Level-up on legal ethics for in-house lawyers on this episode with former state bar prosecutor, Ryan Little, founder of Little Legal. In this episode, we talk about some of the ethical traps in-house lawyers should watch out for, how to handle conflicts of interest, navigating who your client is, Upjohn warnings in internal investigations, and much more.

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Listen to the Podcast here

  

Ethics In The Legal Department With Ryan Little, Founder Little Legal And Former State Bar Prosecutor

My name is Ryan Little. I’m the owner of Little Legal. Fun fact about me is that I’ve been a competitive Ultimate Frisbee player for 20 years.

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On our episode of the legal department, I am excited to welcome Ryan Little, who is the principal of Little Legal, and he is a former State Bar prosecutor. We are going to be talking about some ethical issues for in-house counsel and how to avoid some pitfalls. Ryan, how are you? Great to have you.

I’m doing well. Thank you, Stacy. It is really a pleasure to be here. I am such a fan, and I love what you are doing here, because in-house lawyers are often overlooked when it comes to the ethical issues that they face. I am just happy to be a part.

Thanks so much, and I wanted to jump off. I do not usually do a whole career journey. I have a very, when we did our prep, my mouth was agape when you said, “I grew up in a trailer park in Alabama and ended up as a State Bar prosecutor in Hawaii.” Not to make an assumption, but it is not a normal progression to go from what I would assume is poverty in Alabama, to living in one of the most expensive and exotic states in the union. Tell us a little bit about that.

Ryan Little’s Origin Story: From Trailer Park To State Bar Prosecutor

I will say you are correct. As far as I know, I am the only person from my trailer park who went on to be a State Bar prosecutor. It does indeed seem to be somewhat uncommon. I grew up in Alabama. My mom was a nurse, and this is all going to be intimately related to my career arc. My mom was a nurse, took care of my little brother, and she lost her nursing license. She lost it because she basically had a mental breakdown. The stress of single parenting got to her.

She had not dated much since, and my dad had gotten divorced. One day, she was dating somebody for the first time, and one day she found out that that guy had been cheating on her, and she basically just fell into a deep depression. At that time, she was working as a home health nurse. She went to make a home visit one day at some late in the evening, say of 7:00 PM, and she actually went the next day, at 6:00 AM. She knew that was wrong.

It was intentionally dishonest conduct. Her employer reported her to the Board of Nursing, and the Board of Nursing prosecuted. She has told me millions of times. I remember she was telling me this when I was 14 or 15, and this happened, she said, “I thought they were there for me.” The board said, “We think you should consent to revocation of your license.” She said, “I thought they were looking out for me and wanted to do what was best for me.” I said, “Okay.”

She lost her nursing license, and we instantly went from what I would consider firmly lower-middle class to low class. We would be without water for days at a time. We would not have lights quite often. At one point, I was going to quit the football team because I needed to get a job and work. For the generosity of many of my teammates’ families, who actually took up a collection to keep my family from getting evicted from our spot in the trailer park, I would have had to.

I saw years later when I was offered the opportunity to take a job as a State Bar prosecutor. My first thought was, “I would not want to do that. I do not want to be a narc.” I really started once I got an interview. The guy who told my mom she should consent to revocation of her license went through an interview just like this, and he had the same amount of discretion that I am going to have. It dawned on me that I will have a ton of power over people’s lives, and I can help prevent what happened to me.

I can make sure that the lawyers that I prosecute get the thoughtful, considerate push toward rehabilitation rather than punishment that my mom never did. It was really weird because the job became intensely personal for me, but in a good way. Not in a I take things personally, and I am going to hammer you way, but more in a how many people can we actually help? I did help quite a few. I got a ton of people into rehabilitation programs and helped a lot of people save their careers.

It was a very personal story, and that is very much my origin story. A few years ago, I was poached in private practice to join a high-end ethics group at a really well-regarded West Coast firm and got to train with them for a while. I went out on my own two years ago. Now I am playing the other side of it. Rather than being the prosecutor, I am no longer the one who holds life and death in my hands, so to speak.

