Conflicts of Interest For In-House Counsel: Emerging Issues in the Expanding Role of the Attorney-Employee

Law firm lawyers spend a good deal of time running conflicts checks to see if they can accept representation in a given matter This activity is attributable not only to recent changes in law firm practice,2 but also to the dramatic growth and maturation of conflicts of interest as a subject of serious concern to practicing lawyers.3 As one of the most litigated areas of professional responsibility, lawyer conflicts are now being raised as a basis for such diverse remedies as civil damages, disqualification, and fee forfeiture, as well as the more traditional remedy of professional discipline.4 Until recently, in-house counsel were spared much of this concern, limiting their involvement to making decisions on the company\u27s behalf whether to consent to a conflict of an outside law firm.5 However, as more legal work is being brought in house,6 company lawyers are finding themselves faced with conflicts questions just as complex as those facing their law firm counterparts. Unlike law firm lawyers, however, in-house counsel are often ill equipped to handle these conflict issues. Having viewed themselves as single-client lawyers,7 they are not used to thinking about conflicts issues each time they take on a new matter. More importantly, perhaps, the special situation of inhouse counsel is a factor often overlooked in the vast body of secondary literature that has grown in response to the dilemmas of law firm lawyers.\u27 As a result, company lawyers have little guidance in either detecting the various conflicts that arise in their practices or analyzing how their status as salaried employees of a single client affects their ability to comply with the law governing lawyer conflicts. It is not entirely unexpected that in-house lawyers increasingly find themselves involved in impermissible conflicts given the dramatic changes that have occurred in their own practice setting over the past several decades. Once upon a time, corporate legal departments were relegated to handling such routine tasks as leases, real estate, and contract work.9 As in-house departments rapidly expanded in the 1970s and 1980s they began to handle a larger number of complex problems.1 By the 1990s this growth appears to have slowed; nevertheless, today\u27s corporate legal departments-some of which number hundreds of lawyers-handle a variety of sophisticated matters. This includes wholly new legal services being offered in the areas of preventative or anticipatory legal services and in the management of outside counsel. As will be seen, 2 these new legal services are at least partially responsible for the many conflicts that arise as a result of the growing number of relationships and contacts among in-house lawyers and management and other company personnel. The purpose of this Article is to begin to explore some of the conflicts issues currently facing in-house counsel. The Article will focus on situations involving conflicts between a company and its individual constituents. Part II addresses issues arising from the simultaneous representation of multiple clients, both inadvertent and deliberate, while Part III turns to issues arising from third-party payment and control. There are numerous other conflicts that confront in-house lawyers, such as conflicts between the company and former clients of the lawyer and conflicts arising from some lawyers\u27 dual roles as both legal and business adviser. Although it is beyond the scope of this Article to address all of these conflicts, the concluding section will touch briefly upon some important conflicts arising from a lawyer\u27s self-interest. Part IV briefly addresses business transactions between the lawyer and her client-employer, such as the issuance of stock or stock options as part of the lawyer\u27s compensation, and conflicts arising from wrongful conduct by the employer toward the lawyer, such as conduct resulting in a lawsuit by the lawyer for unlawful discrimination