This Rule governed the practice of law in the District of Columbia from January 1, 1991, through January 31, 2007. As of February 1, 2007, the Amended Rules took effect.
(a) A lawyer employed or retained by an organization
represents the organization acting through its duly authorized constituents.
(b) In dealing with an organization’s directors,
officers, employees, members, shareholders, or other constituents, a
lawyer shall explain the identity of the client when it is apparent
that the organization’s interests may be adverse to those of the
constituents with whom the lawyer is dealing.
(c) A lawyer representing an organization may also
represent any of its directors, officers, employees, members, shareholders,
or other constituents, subject to the provisions of Rule 1.7. If the
organization’s consent to the dual representation is required
by Rule 1.7, the consent shall be given by an appropriate official of
the organization other than the individual who is to be represented,
or by the shareholders.
Comment
The Entity as the Client
[1] An organizational client is a legal entity, but
it cannot act except through its officers, directors, employees, shareholders,
and other constituents.
[2] Officers, directors, employees, and shareholders
are the constituents of the corporate organizational client. The duties
defined in this Comment apply equally to unincorporated associations.
"Other constituents" as used in this Comment means the positions
equivalent to officers, directors, employees, and shareholders held
by persons acting for organizational clients that are not corporations.
[3] When one of the constituents of an organizational
client communicates with the organization’s lawyer in that person’s
organizational capacity, the communication is protected by Rule 1.6.
Thus, by way of example, if an organizational client requests its lawyer
to investigate allegations of wrongdoing, interviews made in the course
of that investigation between the lawyer and the client’s employees
or other constituents are covered by Rule 1.6. This does not mean, however,
that constituents of an organizational client are the clients of the
lawyer. The lawyer may not disclose to such constituents information
relating to the representation except for disclosures explicitly or
impliedly authorized by the organizational client in order to carry
out the representation or as otherwise permitted by Rule 1.6.
[4] When constituents of the organization make decisions
for it, the decisions ordinarily must be accepted by the lawyer even
if their utility or prudence is doubtful. Decisions concerning policy
and operations, including ones entailing serious risk, are not as such
in the lawyer’s province. However, different considerations arise
when the lawyer knows that the organization may be substantially injured
by tortious or illegal conduct by a constituent member of an organization
that reasonably might be imputed to the organization or that might result
in substantial injury to the organization. In such a circumstance, it
may be reasonably necessary for the lawyer to ask the constituent to
reconsider the matter. If that fails, or if the matter is of sufficient
seriousness and importance to the organization, it may be reasonably
necessary for the lawyer to take steps to have the matter reviewed by
a higher authority in the organization. Clear justification should exist
for seeking review over the head of the constituent normally responsible
for it. The stated policy of the organization may define circumstances
and prescribe channels for such review, and a lawyer should encourage
the formulation of such a policy. Even in the absence of organization
policy, however, the lawyer may have an obligation to refer a matter
to a higher authority, depending on the seriousness of the matter and
whether the constituent in question has apparent motives to act at variance
with the organization’s interest. Review by the chief executive
officer or by the board of directors may be required when the matter
is of importance commensurate with their authority. At some point it
may be useful or essential to obtain an independent legal opinion.
[5] In an extreme case, it may be reasonably necessary
for the lawyer to refer the matter to the organization’s highest
authority. Ordinarily, that is the board of directors or similar governing
body. However, applicable law may prescribe that under certain conditions
highest authority reposes elsewhere; for example, in the independent
directors of a corporation.
Relation to Other Rules
[6] This Rule does not limit or expand the lawyer’s
responsibility under Rules 1.6, 1.8, 1.16, 3.3, and 4.1. If the lawyer’s
services are being used by an organization to further a crime or fraud
by the organization, Rule 1.2(e) can be applicable.
Government Agency
[7] Because the government agency that employs the
government lawyer is the lawyer’s client, the lawyer represents
the agency acting through its duly authorized constituents. Any application
of Rule 1.13 to government lawyers must, however, take into account
the differences between government agencies and other organizations.
Clarifying the Lawyer’s Role
[8] There are times when the organization’s
interest may be or become adverse to those of one or more of its constituents.
In such circumstances the lawyer should advise any constituent, whose
interest the lawyer finds adverse to that of the organization, of the
conflict or potential conflict of interest, that the lawyer cannot represent
such constituent, and that such person may wish to obtain independent
representation. Care must be taken to assure that the individual understands
that, when there is such adversity of interest, the lawyer for the organization
cannot provide legal representation for that constituent individual,
and that discussions between the lawyer for the organization and the
individual may not be privileged.
[9] Whether such a warning should be given by the
lawyer for the organization to any constituent individual may turn on
the facts of each case.
Dual Representation
[10] Paragraph (c) recognizes that a lawyer for an
organization may also represent a principal officer or major shareholder.
Derivative Actions
[11] Under generally prevailing law, the shareholders
or members of a corporation may bring suit to compel the directors to
perform their legal obligations in the supervision of the organization.
Members of unincorporated associations have essentially the same right.
Such an action may be brought nominally by the organization, but usually
is, in fact, a legal controversy over management of the organization.
[12] The question can arise whether counsel for the
organization may defend such an action. The proposition that the organization
is the lawyer’s client does not alone resolve the issue. Most
derivative actions are a normal incident of an organization’s
affairs, to be defended by the organization’s lawyer like any
other suit. However, if the claim involves serious charges of wrongdoing
by those in control of the organization, a conflict may arise between
the lawyer’s duty to the organization and the lawyer’s relationship
with the board. In those circumstances, Rule 1.7 governs whether lawyers
who normally serve as counsel to the corporation can properly represent
both the directors and the organization.
