meeting are protected. The mere fact that a lawyer attended the meeting does not mean it was a privileged communication. Whether the minutes might be protected under the privilege will turn on whether they reveal the substance of confidential attorney-client communications. If the minutes look like a recitation of business-related decisions made in the course of a meeting that the attorney just happened to attend, then it is unlikely that the privilege would apply.

Who is the client and Upjohn warnings

Rule of Professional Conduct 1.13 reminds lawyers that, when they represent an organization, they must conform their advice and services to the organization itself. That is, even though they will need to communicate through constituents, the good of the company must be the consideration, rather than the rights and obligations of individuals, including those the lawyer communicates with.

For various reasons, the good of the organization may be very much aligned with management. These can range from reputational issues, to continuity issues, to vicarious liability and beyond. But when a constituent may be unclear on the point, lawyers have an obligation to make clear that they represent the company, not the individual with whom they are communicating. First, the employee should be advised that the company can waive the attorney-client privilege even over the objection of the employee. And second, the employee should understand that the in-house lawyer is not representing the employee's personal interests.

Affiliate and subsidiary conflicts

Another potential peril is a situation where multiple organizations have competing interests and may be communicating with the lawyer about those. Such a situation can arise when dealing with affiliates and subsidiaries.

In such a scenario, the in-house lawyer's first question is usually whether any obligation is owed to the affiliate or subsidiary. Often, the lawyer's employment contract or job description will provide that answer. The lawyer will then either be able to clarify they represent but one company, or they will know that they need to declare a conflict and advise both to get independent counsel, unless the lawyer can procure informed written consent to advise just one of the clients. In situations where the lawyer represents just one entity, but may be called upon to deal with others, it may be helpful for the lawyer to consider whether their title, signature block and other internal and external documentation of the role make that clear. If they do not and cannot be adjusted, then perhaps a special writing delineating the scope of representation can.

Unauthorized practice of law

An unwitting error that sometimes occurs is in-house counsel failing to consider whether their licensure is adequate to serve in the role they are being asked to fill. This may happen because the lawyer started a relationship as outside counsel and moved in-house along the way. But the nature of an in-house role is likely broader and may carry a different licensing requirement.

Typically, the first question to address is the location of the company's headquarters. From there, in-house counsel would then look at the jurisdictional requirements for in-house counsel. In so doing, they should also consider whether the company conducts business in other states and obtain an understanding for what is required in those jurisdictions.

In perhaps a more ideal situation, the legal affairs are limited to the law of one state or a few states, and the in-house counsel is licensed in the state where the company is headquartered and where it conducts most of its legal affairs. But if they are not, they should obtain necessary temporary practice permissions, such as through a registered in-house counsel program. If that cannot be done, then the lawyer should conform their conduct so that they are not practicing law within the meaning of that jurisdiction's laws. Often, that may mean acting in the role of a clerk, where the lawyer provides research and drafts to a lawyer licensed in that jurisdiction to review and advise the company accordingly.

Business pressures

Finally, in-house counsel may sometimes have a dual role and determine that the best business course of action does not align with the best legal analysis. When those interests need to be assessed, there are a few strategies for in-house counsel to consider: Seeking board direction through a collaborative process; outlining the pros and cons in an objective manner, or, if need be, utilizing outside counsel or other experts to assist with the decision.

With these concepts in mind, in-house counsel should be well equipped to address many of the ethical dilemmas they may confront in that role.