Earlier this year, the ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 514 addressing a lawyer’s obligations for advising an organizational client when the advice might also be relied upon by non-client constituents of the organization.
At first glance, I didn’t see the need for a formal opinion. It is a basic concept that lawyers retained by an organization represent the entity, not the employees or constituents.
As it turned out, Opinion 514 is quite helpful. It reminds us that organizational constituents may not clearly understand the lawyer’s role, and that it is incumbent upon a lawyer to clarify his or her role.
Opinion 514 dives into the increasingly common circumstance of a lawyer giving advice to an entity whose members my want to rely upon the lawyer’s advice. It is rooted in several rules, most notably the rules about representation of organizations (Model Rule 1.13, Md. Rule 19-301.13), duty of competence (Model Rule 1.1, Md. Rule 19-301.1), duty of communication (Model Rule 1.4, Md. Rule 19-301.4), and the duty to render candid advice (Model Rule 2.1, Md. Rule 19-302.1).
While the basic premise is that a lawyer represents the organization, in many circumstances the lawyer must make additional disclosures. Rule 19.301.13(e) identifies one situation: Potential conflicts can arise when the lawyer simultaneously represents shareholders or members of the board of directors. In this situation, the lawyer must disclose conflicts under 19-301.7 and, if necessary, obtain a waiver.
Another example where the lawyer must explain his or her role is Rule 19-301.13(d), when the organization’s interests are adverse to some or all of the stakeholders.
Potential or actual litigation against a company is another situation where additional disclosures may be necessary. For example, in an employment matter, the company’s lawyer should disclose to interviewees that the lawyer does not represent the employee. In a negligence case, the lawyer should disclosure to company witnesses who are being deposed that the lawyer represents the company.
Opinion 514 covers much more than disclosures during litigation — is about how members of an organization may not fully understand a lawyer’s role. The writers also focused on circumstances when the lawyer is giving advice to a group (such as a board of directors or a condominium association) about future conduct, and the concern raised that members might confuse advice to the organization as advice to them. The concern, of course, is that the lawyer’s duty is to the client — the organization — not the members.
Another problem may arise when the advice of the organization is counter to what may be in the best interest of a member. In recognition of the confusion and problems that may exist, the authors focused on other rules for guidance. In addition to relying upon the various provisions of Rule 1.13 and the comments, they cited Model Rules 4.1 and 4.3 (Md. Rules 19-304.1 and 19-304.3). The authors have a concern that lawyers must be cognizant that the words may carry an extra meaning to unrepresented parties.
To solve the problem, the opinion places an affirmative duty on lawyers to take reasonable measures to avoid or dispel a constituent’s misunderstanding of the lawyer’s role. The objective, per the authors, is not to create problems for the constituents but to make sure that members are relying upon their own lawyers for advice about their own legal risks.
The policy of disclosure, especially when there is potential for confusion, is sound. Clients have the right to make informed decisions about their matters. Md. Rule 19-301.4. Clients only do so when their lawyer communicates with them properly by giving adequate information with explanations so the client can make decisions about their own matters.
Clarifying roles and obligations helps eliminate confusion and serves clients better.
