General Dynamics Corp. v. Superior Court
7 Cal. 4th 1164, 876 P. 2d 487, 32 Cal. Rptr. 2d 1 (1994)
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Rule of Law:
An in-house attorney may pursue a wrongful discharge claim against their employer for breach of an implied-in-fact contract. They may also pursue a claim in tort for retaliatory discharge if the claim is based on adherence to mandatory ethical obligations or is permissible for non-attorney employees and can be established without breaching the attorney-client privilege.
Facts:
- Andrew Rose began working for General Dynamics Corporation in 1978 and worked there for 14 years, receiving consistent commendations and promotions.
- Rose alleged that through its conduct and assurances over his 14-year tenure, General Dynamics created an implied agreement that he would only be terminated for good cause.
- During his employment, Rose spearheaded an investigation into employee drug use, which led to numerous terminations.
- Rose protested the company's failure to investigate the electronic bugging of the chief of security's office.
- Rose also advised General Dynamics officials that the company's salary policy for a class of employees might violate the federal Fair Labor Standards Act, creating significant financial exposure for the company.
- On June 24, 1991, General Dynamics terminated Rose's employment.
- General Dynamics stated the reason for termination was a loss of confidence in Rose, but Rose alleged the true reasons were his actions related to the drug investigation, the bugging incident, and his salary advice.
Procedural Posture:
- Andrew Rose filed suit against General Dynamics in a state trial court, alleging breach of an implied-in-fact contract and retaliatory discharge.
- General Dynamics filed a general demurrer to the complaint, arguing that Rose, as an in-house attorney, was barred from bringing such claims.
- The trial court overruled the demurrer.
- General Dynamics, the defendant, filed a petition for a writ of mandate with the intermediate appellate court, the Court of Appeal.
- The Court of Appeal denied the petition.
- The California Supreme Court granted review of the matter.
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Issue:
Does an attorney's status as in-house counsel for a corporate employer bar them from pursuing claims for implied-in-fact breach of contract and retaliatory discharge following termination of employment?
Opinions:
Majority - Arabian, J.
No. An attorney's status as in-house counsel does not bar claims for wrongful termination, though such claims are subject to certain limitations. For implied-in-fact contract claims, the court found no policy reason to prevent an in-house attorney from suing for breach of an employment agreement promising termination only for good cause. The court reasoned that such claims focus on the employer's conduct in creating legitimate expectations of job security and do not typically implicate the core values of the attorney-client relationship. For retaliatory discharge tort claims, the court held they are permissible but qualified. An in-house attorney may sue if terminated for adhering to a mandatory ethical obligation under professional rules or statutes. Alternatively, a claim may proceed if a non-attorney could maintain such a claim and a statute or ethical rule permits the attorney to disclose the relevant client confidences. However, if a claim cannot be fully established without breaching the attorney-client privilege, it must be dismissed.
Analysis:
This decision significantly alters the traditional at-will employment relationship for in-house counsel by extending to them wrongful discharge remedies previously available only to non-attorney employees. It carves out an important exception to the rule from Fracasse v. Brent, which established a client's near-absolute right to discharge an attorney at any time. The court balances the sanctity of the attorney-client relationship against the public interest in encouraging employees, particularly lawyers, to uphold the law and professional ethics. This ruling establishes a new precedent in California, creating a framework that protects in-house counsel from retaliation while attempting to safeguard client confidentiality through procedural mechanisms and limitations on the scope of such claims.
