by Fred L. Wilks
When a lawyer becomes counsel of record for a corporate litigant, the lawyer-client relationship is founded upon a simple guiding principle: the lawyer must conform the representation to the concept that the client is the organization itself. Cal. Rules of Prof’l Conduct R. 3-600 (1989). When corporate employees and other representatives are called upon to give deposition testimony in connection with company litigation, the lawyer represents the company, not its witnesses. Yet many of us have encountered company lawyers who announce at depositions that they also represent the employee witness. Presumably, they do so because they are concerned about preventing the witness from testifying at the deposition about privileged pre-deposition communications. That concern, however, does not warrant taking on the dual representation of both the company and its employee witness. The company’s lawyer may instruct the employee witness not to reveal privileged information whether or not the lawyer represents the witness as an individual. Confidential communications between a company’s lawyer and its employees are privileged, and may not be discovered by the company’s adversaries. See Zurich Am. Ins. Co. v. Superior Court (Watts Indus., Inc.), 155 Cal. App. 4th 1485, 1497-98 (2007). Thus, when faced with a lawyer representing both the corporate litigant and its witness at the deposition, one cannot help but wonder: “Have you thought this over?”
The Conflicted Deposition Witness A lawyer who represents both a corporate client and an individual witness at a deposition owes duties to both clients. Representation of the individual witness forms a fiduciary relationship between the lawyer and the witness regardless of whether the witness is an employee or officer of the company, whether the corporate client is paying all of the lawyer’s fees, and whether the lawyer views the corporate client as the “primary” client. Although Rule of Professional Conduct 3-600(E) acknowledges that a lawyer may represent both an organization and its individual constituents, such dual representations must comply with the rules governing representation of adverse interests.
A lawyer shall not, without the informed written consent of each client, represent more than one client in a matter in which the interests of the clients actually or potentially conflict. Cal. Rules of Prof’l Conduct R. 3-310(C) (1989). The problem this rule presents in the context of representing both an organization and its testifying witnesses is that conflicts can easily arise that are not obvious until it is too late. For instance, a conflict of interest may arise between the employee witness and the company merely because the witness has knowledge of facts unfavorable to the corporate litigant’s case. See Yanez v. Plummer, 221 Cal. App. 4th 180, 187 (2013).
The Yanez case involved an underlying lawsuit by an employee against his employer for injuries suffered on the job. A co-worker, Yanez, was present during the incident and was “aware of several unsafe work conditions that may have contributed to [the employee’s] injury,” a circumstance the court viewed as placing Yanez and his employer, the defendant, in “adverse positions.” Id. Apparently failing to recognize this problem, the company’s in-house lawyer, acting as defense counsel in the lawsuit, informed Yanez that he would represent Yanez for the deposition. According to Yanez, the lawyer neither informed him about conflicts nor obtained informed written consent to the dual representation.
To make matters worse, the lawyer questioned Yanez at the deposition, impeaching him with a prior inconsistent statement. Yanez testified that he did not “witness” the accident that was the subject of the underlying lawsuit. In response, the company’s lawyer questioned Yanez on the record and presented a prior inconsistent statement authored by Yanez stating that he “saw” his co-worker fall. After the deposition, the company terminated Yanez for violating company policy against dishonesty.
Yanez sued the lawyer for, among other things, legal malpractice and breach of fiduciary duty. In the context of the lawyer’s motion for summary judgment, his apparent failure to obtain informed written consent constituted evidence of malpractice and breach of fiduciary duty. Id. at 188. Aside from the failure to obtain informed written consent, the lawyer’s conduct at the deposition also supported the malpractice claim. The court explained that the lawyer, in violation of his obligations to the witness, played a substantial role in uncovering the deception the company later charged against him, resulting in his termination. Id. at 190.
