American College of Trust and Estate Counsel
3415 S. Sepulveda Boulevard
Suite 330
Los Angeles, CA 90034
310-398-1888
310-572-7280 (fax) |
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ACTEC COMMENTARIES ON THE MODEL RULES OF PROFESSIONAL CONDUCT
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(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 for 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 on 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 the lawyer knows or reasonably should know 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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| Subject to the requirements of other rules, including both MRPC 1.6 (Confidentiality of Information) and MRPC 1.7 (Conflict of Interest: Current Clients), 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, confirmed in writing, of the business enterprise and an employee, represent both with respect to matters that affect both (e.g., an employment agreement) if their interests are not seriously adversarial. See ACTEC Commentary on MRPC 1.7 (Conflict of Interest: Current Clients). | |
| The lawyer may similarly represent both a fiduciary that owns an interest in a business enterprise and the business enterprise itself, unless to do so would violate MRPC 1.7. | |
| A small 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 and Allocation of Authority Between Client and Lawyer), 1.4 (Communication), 1.6 (Confidentiality of Information) and 1.7 (Conflict of Interest: Current Clients). The lawyer and the fiduciary, with the fiduciary’s informed consent, confirmed in writing, may agree that the fiduciary estate and not the fiduciary shall be the lawyer's client. See MRPC 1.7(b)(when representation is permissible notwithstanding a concurrent conflict of interest); MRPC 1.0(e) (defining informed consent); and MRPC 1.0(b) (defining confirmed in writing). 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. |
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| See also the Annotations following the ACTEC Commentary on MRPC 1.2. |
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| Cases
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California:
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Responsible Citizens v. Superior Court, 20 Cal. Rptr. 2d 756 (Ct. 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 if there is a conflict of
interest between the partners. “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. |
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District of Columbia:
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Griva v. Davison, 637 A.2d 830 (D.C. 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 MRPCs 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 MRPC 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 MRPC 1.7(a) comes into play.” Id.
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Illinois:
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Gagliardo v. Caffrey, 800 N.E.2d 489 (Ill. App. 2003). This case is discussed in the Annotations following
the ACTEC Commentary on MRPC 1.9. |
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Michigan:
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Steinway v. Bolden, 460 N.W.2d 306 (Mich. Ct. 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.” But see Michigan Probate Court Rule 5.117(A),
quoted below, reversing this court’s decision. |
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New Jersey:
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Greate Bay Hotel & Casino, Inc. v. Atlantic City, 624 A.2d 102 (N.J. Super. Ct. Law Div. 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. |
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Ohio:
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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:
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[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. |
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Pennsylvania:
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Pew Trusts, 16 Fid. Rep. 2d. 73 [Montg. Cty (Pa.) 1995]. Lawyer representing the executor or
administrator does owe “derivative duties” to beneficiaries and has an obligation to rectify a situation
where the lawyer observes his client taking action that is improper or otherwise to the detriment
of the beneficiaries. |
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| Ethics Opinions
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Michigan:
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Probate Court Rule 5.117(A) states: “[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.”
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Oregon:
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Or. Op. 1991-62 (1991). The lawyer for a personal representative represents the personal representative
and not the estate or the beneficiaries as such. See also Or. Op. 1991-113 (1991). |
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Pennsylvania:
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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.”
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Virginia:
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Va. Op. 1473 (1992). 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.
MRPC 1.14
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