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October 28, 2016

Walker v. Apple, Inc. 16 C.D.O.S. 11477

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The Fourth District holds a law firm’s concurrent representation of a class representative and, in a separate action, an unnamed but identified class member with conflicting interests results in automatic disqualification.

Brandon Felczer, represented by Hogue & Belong, filed a wage-and-hour class action against Apple. The Felczer trial court certified six subclasses of non-exempt employees.

Stacy and Tyler Walker, also represented by Hogue & Belong, filed a putative class action against Apple in the same court alleging claims of former nonexempt employees of a store who allegedly did not receive final wage statements after termination. The Walkers claimed this was Apple’s policy and practice because it blocked online access to wage statements upon termination and prior to receipt of a final statement.  Apple’s defense was store managers are directed to deliver final paychecks and wage statements in hard copy to terminated employees.

Apple successfully moved to disqualify Houge in Walker, asserting it had a conflict of interest by its concurrent representation of both the certified Felczer class and the putative Walker class.  The Apple employee who terminated the Walkers, Meg Karn, had been a nonexempt Apple employee and was a member of the Felczer class.  She was later promoted to an exempt management position, as were other Felczer class members. Houge, Apple argued, would have to cross-examine its own client, Karn, about the procedure followed in terminating the Walkers.  This would challenge her compliance with the law, or with her managerial responsibilities.

Rule 3-310 of the Rules of Professional Conduct precludes representation of clients in separate matters whose interests conflict without informed, written consent. A court first evaluates whether the challenged representation is concurrent or successive. Houge’s representation of the Felczer class and the Walkers was concurrent, affecting the attorney’s duty of loyalty.

Karn, as a member of the certified Felczer class, was a client of Houge.  Once a class is certified, class counsel are deemed to represent absent class members for ethical rules prohibiting communication with represented parties.  Courts and commentators recognize that attorney-client privilege applies to post-certification communications between attorneys and class members.  The Court of Appeal stopped short of adopting an identical rule for conflicts, implicitly agreeing with the Walkers that would be impractical since the identities of absent class members are often unknown.

The court distinguished cases where disqualification was unsuccessfully sought because no class had been certified, and it was impractical to obtain consent from unknown, absent class members. The Felczer class was certified, and Karn’s identity and significant role in Walker were known.  The impracticality limitation did not exist, and it was proper to find Houge represented Karn for conflicts analysis.

Nor did the court agree that the conflict was hypothetical and speculative. A conflict of interest exists when a lawyer’s duty on behalf of one client obligates the lawyer to take action prejudicial to the interests of another client.  Disqualification is not required if only a hypothetical conflict exists, but in this case the conflict was actual.  The Walkers asserted Apple had a policy of denying terminated employees final wage statements by eliminating online access.  Apple blamed Karn for not implementing its policy to provide terminated employees with final wage statements in hard copy.

These conflicting litigation strategies implicated the Walkers’ burden of showing Apple acted intentionally and Apple’s good faith defense. The need for Karn’s testimony was not hypothetical or speculative.

Karn’s interests conflicted with the Walkers because her testimony could jeopardize her employment prospects. To support the Walkers, she would have to testify against her employer, or testify in a way to undermine her own abilities. It would violate the Houge’s duty of loyalty to Karn to force this choice on her to benefit the Walkers.  Although Karn had no direct stake in Walker, she had a practical interest in not being portrayed as a liar or as a poor manager, and a right to not have her counsel put her in this position.

The Court of Appeal held it could not defer a disqualification decision. Although Walker was not yet certified, and the case may settle before trial, an exception for these reasons would swallow the rule.  Many conflicts would go unremedied because most cases settle or otherwise resolve before trial.

The Court would not consider the Walkers’ argument, raised only on appeal, that the conflict could be remedied by associating co-counsel to examine Karn. Apple argued there were other employees who, like Karn, were members of the Felczer class but adverse to members of the Walker putative class due to promotion to management positions within Apple.  Because the Walkers did not raise the associated counsel issue in the trial court, Apple was deprived of making a record to support its contention that the Walker’s proposed solution would not remedy the potential conflicts.

The Walkers argued, consistent with Ninth Circuit precedent, that policy justifications for the automatic disqualification applicable to individual litigant suits are not fully transferrable to class action cases. Two classes may have common adversity to a defendant, but also have interests adverse to each other.  Class action attorney conflicts often develop when different members of the same class develop divergent interests regarding how to prevail on their shared claims.  A balancing test for concurrent representation conflicts in circumstances unique to class actions may be appropriate.

The Walker case was inapposite because the Walker-Karn conflict, although it arose in a class action, was more akin to individual litigant suits.  It was not, as in the cases where balancing is appropriate, an intraclass dispute over settlement in the same case.  It was a conflict between members of different classes in different cases, and implicated the policy concerns underlying the duty of loyalty.

Comment: This case illustrates that while there is some leeway in conflicts analyses in representing unnamed class members, disqualifying conflicts can nonetheless arise.

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