Lawyers who represent corporations and serve on boards must be very sensitive to potential conflicts.
I am an attorney who represents a corporation and also serves on the board of directors of that corporation. Is this dual role prohibited?
The question presents a fact pattern that is not an uncommon practice seen throughout Pennsylvania. An attorney may be representing a corporation and because the attorney is a trusted friend of the incorporator or members of the board of directors, the attorney is oftentimes placed on the board of directors. This is often seen in nonprofit corporation situations.
The question is, does this create a conflict of interest under Rule of Professional Conduct 1.7?
Rule 1.7 is the main conflict of interest rule and deals primarily with the concept of concurrent conflict of interest. One aspect of a concurrent conflict is seen under Rule 1.7(a)(2), where there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client or to the lawyer or to a third person. Obviously, the lawyer’s position as a member of the board of directors could create a conflict of interest. Any lawyer serving in this capacity must be very sensitive to the potential for a conflict.
Although Rule 1.7 does not specifically address the issue of the lawyer on the board, the comments do. Comment 35 to Rule 1.7 is on point. The comment talks about a lawyer for a corporation who is also a member of the board of directors. The comment notes the lawyer “should determine whether the responsibilities of the two roles may conflict.”
Comment 35 to Rule 1.7 then goes on to discuss when a lawyer may be called to advise the corporation in matters involving the actions of the directors. The comment suggested that if the role arises frequently, there might be the potential for a conflict.
The bottom line in Comment 35 is as follows:
“If there is a material risk that the dual role will compromise the lawyer’s independence of professional judgment, the lawyer should not serve as a director or should cease to act as the corporation’s lawyer when conflicts of interest arise.”
The comment also notes that if the corporate lawyer is also a member of the board, the discussions with the board would not necessarily be subject to attorney-client privilege. This is a very important consideration. If the board is looking to the lawyer, who is also a board member, for legal advice, there may be some rather frank discussions. It is the lawyer’s obligation to ensure that the members of the board know that the lawyer is not acting as a lawyer and there is no privilege to what is said. Comment 35 to Rule 1.7 is very clear on that point.
The past practice of a lawyer being on the board and also serving as the corporation’s lawyer, despite an honorable tradition of sorts, probably should be reconsidered in this modern world. Years ago, conflicts of interest weren’t always recognized as clearly as they are now. The Rules of Professional Conduct were not enforced as strongly in the past as they are now.
It is difficult to see how a lawyer could be both a board member and the attorney for the corporation because there are going to be conflicting roles.
If a board of directors divides on an issue, how can a lawyer advise the full corporation if the lawyer is serving on one faction of the board? The lawyer has to be in a position to provide independent advice to the board. If the lawyer is also a member of the board then the independence of the lawyer would be compromised.
In conclusion, although there is no absolute prohibition about a lawyer for a corporation also serving on its board, any lawyer who is playing that dual role has to be very sensitive to a conflict of interest arising. Even more importantly, a lawyer has to be aware of how he or she is perceived by the other board members.
The lawyer must make sure the board understands that the lawyer sitting on the board of directors is not acting as an attorney and there is no attorney-client privilege unless stated to the contrary. The best practice would be for a lawyer to make a choice: either be the lawyer for the corporation or be a member of the board.
A lawyer representing a defendant in a case is under no obligation to take orders from another lawyer defending a co-defendant.
There is a multiple-defendant trial about to begin. I represent one of the lesser defendants in the matter. The main lawyer who represents Mr. Big has provided instructions about what to do and not do on cross-examination and argument, etc. Mr. Big has paid for all of our legal fees. What are my obligations during the trial?
The answer is very simple. There is no obligation to Mr. Big or Mr. Big’s lawyer. As the attorney for one of the co-conspirators in this drug gang, the lawyer must act in the client’s best interest and must do what he or she thinks is necessary for the client as opposed to what Mr. Big or Mr. Big’s lawyer thinks. Obviously, any time there are multiple defendants, there is no harm in the lawyer discussing strategies and approaches. There is also no harm in a more experienced lawyer giving some suggestions or advice to a less experienced lawyer as to how to defend the case.
But it is a far different issue if the lawyer for Mr. Big starts to tell a lawyer not to do this or that if the lawyer thinks those things should be done. Once a lawyer represents a client, the obligation is to the client and to no one else.
Under Rule of Professional Conduct 1.8, which is the specialized conflict of interest rule, under Subsection (f), a lawyer cannot accept compensation for representing a client from another person unless the client gives informed consent and there is no interference with the lawyer’s independence and professional judgment or with the attorney-client relationship.
Rule 1.8(f) also makes it very clear the information relating to the representation of a client is protected as required by Rule 1.6, which is the confidentiality rule. Comments 11 and 12 to Rule 1.8 deal with a situation where someone else is paying the lawyer’s bill. Comment 12 notes a conflict of interest can arise if there is a significant risk that the lawyer’s representation of the client will be limited by a lawyer’s own interest in the fee arrangement.
Comment 13 is also of interest to the general conflict of interest rule, Rule 1.7.
This comment also notes that if the fees are paid by someone else, the arrangement cannot compromise the lawyer’s duty of loyalty and/or independent judgment to the client. Although, depending on the type of criminal gangs involved, the lawyer may suffer some threats as the trial progresses, the lawyer’s duty is only to the independent client.
But when it is all said and done, the lawyer represents a client — not Mr. Big and not the other lawyers. A lawyer has to be in a position to make his or her independent judgment on these matters, despite who is paying the fee. •
Chester County lawyer Samuel C. Stretton has practiced in the area of legal and judicial ethicsfor more than 35 years. He welcomes questions and comments from readers. If you have aquestion, call Stretton directly at 610-696-4243 or write to him at 301 S. High St. P.O. Box 3231, West Chester, Pa. 19381