Representing Both Defendant-Employer and Defendant-Employee

Plaintiff Strategies in Naming an Individual Co-Defendant

There are several reasons that a plaintiff might name a supervisor or manager as a co-defendant. The first is factual: The plaintiff may very well view her manager as the source of the discrimination. After all, an individual supervisor or manager is often the person making employment decisions, or, at the very least, is the person communicating that decision to a given plaintiff.

The second reason is procedural: For plaintiffs working for incorporated companies that have a principal place of business in another state, naming an individual defendant will likely destroy diversity jurisdiction and ensure that the case remains in state court. State courts are generally seen as more plaintiff-friendly than federal courts. Thus, to the plaintiff and her counsel, naming an individual co-defendant is simply sound litigation strategy.

There are also strategic reasons for naming an individual co-defendant. The plaintiff may hope to create tension and hostility between the employer and individual defendant. It would certainly make the plaintiff's success more likely if the defendants began pointing fingers at one another. In addition, the individual co-defendant may have his or her own insurance coverage, through a director or executive's plan or through his or her own homeowner's plan.

Strategic Advantages to Joint Representation

Whenever an employer and individual employee are jointly sued, the question that will be foremost in the employer's concerns is whether it is obligated under state law to defend, or at least indemnify, the individual co-defendant. Several jurisdictions, most notably California, require private employers to indemnify employees for losses incurred in the course and scope of their employment.

California interprets its indemnification provision to require an “employer to indemnify an employee for attorneys' fees and costs incurred in defending a third-party lawsuit, where such expenses are necessary and the lawsuit is based on the employee's conduct within the course and scope of his or her job duties.” In order to garner the protection of this provision, an employee seeking indemnity must show that the conduct defended against was within the course and scope of employment. “Course and scope” are defined using respondeat superior principles; that is, an employer is vicariously liable for risks incidental to the employer's business. Consequently, a California employer is required to indemnify its employees against the costs of any lawsuit so long as the employee's conduct was “not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer's business.” See Cassady v. Lewis, 145 Cal.App.4th 220 (Cal. Ct. App.2006); Jacobus v. Krambo, 78 Cal. App. 4th 1096 (Cal. Ct. App. 2000).

In a jurisdiction like California, where an employer is required to defend or indemnify a sued employee, there is an obvious practical advantage to a joint representation: One defense is less costly than two. In addition, by engaging in a joint representation, the employer would have more control over defense costs and strategy, as well as more assurance that the employee's defense is being effectively and efficiently handled. Finally, the employer would likely have more familiarity with its corporate policies and procedures and greater access to other employees who may act as witnesses. It would be more efficient to translate such information to one counsel.

A joint representation may also suggest to the jury that the employer supports the individual defendant and that the employer does not believe the individual defendant engaged in any misconduct. Finally, a joint representation ' paid for by the employer ' is more likely to ensure the cooperation and loyalty of the individual defendant. Whenever an individual defendant is named, it is almost certain that that individual will be a key witness to the lawsuit. Providing a joint representation will go a long way toward guaranteeing an atmosphere of cooperation and support.

Pitfalls of a Joint Representation

There are several situations in which a joint representation is not advisable or is even prohibited by the Rules of Professional Conduct. Clearly, if an employer is asserting a defense that implicates the individual defendant (e.g., that the employee acted outside the scope of his employment), a conflict of interest exists and a joint defense would be inadvisable. Indeed, Model Rule of Professional Conduct 1.7 prohibits a lawyer from representing a client where that client's interests would be directly adverse to another client's interest or where the representation would materially limit the lawyer's representation of another client.

In addition to conflict of interest issues, joint representations may also implicate a lawyer's duty to maintain client confidences. For instance, what if an individual defendant reveals facts suggesting that he did engage in harassing conduct? A lawyer may not be able to divulge such information to the employer without violating his or duties to the individual defendant. In such a situation, the lawyer may be forced to withdraw from his or her representation of the employer.

