The at-will employee protection most law firms have as employers which permits them to terminate an at-will employee for any or no reason but for a discriminatory reason faced scrutiny last month in the law firm context regarding an allegation that an associate attorney was terminated from their firm for raising ethical concerns.

In this month's column, we discuss the Southern District of New York's decision in Joffe v. King & Spalding, 2018 WL 2768645, which in June, denied the motion of King & Spaulding for summary judgment.

'Joffe v. King & Spaulding'

Plaintiff, David Joffe, was a litigation associate at defendant King & Spalding from January 2012 until his termination in December 2016. Joffe brought a lawsuit against King & Spalding, claiming that he was fired for raising ethical concerns over King & Spalding's representation of ZTE Corp. Joffe made two claims against King & Spalding: for breach of contract under Wieder v. Skala; and for wrongful discharge under Section 510 of ERISA concerning the timing of his discharge in relation to the vesting of certain of his 401-K benefits. King & Spalding made a motion for summary judgment, alleging that Joffe was fired based on his poor performance as an attorney for King and Spalding and that Joffe's claims should be dismissed.

In 2014, Joffe was a sixth year associate qualified for promotion to “senior associate,” the final stop before achieving partner status at King & Spalding. In July 2014, King & Spalding began representing ZTE, which was accused of sharing confidential information in violation of a NDA it held with Vringo, Inc. Joffe, along with two King & Spalding partners, worked on the matter.

At a hearing on July 7, 2014, one partner filed a declaration from a ZTE employee that stated that Vringo had illicitly shared information with the European Commission. However, on July 24, 2014, King & Spalding was forced to reveal that they had no factual basis for this claim. The judge in the case issued a reprimand regarding the declaration, calling it a “material misrepresentation” and stating that “everybody acted in, at least, reckless disregard of the truth.”

In December 2015, ZTE and Vringo reached a settlement, but only after it came to light that, contrary to its initial claims, ZTE had shared Vringo's confidential information with the NDRC, a Chinese regulatory agency, and with Google. Moreover, prior to settlement, the judge entered an order to show cause as to why ZTE and the King & Spaulding partners should not be sanctioned under the Federal Rules of Civil Procedure—an order which was not resolved.

According to Joffe, the order to show cause, coupled with the numerous “misstatements and corrections” in the ZTE case, indicated to him that the King & Spaulding partners may have committed an ethical violation.

Joffe testified that, while he was of the opinion that neither of the partners had either lied to the Judge, or were guilty of “intentional misconduct,” their failure to properly vet the information provided by ZTE was troubling enough that it should be reported “[so that] someone … who's more experienced and who's not involved could look at it.” As such, Joffe, both parties agree, raised his concerns with King & Spalding's general counsel, and the firm's outside counsel, with the issues of “professional liability” and “potential malpractice liability” at the center of these discussions.

According to Joffe, as a result of his contacting King & Spalding's general and outside counsels, the firm began to retaliate against him. For instance, Joffe alleged he was removed from the partnership track in December 2015, his pay was frozen, and he was not awarded a bonus for 2015.

On July 25, 2016, Joffe sent an email to King & Spaulding's partner in charge of the Business Litigation Associates Committee, outlining the circumstances in which he found himself. While Joffe claims that this email was another attempt to report unethical conduct, the court found that its purpose is open to interpretation. A week after reviewing the email, the partner asked for a report on Joffe's billable hours, and in September 2016, resolved to fire Joffe, forwarding the July 25, 2016, email to the King & Spalding associates evaluation committee as part of this process.

Between September 2016, and his ultimate dismissal in December 2016, Joffe received his 2015 performance review from the partner and another partner in which, Joffe claims, though the other parties deny it, he was told not to share the “red flags” he described in his July 25, 2016 email with other members of King & Spalding.

At a meeting on Dec. 7, 2016, Joffe was fired from King & Spalding, and offered a severance agreement for “six months' salary in exchange for a general release of claims against the firm.” Joffe's formal termination came on Dec. 14, 2016. In addition, as he was fired before Jan. 1, 2017, King & Spalding was able to withhold a $20,000 contribution to Joffe's 401-k, by revoking it on Dec. 29, 2016.

King & Spalding gave three reasons for Joffe's firing. First, the firm faulted Joffe's “administrative shortcomings” in that he either failed to, or was late in submitting, a required self-evaluation and practice plan. Second, Joffe received a negative review from a partner in King & Spalding's Washington D.C. office, who, in August 2015, recommended that Joffe be removed from the partnership track. Third, and finally, King & Spalding contended that Joffe's services were no longer in demand. Joffe was also told, among other things, that most of the cases he was involved with were ending, and it was unlikely Joffe would be required on new ones.

