Ethically Speaking
| Publication year | 2012 |
| Pages | 48 |
John M. Burman Carl M.Williams Professor of Law & Ethics University of Wyoming College of Law
Forming the Lawyer-Client Relationship, Part II Special Considerations When Representing an Organization
The last Ethically Speaking column contained the first installment of what will be a three-part series about the lawyer-client relationship.[1] Part I of the series discussed the nature and elements of the relationship, as well as the ethical and legal importance of documenting that relationship through the use of non-engagement, engagement, and closing letters.[2] This column will expand on using proper documentation, especially when a lawyer is representing an organization or entity of some type.
Why Document?
As the last column noted, a lawyer who forms a lawyer — client relationship and fails to document it properly can be certain of one thing. That is, there will be at least two versions of the agreement: the client's and the lawyer's. If there is a disagreement about the meaning of the agreement (or even if there was or is an agreement), a reviewing court, usually acting through a jury, will likely side with the client.[3] Further, as the column noted, the Wyoming Rules of Pro-fessional Conduct (" the Rules") require that lawyers communicate certain information to clients before or soon after the lawyer — client relationship begins.[4]
A lawyer's failure to use proper documentation to describe the existence and parameters of a lawyer — client relationship does not mean that the relationship does not exist or that the relationship exists on the terms that the lawyer thinks. Rather, as the lawyer in the Togstad[5] case found out the hard way (he became the judgment debtor in a large legal malpractice case), whether a lawyer-client relationship exists will depend on the client's reasonable expectations, not the lawyer's subjective belief. Further, as the Rules make clear, the burden is on a lawyer to clarify both whether a lawyer — client relationship exists at all, and, if it does, the lawyer must explain the nature of that relationship. That can all be done, of course, orally, but it makes much more sense to do it all in writing so that the lawyer can both prove the existence and scope of the relationship, and so that neither the lawyer nor the client misunderstands the nature and scope of the relationship.
A Lawyer-Client Relationship With an Organization as the Client
Properly forming and defining the lawyer — client relationship is even more difficult when the client is an organization. The reason is simple. If the client is an individual, the identity of the client, as well as who speaks for the client (the individual) are questions that are usually easy to answer (the exception will generally be when the individual is not competent, and must act through another, such as a guardian or a conservator). By definition, however, an organization consists of a group of individuals; the identity of the client, therefore, is often not clear. Similarly, the identity of the individuals within that group with whom the lawyer may or should interact is also often not clear.
While the Rules are largely based on the traditional notion of a small law firm representing an individual client, the Rules do contain one rule, Rule 1.13, that relates expressly to the representation of organizations. That rule contains important guidance on both questions. That is, who is the c lient, and with whom should the lawyer interact?
First, who is the client? Paragraph (a) answers that question. "A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents." The answer is plain. The client is, in other words, the organization, not the individuals who constitute the organization. As the remainder of the rule indicates, a lawyer who represents an organization owes his or her highest duties to the organization, the client. The last clause of paragraph (a) restates the obvious. An organization, which consists of individuals, can act only through those individuals, which the rule refers to as "constituents." An organization, in the words of the rule, must act through its "duly authorized constituents."[6] The question for the lawyer representing the organization, therefore, is which individuals are "duly authorized?"
Before determining which individuals are "duly authorized, " the lawyer must know a bit about the organization he or she represents. The reason is that most organizations are legal entities of some sort. They exist, in other words, by virtue of statute. For many years, for example, the most common form of legal entity was a corporation. In Wyoming, of course, corporations exist because a Wyoming statute allows them to exist.[7] Further, the statute specifies which persons are duly authorized to act on behalf of the corporation. For example, the ultimate authority is to be exercised by a board of directors.[8] That board is to act, however, in accordance with the corporations articles of incorporation, [9] and its bylaws.[10] In addition, the board of directors may delegate some of its authority to one or more of the corporation's constituents, usually one of the corporation's officers. Such delegations usually occur through a formal action of the board, such as a corporate resolution. It is important, therefore, for the lawyer representing the corporation to be familiar with both the entity's foundational documents (the articles of incorporation and the bylaws), and any corporate resolutions that delegate authority to one or more constituents.
A lawyer's failure to deal with "duly authorized constituents, " has potentially disastrous consequences both for the client and for the lawyer. First, the lawyer may be following instructions from a person who is not authorized to give them, and a person whose interests may not be consistent with the organization's. As a result, the lawyer may either take actions or not take actions that he or she should take. Second, dealing with inappropriate persons may defeat the attorney-client privilege.
Wyoming's attorney-client privilege statute[11] does not expressly apply to communications between a lawyer and constituents of an organization. As a general matter, however, the attorney-client privilege applies to organizations.[12] While the United States Supreme Court has ruled that the federal attorney-client privilege[13] applies to organizations (corporations, in particular), the opinion is not binding on states because the Court was construing the federal law of evidence, and the attorney-client privilege often arises under state law.
All that a Wyoming lawyer may and should say to an organizational client is that communications with certain constituents are probably covered by the Wyoming attorney-client privilege, but the Wyoming Supreme Court has never ruled on the issue. Furthermore, even assuming that the privilege does apply to organizations, there are two different views of how the privilege applies. In its opinion, the United States Supreme Court adopted the so-called "subject matter" test.[14] That test includes all communications between the corporation's lawyer and any employee of the corporation so long as the communication involves the subject matter of the legal issue. The other view, by contrast, is known as the "control group" test. It includes only those communications between the corporation's lawyer and those persons who are in control of the legal issue.[15]
Since the Supreme Court's opinion adopting the subject matter test for the federal law of evidence, state courts have not consistently followed that decision. It seems likely, however, that the Wyoming Supreme Court would adopt some version of the subject matter test, as the test simply makes more sense. Wyoming lawyers are left in the awkward position of not knowing, and not being able to determine the law in Wyoming. All they can do is advise organizational clients that the attorney-client privilege probably applies, and that some version of the subject matter test will probably be used. Only with that information...
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