These pitfalls are especially evident in a sexual harassment suit. In many harassment cases, an employer can avoid liability by demonstrating that it took reasonable action to prevent and promptly correct any harassing conduct and that the plaintiff unreasonably failed to take advantage of the employer's corrective measures. This defense, titled the Faragher/Ellerth defense, generally allows an employer to escape liability if the employer can demonstrate that:

• It has a well-publicized anti-harassment policy;
• It investigated the plaintiff's complaints of harassment once made;
• It took immediate steps to stop the harassment (including firing the harasser); and
• The plaintiff failed to make a timely complaint.

By asserting such a defense, the employer is stating that the individual defendant's conduct violated the company's no-harassment policy. Thus, a conflict of interest would exist making the joint representation inadvisable and perhaps even prohibited. A final pitfall of a joint representation is the risk that the individual defendant will leave his or her employment. Whether the departure is related to the current lawsuit or not, such a departure could lead to serious communication issues between the individual defendant and the lawyer. This is especially true where the individual defendant and employer are no longer on good terms. For these reasons, it is incumbent upon the lawyer to communicate to the individual defendant, before embarking on the joint representation, the importance of continuing communication.

Identifying and Dealing With Conflicts of Interest

To determine whether a conflict of interest exists and a joint representation is possible, a lawyer must conduct an initial investigation into the allegations in plaintiff's complaint. The beginning point would be an interview of the individual
defendant. However, unless it is very clear from the outset that no conflict exists, counsel should make it clear to the individual defendant during this initial interview that counsel is representing the employer. If this point is not clearly made, anything the individual defendant, as a potential client says may be protected by the attorney-client privilege. While the lawyer should try to establish a good relationship with the individual defendant, the lawyer should also stress to the individual that, if any wrongdoing is revealed, the employer may have to take corrective action. This is especially true in a sexual harassment case.

In addition to interviewing the individual defendant, the lawyer should interview other company employees. The lawyer should gather information about the allegations in plaintiff's complaint, as well as the individual defendant's workplace conduct in general.

Even if the investigation reveals no actual conflicts of interest, the lawyer should, before entering into the joint representation, communicate to both the employer and individual defendant the risk of a future conflict. The lawyer should also indicate that he or she would have to withdraw from one or both of the representations if such a conflict materialized. Ultimately, the lawyer should seek written informed consent from both parties concerning the joint representation and the risk of future conflicts.

Conclusion

If, after conducting an initial investigation, an employer and its counsel choose not to engage in a joint representation, but rather pay the fees of an individual defendant's separate counsel, other issues become relevant. First, the lawyers for both sides should make it clear that there is no attorney-client privilege between the employer's counsel and the employee, or the employee's counsel and the employer. Second, both lawyers should be cognizant of the rules regarding contact with a represented person and avoid contacting the other defendant except through that defendant's counsel. Finally, if the employer is able to recommend counsel to the employee-defendant, the employer should seek to recommend someone with whom the parties have a good relationship. This will facilitate both defendants' individual defenses as well as avoid the hostility and friction which can only serve to benefit the plaintiff.

William C. Martucci, a member of this newsletter's Board of Editors, Kristen A. Page, and Jennifer K. Oldvader are corporate defense lawyers in the National Employment Litigation and Policy Group at Shook, Hardy & Bacon, L.L.P. in Washington, D.C. and in Kansas City, MO. Martucci may be reached at [email protected] or 816-474-6550; Page may be reached at [email protected] or 816-474-6550; Oldvader may be reached at [email protected] or 816-474-6550.

The last decade has marked a dramatic rise in the number of executives, supervisors and managers who are being sued in their personal capacity for their work-related actions. This rise is largely the result of the expansion of many state discrimination laws to allow for lawsuits against not only the corporate employer, but also individual supervisors.

