Two recent North Carolina decisions, Sloan‑Oudeh v. State Farm Fire & Casualty Co. (N.C. Ct. App. Feb. 18, 2026) and WP Church, LLC v. Whalen (2026 NCBC Order 10) offer timely and instructive guidance on attorney disqualification, underscoring the judiciary’s increasing willingness to enforce ethical boundaries even when doing so disrupts ongoing litigation. Although arising in different contexts, both cases emphasize that courts will closely scrutinize counsel’s role when representation threatens to blur the line between advocate, witness, or conflicted fiduciary.
Sloan‑Oudeh v. State Farm Fire & Casualty Co. (N.C. Ct. App. Feb. 18, 2026)
Rule 3.7 and the Lawyer as Necessary Witness
In Sloan‑Oudeh, the North Carolina Court of Appeals affirmed the disqualification of plaintiff’s counsel under Rule 3.7 of the Rules of Professional Conduct, concluding that counsel was “likely to be a necessary witness” in an insurance bad‑faith case. The court emphasized that the plaintiff herself lacked direct knowledge of many key communications and negotiations, which had been handled almost entirely by her attorney. Because those communications went to contested issues such as bad faith, unfair trade practices, and punitive damages, the attorney’s testimony could not be avoided or characterized as collateral. Importantly, the Court rejected arguments that disqualification would cause substantial hardship, noting advance notice, the availability of other attorneys within the firm, and counsel’s long‑standing awareness that he might be called as a witness.
WP Church, LLC v. Whalen (2026 NCBC Order 10)
Dual Representation and Non‑Consentable Conflicts
The North Carolina Business Court’s decision in WP Church v. Whalen addresses a different, however equally significant ethical concern: whether a law firm may simultaneously represent a company and its manager when derivative claims allege serious self‑dealing and misappropriation. The court held that such dual representation was impermissible where the allegations went well beyond mere mismanagement and included detailed claims of fraud, theft, and conflicted transactions exceeding $5 million. Applying Rules 1.7 and 1.13, the court found that informed consent could not cure the conflict, particularly where the allegedly conflicted manager effectively controlled the entity and where disinterested approval was lacking. The court ordered disqualification sua sponte and struck all filings made on behalf of the company by conflicted counsel.
What These Decisions Signal to the Legal Profession
Together, these decisions are noteworthy for what they signal to the legal profession. Courts are not treating disqualification as a purely tactical remedy or a theoretical ethical concern; rather, they are prepared to intervene decisively where counsel’s continued involvement threatens trial integrity, client interests, or public confidence in the process. Both opinions stress that advance planning, internal firm firewalls, and consent letters may not suffice when the substance of the lawyer’s role, or the severity of alleged misconduct, creates an unavoidable conflict.
Practical Takeaways for Practitioners
For practitioners, the implications are clear. Lawyers who become deeply embedded in the factual narrative of a dispute risk becoming indispensable witnesses, even in civil and insurance litigation, where such outcomes are often underestimated. Likewise, firms representing closely held companies or LLCs must carefully evaluate dual representation at the outset of disputes involving fiduciary allegations, particularly in derivative actions. These cases serve as a reminder that ethical compliance is not merely a professional obligation; it is a strategic imperative that can determine who gets to stay in the courtroom and who does not.
