Conflicts in Corporate Representation
When a lawyer takes on the representation of a corporate client, avoiding conflicts can become especially tricky. While nominally, the corporation is the lawyer’s client, the corporation is usually a conglomeration of many individuals with sometimes-conflicting needs. The motives of corporate directors and officers sometimes diverge from those of the shareholders. Shareholders often demand results fast or they will sell their shares. Directors and officers must placate shareholders to save their own jobs, but also must consider that investments take time to grow and nurture. Sometimes a corporation has to take a loss in a quarter in order to invest in greater future returns. Director interests might diverge from those of the day-to-day officers of the corporation. Preferred stockholder interests may differ from those of common stockholders. The list of potential conflicts goes on and on, and can present quite a headache for lawyers pursuing the best interests of the corporation as a whole. See
Note that an attorney may, perhaps, represent a corporation and its employees (including directors and officers) provided that their interests are not adverse and that consent is obtained for the dual representation. See Model Rule 1.7.
Big conflicts occur when the lawyer is approached by, for example, an officer of the corporation because the officer seeks legal advice about a wrong he may have committed while carrying out a corporate function. The problem is that the lawyer represents the corporation as a whole, but not necessarily the officer individually.
The corporation’s legal goals are not always consistent with those of the officer who may be consulting with the corporate attorney, especially if the officer is in a position where he needs to extricate himself from a legal quagmire. The officer’s crimes, for example, might be imputed to the organization. The organization will surely try to distance itself from the officer’s wrongdoing, and to do whatever it must to rectify the problem, including perhaps firing the officer or contacting the governmental authorities regarding the wrongdoing.
If the lawyer represents both the corporation and the officer individually, and communicates what the officer has told the lawyer to others in the corporation, then the lawyer may be violating the officer’s right to prevent confidences from being divulged. Then again, if the lawyer represents the corporation and not the officer individually, then the lawyer’s obligation to protect the corporation supersedes any obligation to the officer personally.
Basically, if the lawyer for the firm knows that someone associated with the firm is engaged in an act that would constitute a violation of a legal obligation to the organization, then the lawyer has a duty to proceed in a manner that promotes the best interests of the organization – and not the individual.
Model Rule 1.13 holds that a lawyer must take the following steps upon learning of an employee violation that will likely cause a substantial injury to the organization:
- suggest that the offender reconsider the matter.
- advise that a legal opinion on the matter be given to an appropriate authority (perhaps the firm’s chief counsel).
- refer the matter to a higher authority.
If the corporation refuses to act to rectify the problem then the attorney may resign from his post.