Washington Lawyer

Legal Ethics: Opinion 305 Ethical Considerations Arising From Representation of Trade Association

From Washington Lawyer, February 2002

(The February 2002 Washington Lawyer “Speaking of Ethics” column addressed the representation issues in Opinion 305 (Ethical Consideration Arising From Representation of Trade Association). Opinion 305 deals with complicated and multi-faceted issues pertaining to representation of an association, the situations of non-representation and actual representation of the association’s members, and adverse representations for the association, its members, and third parties. Rules 1.6 (Confidentiality of Information), Rule 1.7 (Conflict of Interest), Rule 1.1.3 (Organization of Client), Rule 1.16 (Declining or Terminating Representation) and other legal authorities were mentioned in Opinion 305.)

Rule 1.13(a) states that “A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” The Comment to Rule 1.13 further states that “The duties defined in this Comment apply equally to unincorporated associations.” Comment [13] to Rule 1.7 adds, “[T]he lawyer who represents a… trade association or other organization-type client is deemed to represent that specific entity, and not its … members or ‘other constituents.’” A lawyer representing a trade association then, does not, simply by or through that representation, establish an attorney-client relationship with each member.

1. Representation Adverse to Member

In general, the lawyer for a trade association is not prohibited from representing the association in a manner adverse to a member or members. Comment [13] to Rule 1.7; D.C. Bar Ethics Op. No. 216. In the situation where the trade association becomes adverse to the interests of one of the members, Comment [8] to Rule 1.13 provides guidance to the trade association’s lawyer:

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..
. In addition, since the member is not a client of the association’s lawyer, the lawyer is usually free to represent an unrelated party with interests adverse to the member. Comment [13] to Rule 1.7.

2. Attorney-Client Relationship With Member of Association

…An attorney-client relationship may be formed in the absence of an express agreement, and is “not dependent on the payment of fees [or]… upon the execution of a formal contract.” Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311,1317 (7th Cir.), cert. denied, 439 U.S. 955 (1978). What is most important is whether the member of the trade association disclosed confidential information to the association’s lawyer, and the surrounding circumstances and expectations.

If the new representation would require the lawyer to advance two adverse positions in a single matter, then Rule 1.7(a) prohibits the representation. In other circumstances, the applicable rule is Rule 1.7(b), which provides that a lawyer shall not represent a client with respect to a matter if:

(1) that matter involves a specific party or parties and a position to be taken by that client in that matter is adverse to a position taken or to be taken by another client in the same matter even though that client is unrepresented or represented by a different lawyer;
(2) such representation will be or is likely to be adversely affected by representation of another client;
(3) representation of another client will be or is likely to be adversely affected by such representation; or
(4) the lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by the lawyer’s responsibilities to or interests in a third party or the lawyer’s own financial, business, property, or personal interests.

Rules 1.6 (confidentiality of information) and 1.10 (imputed disqualification) may also be implicated. . To overcome the conflict and continue the adverse representation, the lawyer must disclose the issue and obtain the consent of the member as well as of the prospective client, pursuant to Rule 1.7(c).

3. Impairment of Representation

Even if no attorney-client relationship exists with the member, the lawyer must determine whether the representation would be materially impaired by her representation of the trade association. Pursuant to Comment [14] to Rule 1.7, representation (absent informed consent) would be improper if:

(a) the adverse matter is the same as, or substantially related to, the matter on which the lawyer represents the organization client. [sic] (b) during the course of representation of the organization client the lawyer has in fact acquired confidences or secrets (as defined in Rule 1.6(b)) of the organization client or an affiliate or constituent that could be used to the disadvantage of any of the organization client or its affiliate or constituents, or (c) such representation seeks a result that is likely to have a material adverse effect on the financial condition of the organization client.

…This test involves a careful analysis of the attorney’s relationship and dealings with the member and the member’s relationship and dealings with the association. For example, a member’s disclosure of confidential information relevant to the association’s matter undertaken by the attorney may be a basis for disqualification. …

Alternatively, the matter may not be undertaken if the result sought by the prospective client is likely to have a material adverse impact on the trade association’s finances. See Comment [16] to Rule 1.7. …

If the analysis demonstrates that the lawyer’s representation of the trade association will materially limit its representation of the prospective client, then the lawyer may only accept or continue the representation by obtaining the consent of the trade association and the prospective client, pursuant to Rule 1.7(c). See Comment [1] to Rule 1.16 (“A lawyer should not accept representation in a matter unless it can be performed competently, promptly, without improper conflict of interest, and to completion.”).

A lawyer who represents a trade association does not, without more, represent the members of the association. When asked to represent a client in a matter where the lawyer would be adverse to an association member, however, the lawyer must consider the relevant facts and circumstances to determine if the member has a reasonable belief that an attorney-client relationship exists between the member and the lawyer. If so, the lawyer may accept the new representation only with the consent of both the prospective client and the member. If no attorney-client relationship exists with the member but the lawyer’s representation would be impaired because of a substantial relationship between the subject of the new representation and its representation of the trade association, or if the new matter is likely to be financially adverse to the association, then the representation may proceed only with the consent of the client and the trade association.

Inquiry No. 00-6-15
Adopted: January 16, 2001