There are times when a lawyer may be required to give legal advice to their organizational clients about conduct that may create legal risk for nonclient constituents of the organization. Both in-house and outside counsel advise organizations about contracts, regulatory requirements and many other issues up to and including potential criminal liability. When a lawyer does this, they communicate advice to individuals who are likely to implement and act on that advice. Except for extraordinary circumstances, such as when a constituent of the organization becomes a co-client, the organization remains the client. Recently released ABA Formal Opinion 514 provides ethical guidance to lawyers about such a situation. The opinion describes its application as follows:

(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.

ADVICE TO THE ORGANIZATION

ABA Formal Opinion 514 makes it clear that lawyers who work for an organization can only give advice to their clients by relaying that information to nonclients who are constituents of the client. This may create uncertainty about the lawyer’s role and application of legal advice. That uncertainty may not be present in representations of all organizations. In cases where the lawyer or firm is pursuing an investigation of misconduct allegations, the lawyer’s role is to gather information and later present it to one or more representatives of the organization. The opinion continues by stating:

In the context of a formal internal investigation of alleged wrongdoing, the divergence of the organization’s interests and those of the individual constituents who are suspected of wrongdoing should ordinarily be clear. However, such divergence of interest in other contexts may often be less clear.

In most cases, the interests of constituents in the organization itself may be aligned, but in many cases, they may not be identical. ABA Formal Opinion 514 acknowledges that the lawyer generally does not owe duties under the Rules of Professional Conduct to constituents of an organization unless the lawyer also represents those constituents. This opinion addresses the question of “whether the professional responsibilities of a lawyer representing the organization require the lawyer to inform the organization when proposed future conduct may pose legal risk for the organization’s constituents.” The opinion concludes that Model Rule 1.4(b) (identical to Oklahoma’s rule) and Model Rule 2.1 (also identical to Oklahoma’s rule) allows and, in some situations, may require a lawyer to provide such information.

ORPC 1.4(b) outlines “the duty of an attorney to advise the client promptly whenever he has any information to give which it is important the client should receive.” ORPC 2.1 provides, as follows:

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client’s situation.

ADVICE TO CONSTITUENTS

The opinion also addresses the lawyer’s responsibility to nonclient constituents of the organization. As noted earlier, lawyers representing an organization do not owe nonclient constituents the same duties owed to the organizational client. But lawyers representing organizational clients may have obligations to nonclient constituents of the organization under the Rules of Professional Conduct. For example, ORPC 4.1 requires the lawyer to be truthful when dealing with others on their client’s behalf. Further, ORPC 4.3 prohibits a lawyer from giving legal advice other than advice to secure counsel to an unrepresented person “if the lawyer knows or reasonably should know that the interests of such person are or have a reasonable possibility of being in conflict with the interests of the client.”

ORPC 4.3 also requires a lawyer to correct misunderstandings about the lawyer’s role in a particular matter. This is particularly important, given that the constituents who have received the lawyer’s advice for the organization may believe they are clients of the lawyer when they are not. The opinion summarizes the lawyer’s duty as:

The Model Rules do not provide any particular formula for avoiding or dispelling constituents’ possible misunderstandings. Under the circumstances, the lawyer may need to discuss with the nonclient constituent that: the lawyer represents only the organization, and not the constituents; the constituents may have a personal legal risk if the constituents act on behalf of the organization in the matter under discussion; the lawyer is rendering advice to the organization through the individual constituents, not to, or for the benefit of, the individual constituents; in giving advice to the organization, the lawyer is taking account of the interests of the organization, not necessarily those of the individuals; and if individual constituents want legal advice about how a proposed course of conduct will affect their personal legal interests, the constituents must seek that advice from their own counsel, not from the organization’s lawyer.

There is much more information in ABA Formal Opinion 514. I recommend that lawyers who advise organizational clients take a look at the opinion for the guidance it provides.

Mr. Stevens is OBA ethics counsel. Have an ethics question? It’s a free member benefit, and all inquiries are confidential. Contact him at richards@okbar.org or 405-416-7055. Ethics information is also available online at www.okbar.org/ec.