What I tell my clients is, “What I can do is keep you out of trouble with the bar, or I can help to the best of my ability. If you are in trouble, I can help you get out of it. I can help you navigate that process.” One of the things that really hurt my mom, in her case, is that she did not know that there were lawyers who did professional regulation defense. She did not know that she could hire a lawyer. I do not know that it would have made a difference.

That is probably a steep climb there. You are right. Not even knowing that there are resources. It is so unfortunate that she was misled to think that the revocation was in her best interest.

I do not know that they told her it was in her best interest. She just assumed.

This is what happens.

I am a nurse, so this is what I should do. That is my origin story, and now I represent lawyers and law firms of all types and help them stay out of the ditch.

I am sure that experience helps you bring a lot of compassion to your work and thoughtfulness. You are looking at the long game. You are not just trying to get people out of a jam in the short term.

I definitely think it does.

Thank you for sharing that. It is a really personal story. As I said, your compassion comes through. We are a little bit more, at least in California, we are a little more aware of ethical traps because of the Tom Girardi case.

I never heard of him.

All of the twists and turns were exposed. In-house lawyers, especially in California, have to do their CLEs. There is a big ethical component to that. I do not know that it is always at the forefront of mind, especially as in-house lawyers are really coached and urged to become more business partners and business accelerators, etc. I wondered if you could just give us a couple of bullet points on the big ethical issues that in-house lawyers need to watch out for.

Conflict Of Interest: Representing The Entity Vs. Constituents (Rule 1.7 & 1.13)

I love the way that you phrased that because it is definitely true. One of the things that I hear a lot from lawyers who go in-house is “I am a cost center,” and they always feel like they are the first ones on the chopping block if things go wrong. That does lead people to want to prove themselves and to want to figure out, “How do I show them a value-add to this team?” and not just look like dead weight.

In terms of going in-house, the first conflict that comes up is The first ethical issue that comes up is really going to be conflicts of interest. Rule 1.7 of the California rules and of the model ABA model rules, which have been adopted by every state in the nation in some form or fashion, prohibit lawyers from engaging in concurrent conflicts of interest. At the same time, Rule 1.13 allows in-house lawyers to represent both the entity and its constituents.

The first ethical issue that comes up is usually a conflict of interest. Share on X

Where this comes up all the time is the CEO or the CFO or the COO or the VP who thinks, “You are my lawyer.” That is just not the case. An in-house lawyer represents the entity. They represent Acme Corp. They do not represent John Smith, CEO. This gets really tricky because you are working so closely with the executive team or with the C-suite that it often feels as if you are their personal lawyer.

They will say that, by the way. It is an endearment, and they are sharing their respect for you, their affinity for you, etc., but you do have to, at times, correct that.

I am sure we will talk about Upjohn issues later on, but that definitely comes up. It is funny where this comes up most often. I assume you probably have some of these listeners out there is people who represent organizations like HOAs. It comes up all the time because HOAs are just like little microcosms of society that engage in the most grievance political fights, and so are corporations.

Multiple subsidiaries or multiple departments? There are a lot of political issues, especially as the company grows.

There are corporate family conflicts. Can I represent both the parent company and the subsidiary? Sometimes that is state by state in terms of how they view those conflicts. If we are going to engage in that sort of dual representation, because you can represent the constituents, you can represent Acme Corp and John Smith, CEO, but you want to make sure that you paper that relationship the right way. You want to make sure you get a conflict waiver on both sides of the relationship.

One from the corporation, and one from the constituent. You also need to make sure that you fully disclose to both sides what the risks are of that dual representation. When we are talking about the enforceability of a conflict waiver, because this does come up, you want to make sure that you have given a really full and free disclosure.

My off-the-shelf advice for in-house lawyers, or really anybody who is engaging in the process of drafting a conflict waiver if they do not hire me to do it for them, is the fuller the disclosure, the more enforceable the waiver. That has come up a lot in cases across the country. Most notably in California, I think there is the McDermott case, a couple of years ago, where there was a big conflict waiver that was at the heart of the whole thing.

When we talk about an example of when an in-house lawyer might be representing, or might be asked to represent, the company and one of the constituents?

