Ethical Trap for the Organization Lawyer: Interplay Between Krc 1.6, 1.13, 1.7 and 1.11
| Publication year | 2003 |
| Pages | 20-31 |
| Citation | Vol. 72 No. 4 Pg. 20-31 |
72 J. Kan. Bar Assn. 4, 20-31 (2003). Ethical Trap for the Organization Lawyer: Interplay Between KRC 1.6, 1.13, 1.7 and 1.11
72 J. Kan. Bar Assn. 4, 20-31 (2003)
I. Introduction
Kansas lawyers have been governed by the Kansas Rules of Professional Conduct (KRPC), adapted from the Model Rules of Professional Conduct (MRPC), since their adoption March 1, 1988. The lawyer who represents an organization, public or private, often faces potential ethical conflicts due to the multiple constituent elements that compose the typical organization, the possibility of conflict of interest among the constituent elements, and ambiguity in the wording of the Rules. Lawyers representing government organizations are governed by additional constraints because government lawyers are held to an additional requirement to preserve and advance the public interest. This public interest obligation includes at least three standards: maintaining impartiality, avoiding conflict of interest, and avoiding the appearance of impropriety.[1]
Adding to the idealized public interest notion, many government lawyers in Kansas are also "state officers and/or employees," and are thus subject to the disclosure requirements of the State Governmental Ethics Law[2] and the conflict of interest jurisdiction of the Kansas Governmental Ethics Commission. The additional statutory and public interest overlay on the Model Rules often exposes the government lawyer to conflicts and ambiguities that can exacerbate the normal tensions and frustrations inherent in public practice.
The very nature of organizations can create ethical dilemmas. Organizations are made up of people and personal relationships. Unfortunately, organizational collegiality has the potential to trigger ethical conflicts. In traditional legal relationships, a bright line can be maintained between the proper role of lawyer and client. The lawyer usually has the benefit of fairly clear,
client-directed goals. But the bureaucratic culture, both public and private, often requires the lawyer to work in a team context, and the distinction between the lawyer and his colleagues in the organization can become easily blurred. The lawyer must balance the pressure to be part of the organization as a "team player" against the need to preserve professional independence, which is not only necessary for effective representation but also required by KRPC.[3]
The potential for ethical complications in organizational representation has become so pronounced that an increasing number of public and private organizations have developed in-house ethics divisions structured much like their tax and corporate divisions.[4]
II. KRPC 1.6 - Confidentiality of Information; KRPC 1.13 - Organization as a
Client.
Confidentiality is arguably the most fundamental of the principles governing the
lawyer-client relationship. Rule 1.6 applies not merely to matters communicated in confidence by the client, but also to information relating to the representation, whatever the source.[5] The confidentiality requirement applies when the client is an organization and should be read in conjunction with Rule 1.13.
Rule 1.13 details the difficulty involved for an attorney representing an organization who is also responsible for insuring that wrongful acts or omissions are prevented or rectified. While the organization is a legal entity, it cannot act except through its constituent members - officers, directors, employees, shareholders and others.[6] But the confidentiality privilege belongs to the organization and not the constituent members, except in special circumstances. Case law makes clear that the lawyer's primary duty is to the corporate entity rather than to its constituent elements.[7] Thus, a shareholder could not sue the entity's lawyer for violation of duty to the shareholder.[8] A lawyer who represented a bank for 40 years owed no fiduciary obligation to the chairman of the bank and was free to assist in efforts to remove the chairman for participation in making illegal loans.[9]
Unfortunately, organizational collegiality and proximity can cause co-workers to confide in a lawyer colleague. Therein lies a problem. The point was demonstrated in a case originating in the U.S. District Court for the District of Kansas.[10] A former officer of a hospital, the subject of a grand jury investigation, opposed the government's motion to compel testimony of the hospital's attorneys, asserting attorney-client privilege and the work product doctrine based on his relationship with corporate attorneys in his individual capacity. The 10th Circuit affirmed the district court's order to compel, holding that a personal attorney-client relationship did not exist merely because the corporate officer reasonably believed that corporate counsel was representing him on an individual basis. For the privilege to attach to the individual officer, the 10th Circuit articulated a detailed test. For corporate officers to assert the attorney-client privilege with respect to conversations with corporate counsel, even though the privilege belongs generally to the corporation,
[f]irst, they must show they approached [counsel] for the purpose of seeking legal advice. Second, they must demonstrate that when they approached [counsel] they made it clear that they were seeking legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the [counsel] saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with [counsel] were confidential. And fifth, they must show that the substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the company.[11]
The decision emphasizes that when one consults an attorney, not as a lawyer seeking either a legal opinion or assistance in some legal proceeding, but rather as a friend, colleague, or negotiator, the consultation is not professional and the statement is not privileged as
attorney-client consultation.
However, it is important to note that an attorney-client relationship is not necessary to trigger a confidentiality expectation. The duty to protect confidences is broader than the attorney-client privilege and includes what were formerly called client "secrets." This appears to be one of the multiple messages in the Kansas case of Crandon v. State Bank Commissioner.[12]
Plaintiff Crandon was discharged from her position as General Counsel to the State Bank Commissioner after she had reported alleged violations of federal and state banking law to the Federal Deposit Insurance Corporation, the federal counterpart of many of the State Bank Commissioner's duties. Crandon claimed wrongful discharge for exercising her First Amendment rights and retaliatory discharge under the state "whistleblower" statute.[13] Crandon claimed she had not breached her attorney-client relationship with the organization and that the information she had conveyed to a third party was consistent with established organization policy. She also claimed her discharge was in retaliation for exposing agency wrongdoing and was prohibited under the "whistleblower" statute.
But the state successfully maintained that client confidences may arise in the nature of organizational representation, and that the lawyer has an obligation to keep those confidences. The opinion seemed to turn on the particularly close working relationship required between an agency's general counsel and the chief executive officer. The court found that Crandon should have first attempted to persuade the agency head to remedy the situation, and if unsuccessful, she should have next appealed to higher authority in state government.
[The Agency head] relied on plaintiff for legal advice for his guidance and for the guidance of the organization and its employees. The organization's attorney has a responsibility to give advice when necessary to prevent or rectify unlawful or improper acts of the organization and its employees. This advice must be given by presenting the attorney's opinion to the proper person or persons in the organization who have the authority to correct the problems.[14]
The court also determined that attorneys have an employer-employee relationship different from that of other employees and their conduct is measured by a different standard. Crandon could not assert statutory or common law whistleblower or retaliatory discharge claims when terminated for "reporting" suspected misconduct to outside agencies. The court enunciated a balancing test, weighing an employee's First Amendment rights against the interests of the state as an employer.[15]
One clear lesson from Crandon is that the lawyer's personal concept of the public interest must play a subordinate role to confidentiality. Even so-called "whistleblower" statutes do not vitiate the lawyer's confidentiality and loyalty obligations. It seems clear that while a nonlawyer employee can "blow the whistle" on organizational wrongdoing, a lawyer employee does so at great peril.
The Crandon rationale applies to private organizations as well and follows the comment to Rule 1.13. When constituent members of the corporate organization make decisions for it, those decisions must ordinarily be accepted by the lawyer. Policy and operational decisions are normally not part of the lawyer's province.[16] However, when the lawyer knows the organization may be substantially injured by actions taken by a constituent element, or is in violation of law, it may become necessary for the lawyer to ask the constituent to reconsider the matter.
If that fails, or if the matter is of...
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