Neutrals, government, and organizations - Lawyer representin...

Learning Outcomes

After reading this article, you will be able to identify the ethical duties of a lawyer representing an entity or other organization. You will understand who the client is, how to address conflicts between the organization and its constituents, the lawyer’s obligations when misconduct is discovered, and the rules for dual representation. You will be able to apply these principles to MPRE-style questions.

MPRE Syllabus

For the MPRE, you are required to understand the ethical rules governing lawyers who represent organizations. This includes recognizing the identity of the client, handling conflicts between the entity and its constituents, and the lawyer’s responsibilities when organizational misconduct is suspected. You should be prepared to:

• Distinguish between the organization as client and its individual constituents.
• Explain the lawyer’s duty of loyalty and confidentiality to the organization.
• Identify when a lawyer must report misconduct within the organization (“reporting up”).
• Recognize when disclosure outside the organization (“reporting out”) is permitted.
• Analyze conflicts of interest in dual representation of the organization and its constituents.
• Apply the rules for withdrawal when organizational misconduct is not addressed.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. When a lawyer represents a corporation, who is the client?
   1. The board of directors
   2. The CEO
   3. The corporation itself
   4. The shareholders
2. If a lawyer learns that an employee is committing fraud that will harm the organization, what is the lawyer’s first required step?
   1. Report the misconduct to outside authorities
   2. Disclose the information to the public
   3. Refer the matter to higher authority within the organization
   4. Withdraw from representation immediately
3. Under what circumstances may a lawyer reveal confidential information about organizational misconduct to persons outside the organization?
   1. Whenever the lawyer suspects wrongdoing
   2. Only if required by law or to prevent substantial injury to the organization after internal reporting fails
   3. Whenever the organization requests it
   4. Only with the consent of the employee involved
4. May a lawyer represent both an organization and one of its employees in the same matter?
   1. Yes, always
   2. Yes, if there is no conflict and informed consent is obtained
   3. No, never
   4. Only if the employee is a director

Introduction

When a lawyer is retained by an entity such as a corporation, partnership, or other organization, the client is the organization itself—not its owners, officers, employees, or other constituents. This distinction is critical for determining to whom the lawyer owes duties of loyalty and confidentiality, how conflicts are managed, and what actions are required if misconduct is discovered within the organization.

Key Term: Organizational Client
The entity itself (e.g., corporation, partnership, association) as the client, rather than its individual constituents.

The Organization as the Client

A lawyer representing an organization acts on behalf of the entity as a whole. The lawyer’s duties are owed to the organization, not to its individual officers, directors, employees, or shareholders. This means that, even if the lawyer interacts with individuals within the organization, those individuals are not the client unless a separate attorney-client relationship is established.

Key Term: Constituent
A person such as a director, officer, employee, member, or other individual acting on behalf of the organization.

Duty of Loyalty and Confidentiality

The lawyer must act in the best interests of the organization. Communications between the lawyer and organizational constituents are protected by confidentiality only to the extent they relate to the lawyer’s representation of the organization. If the interests of the organization and a constituent diverge, the lawyer must clarify that the organization is the client.

Reporting Misconduct Within the Organization (“Reporting Up”)

If a lawyer learns that someone associated with the organization is acting, intends to act, or refuses to act in a way that violates the law or a legal obligation and is likely to cause substantial injury to the organization, the lawyer must act in the best interest of the organization. The lawyer must refer the matter to higher authority within the organization, such as the board of directors, unless the lawyer reasonably believes that it is not necessary.

Key Term: Reporting Up
The lawyer’s duty to refer organizational misconduct to higher authority within the entity when necessary to protect the organization.

Disclosure Outside the Organization (“Reporting Out”)

If the highest authority within the organization fails to address the misconduct in a timely and appropriate manner, and the lawyer reasonably believes the violation will result in substantial injury to the organization, the lawyer may (but is not required to) reveal confidential information to the extent necessary to prevent the harm. This is permitted only if such disclosure is not otherwise prohibited by the rules of confidentiality or law.

Key Term: Reporting Out
The lawyer’s discretionary authority to disclose organizational misconduct to outsiders when internal reporting fails and substantial injury is likely.

Dual Representation and Conflicts

A lawyer may represent both the organization and one or more of its constituents in the same matter if their interests are not adverse and each gives informed consent, confirmed in writing. If a conflict arises, the lawyer must clarify the representation and may need to withdraw from representing one or both parties.

Key Term: Dual Representation
Representing both the organization and an individual constituent in the same matter, subject to conflict rules and informed consent.

Withdrawal

If the lawyer’s services are being used to further a crime or fraud, or if the lawyer is unable to prevent or rectify substantial injury to the organization, the lawyer may be required to withdraw from the representation. The lawyer must take reasonable steps to minimize harm to the organization upon withdrawal.

Worked Example 1.1

A lawyer represents a corporation. The CFO tells the lawyer that the company plans to hide a significant liability from its financial statements, which will be submitted to regulators. What must the lawyer do?

Answer:
The lawyer must refer the matter to higher authority within the corporation, such as the board of directors. If the board fails to act and the lawyer reasonably believes the misconduct will cause substantial injury to the corporation, the lawyer may disclose the information to regulators if permitted by confidentiality rules.

Worked Example 1.2

An in-house lawyer is asked by a company manager to represent both the company and the manager in an internal investigation. The lawyer learns that the manager’s interests may conflict with the company’s. What should the lawyer do?

Answer:
The lawyer must explain to the manager that the company is the client. If a conflict exists, the lawyer may represent both only if there is no actual conflict and both the company and the manager give informed consent, confirmed in writing. If a conflict arises, the lawyer may need to withdraw from representing one or both parties.

Exam Warning

Be careful: The lawyer’s duty is to the organization, not to individual employees. Do not assume that representing the organization means you represent its officers or employees personally.

Revision Tip

Always clarify in writing who the client is when dealing with organizational constituents, especially if their interests may diverge from the organization’s.

Key Point Checklist

This article has covered the following key knowledge points:

• The organization itself is the client, not its individual constituents.
• The lawyer’s duty of loyalty and confidentiality is owed to the organization.
• If organizational misconduct is discovered, the lawyer must report up the chain of authority.
• Disclosure outside the organization is permitted only if internal reporting fails and substantial injury is likely.
• Dual representation of the organization and a constituent is allowed only with informed consent and no conflict.
• Withdrawal may be required if the lawyer’s services are used for wrongdoing or substantial injury cannot be prevented.

Key Terms and Concepts

• Organizational Client
• Constituent
• Reporting Up
• Reporting Out
• Dual Representation