It certainly will come up where you are representing both at the same time. What may come up more frequently is the company giving you special dispensation to represent a constituent in a given matter. Maybe the CEO is being deposed, and you want to make sure that the company says, “Sure. You can go defend the deposition.” You have done this millions of times, and you are not necessarily representing the company, but you still are. When you are providing legal advice to the CEO, you want to make sure, again, you have created an attorney-client relationship. You are rendering legal advice. You need to make sure that the relationship is papered properly.

In that situation, would you recommend that the in-house lawyer actually do an engagement or a waiver to represent a CEO or other party? Litigation may be that is easier where the company is sued and then the executives are named individually. Is that something you would recommend that we paper?

I would certainly paper the conflict waiver if the in-house counsel is going to be representing them, because at that point, you arguably do have multiple clients in this situation. What most corporations are doing realistically is, once this whole C-suite gets named in a lawsuit, you are probably hiring outside counsel, which would be a better move.

The outside counsel. If I am there, they are working in my direction. My client is the company, and so you may need to have a separate lawyer for an executive, depending on whether they are interested or divergent. Are you saying in that case that maybe we should have a waiver for the executive to sign?

If we are getting to the point where we are retaining outside counsel, perhaps the corporation is paying outside counsel. What you would need to do is have a third-party payer agreement in place, which would be the responsibility of the outside lawyer to obtain on behalf of their client, who is, in this case, the CEO or whoever the constituent is of the corporation that they are representing. That makes a lot of sense, and it does make sense for in-house counsel in that moment to say, “You have got outside counsel, I am not your personal lawyer on this, I am representing corporate.” Give the Upjohn warning every time you see them in the hallway.

Great way to build trust.

Just so you know, I have got you an outside lawyer, and I am not your lawyer. Anything you say could be privileged. It might be at corporate discretion. That is probably how I would handle it.

Just being aware of who the client is is really important. You talked a little bit about that. It is not infrequent that your executive colleague, the folks that you work with and who direct the business on a day-to-day basis, fall out with the company. This has happened to me many times, where you go from being that person’s colleague and advisor to being adverse to them. Tips on how to handle that? What should the lawyer be aware of? What do they need to do in those situations where, let us just say, “We are going to fire the CEO?”

That is a messy situation. It just is. First and foremost, you have to remember to whom you owe your duty. It is really tempting, especially if you have had a long, fruitful relationship with this person, to want to tell them, “I have got your back,” because there is a human element to it. That is the difficult thing about ethics. Ethics is a little bit like the reasonably prudent person standard, and it is like, “Great.” We are supposed to all be these soulless, perfect decision-makers, but we are not.

Ethics is a bit like the ‘reasonably prudent person’ standard—we’re expected to be flawless, emotionless decision-makers, but we’re not. We’re human. Share on X

That is just not the reality of the situation. Introducing humanity into the relationship does create potential for weird circumstances to arise. In my mind, if you are firing the CEO, I think you could probably, as a best practice, remind the CEO, “I represent the company. Jane, I really enjoyed working with you. You are the smartest woman I have ever met. I have loved this. Now that we are no longer on the same team, please remember I represent the company.

Anything that you say to me, if you are going to tear down the company or if you are going to admit all these potentially illegal things that you did, that does create liability for you. I have a duty to report these things to my client. I owe them a fiduciary duty. I have loved working with you, but just keep that in mind going forward. We can still be friends, but we are not talking about this anymore.”

It is fine. It is almost easier once the person knows that they are going to be cutting ties with the company. I had a GC call me a couple of months ago, and the board had let her know that, without the CEO’s knowledge, they were going to be making a change. Imagine her situation where she is working in offices next to the CEO. They are doing day-to-day business. Maybe there are some strategic deals they are working on, and all the while she knows that the board is making plans to make a change.

In that situation, you just have to keep it in. That is the duty of confidentiality. Again, you represent the corporation. You owe them a fiduciary duty. Your duty of confidentiality is with the corporation, and any failure to abide by that duty can land you in hot water with the bar.

The sharing of information is a great jumping-off point. The sharing of information is a real, let me just say, management of information is a really important in-house skill, and it is hard to keep in mind. I just actually had a recent issue where someone was asking about something that I could not share with them because they are not in the need-to-know circle. Let us talk about the duty of confidentiality in an in-house setting. What do in-house lawyers need to know about what they can share and when?

