ACTEC COMMENTARIES ON THE MODEL RULES OF PROFESSIONAL CONDUCT
MRPC 1.13
Organization as Client.
(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.
(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization. In determining how to proceed, the lawyer shall give due consideration to the seriousness of the violation and its consequences, the scope and nature of the lawyer's representation, the responsibility in the organization and the apparent motivation of the persons involved, the policies of the organization concerning such matters and any other relevant considerations. Any measures taken shall be designed to minimize disruption of the organization and the risk of revealing information relating to the representation to persons outside the organization. Such measures may include among others:
(1) asking reconsideration of the matter;
(2) advising that a separate legal opinion on the matter be sought for presentation to appropriate authority in the organization; and
(3) referring the matter to higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest authority that can act in behalf of the organization as determined by applicable law.
(c) If, despite the lawyer's efforts in accordance with paragraph (b), the highest authority that can act on behalf of the organization insists upon action, or a refusal to act, that is clearly a violation of law and is likely to result in substantial injury to the organization, the lawyer may resign in accordance with Rule 1.16.
(d) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when it is apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.
(e) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.
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ACTEC COMMENTARY ON MRPC 1.13
Subject to the requirements of other rules, including MRPCs 1.6 (Confidentiality of Information), 1.7 (Conflict of Interest: General Rule) and 2.2 (Intermediary), the lawyer who represents a corporation or partnership may appropriately undertake to represent individuals who are interested in the business or are employed by it. The common interests of multiple clients with respect to matters concerning the business enterprise may predominate over any separate interests they may have. Multiple representation in such cases may be in the best interests of the clients and may provide them with better and more economical representation. The lawyer may, with full disclosure and the informed consent of the business enterprise and an employee, represent both with respect to matters that affect both, such as an employment agreement if their interests are not seriously adversarial. See ACTEC Commentary on MRPC 1.7 (Conflict of Interest: General Rule). The lawyer may similarly represent both a fiduciary that owns an interest in a business enterprise and the business enterprise itself.
A minority of cases and ethics opinions have adopted the so-called entity approach under which the fiduciary estate is characterized as the lawyer's client. However, most cases and ethics opinions treat the fiduciary as the lawyer's client and the beneficiaries as persons to whom the lawyer owes some duties. See ACTEC Commentaries on MRPCs 1.2 (Scope of Representation), 1.4 (Communication), 1.6 (Confidentiality of Information) and 1.7 (Conflict of Interest: General Rule). The lawyer and the fiduciary, following full disclosure by the lawyer, may agree that the fiduciary estate and not the fiduciary shall be the lawyer's client. Such an agreement may significantly affect the extent of the lawyer's duties to the fiduciary, including the duty of confidentiality. However, such an agreement may not limit the duties that the lawyer or the fiduciary otherwise owe to the beneficiaries of the fiduciary estate.
ANNOTATIONS
(Refer to Caveat)
See also the Annotations following the ACTEC Commentary on MRPC 1.2 (Scope of Representation).
Cases:
California:
Responsible Citizens v. Superior Court, 20 Cal. Rptr. 2d 756 (Cal. App. 1993). Representation of a partnership does not necessarily entail representation of the individual members of the partnership for purposes of determining whether counsel for the partnership must be disqualified. "Considering the mutability of circumstances surrounding an attorney's representation of a partnership, and the attorney's relationship with individual partners, we believe the rule's approach is sensible. All partnerships are not shaped by the same mould. The relationship a partnership attorney has with the individual partners will vary from case to case. A rule which may seem appropriate for an attorney representing a two-person general partnership may be entirely inappropriate for an attorney representing a limited partnership with scores or even hundreds of partners." 20 Cal. Rptr. 2d at 765.
District of Columbia:
Griva v. Davison, 637 A.2d 830 (D.C. App. 1994). This decision reversed a summary judgment granted to two members of a three-member general partnership and to the law firm that represented both the partnership and the two individual members in an action for breach of fiduciary duties. Applying the modified form of Rules 1.7 and 1.13 that were adopted in D.C., the court concluded that, "a law firm ethically can represent several individuals in creating a partnership after obtaining their informed consent pursuant to Rule 1.7(c)." 637 A.2d at 844. The court continued to say that, "with the informed consent of all affected clients, a law firm ethically can represent a partnership and one or more of its individual partners at the same time--including representation as to matters affecting the partnership, except when such dual or multiple representation would result in an 'actual conflict of positions,' Id., in which case the absolute prohibition of Rule 1.7(a) comes into play." Id.
Michigan:
Steinway v. Bolden, 460 N.W.2d 306 (Mich. App. 1990): "We conclude that the clear intent of the Revised Probate Code and of the court rule is that, although the personal representative retains the attorney, the attorney's client is the estate, rather than the personal representative. The fact that the probate court must approve the attorney's fees for services rendered on behalf of the estate and that the fees are paid out of the estate further supports this conclusion." See, however, amended Probate Court Rule 5.117(A), cited below.
New Jersey:
Greate Bay Hotel & Casino, Inc. v. Atlantic City, 624 A.2d 102 (N.J. Super. 1993). A law firm that represents a business trust is treated as representing the entity and not the individual members of the trust. Accordingly, the law firm was not disqualified from representing a party adverse to a member of the business trust with whom the law firm had no other connection.
Ohio:
Arpadi v. First MSP Corp., 628 N.E.2d 1335 (Ohio 1994). In this action brought by the limited partners of a partnership against the general partner and the law firm that represented the partnership, the Supreme Court of Ohio held that:
[W]hether the duty arising from an attorney-client relationship is owed to the limited partnership itself or to the general partner thereof, it must be viewed as extending to the limited partners as well. Inasmuch as a limited partnership is indistinguishable from the partners which compose it, the duty arising from the relationship between the attorney and the partnership extends as well to the limited partners. Where such duty arises from the relationship between the attorney and the general partner, the fiduciary relationship between the general partner and the limited partners provides the requisite element of privity recognized under Elam, supra. Such privity, in turn, extends the duty owed to the general partner to the limited partners regarding matters of concern to the enterprise. 628 N.E. 2d at 1338-1339.
Ethics Opinions:
Michigan:
Probate Court Rule 5.117(A) was amended effective April 1, 1992 to state that: "[a]n attorney filing an appearance on behalf of a fiduciary or trustee shall represent the fiduciary or trustee." The comment by the Probate Rules Committee stated that the amendment "clarifies that the lawyer represents the fiduciary or trustee and not the estate."
Oregon:
Or. Op. 1991-62 (1991). The lawyer for a personal representative represents the personal representative and not the estate or the beneficiaries as such. This opinion followed in Or. Op. 1991-113 (1991).
Pennsylvania:
Pa. Op. 91-62A (1991). The lawyer who is retained by an administrator of a decedent's estate represents the estate and not the administrator "at least where the interests of the estate diverge from those of the administrator."
Virginia:
Va. Op. 1473 (1993). A lawyer who is retained to represent "the estate" will be treated as counsel to all co-executors although each co-executor may have independent counsel.
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