Beyond advising on a wide range of legal issues, in-house counsel are often valuable because of the intimate knowledge they have of the companies for which they work. But does this very same depth of insight create a risk for companies looking to hire in-house counsel from a competitor?
There are certainly potential issues a company may encounter when looking to hire in-house attorneys from a rival, including that an attorney is taking privileged information or that a conflict is imputed to all in-house lawyers in a legal department, according to both in-house and outside counsel, but there are ways to minimize the risk.
"Being in-house, the most important thing that we can do to be useful and to do our job effectively is to know the business. And an attorney who has worked in the industry and worked for a competitor before can be really useful in that respect," said Rebecca Signer Roche, assistant general counsel of labor and employment at DynCorp International. But at the same time, she said, there are "a lot of ethical considerations" around attorney-client privilege and attorney work product.
And if there's a conflict between two competitors, the argument may be made that all in-house attorneys at the new company, not just the one hired from a competitor, are conflicted, said Joseph Ahmad, partner at firm Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, pointing to a lawsuit in which his firm represented a lawyer in such a predicament. The case involved in-house attorney Charlotte Rutherford, who left her role as deputy general counsel for intellectual property at oilfield services company Schlumberger Ltd. to join patent licensing and enforcement company Acacia Research Group. In the weeks and months after her departure, Rutherford allegedly shared confidential and proprietary information with Acacia that was used to acquire a patent. Several months later, this patent was the basis of an infringement claim against Schlumberger.
In response to the patent infringement suit, Schlumberger sought to not only disqualify Rutherford, but also all in-house counsel at Acacia and its subsidiaries "based on the imputation of Rutherford's conflict to her fellow Acacia attorneys." In March 2015, the U.S. District Court for the Western District of Texas in Austin disqualified Rutherford and all in-house counsel for Acacia and its subsidiaries. On appeal, the U.S. Court of Appeals for the Federal Circuit agreed with the disqualifications, noting that while "there are important societal rights implicated by attorney disqualification ... there is an overriding countervailing concern suffusing the ethical rules: a client's entitlement to an attorney's adherence to her duty of loyalty, encompassing a duty of confidentiality."