The Yanez court acknowledged that it is not an ethical violation per se for a corporate litigant’s lawyer to also represent an employee witness at a deposition. Id. at 190. However, given the court’s broad view of what constituted a conflict—i.e., the witness’s mere knowledge of unfavorable facts—potential conflicts will exist in many cases, requiring the lawyer to obtain the informed written consent of both parties. Indeed, a lawyer trying to rule out potential conflicts must wrestle with the reality that most witnesses pose a risk of providing testimony “unfavorable” to the litigant’s case, and acknowledge that ascertaining the full scope of the witness’s knowledge prior to the deposition can be difficult. Even if a witness has seemingly shared everything he or she knows, whether the testimony is “unfavorable” is often in the eye of the beholder. Moreover, even if the witness seems to have only “favorable” testimony to offer, too often witnesses give testimony under oath that differs from what they told their lawyer before the deposition.
Informed Written Consent May Not Solve All Problems As the discussion notes of California Rule of Professional Conduct 3-310 caution, there are some matters in which the conflicts are such that written consent may not suffice. For instance, clients may not waive the lawyer’s duty to perform legal services competently, as required by Rule of Professional Conduct 3-110. If the conflict is such that the lawyer is unable to perform competently under the circumstances, the lawyer must withdraw from the representation pursuant to Rule of Professional Conduct 3-700(B)(2). See Cal. State Bar Formal Op. No. 1989-115 (1989) (distinguishing between the effectiveness of conflict waivers for the purpose of disqualification versus State Bar disciplinary action and malpractice liability).
Arguably, the lawyer breaches the duty of competence where the lawyer questions a client witness in a way the lawyer should know may elicit testimony placing the interests of the witness in peril. In the Yanez case, even if the lawyer had obtained informed written consent for the dual representation, the lawyer’s duty of competence likely obligated him to refrain from questioning the witness in a way that endangered his continuing employment. Even attempting to limit the scope of the representation may not relieve the lawyer from the duty to consider the client’s interests beyond the litigation, issue spot, and protect the witness’s interests. A lawyer has a duty to alert the client to legal problems that are reasonably apparent even if they fall outside the scope of the representation. See Nichols v. Keller, 15 Cal. App. 4th 1672, 1684 (1993).
Finally, even where prior written consent is obtained, further disclosure and written consent may be required later when unforeseen potential conflicts arise or potential conflicts ripen into actual conflicts. See Cal. Rules of Prof’l Conduct R. 3-310, Discussion (1989). What can the lawyer do mid-deposition if the witness provides unexpected testimony that causes potential conflicts to ripen into actual conflicts or otherwise materially affects the nature of the conflicts previously disclosed? Must the lawyer put the deposition on hold? If further consent is not obtained, the lawyer may be required to withdraw.
Informed Written Consent Means Full Disclosure Informed written consent for the purpose of conflict rules means the client has agreed in writing to the representation following disclosure of all relevant circumstances and of the actual and reasonably foreseeable consequences to the client. Cal. Rules of Prof’l Conduct R. 3-310(A). A lawyer owes the highest duty to make full disclosure of the areas of potential conflict, and the possibility and desirability of seeking independent legal advice. See Klemm v. Superior Court, 75 Cal. App. 3d 893, 901 (1977).
A lawyer representing a company and an individual witness should disclose that neither client may invoke the attorney-client privilege to prevent disclosure to the other client of communications with the lawyer during the course of the common representation. See Cal. Evid. Code § 962 (West 2015). The lawyer, as a fiduciary of both clients, is required to disclose to both clients all communications that touch upon matters affecting both clients. See Wortham & Van Liew v. Superior Court, 188 Cal. App. 3d 927, 931-32 (1987). This obligation, however, may be waived, according to a Formal Opinion of the Los Angeles County Bar Association: a lawyer may obtain consent not to disclose certain confidential information about one joint client to the other client. See Los Angeles Cnty. Bar Ass’n Formal Op. No. 471 (1992). In obtaining such consent, the risk that the client might not learn information he or she might want to know and might have been able to learn if separately represented should be disclosed. Id.