Again, it all sort of emanates from the first question you asked, which is “Who is your client?” It is the corporation. It is the entity that is your client. Rule 1.6 is the rule governing confidentiality in the rules of professional conduct. It varies a little from state to state. For instance, my practice. I am in Hawaii, Alabama, and California. Each one of those has a slightly different version of the rule. We are adding Oregon and other states soon, and they have their own duties. In general, you are able to reveal confidential information to the extent necessary to effectuate the representation. That is a rule of thumb. I encourage them to go take a look at their own jurisdiction’s version of Rule 1.6.

One thing I do from a practical standpoint is I will ask the client, whoever is engaging, asking me to help with the deal or some other matter, “Who is in the loop?” Just to have that conversation ahead of time about, “Is this something super confidential? Can I bring these people in?” I do not want to have a foot in the door and just accidentally share information with people that are not in the loop.

Attorney-Client Privilege Vs. Duty Of Confidentiality & The Scope Of Legal Advice

That is exactly right. When we are talking about confidentiality, there is an important distinction to make that really only ethics nerds like me care about, which is the delineation between the duty of confidentiality on the one hand and the attorney-client privilege on the other. Those sound the same, and they are often used interchangeably by average practitioners, but they are very different.

The duty of confidentiality is a personal duty that you owe to your clients. What we are talking about when we are saying “Who needs to be in the loop,” we are starting to get more into attorney-client privilege issues. When an in-house lawyer is advising a corporation, only legal advice is privileged, business advice is not.

Only legal advice is privileged; business advice is not. That distinction is especially important for people in smaller organizations who are wearing many hats. Share on X

That is an important distinction, especially for people who are working in smaller organizations and are wearing a lot of hats. For instance, I am consulting on a case right now where it is a big real estate developer, and their general counsel is also a primary project manager. That creates a lot of issues. What happens if this project goes to litigation? What is privileged? What is not?

That GC might be a recipient witness.

Exactly. You might be called as a recipient witness to testify if you are a client. That is a super sticky situation. When we are talking about who is in the loop, I think that is the right question to ask. What is difficult for in-house counsel, especially if you are filling the general counsel role, is that you are often the person that people come to to ask that question, “Who can I tell?” I represent lots of really big law firms, and almost to a tee, once you get above a certain size, you hire a general counsel, and that is my point of contact.

I find myself asking this many times, “We’re working on this project to handle XYZ. Who can we talk with about this from your end? Who do you want to know?” The real issue is that you can get into privilege waiver situations if any unnecessary people are in the room when the legal advice is given. If you are an in-house lawyer, you want to start to develop that analysis in tandem with the officers and directors, but then the ultimate call is really going to be yours. As small as possible.

Less is more. You’re making me feel like my job is super heavy right now.

Your job is heavy, but in the best way.

Let us talk about another information sharing issue, which is the duty to report up the ladder. That is something I think many of us are not super aware of, but it is an expectation. When the proverbial shit hits the fan, there is the “Where were the lawyers? The lawyers were supposed to be on this.” Talk about that duty. What is up-the-ladder reporting?

Duty To Report Up The Ladder (And Up & Out Reporting)

This comes up a lot for in-house people, but maybe not in the general counsel role. They are not the Chief Legal Officer or the general counsel. They find out something is going on that should not be. The question is, who do they go to? If you are in a really big organization, if we are talking Fortune 500, and there are 150,000 employees, you probably have a pretty established chain of command.

The rules typically want you to do, and I cannot speak for every jurisdiction, I am not your lawyer, but the rules typically request of you or expect of you that you take your report of some information that could be potentially damaging to the company, or illegal, or harmful to the public, depending on the jurisdiction that you are in. You report that as high up the chain as you can, up to and including the CEO. That might look like, “I am the assistant general counsel, and I am reporting it to the senior assistant who then reports it.” If they do not do anything, I just keep going up and up.

What sorts of things do we need to watch out for to be reported up the chain?

Certainly illegal activity. There is also information that if you find out that the corporation or the entity is about to take action that would be illegal, or would have some sort of harmful impact on the public, I think it is a common one. If you find out that your company is about to pump a bunch of toxic chemicals into the watershed, that is probably the type of thing you would want to report up. There is actually up-and-out reporting, so it is not just up.

