Washington Supreme Court: In-House Counsel Can Sue for Wrongful Discharge

Temple of Justice

In a case of first impression in Washington, the Supreme Court held that former in-house counsel can sue their employers for wrongful discharge. Karstetter v. King County Corrections Guild was before the Supreme Court after the trial denied a defense motion to dismiss and the Court of Appeals later reversed the ruling. The initial pleadings framed the narrow legal issue before the Supreme Court.

In those pleadings, the plaintiff alleged that he had worked for the defendant as an in-house counsel on a succession of contracts that included a termination clause providing him an opportunity to correct any behavior the defendant deemed “inappropriate.” Although the plaintiff eventually formed his own law firm, he argued that he essentially remained in-house counsel. The plaintiff was later terminated by the defendant without affording him the notice and opportunity to correct provided in the termination clause. The plaintiff also asserted that he was fired for cooperating with the investigation of a whistleblower complaint.

As noted, the trial court denied the employer’s motion to dismiss the former employee’s breach-of-contract and wrongful-discharge claims; however, the Court of Appeals reversed. At the Supreme Court, the employer primarily argued that as a lawyer, the in-house counsel could be fired for any reason without redress under RPC 1.16(a)(3)—requiring a lawyer to withdraw when discharged—and associated decisional law from the traditional attorney-client context, which essentially finds that a client can terminate a lawyer at any time and for any reason.

A six-member majority of the Supreme Court disagreed. Relying heavily on the California Supreme Court’s decision in Gen. Dynamics Corp. v. Superior Court, 876 P.2d 487 (Cal. 1994), this  majority concluded that the relationship between an in-house counsel and the employer must be assessed as an employee-employer relationship as well as that of an attorney-client. The majority reasoned that RPC 1.16 standing alone did not expressly prohibit a wrongful discharge claim by in-house counsel, acknowledging that “[t]oday’s legal employees operate differently from private sector attorneys.” 444 P.3d at 1190. The three-member dissent argued that in-house attorneys should be treated the same as their private practice counterparts and, therefore, should not have a legal remedy for their discharge.

In a footnote, the majority flagged but did not address what may be a more practical problem in this context: the extent to which former in-house counsel may reveal privileged or otherwise confidential information in litigating a wrongful discharge claim. In doing so, the majority cited In re Schafer, 149 Wn.2d 148, 66 P.3d 1036 (2003), where the Supreme Court rejected a “whistleblower” exception to lawyer confidentiality. RPC 1.6(b)(5) includes an exception that permits a lawyer to “reveal information relating to the representation of a client to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client.”

The ABA, in Formal Opinion 01-424 (2001), concluded that a wrongful discharge action by a former in-house counsel fits within the meaning of “claim” as used in the corresponding ABA Model Rule on which Washington RPC 1.6 is patterned generally. The ABA opinion cautioned, however, that the scope of the exception was narrow and that “[t]he measures necessary to protect information that may be disclosed will be unique to each situation.” Id. at 4. The ABA opinion counseled that lawyers in this situation should consider using available procedures such as sealed filings and in-camerareview to protect continuing client confidentiality. In sum, although Karstetter allows wrongful discharge claims by former in-house counsel (at least on its asserted facts), the specific path for litigating them remains an open question in Washington.