Ethics Opinion No. 287
Adopted July 19, 1975
An attorney has submitted an inquiry concerning the ethical propriety of circumstances in which attorneys employed by a governmental agency in its real estate division and performing professional services are subject to supervision by two or three levels of lay supervisors. It appears that legal advice to the head of the department in which they are employed is subject to review by their two levels of lay supervision. There concurrently exists in this organization a legal department, but the attorneys in question are neither in this department nor subject to direct supervision by it; however, there is a procedure denominated an “annual professional evaluation,” apparently conducted by a lawyer or lawyers, which purports to evaluate the general professional performance of the attorneys employed in the real estate division.
The applicable Canon of the Code of Professional Responsibility is Canon 5, “A lawyer should exercise independent professional judgment on behalf of a client.” Under this Canon, there are several pertinent ethical considerations.
EC 5-1 states:
“The professional judgment of a lawyer should be exercised, within the bounds of the law, solely for the benefit of his client and free of compromising influences and loyalties. Neither his personal interests, the interest of other clients, nor the desires of third persons should be permitted to dilute his loyalty to his client.”
EC 5-24 states, in pertinent part:
“Although a lawyer may be employed by a business corporation with non_ lawyers serving as directors or officers, and they necessarily have the right to make decisions of business policy, a lawyer must decline to accept direction of his professional judgment from any layman.”
EC 5-18 states, in part:
“A lawyer employed or retained by a corporation or similar entity owes his allegiance to the entity and not to a stockholder, director, officer, employee, representative, or other person connected with the entity. In advising the entity, a lawyer should keep paramount its interests and his professional judgment should not be influenced by the personal desires of any person or organization.”
In Formal Opinion 324 (August 9, 1970) by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association, issues somewhat similar to those involved here were considered in the context of the degree of supervisory control which could be exercised, consonant with the Code of Professional Responsibility and the pre-existing Canons of Professional Ethics, by the boards of directors of legal aid societies, which might be composed in part or whole of laymen, over the legal services rendered by lawyers employed by such societies. There the Committee held that although the governing board of a legal aid society could lay down guidelines respecting the categories or kinds of clients staff attorneys may represent, and the types of cases they may handle, once the attorney has accepted a client or case sanctioned by board policy, the board may not interfere with its attorney’s independent professional judgment in the handling of the matter.
For many years, both governmental agencies and private business organizations have employed lawyers as common law employees, to render professional legal services to these entities. There is no question but that such lawyers are subject to the same ethical requirements as their brothers in private practice.1 However, the so-called “in-house” or “house” counsel, having in effect cast his lot with only one client, and concurrently in many instances by reason of necessary specialization having lost much of his ability to seek alternate employment, can be confronted by uniquely agonizing dilemmas threatening his ability to exercise independent professional judgment and maintain his ethical standards. Of course, it is a rare lawyer in private practice who does not, at some point in his professional career, also find himself apparently facing the loss of a “good,” if not his “best,” client, with resulting adverse financial consequences, if he fails to accede to the latter’s insistence on some issue which involves either an impairment of the free exercise of his professional judgment, or the violation of an ethical prohibition. But it is, perhaps, easier from a psychological standpoint for a client who comes to a lawyer in private practice to accept his lawyer’s refusal to take certain action on ethical grounds, than it is for the business executive to accept a similar refusal to follow an explicit management directive by an employee who is one subordinate among many.
It is therefore important for each lawyer who accepts employment from a single client to have a clear understanding in this area with his employer, perhaps in the form of an employment contract or statement of policy. (See EC 5_24: “Where a lawyer is employed by an organization, a written agreement that defines the relationship between him and the organization and provides for his independence is desirable since it may serve to prevent misunderstanding as to their respective roles.”) Then when a problem arises, the employer will be prepared to some degree and the likelihood of an irreconcilable confrontation diminished.
With this preamble, we turn to the inquiry at hand. It appears to us that the form of organization and division of responsibilities within an organization are not controlling on the question of whether a lawyer employed by the organization can discharge his professional duties in an ethical manner. At some point almost every house counsel is subject to lay supervision, whether it be by a lower-level supervisor or the president of the corporation.2 Of course, in a similar sense even a lawyer in private practice must satisfy his lay client.
The crucial question is whether the lay supervisor attempts to influence the lawyer-employee in the exercise of his professional judgment. An example of this would be an attempt to require a modification or withdrawal of a legal opinion or recommendation representing the exercise of his professional judgment. If interference of this nature is attempted, the lawyer-employee is required by Canon 5 to resist any such attempt, even to the point of risking discharge.
It is doubtless true that a form of organization which provides for all lawyers to be placed in a legal department, with only the department head answering directly to lay supervision, would greatly facilitate compliance by lawyer-employees with ethical requirements. However, the Code does not mandate any particular form of organizational structure, but only requires that a lawyer employee not be subject to lay supervision which interferes with the free exercise of his professional judgment.
The facts disclosed by the inquiry therefore do not necessarily lead to a conclusion that violations of professional ethical standards are occurring. Additional facts reflecting the nature and extent of the supervision and review of the lawyer’s work by the lay supervisors would be required in order to decide this question. However, we believe it to be likely that the principles set out in this Opinion will enable the individuals involved to themselves reach an appropriate conclusion in this regard.
1 The use of the term “private practice” in this opinion is intended to refer to that form of practice in which a lawyer holds himself out as being willing to accept employment by a client only as a non-employee agent, as contrasted with employment as a common law employee; it is recognized that a lawyer employed on a fulltime basis by a private business entity could also be regarded as engaged in “private” practice, as contrasted with fulltime practice on behalf of a public governmental agency or entity.
2 In the case where the supervisor is also a lawyer, but not practicing as such, his point of view will probably tend to be more business than professionally oriented. Such lawyer-businessmen should be aware, however, that even while acting as businessmen, they are bound by the strictures of the Code of Professional Responsibility, OBA Opinion No. 281 (9/21/74), 45 Okla. Bar J. 2173 (9/28/74), and most certainly could not countenance, much less seek to coerce, a violation by a lawyer-employee.