The American Bar Association (ABA) Standing Committee on Ethics and Professional Responsibility recently issued Formal Opinion 514[1] regarding a lawyer’s obligations when advising organizational clients. Under such representation, the lawyer must generally relay advice through an organization’s constituents authorized to act on the entity’s behalf, such as board members, officers, or employees; however, in these circumstances the organization itself remains the client. Misperceptions surrounding the lawyer’s role, including by individual constituents who may take the advice as personal, have the potential to raise conflicts of interest.
In the opinion, the ABA focuses on circumstances under which “(1) a lawyer—in-house or outside counsel—is giving advice to an organization client through a constituent about future action the organization may choose to take; (2) the lawyer knows or reasonably should know that the constituents are likely to have their own legal interests at stake—for example, where the lawyer is advising the organization about possible future conduct for which the constituents may be subject to personal civil or criminal liability; and (3) the lawyer does not intend to create a client-lawyer relationship with the constituent or otherwise to assume fiduciary or contractual duties to the constituent.”
Background
Provisions within the Model Rules of Professional Conduct[2] lay out the standards of competent representation (Rule 1.1), necessary communication (Rule 1.4), and candid advice (Rule 2.1) that lawyers should follow when advising a client, like an organization, on future conduct. These stipulations could impose a responsibility on the lawyer to advise the organization when their actions might put constituents at legal risk.
However, lawyers must refrain from giving legal advice to nonclients or risk inadvertently creating a client-lawyer relationship. Despite the lawyer acting in the sole interest of his/her intended client, those receiving the lawyer’s advice (like a board member, officer, or employee) may believe that the lawyer is acting in their best interest and rely on said advice, perhaps ultimately to the individual’s detriment. As a practical matter, it is difficult for lawyers to avoid conveying advice on the organization’s behalf through its constituents, which further raises concerns and uncertainty around both the lawyer’s role and the substance of his/her counsel.
For example, the ABA points to Upjohn v. United States. In this case, an organization’s lawyer conducted an internal investigation into the organization’s conduct, collected information and facts from the organization’s constituents, and used that information to determine whether misconduct occurred within the organization. In this situation, and others like it, the lawyer must not give advice to the constituent; rather, the lawyer’s role is simply to obtain information from the individual constituent in order to either conduct litigation on behalf of the organization or help the lawyer to later convey advice to some other representatives of his/her organizational client.
Lawyers’ Duties to Organizational Clients
The Model Rules also establish the duties lawyers must uphold to their clients. For example, in addition to owing the client the duties of competence and confidentiality, a lawyer must also meet the duty of avoiding conflicts of interest. As pertains to organizational clients, the rules state that lawyers who represent organizations “do not owe the obligations of the client-lawyer relationship to the organization’s constituents simply by virtue of the lawyers’ interaction with such constituents.”
However, the ABA addresses the question whether the professional duties of an organization’s lawyer require the lawyer to inform the organization when future conduct could impose legal risks for the organization’s constituents. First, Model Rule 1.4(b) states that lawyers must “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” Moreover, Model Rule 2.1 states that, when representing a client, a lawyer should exercise independent professional judgment and give candid advice. Such advice may refer to the law and/or to relevant moral, economic, social, and political factors.
It is important that the organizational client remain informed when potential future conduct could impose legal risks on an organization’s constituents. The ABA notes that “when an organization’s lawyer advises an organization about whether to engage in future conduct, the lawyer should generally advise the organization about legal considerations that are important to the organization’s decision.”
Lawyers’ Duties to Nonclient Constituents of an Organization
Lawyers do not owe the same duties to nonclients as they do to clients. However, lawyers are expected to adhere to certain Model Rules when interacting with others on a client’s behalf, including requirements to adhere to the truth and to avoid misleading or exploiting a nonclient’s misunderstanding of the lawyer’s role.
Generally, Model Rule 4.3 holds the most relevancy here. This rule forbids a lawyer from giving legal advice to a nonclient, other than advising the nonclient to secure counsel, if the lawyer knows (or reasonably should know) that the nonclient’s interests could conflict with the interests of his/her organizational client.
To that end, an organization’s constituents may misinterpret the role of the organization’s lawyer when given advice. “The objective is not to advise constituents about how to act in light of personal legal risks,”’ the Standing Committee explains, “but simply to give them information to prevent them from erroneously relying on misunderstandings of the lawyer’s role.” The comments to Rules 4.3 and 1.13, in this regard, “do not limit or specify what information may or must be provided in any given situation.” But, depending on the circumstances, “a more in-depth conversation may be necessary to satisfy the lawyer’s duty to undertake ‘reasonable efforts to correct’ a constituent’s misunderstanding of the lawyer’s role as lawyer to the organization.”
Conclusion
Lawyers representing organizations must adhere to the Model Rules, which set forth a standard of competent representation, necessary communication, and candid advice. However, to avoid misunderstandings about the roles and duties owed by the lawyer, an organization’s lawyer should also advise its constituents early on about his/her role and take reasonable measures to dispel any misconceptions about his/her duties to individuals.
[1]ABA Formal Opinion No. 514 (January 8, 2025)
[2]ABA Model Rules of Professional Conduct (2025)
