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When a C-Suite Sues, What's a GC to Do?

By William Vogeler, Esq. on May 17, 2018 | Last updated on March 21, 2019

It was the worst of times. Period.

That's because it's hard to talk about the best of times when your executive officer has a legal issue with the company. It's really a problem when the C-Suite complains to the company attorney.

And if they sue, it only gets worse. That's when general counsel has to put down the easy reading and look at the hard rules.

Conflicts of Interest

The Rules of Professional Conduct were not written for general counsel, although Rule 1.13 offers some guidance on representing an organization as a client.

"Unlike law firm practitioners, in-house lawyers have fewer clear guideposts to help them navigate the ethical landscape," Nicole Hyland wrote for the American Bar Association.

When it comes to facing a former company officer, however, Professional Rule 1.7 is the first commandment on conflicts of interest. Basically, it means you have to pass the case off to outside counsel.

It's important to do a conflict check there, too. It can be an expensive mistake to pay a law firm only to have it disqualified on your company's dime.

Worst Times

Other than right before a merger, tax audit or initial public offering, the worst time for a former executive to sue a company is during the NBA playoffs. At least it must look that way to the Cleveland Cavaliers.

Already down in the conference finals, the Cavs organization has been sued by its former chief financial officer. Mozelle Jackson, who has been with the team since 2010, says they retaliated against her.

Mozelle alleges that she was threatened, not fired, over an internal discrimination claim. An employee allegedly saw others deleting electronic evidence in the case, and Mozelle raised concerns with the company attorney.

The Cavs took no remedial action, she alleged, but outside counsel Howard Luckoff threatened to "ruin" her reputation if she fought the organization over it. CEO Len Komoroski was present at the time, Mozzelle says.

In basketball, they talk about a heat check when a player gets too hot. In corporate law, we talk about a conflict check when an internal issue gets too hot.

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