Do In-House Counsel also represent the organization's employees?

Friday, February 26 2016 13:55 Written by  Bill MacMinn

By William T. MacMinn, Esquire Reprinted with permission from the February 25, 2016 issue of The Legal Intelligencer. (c) 2016 ALM Media Properties. Further duplication without permission is prohibited.

Can organization attorneys represent their agents in an individual capacity? A recent Pennsylvania Superior Court decision said no.

The confidentiality of attorney-client communications is a long-standing privilege across the United States. The U.S. Supreme Court, in Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998), reasoned that full and frank disclosure is a prerequisite that attorneys need in order to give their clients the best legal advice available. "It is the most revered of the common law privileges," according to Commonwealth v. Chmiel, 738 A.2d 406, 414 (Pa. 1999).

There are exceptions to lawyer-client communications. Lawyers cannot hide knowledge that a future crime is going to be committed. The right to assert the privilege can be voided if the communication to the lawyer was also made to nonlawyers. Of current interest is a third exception¬—the client's right to waive the privilege.

Recent decisions (three related cases) by the Pennsylvania Superior Court¬—Commonwealth v. Schultz, No. 280 MDA 2015 (Pa. Super. Ct. Jan. 22, 2016); Commonwealth v. Curley, No. 299 MDA 2015 (Pa. Super. Ct. Jan. 22, 2016); Commonwealth v. Spanier, No. 304 MDA 2015 (Pa. Super. Ct. Jan. 22, 2016)¬—addressed the issue of the right of an organization attorney to waive the privilege of the agent when the agent is being investigated for individual misconduct by a grand jury.

The cases involved a university lawyer who arguably also represented three of the university's administrators/agents—a president, a vice president and an athletic director. The university attorney gave damning testimony before a state grand jury. At issue was the scope of her representation and her right to testify when the university arguably waived attorney-client privilege—but the three university employees did not issue individual waivers.

Baldwin's Legal Role in Sandusky Scandal

The case involved the complaints of three Penn State administration officials who were charged with coverup crimes by a Pennsylvania grand jury in connection with the Jerry Sandusky sex-abuse scandal. Graham Spanier, Tim Curley and Gary Schultz asserted that Cynthia Baldwin, an attorney for Penn State, should not have been allowed to testify before the grand jury against their interests.

The three administrators testified before the state grand jury while Baldwin was present. At a subsequent grand jury hearing, Baldwin gave her own testimony after Penn State waived its privilege, in part. A new counsel for Penn State agreed to waive the university's attorney-client privilege but also asserted "it could not waive any privilege that Curley and Schultz might have and again declined to waive its privilege as to communications between Ms. Baldwin and Curley and Schultz."

Though the Office of Attorney General agreed not to question Baldwin about potential confidential communications between Curley, Schultz, Spanier and Baldwin, Baldwin did provide testimony about private communications that cast the defendants in a negative light. Baldwin said of Spanier: "He is not a person of integrity," she testified. "He lied to me."

Reversal by the Pennsylvania Superior Court

The state Superior Court reversed the lower court's decision to allow her testimony and dismissed several criminal counts against the three PSU administrators. The higher court accepted the defendants' argument that her appearance before the grand jury either created an attorney-client relationship or it did not.

  • If her appearance did create the attorney-client relationship, then any waiver had to include the individual defendants.

  • If her appearance did not create the attorney-client relationship, then the three defendants should have had the right to use their own counsel. Moreover, her presence in the grand jury room would have been contrary to grand jury secrecy rules.

Judge Mary Jane Bowes, who wrote the higher court opinion for the Superior Court panel, ruled that "Ms. Baldwin did not properly explain to Mr. Curley that her representation of him was solely as an agent of Penn State and that she did not represent his individual interests. ... We find that, even assuming Ms. Baldwin represented Curley in an agency capacity, his communications to her regarding being subpoenaed to testify before the criminal investigating grand jury were privileged." (The opinions for the other two defendants were similar.)

Effect of Baldwin decision on new legal relationships

The Baldwin case raised many legal ¬issues such as:

  • What organizations are covered by the decision? The logic of the decision applies to more than just universities. Corporations, partnerships, government agencies, nonprofits, and almost any work environment could be affected.

  • Which individuals are covered? The case reasonably applies to anyone who works for the company in any capacity. Agents could include directors, officers, administrators, employees and even independent contractors.

  • Where does the decision apply? While the case involved testimony by an attorney before a grand jury, its reasoning can logically apply to any criminal court, any civil courts, probate courts, or anywhere a lawyer may be asked to testify about the conduct of a worker.

  • Who is really the client? In the Baldwin case, the administrators did act on behalf of the university but they were being charged individually. The line between agency conduct and individual conduct is a thin and very gray one.

In-house lawyers who testify against the interest of employees are not only at risk for being accused of breaking the attorney-client privilege. They are also at risk for the ethical violations of having a conflict of interest between the organization and the individual worker and for legal incompetence.

Some of the questions lawyers and clients alike will now need to review are:

  • Should the individual and the organization each get separate counsel?
  • What warnings should the lawyer give to the employee before speaking with the employee?
  • What is the effect of a signed informed consent by the client?
  • What happens when the relationship between the individual and the organization goes sour in some way?

The Baldwin case only raises the questions. The answers will likely involve ¬additional litigation.

Last modified on Friday, February 26 2016 21:56
Bill MacMinn

Bill MacMinn

Bill concentrates his practice in the area of litigation, including Commercial Litigation, Personal Injury, Products Liability, Employment Litigation, Estate Litigation, Real Estate, and Arbitration. He represents a broad spectrum of individuals, corporations and institutions in commercial, employment litigation, collection, construction and personal injury actions. He has expertise in a wide variety of venues in Bucks and surrounding counties, and in the United States District Court. Bill also has extensive experience in Alternate Dispute Resolution forums, including participation in the American Arbitration Association, private arbitrations and private court systems. He is frequently appointed as arbitrator.

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