CHAPTER 1 - 1-9 REPRESENTING CORPORATE OR OTHER BUSINESS ENTITIES

• Jurisdiction: United States

1-9 Representing Corporate or Other Business Entities

1-9:1 General Rules of Entity Representation

Lawyers representing organizations and business entities represent the organization.⁴⁹⁶ Though the lawyer deals with the entity through its representatives,⁴⁹⁷ the lawyer ordinarily does not represent the individual officers or management.⁴⁹⁸ This distinction has led to confusion on occasion when shareholders or directors attempt to assert that the corporation's lawyer is or was also their own. In Fairfax Properties, Inc. v. Lyons, the Appellate Court addressed the issue of whether, when an attorney is retained by a corporation, the attorney owes a duty to the corporation or to the individual shareholders or directors. In determining that the attorney only owes a duty to the corporation and not to the directors, the Appellate Court looked to Rule 1.13 of the Rules of Professional Conduct.⁴⁹⁹

In another matter, a court disqualified a law firm that wished to represent both shareholders and a corporation.⁵⁰⁰ An attorney attempting to appear for a corporation was disqualified in a matter when it was determined that he had not been appointed by a majority of directors.⁵⁰¹ A court refused to disqualify a law firm from representing a party when it previously represented a corporation of which the party was a shareholder, noting that shareholders are not clients of the firm under the entity theory and thus prior representation of the corporation was not prior representation of a shareholder.⁵⁰² A court rejected an argument that representation of the closely-held corporation is also representation of officers.⁵⁰³

The lawyer must ensure that employees of the organization understand the lawyer's role.⁵⁰⁴ A lawyer may represent both the organization and its employees, subject to the Rule 1.7 conflicts rules.⁵⁰⁵

Though corporations, business entities or governments have a recognized legal existence, they only act through representatives. Lawyers representing such entities are often challenged when the interests of members, directors or employees of the client organization clash or conflict with the interests of the organization. In such situations, the lawyer must be careful to make sure that the individuals she is dealing with understand the lawyer's role and the fact that if called upon to choose, the lawyer must always choose to benefit the organization, even at the expense of the individuals.⁵⁰⁶

Thus, if a lawyer is conducting an investigation on behalf of an organization and is interviewing corporate employees, he must advise the employees of his role and that he is not acting as their lawyer. This is sometimes called the "corporate Miranda"⁵⁰⁷ or "Upjohn warning"⁵⁰⁸ regime, as the careful lawyer will preface an interview with a careful discussion of their exact role and that things said may not be considered confidential. Care should be taken, as Rule 4.3 prohibits a lawyer in such a circumstance from feigning...