Let us break down and out.

Up and out, would be you go up the ladder as high as you possibly can. If nobody does anything, there are certain jurisdictions where you can disclose that confidential information.

You can or you must?

There’s somewhere it is permissive, and there is somewhere it is mandatory, so you need to know what your jurisdiction-specific rules are.

Let us use your toxic chemical example. If somebody suspected that, where should they go to validate after they have taken it up the chain? Where should they go to determine whether they have an actual mandatory duty to report out?

Tell me more about what you mean by that. I am not sure I am following.

You said if we learned that the company might be doing something that is harmful to the public or illegal, we have a duty to report up our chain. If nothing is done, we might have an obligation to report out to authorities or to regulators. We are not giving a 50-state survey here, but where could the lawyer look to find out whether they actually have a mandatory duty?

It is going to be in your state’s rules of professional conduct. Take a look. It is going to be a Chapter 1 rule. For the up-and-out distinction, it is either going to be in Rule 1.6 or it might be in Rule 1.13, which is the rule governing a lawyer’s ability to represent an organization and its constituents.

Going back to your experience in the Hawaii State Bar, did lawyers ever call for consultations?

Yes.

They liked that? I would be a little nervous. Calling for a friend here?

That is another one where it is really jurisdiction-specific. When I was a bar prosecutor in Hawaii, that was a huge part of my job. People would call in with issues, and we would give them what we had a mealy-mouthed term for confidential informal guidance. It was confidential. California is a little bit less direct in its informal guidance than we were in Hawaii. Alabama is very helpful, and they also actually have a safe harbor provision. If you call the bar with an ethics issue and request a written opinion, and you follow that opinion, you actually cannot be prosecuted.

It is really jurisdiction-specific. I would also say if you are nervous about reporting to the bar, you might perhaps engage the services, and maybe that would be the place to go, I will say because I know you have a broader audience. If you need an ethics lawyer and I am not licensed in your jurisdiction, I have already told you where I am, feel free to get in touch. Because I am a member of some organizations, I can probably refer you to the best person in your state.

That is an awesome resource, and we will put that in the show notes. Also, how to reach you. I am thinking relatedly of internal investigations, something that gives rise to what could be illegal conduct. We have mentioned Upjohn a couple of times, but it would be helpful to review that. What is Upjohn? When does it come into play? What do we need to know about it?

Upjohn Warning In Internal Investigations

Let us start first and foremost with what is Upjohn? If you are an audience member and you do not know what Upjohn is, you definitely need to hire an ethics lawyer. Upjohn is the Supreme Court case that expanded what was then called the control group test over attorney-client privilege. When representing a corporation or an entity prior to Upjohn, the doctrine governing organizational attorney-client privilege was that you had privilege as to members of the control group.

Upjohn made it clear that you can have attorney-client privilege over lower-level constituents of the group or entity. As a best practice, it is actually not codified. What has emerged since then is what is called an Upjohn warning. The idea is that we, as the lawyers, are giving notice to the lower-level employee that I am a lawyer, but I am the corporation’s lawyer. I am not your lawyer. The idea is that we want to give them a free and full disclosure, like the conflict waiver we discussed earlier.

The best practice is what’s called an Upjohn warning. The idea is that, as lawyers, we give notice to the lower-level employee: I am a lawyer, but I am the corporation’s lawyer—I am not your lawyer. Share on X

That would make it essentially impossible for them to say, “I did not know it was an investigation. I thought that you were representing me. I did not know that you were representing the corporation.” What I tell people is that when we are doing internal investigations, or there is an Upjohn issue, generally give the warning first thing in the interaction. There are a lot of issues tend to arise if you are giving it after substantive questioning has begun, or after the employee has already disclosed sensitive facts, or only after the employee expresses concern.

That is really a big one is “Wait. Am I not your lawyer? Did I do something wrong? Am I being investigated?” We want to make sure that we give the Upjohn warning early. In terms of what we want to say in it, the bullet points I want to tell people are that I represent the company. Attorney-client privilege in this conversation may be privileged, but only as regards the company. The company is going to be the holder of that privilege.