The lawyer should also disclose to the employee witness the risk that information the witness reveals may affect his or her relationship with the company. The witness’s unfavorable testimony, or even information shared in confidence, may lead to loss of advancement within the company, discipline, or, as was the case in Yanez, termination.
Of course, the lawyer must also make adequate disclosures to the company client as well. Those disclosures must be made to, and consent obtained from, an authorized constituent of the company other than the individual who is to be jointly represented. See Cal. Rules of Prof’l Conduct R. 3-600(E). The lawyer should disclose to the company that he or she would be unable, consistent with the duty of competence, to provide advice to either client regarding matters where the clients’ interests conflict. As discussed above, unforeseen conflicts may arise that require further disclosure and consent, which, if not given, may require withdrawal. See Cal. Rules of Prof’l Conduct R. 3-310, Discussion (1989). The possibility that withdrawal may be required—thus compelling the company to retain new counsel who is not as familiar with the case—should be disclosed to the organization. To avoid this problem, the lawyer may ethically ask the witness at the outset to consent to the lawyer’s continued representation of the corporate client with an agreement not to seek disqualification notwithstanding any adversity that may develop in the future. See Zador Corp. v. Kwan, 31 Cal. App. 4th 1285, 1300 (1995). If the waiver was informed, the lawyer may withdraw from representation of the witness client and continue to represent the corporate litigant even if otherwise confidential information would be used against the witness. Id. at 1301.
The lawyer should also consider disclosing to both clients factors that, from each client’s perspective, might appear as a temptation for a lawyer to favor one client over the other. For instance, the lawyer may have a long-standing relationship with the individual witness, an officer of the company, with influence over the company’s selection of counsel and repeat business for the lawyer. These facts, if present, should be disclosed to other constituents in positions of authority within the organization. In most cases, where the joint client is an employee, the apparent temptation will favor the corporate client: presumably the company is paying the lawyer’s fees for both clients, and the company is more likely to bring repeat business. Of course, the corporate client’s payment of the legal fees may not interfere with the lawyer’s independence of professional judgment, or with the lawyer-client relationship with the individual. See Cal. Rules of Prof’l Conduct R. 3-310(F)(1). In fact, although one might reasonably assume the individual witness has no objection to the company’s paying the lawyer’s fees, the lawyer must obtain the non-paying client’s informed written consent. Id. at R. 3-310(F)(3). The dynamics of the relationship will vary in each case, and the factors that may influence the clients’ decision to consent to dual representation should be carefully considered in connection with disclosure.
Conclusion A lawyer representing a corporate litigant should resist the temptation to take on the joint representation of the client’s employees or officers testifying at depositions. More often than not, any benefits of representing the witness as an individual will be outweighed by the burdens of analyzing and appropriately disclosing potential conflicts, obtaining consent, risking new unforeseen conflicts requiring further disclosure and consent, possible mandatory withdrawal, and potentially constraining the lawyer’s cross-examination of the witness should the need arise.
If the lawyer chooses to avoid dual representation, the lawyer must still consider disclosures that must be made to the witness. In many cases, the lawyer must clarify his or her role for the witness with what is commonly referred to as a “corporate Miranda warning” or an “Upjohn warning,” a reference to the landmark opinion Upjohn Co. v. United States, 449 U.S. 383 (1981). The lawyer must explain to the witness that the lawyer’s client is the company whenever it becomes apparent that the company’s interests are or may become adverse to the witness. See Cal. Rules of Prof’l Conduct R. 3-600(D). The lawyer must not mislead the witness into believing that the witness may communicate confidential information that will not be disclosed to the company or used in the company’s interest. Id. In simple terms, the lawyer should endeavor to make it clear to the witness that the lawyer has only one client, and that client is the company.
Fred L. Wilks is a business litigation attorney with Hodel Wilks LLP in Irvine, and can be reached at FWilks@hodelwilks.com.