Wieder v. Skala, 80 N.Y.2d 628 (1992)

In a law firm associate’s employment, there is an implied understanding that both the associate and the firm will conduct their practice in accordance with the ethical standards of the profession, and a discharge for adhering to those standards can constitute a breach of contract.

Summary

A law firm associate, Wieder, claimed wrongful discharge from the defendant law firm, Skala, due to his insistence on reporting professional misconduct by another associate as required by ethical rules. The New York Court of Appeals held that while the employment-at-will doctrine generally applies, an implied-in-law obligation exists within the attorney-law firm relationship that the firm will not impede the attorney’s ethical obligations. Terminating an associate for adhering to these mandatory ethical obligations constitutes a breach of contract. The court, however, declined to recognize a tort cause of action for abusive discharge.

Facts

Wieder, an attorney, was employed as a commercial litigation associate at the Skala law firm. He requested the firm represent him in a personal real estate transaction, and another associate, L.L., was assigned. L.L. neglected the matter and made false statements to conceal his neglect. Wieder reported this to senior partners, who admitted L.L. was a known liar. Wieder confronted L.L., who admitted to malpractice and fraud. Wieder insisted the firm report L.L.’s misconduct, as required by the Code of Professional Responsibility. The firm initially declined, then reported only after Wieder’s persistence. He was subsequently berated and ultimately fired shortly after filing motion papers in an important case he was handling.

Procedural History

Wieder sued Skala, alleging breach of contract and wrongful discharge. The Supreme Court dismissed the claims based on the employment-at-will doctrine. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

Issue(s)

1. Whether an implied-in-law obligation exists in the employment relationship between a law firm and an associate attorney, requiring both to adhere to the ethical standards of the legal profession, such that a termination for adhering to those standards constitutes a breach of contract.
2. Whether the discharge of an attorney for insisting on compliance with the ethical rules constitutes a tort of abusive discharge violating public policy.

Holding

1. Yes, because the unique nature of the attorney-law firm relationship includes an implied understanding that both will conduct their practice ethically, and the firm will not impede the attorney’s compliance with those ethical standards.
2. No, because significant alterations of employment relationships are best left to the Legislature.

Court’s Reasoning

The Court of Appeals distinguished this case from prior employment-at-will cases like Murphy v. American Home Products Corp. and Sabetay v. Sterling Drug, noting that those cases involved financial managers in large corporations, whereas Wieder’s role as an attorney was central to the firm’s purpose. The court emphasized that lawyers have a unique duty of self-regulation. DR 1-103(A) of the Code of Professional Responsibility places a duty on lawyers to report potential violations of disciplinary rules. The court stated, “[t]he reporting requirement is nothing less than essential to the survival of the profession”. The court reasoned that insisting Wieder disregard DR 1-103(A) forced him to choose between his employment and potential suspension or disbarment. The court found an implied agreement that the firm would not frustrate the legitimate purpose of the employment relationship by requiring unethical conduct. Quoting Patterson v. Meyerhofer, the court stated that “in every contract there is an implied undertaking on the part of each party that he will not intentionally and purposely do anything to prevent the other party from carrying out the agreement on his part”. The court refused to create a new tort of abusive discharge, deferring to the Legislature on such matters, citing Remba v. Federation Employment & Guidance Serv.