Lawyers’ Duties to Adversaries and Third Persons - July 14 Flashcards
If a lawyer represents an organization, does the lawyer represent the organization’s personnel in their individual capacities as a result? (Q)
No. In representing an organization, a lawyer represents the organization acting through its constituents, i.e., through its authorized officers, directors, employees, and shareholders, or their equivalents. Thus, a lawyer who represents the organization does not, for that reason alone, also represent the organization’s constituents in their individual capacities. This is true even if a constituent of the organization supervises or directs the lawyer’s work.
A lawyer was contacted by the general counsel of a business. The general counsel explained that the business needed external counsel to review the employment contracts of individuals within the business’s legal department. The lawyer sent over an engagement letter, which the general counsel signed. The lawyer reviewed the employment contracts as directed by the general counsel. At no time did the lawyer communicate with anyone from the business other than the general counsel.
Is the lawyer’s client the general counsel? (Q)
No. The general counsel is not the lawyer’s client; the business is the client. If a lawyer is employed or retained by an organization, the lawyer represents the organization. The representation of an organization will occur through the organization’s duly authorized constituents. The fact that a constituent of the organization may review and direct the lawyer’s work does not mean that the constituent is the lawyer’s client instead of the organization.
Here, the general counsel retained the lawyer on behalf of the business for the lawyer to serve as the business’s external counsel and review its employment contracts. The general counsel was a duly authorized constituent of the business, but the mere fact that the general counsel reviewed and directed the lawyer’s work did not make the general counsel the lawyer’s client. Thus, the lawyer’s client is the business, not the general counsel.
If an organization’s constituent communicates in his organizational capacity with the organization’s lawyer, is that communication normally protected by the lawyer’s duty of confidentiality? (Q)
Yes. If an organization’s constituent communicates in his organizational capacity with the organization’s lawyer, that communication is normally protected by the lawyer’s duty of confidentiality. However, the constituent’s communication does not make the constituent the lawyer’s client in the constituent’s individual capacity. Therefore, the lawyer may not disclose confidential information to the constituent except as otherwise provided by the rules of professional conduct.
What is a shareholder derivative action? (Q)
A shareholder derivative action is a lawsuit brought by a corporation’s shareholders against the corporation’s officers or directors, alleging mismanagement of the corporation. A derivative action is nominally brought on behalf of the corporation itself, though in reality these lawsuits often reflect disputes over the management of the organization rather than harms or breaches of duty by officers or directors.
May a corporation’s lawyer often defend the corporation against a shareholder derivative action? (Q)
Yes. In many instances, a corporation’s lawyer may defend the corporation against a shareholder derivative action. Although the corporation is nominally the plaintiff in the action, derivative suits are often a normal incident of the corporation’s business, and the lawyer may defend the corporation against those suits just as the lawyer may defend against other suits. However, if the derivative suit alleges serious wrongdoing by the board of directors or officers who control the organization, the lawyer must consult the ethical provisions on conflicts of interest to determine whether there is a true conflict between the organization and its controlling constituents.
Pursuant to the MRPC rules on representing organizations, under what circumstances must an organization’s lawyer report the actions of an officer or employee to a higher authority within the organization? (Q)
Under the MRPC rules on representing organizations, a lawyer must report the actions of an officer, employee, or other constituent to a higher authority within the organization if:
the lawyer knows the constituent is committing or intends to commit a violation of a legal obligation to the organization or a violation of law that might be imputed to the organization,
the violation is likely to cause substantial harm to the organization, and
the violation relates to a matter within the scope of the lawyer’s representation.
Under these conditions, the lawyer must act as is reasonably necessary in the best interests of the organization. This means that unless the lawyer reasonably believes that the organization’s best interests can be served without reporting (e.g., if talking to the actor would solve the problem), the lawyer must report the matter to higher authority within the organization.
Is a lawyer’s duty to report a matter to a higher authority within the organization triggered merely because the lawyer disagrees with a decision made elsewhere in the organization? (Q)
No. A lawyer does not have a duty to report a matter to a higher authority within the organization merely because the lawyer disagrees with a decision. This is true even if the decision seems unwise or risky. Rather, the duty to report extends to known violations of legal duties to the organization or known violations of of law that could be imputed to the organization. Absent one of these violations, a lawyer normally must accept management or operational decisions made by or on behalf of the organization.
If the highest authority within an organization fails to address a clear violation of law within the organization as reported by the organization’s lawyer, and the lawyer reasonably believes the failure to address the violation will result in substantial injury to the organization, may the lawyer reveal information relating to the representation to the extent necessary to protect the organization from substantial injury? (Q)
Yes. If (1) a lawyer reports a clear violation of law within the organization as required by the rules of professional conduct, (2) the highest authority within the organization fails to address the violation, and (3) the lawyer reasonably believes this will result in substantial injury to the organization, the lawyer may reveal information relating to the representation to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization. The lawyer may do so regardless of whether the information is otherwise confidential.
This rule does not apply if the violation is the subject of the lawyer’s representation of the organization or its officers, employees, or other constituents, i.e., if the organization retained the lawyer to investigate the alleged violation or to defend the organization or a constituent against a claim arising out of the violation.
Does a lawyer’s duty to report a matter to a higher authority within the organization apply if the lawyer represents a government agency? (Q)
Yes. A lawyer’s duty to report violations of law or legal duties within an organization to a higher authority applies if the lawyer represents a government agency. However, a government setting may implicate additional rules, regulations, or statutes outside the rules of professional conduct that would not apply to analogous situations in a nongovernment organization.
If a lawyer reasonably believes that she has been discharged for reporting a matter to a higher authority within the organization, must the lawyer take reasonable steps to ensure that the organization’s highest authority is informed of the discharge? (Q)
Yes. If a lawyer reasonably believes that she has been discharged for reporting a matter to a higher authority within the organization, the lawyer must take whatever steps the lawyer reasonably believes necessary to ensure that the organization’s highest authority is informed of the discharge. Similarly, if the lawyer withdraws from the representation under circumstances that require or permit reporting a matter to a higher authority within the organization, the lawyer must take reasonable steps to ensure that the organization’s highest authority is informed of the withdrawal.
If a lawyer for an organizational client is dealing with the organization’s constituents, and the lawyer knows or should know that the organization’s interests are adverse to the interests of those constituents, must the lawyer make sure the constituents understand that the lawyer is representing the organization and not the constituents? (Q)
Yes. If a lawyer who is representing an organization is dealing with the organization’s officers, directors, employees, or other constituents, and the lawyer knows or reasonably should know that the organization’s interests are adverse to the constituents’ interests, the lawyer must make sure the constituents understand that the lawyer is representing the organization and not the constituents. The lawyer should also explain that the lawyer cannot represent the constituents, that discussions between the lawyer and the constituents may not be privileged, and that the constituents may wish to seek independent counsel.
If a lawyer represents an organizational client, is the lawyer ever permitted to represent any of the organization’s directors, officers, employees, members, shareholders, or other constituents? (Q)
Yes. If a lawyer represents an organization, the lawyer may also represent any of the organization’s directors, officers, employees, shareholders, or other constituents, so long as the representation satisfies the conflict-of-interest rules. Under these rules, a lawyer may not represent a client if (1) the representation would be directly adverse to another client; or (2) there is a significant risk that the representation would be materially limited by the representation of another client, a former client, or a third person, or by the lawyer’s own interest. However, the conflicts rules sometimes allow a representation if each affected client gives written informed consent. If the organization’s consent to a representation is required, it must be given by (1) an organizational official other than the official the lawyer is trying to represent or (2) the organization’s shareholders.