Joffe claimed that the firm's reasons for his termination were illogical and pretextual. The court made a number of observations concerning the claims:

• While Joffe's tardiness regarding the self-evaluation and practice plans was evident, there was no conclusive evidence that such failures were egregious enough to merit dismissal.
• King & Spalding did not generally keep track of which associates failed to present practice plans or self-evaluations.
• The head of human resources testified that he did not believe any attorney at King & Spalding had, in his experience, ever been punished for not submitting a practice plan.
• Even if there was a valid reason for removing Joffe from the partnership track, to deny him his 2015 bonus for missing the minimum hour threshold, contrary to common practice at King & Spalding, and to fire him in 2016, when Joffe had already billed over the minimum hour threshold at the time of his termination, was unusual.
• Regarding the negative review Joffe received, which expressed the partner's displeasure with Joffe's performance in no uncertain terms, both Joffe and the partner stated that their time working together was minimal.
• In 2014, Joffe received a positive review and was promoted to senior associate.
• In 2016, not only did Joffe receive positive feedback as to the quality of his work, he was also reviewed by five partners, four of whom were satisfied with his performance.
• The claim that many of Joffe's matters were coming to a close, three matters in question, it was evident that none were close to closing at the time Joffe was fired.

King & Spaulding moved for summary judgment to dismiss Joffe's complaint arguing that Joffe was terminated for legitimate performance-related reasons. In opposition, Joffe argued that the motion should be denied on the basis that he had two viable claims: “a common-law claim for breach of contract under Wieder v. Skala, 80 N.Y.2d 628 (1992), premised on his alleged retaliatory discharge”; and “a claim for wrongful discharge under Section 510 of ERISA, 29 U.S.C. Section 1140, related to the timing of his discharge relative to the vesting of the firm's contribution to his 401k account.”

King & Spalding argued for a narrow interpretation of Wieder which would require the plaintiff to establish “actual knowledge” or “clear belief” of wrongdoing, have reported it, and, thus, have faced retaliation.

The court rejected King & Spalding's reading of Wieder, which it found, was contrary to both Rule 8.3(a) of the New York Rules of Professional Conduct, and ethics opinions of the New York State Bar Association. The court ruled:

It is immaterial whether, with the benefit of hindsight, the underlying suspected unethical conduct may not amount to a violation of the disciplinary rules … A law firm that punishes an attorney for reporting conduct that the attorney mistakenly (but sincerely) believes to be unethical, “impede[s] or discourage[s] … compliance” with the rules of professional conduct, regardless of whether the attorney is proven correct. Adopting King & Spalding's crabbed reading, associates who suspect unethical conduct would be forced to choose between reporting their concerns, and risking dismissal if it turns out they are wrong, and staying silent, and risking themselves violating their personal reporting obligation if it turns out their concerns are correct.

Moreover, considering the facts through the lens most favorable to the plaintiff in the context of a motion for summary judgment, the court found that Joffe established a prima facie case for breach of contract under Weider for several reasons. The court held, it is reasonable to conclude that Joffe, in good faith, had ethical concerns, which he raised with King & Spalding. In addition, while it is unclear what exactly Joffe told his superiors, the court ruled that it is reasonable to conclude that “Joffe appreciated that the situation was a close call” and conveyed this to the firm's legal representatives. Moreover, while the court acknowledged that the July 25, 2016, email may have been sent out of concern for the financial issues Joffe felt he was facing at King & Spalding (namely the loss of his 2015 bonus and his pay freeze), it is also found that it was reasonable the he may have been motivated by what he considered potential ethics violations.

Furthermore, the reasons King & Spalding gave for firing Joffe were, the court determined, not sufficient to warrant the grant of summary judgment. For, the court concluded, King & Spalding's claims regarding Joffe's alleged “administrative shortcomings,” his negative review, and the assertion that his career had “plateaued,” were not conclusively supported by the facts. Thus, the court upheld Joffe's prima facie claim under Wieder, and ruled that, while King & Spalding may have “demoted and fired Joffe for unrelated, legitimate reasons … there is adequate evidence that the justifications proffered by King & Spalding are pretextual for the case to go to a jury.”

Finally, the court also ruled that, by failing to establish that Joffe's dismissal had no pretextual basis, King & Spalding's motion for summary judgment should also be denied on Joffe's ERISA claim.

Conclusion

The issue of raising ethical issues concerning one's employer is a difficult dilemma. The termination of an attorney who raises ethical concerns may expose law firms to claims of retaliatory termination.As demonstrated by Joffe such claims are often fact laden and often require a trial to determine.

Arthur J. Ciampi is the coauthor of the treatise 'Law Firm Partnership Agreements' and is the managing member of Ciampi LLC. Maria Ciampi, of counsel to Ciampi LLC, assisted in the preparation of this article.