This trend toward naming individual employees as co-defendants in employment suits means that lawyers are increasingly being asked to defend both the employer and the individual co-defendant. Of course, whenever a lawyer is faced with a joint representation, he or she must carefully examine the facts for actual and potential conflicts of interest between the two defendants. The employment context presents unique risks in this regard and the lawyer must consider not only the ethical implications, but also the practical concerns that come with representing both the company and the individual.

This article addresses those considerations and provides practical insights and advice on the pros and cons of a joint representation.

Plaintiff Strategies in Naming an Individual Co-Defendant

There are several reasons that a plaintiff might name a supervisor or manager as a co-defendant. The first is factual: The plaintiff may very well view her manager as the source of the discrimination. After all, an individual supervisor or manager is often the person making employment decisions, or, at the very least, is the person communicating that decision to a given plaintiff.

The second reason is procedural: For plaintiffs working for incorporated companies that have a principal place of business in another state, naming an individual defendant will likely destroy diversity jurisdiction and ensure that the case remains in state court. State courts are generally seen as more plaintiff-friendly than federal courts. Thus, to the plaintiff and her counsel, naming an individual co-defendant is simply sound litigation strategy.

There are also strategic reasons for naming an individual co-defendant. The plaintiff may hope to create tension and hostility between the employer and individual defendant. It would certainly make the plaintiff's success more likely if the defendants began pointing fingers at one another. In addition, the individual co-defendant may have his or her own insurance coverage, through a director or executive's plan or through his or her own homeowner's plan.

Strategic Advantages to Joint Representation

Whenever an employer and individual employee are jointly sued, the question that will be foremost in the employer's concerns is whether it is obligated under state law to defend, or at least indemnify, the individual co-defendant. Several jurisdictions, most notably California, require private employers to indemnify employees for losses incurred in the course and scope of their employment.

California interprets its indemnification provision to require an “employer to indemnify an employee for attorneys' fees and costs incurred in defending a third-party lawsuit, where such expenses are necessary and the lawsuit is based on the employee's conduct within the course and scope of his or her job duties.” In order to garner the protection of this provision, an employee seeking indemnity must show that the conduct defended against was within the course and scope of employment. “Course and scope” are defined using respondeat superior principles; that is, an employer is vicariously liable for risks incidental to the employer's business. Consequently, a California employer is required to indemnify its employees against the costs of any lawsuit so long as the employee's conduct was “not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer's business.” See Cassady v. Lewis , 145 Cal.App.4th 220 (Cal. Ct. App.2006); Jacobus v. Krambo , 78 Cal. App. 4th 1096 (Cal. Ct. App. 2000).

In a jurisdiction like California, where an employer is required to defend or indemnify a sued employee, there is an obvious practical advantage to a joint representation: One defense is less costly than two. In addition, by engaging in a joint representation, the employer would have more control over defense costs and strategy, as well as more assurance that the employee's defense is being effectively and efficiently handled. Finally, the employer would likely have more familiarity with its corporate policies and procedures and greater access to other employees who may act as witnesses. It would be more efficient to translate such information to one counsel.

A joint representation may also suggest to the jury that the employer supports the individual defendant and that the employer does not believe the individual defendant engaged in any misconduct. Finally, a joint representation ' paid for by the employer ' is more likely to ensure the cooperation and loyalty of the individual defendant. Whenever an individual defendant is named, it is almost certain that that individual will be a key witness to the lawsuit. Providing a joint representation will go a long way toward guaranteeing an atmosphere of cooperation and support.

Pitfalls of a Joint Representation

There are several situations in which a joint representation is not advisable or is even prohibited by the Rules of Professional Conduct. Clearly, if an employer is asserting a defense that implicates the individual defendant (e.g., that the employee acted outside the scope of his employment), a conflict of interest exists and a joint defense would be inadvisable. Indeed, Model Rule of Professional Conduct 1.7 prohibits a lawyer from representing a client where that client's interests would be directly adverse to another client's interest or where the representation would materially limit the lawyer's representation of another client.

