## Facts

- Richard K. Spratley and Brett G. Pearce were in-house “Claims Litigation Counsel” attorneys for State Farm in Utah and represented State Farm and its insureds in claims-related litigation.
- They alleged State Farm pressured them to act contrary to professional ethical duties and retaliated when they resisted.
- They resigned in June 2000 and retained copies of documents and materials from their prior work, including items State Farm asserted were confidential or privileged; some were attached to their complaint.
- They sued State Farm and certain employees for employment-related tort and contract claims, including misrepresentation, tortious interference, retaliation/termination in violation of public policy, breach of contract and the implied covenant, wrongful discharge, and intentional infliction of emotional distress.
- State Farm moved for orders restricting disclosure and use of communications and information from the prior attorney-client relationships, compelling return of retained documents, and disqualifying plaintiffs’ chosen counsel based on alleged exposure to confidential information.
- The trial court granted the requested relief (non-disclosure, document return, and disqualification), and the Utah Supreme Court accepted interlocutory review.

## Issues

1. To what extent may former in-house counsel use or disclose information and communications obtained during representation of the former client (and insureds) when suing the employer-client.
2. Whether the trial court properly ordered return of retained client documents and restricted their use.
3. Whether plaintiffs’ counsel should be disqualified based on receiving confidential or privileged information from the former in-house attorneys.

## Decision

- The court affirmed in part, reversed in part, and remanded the trial court’s order.
- The court generally upheld restrictions protecting confidentiality and privilege, but required a more tailored, case-specific approach that permits the former in-house attorneys to pursue their claims under judicial controls.
- The court largely affirmed the requirement that improperly retained documents be returned, while allowing that appropriate litigation use could be addressed through supervised discovery and protective procedures.
- The court reversed in part the blanket disqualification of plaintiffs’ counsel as overly broad, directing the trial court to consider narrower measures and to disqualify only upon a sufficient showing that confidentiality protections could not otherwise be maintained.

## Legal Principles

- Former in-house counsel remain bound by continuing duties of confidentiality and loyalty to former clients, including protection of privileged and confidential information learned during representation.
- Information relating to representation may not be disclosed absent a recognized exception; employment status does not relax professional obligations.
- Courts should balance confidentiality interests (including those of represented insureds) against a former attorney’s ability to vindicate personal legal rights, using tailored protective mechanisms (e.g., protective orders, sealed filings, and judicial screening such as in camera review).
- Client documents and files are generally the client’s property; former counsel may be compelled to return retained confidential or proprietary materials, with any necessary use to be handled through appropriate discovery under court supervision.
- Disqualification is a severe remedy aimed at protecting the integrity of proceedings and client confidences; it should not be imposed as a blanket measure where narrower restrictions can prevent misuse of confidential information.

## Conclusion

The Utah Supreme Court required careful judicial control over any use of confidential information by former in-house counsel suing their former employer-client, upheld return of retained client materials subject to supervised litigation access, and narrowed an overbroad disqualification order in favor of less restrictive protections where feasible.


Spratley v. State Farm Mut. Auto. Ins. Co., 78 P.3d 603 (Utah 2003)