Whistleblowing Attorney Loses

The public policies that underpin Rule 1.13(b) do not protect a whistleblowing attorney’s job, according to a recent opinion of the Utah Supreme Court.

This case requires us to determine whether rule 1.13(b) of the Utah Rules of Professional Conduct reflects a clear and substantial public policy of the kind sufficient to prevent companies from terminating in-house legal counsel for reporting illegal activity to management. David K. Pang, an attorney, filed a complaint against his employer alleging that he was terminated for refusing to ignore the company‘s violation of several states‘ usury laws. He asserted that the company had effectively asked him to violate the Utah Rules of Professional Conduct in order to keep his job. The district court dismissed his complaint, concluding that Mr. Pang was an at-will employee and that his firing did not violate a clear and substantial public policy of the State of Utah. We affirm the district court‘s decision. Rule 1.13(b) does not constitute a clear and substantial public policy that prevents the termination of an at-will employee. And even if it did, other rules of professional conduct evince strong policy choices that favor allowing clients to terminate the attorney-client relationship at any time, including firing an inhouse lawyer with whom an organizational client disagrees.

Background

Between 2009 and 2012, Mr. Pang worked as a compliance officer for Internal Document Services (IDS) and Progressive Finance. Resource Management Incorporated (RMI) also hired Mr. Pang in 2012, becoming a ―co-employer‖ with the other two companies. IDS promoted Mr. Pang to in-house counsel in 2011, making him responsible for its compliance with state regulatory requirements in several different jurisdictions. Mr. Pang apparently worked in this same capacity for the other two companies. Because the relationship between these three entities is not relevant to the merits of the issues presented on appeal, we will refer to them collectively as ―the Company throughout this opinion.

Beginning in September 2011, Mr. Pang became concerned that the Company was violating “usury laws in numerous states by charging an interest rate above statutory limits and not registering as a loan institution.” He warned the Company‘s owners ―repeatedly “that these oversights ―rendered their out of state practice illegal.” Mr. Pang ―made a final attempt to convince “the Company of its ―illegal lending practices” in May 2012. He ―printed, and took home, loan contracts from different states in order to develop a spreadsheet report to show the specific number of . . . usury violations.” Two weeks later, the Company fired Mr. Pang ―for taking home documents, “citing a provision of the employee handbook that prohibited such conduct. ―[A]t the time of his termination,” Mr. Pang learned ―for the first time “that ―the owners were aware of the problems but did not plan to correct” them. And he ―was told to ignore ” the Company‘s ―non-compliance.”

Holding

We affirm the district court‘s decision. Even though the court erroneously denied Mr. Pang‘s request for a hearing, the error was harmless. Mr. Pang fails to invoke a clear and substantial public policy that would have prohibited the Company from terminating him. The specific allegations in his complaint do not support the assertion that he was terminated for refusing to commit an illegal act, and rule 1.13(b) does not, standing alone, reflect the type of public policy that qualifies as an exception to the at-will employment rule.

(Mike Frisch)