ACC Files Amicus In Suit Involving Bizarre Application of Rules of Professional Conduct to In-house Counsel Compensation Dispute

ACC Position: 

On January 27, 2016, the ACC and its Washington Chapter filed an Amicus brief in the Court of Appeals of the State of Washington protesting what may be the most bizarre application of the rules of professional conduct to in-house counsel that we have seen in ACC Advocacy.

Chism v. Tri-State Construction is a suit for withheld compensation between Tri-State and its general counsel who left the company. After a trial, the jury found that the company violated Washington’s prohibition on withholding employee compensation and awarded Chism the bonuses he claimed he was due. The trial judge then reduced the judgment amount, finding that Chism had breached his fiduciary duty to Tri-State by violating rules 1.7 (conflicts of interest) and 1.8 (business relationships) of the Washington Rules of Professional Conduct. This trial court decision presents serious issues concerning the novel application of professional ethics rules to the employee-employer salary negotiations between an in-house counsel and his corporate client. Additionally, Tri-State argues that Chism violated Rule 1.5 of the Rules of Professional Conduct relating to unreasonable fee agreements. To our knowledge, no court has ever inserted the rules of professional conduct into the salary negotiations of an in-house counsel. ACC argues in its brief that the rules cited by the trial court and Tri-State do not extend to the specific and narrow context of in-house counsel compensation arrangements and that in performing the business function of negotiating salaries, in-house counsel acts as a member of an executive team, not on behalf of the company as its legal counsel.

The lack of legal precedence cited by the decision of the trial court demonstrates the strained reading of these rules the decision represents, as well as a failure to give fair notice to the in-house bar of its obligations. If left undisturbed, the decision by the court will unfairly put at risk the compensation earned over the course of years by virtually every in-house counsel in Washington State.

Click here to view the amicus brief.