Task Force on Corporate Responsibility: Should the American Bar Association adopt new ethics rules?

Georgetown Journal of Legal Ethics, The, Summer 2003 by Kroetsch, Nicole, Petrich, Samantha

B. ORGANIZATION AS CLIENT

Model Rule 1.13 addresses who a lawyer's client actually is when representing an organization.51 Subsection (a) of Model Rule 1.13 states that "a lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents."52 The premise of subsection (a) is that the lawyer's client is the organization as a whole, not the separate constituents (officers, directors, employees, shareholders) of the organization.53 Thus, the lawyer's loyalty is to the organization, not the organization's constituents.54

In addition, Model Rule 1.13 addresses what measures lawyers can take if they discover conduct that is likely to result in substantial injury to the organization.55 More specifically, if confronted with corporate misconduct, a lawyer must consider certain measures in order to minimize disruption of the organization.56 In fact, the Supreme Court of Kansas, in Crandon v. Kansas, held that bypassing these measures and disclosing the misconduct to a source outside of the organization is a violation of the Kansas version of Rule 1.13.57 The attorney in question was the general counsel for an organization and became privy to information, through an employee of the organization, regarding misconduct within the organization.58 Rather than going through the various measures outlined in Model Rule 1.13, the attorney advised the employee, without any consultation with corporate executives, to turn the matter over to an outside agency.59 Based on these facts, the court held that "until she satisfied those rules, plaintiff had no duty or privilege to disclose the information"60 nor did she "take steps available to her that a reasonably prudent attorney would have taken prior to reporting what she suspected."61 This case illustrates that the measures listed in Model Rule 1.13 attempt to deal with the issue internally, and as a last resort, look to an outside party for assistance. Note, however, that such measures are to be taken only when the misconduct is related to the representation.62

C. SCOPE OF REPRESENTATION

Model Rule 1.2(d) states:

A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.63

Attorneys who represent corporate clients may find that this rule fails to clearly define what it means to "know" that officers or directors of a corporation have engaged in "criminal or fraudulent" behavior. This issue was considered by the Ethics 2000 Commission.64 As part of this consideration, Comments 9 through 12 (formerly Comments 6 through 9) were revised to provide additional direction to help lawyers determine what Model Rule 1.2(d) means.65 While minor changes were made in these comments to provide more guidance to lawyers about what they must do to avoid assisting a client to commit a crime (new Comment 10) and to clarify the distinction between advising and being a party to the course of action (new Comment 9), the most significant change is found in Comment 12 (former Comment 9).66 This Comment now offers an attorney a more detailed example of a situation in which she will violate Rule 1.2(d) even though a defrauded person is not a party to a transaction.67 It also replaced "must" with "should" when directing a lawyer not to participate in a criminal or fraudulent act.68