In addition to conflict of interest issues, joint representations may also implicate a lawyer's duty to maintain client confidences. For instance, what if an individual defendant reveals facts suggesting that he did engage in harassing conduct? A lawyer may not be able to divulge such information to the employer without violating his or duties to the individual defendant. In such a situation, the lawyer may be forced to withdraw from his or her representation of the employer.

These pitfalls are especially evident in a sexual harassment suit. In many harassment cases, an employer can avoid liability by demonstrating that it took reasonable action to prevent and promptly correct any harassing conduct and that the plaintiff unreasonably failed to take advantage of the employer's corrective measures. This defense, titled the Faragher/Ellerth defense, generally allows an employer to escape liability if the employer can demonstrate that:

• It has a well-publicized anti-harassment policy;
• It investigated the plaintiff's complaints of harassment once made;
• It took immediate steps to stop the harassment (including firing the harasser); and
• The plaintiff failed to make a timely complaint.

By asserting such a defense, the employer is stating that the individual defendant's conduct violated the company's no-harassment policy. Thus, a conflict of interest would exist making the joint representation inadvisable and perhaps even prohibited. A final pitfall of a joint representation is the risk that the individual defendant will leave his or her employment. Whether the departure is related to the current lawsuit or not, such a departure could lead to serious communication issues between the individual defendant and the lawyer. This is especially true where the individual defendant and employer are no longer on good terms. For these reasons, it is incumbent upon the lawyer to communicate to the individual defendant, before embarking on the joint representation, the importance of continuing communication.

Identifying and Dealing With Conflicts of Interest

To determine whether a conflict of interest exists and a joint representation is possible, a lawyer must conduct an initial investigation into the allegations in plaintiff's complaint. The beginning point would be an interview of the individual
defendant. However, unless it is very clear from the outset that no conflict exists, counsel should make it clear to the individual defendant during this initial interview that counsel is representing the employer. If this point is not clearly made, anything the individual defendant, as a potential client says may be protected by the attorney-client privilege. While the lawyer should try to establish a good relationship with the individual defendant, the lawyer should also stress to the individual that, if any wrongdoing is revealed, the employer may have to take corrective action. This is especially true in a sexual harassment case.

In addition to interviewing the individual defendant, the lawyer should interview other company employees. The lawyer should gather information about the allegations in plaintiff's complaint, as well as the individual defendant's workplace conduct in general.

Even if the investigation reveals no actual conflicts of interest, the lawyer should, before entering into the joint representation, communicate to both the employer and individual defendant the risk of a future conflict. The lawyer should also indicate that he or she would have to withdraw from one or both of the representations if such a conflict materialized. Ultimately, the lawyer should seek written informed consent from both parties concerning the joint representation and the risk of future conflicts.

Conclusion

If, after conducting an initial investigation, an employer and its counsel choose not to engage in a joint representation, but rather pay the fees of an individual defendant's separate counsel, other issues become relevant. First, the lawyers for both sides should make it clear that there is no attorney-client privilege between the employer's counsel and the employee, or the employee's counsel and the employer. Second, both lawyers should be cognizant of the rules regarding contact with a represented person and avoid contacting the other defendant except through that defendant's counsel. Finally, if the employer is able to recommend counsel to the employee-defendant, the employer should seek to recommend someone with whom the parties have a good relationship. This will facilitate both defendants' individual defenses as well as avoid the hostility and friction which can only serve to benefit the plaintiff.

William C. Martucci, a member of this newsletter's Board of Editors, Kristen A. Page, and Jennifer K. Oldvader are corporate defense lawyers in the National Employment Litigation and Policy Group at Shook, Hardy & Bacon, L.L.P. in Washington, D.C. and in Kansas City, MO. Martucci may be reached at [email protected] or 816-474-6550; Page may be reached at [email protected] or 816-474-6550; Oldvader may be reached at [email protected] or 816-474-6550.