The company may disclose any of the information that you tell me, and you may actually want to retain personal counsel because I am not representing you. Again, I’m representing the company. Where things get really thorny for in-house counsel, when we’re talking about investigations and Upjohn warnings, is when employees ask about their own personal exposure or the question, “Did I do something wrong?”

Again, when you get into it, it is like the CEO who’s been fired who’s your friend. You want to reassure them about the consequences of what is going on, or you want to help them frame their narrative. That can bring up issues both as regards privilege and as regards professional duties, and avoiding things like engaging in dishonest conduct.

My bonus point on Upjohn is that my rule of thumb is to make sure that there is only one note-taker when it comes to internal investigations. If you have two, you have the opportunity for people to have different accounts of what happened. I do not say do not record or have a transcript of the interview.

That sort of thing is very often discoverable, and then I would say reduce whatever notes you take to a memo promptly. The question comes up, “Should I shred my notes or throw them away?” That really is a risk-tolerance dependent issue for the client to decide and the lawyer to decide to some point. Especially if you are working in a highly regulated industry where Sarbanes-Oxley is going to apply, you might have a situation where that would be a crime.

Those are great tips. I wrote all of those down. One last substantive area before we get to the fun in the conversation. A lot of companies have multi-state operations. I have only worked in one state, so it has not affected me. For in-house counsel who have businesses in multiple states and advise in multiple states, do they need to be licensed in all of those states? I could see that could get sticky if there were issues.

The typical rule is that most states have some sort of in-house counsel allowance for non-registration or not taking the bar. There is some sort of grace there, but it is really a state-by-state consideration. Certain states are a little bit more rigorous on it. California has recently reconsidered its in-house counsel registration requirements. Typically, I do not see in-house counsel being licensed in every state where their business has operations, but they do typically have their roster of lawyers that they go to in that state.

In California, we have this person, in New Mexico we have this person, and in Georgia we have that person. They realize, because it is so prudent risk management from a business risk standpoint, we are talking about general stuff. Sure, I can look up a service rule for a lawsuit as well as anybody. If we are getting to the point where we have a real, nuanced question that we are trying to answer, then at that point, we are going to retain somebody local.

It is evolving. You need to just keep your eye on it as the matter evolves. This was really informative. I am really thrilled to know you. You have a great network and resources for ethical issues. The last question is a fun one. I have used music my whole life to get pumped up every day. I listen to something different to get started. What is your pump-up song?

I love Don’t Stop Me Now by Queen. I love that song.

It builds. That is a good one.

That would probably be it. I love the energy of it, and I think that Freddie Mercury is the best rock singer of all time.

Stipulated, agree. Thanks for being here. I really enjoyed it.

Thank you, Stacy.

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If you want more content from the legal department, check out TLD GoalGetter on Substack. It’s a mix of free and subscription-based content to help you level up in your career. That’s TLD GoalGetter on Substack.

If you want more content from the legal department, check out TLD GoalGetter on Substack. It’s a mix of free and subscription-based content to help you level up your career. Check out TLD GoalGetter on Substack.

Before you go, if you want more content from the legal department, check out TLD GoalGetter on Substack. It’s a mix of free and subscription-based content to help level up your career. That’s TLD GoalGetter on Substack. Hope you check it out.

  

Important Links

• Ryan Little on LinkedIn
• Little Legal
• Certified Corporate Governance Professional
• The New Rules of Executive Presence

 

About Ryan Little

Ryan S. Little is the founder of Little Legal, a multi-state ethics firm serving lawyers in California, Hawai‘i, Alabama, Oregon, Colorado, and New Mexico. A former state bar prosecutor, Ryan offers his clients an insider’s view of lawyer regulation and enforcement.

At Little Legal, he advises lawyers and law firms on complex ethics, risk management, and discipline defense matters. Recognized as a leader in the field of ethics and professional responsibility, Ryan serves on the Board of the Association of Professional Responsibility Lawyers, the largest ethics law bar association in the United States.

He also serves on the Board of the Association of Discipline Defense Counsel, a California-specific legal ethics bar association. Ryan regularly speaks and writes on legal ethics issues and has been published or quoted by Bloomberg, the ABA Journal, Law360, the Daily Journal, Honolulu Civil Beat, and the Orange County Register.