September 29, 1997
A subordinate lawyer on the staff of an in-house legal department whose advice regarding possible termination of the employment of the general counsel is sought by the corporation's chief executive officer:
May not discuss the CEO's conversation with the general counsel.
May give legal advice to the CEO about the general counsel's employment.
Has no duty to bring the matter to the attention of the corporate board.
References: MRPC 1.6, 1.7, 1.8, 1.13, 5.4.
A corporation has an in-house legal department consisting of a general counsel and three other lawyers. The corporation recently hired a new chief executive officer (CEO), who has the authority to hire and fire corporate employees.
The CEO has developed a better working relationship with one of the subordinate lawyers than with the general counsel. Some of the CEO's comments to the subordinate lawyer relate to discontent with the work of, and even possible departure of the general counsel, and the likelihood of the subordinate lawyer filling the general counsel's position. To date, the subordinate lawyer has backed away from conversations that relate to legal advice to the CEO concerning the employment of the general counsel. The subordinate lawyer believes that the corporate board, which in the past has shown confidence in the general counsel, is unaware of these comments. However, the subordinate lawyer does not have regular access to board members.
The subordinate lawyer asks: (1) whether he/she discuss the CEO's conversations with the general counsel; (2) whether he/she can give legal advice to the CEO about the general counsel's employment; and (3) whether he/she have a duty to bring the matter to the attention of the corporate board.
Some of the inquirer's concerns, expressed and unexpressed, pertain to commonplace employment relations problems which working members of society face and which the Michigan Rules of Professional Conduct do not address. However, the ethics rules do provide guidance for some of the aspects of the inquirer's concerns.
MRPC 1.13(a) and (d) state:
"(a) A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders, or other constituents.
". . .
"(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 believes that such explanation is necessary to avoid misunderstandings on their part."
The Comment to MRPC 1.13 is also helpful in addressing the dilemma of the inquirer, which states in part: "In transactions between an organization and its lawyer, the organization can speak and decide only through agents such as its officers or employees. In effect, the client-lawyer relationship is maintained through an intermediary between the client and the lawyer. This fact requires a lawyer under certain conditions to be concerned whether the intermediary legitimately represents the client." Further, the Comment states that "The fact that the organization is the client may be quite unclear to the organization's officials and employees. An organization official accustomed to working with the organization's lawyer may forget that the lawyer represents the organization and not the official. The result of such a misunderstanding can be embarrassing or prejudicial to the individual if, for example, the situation is such that the client-lawyer privilege will not protect the individual's communications to the lawyer. The lawyer should take reasonable care to prevent such consequences. The measures required depend upon the circumstances . . . ."
The facts of this inquiry are such that it is clear that the chief executive officer of the corporation is talking to the subordinate lawyer in secret.
MRPC 1.6 (a) and (b) state:
"(a) "Confidence" refers to information protected by the client-lawyer privilege under applicable law, and "secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.
"(b) Except when permitted under paragraph (c), a lawyer shall not knowingly:
"(1) reveal a confidence or secret of a client;
"(2) use a confidence or secret of a client to the disadvantage of the client; or
"(3) use a confidence or secret of a client for the advantage of the lawyer of a third person, unless the client consents after full disclosure."
The Comment to 1.6 states that: "A fundamental principle in the client-lawyer relationship is that the lawyer maintain confidentiality of information relating to representation." The Comment further states, "Lawyers in a firm may, in the course of the firm's practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be confined to specified lawyers, or unless the disclosure would breach a screen erected within the firm in accordance with Rules 1.10(b), 1.11(a), or 1.12(c)."
The quandary that has arisen because of the inquirer's recognition of the expectation of loyalty or duty to two masters is addressed by MRPC 1.7(b) which states:
"(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests unless:
"(1) the lawyer reasonably believes the representation will not be adversely affected; and
"(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved"
The Comment to 1.7 provides in part, "Loyalty to a client is also impaired when a lawyer cannot consider, recommend, or carry out an appropriate course of action for the client because of the lawyer's other responsibilities or interests. The conflict in effect forecloses alternatives that would otherwise be available to the client. Paragraph (b) addresses such situations. A possible conflict does not itself preclude the representation. The critical questions are the likelihood that a conflict will eventuate and, if it does, whether it will materially interfere with the lawyer's independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client. Consideration should be given to whether the client wishes to accommodate the other interests involved."
MRPC 1.8(b) states:
"(b) A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client consents after consultation, except as permitted or required by Rule 1.6 or Rule 3.3."
Rule 3.3 refers to candor toward a tribunal and is not applicable here.
MRPC 5.4(c) states:
"(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services."
The lawyer asks whether he/she may discuss the CEO's conversations with the general counsel. The answer is no. That would clearly disadvantage the corporation for whom the CEO speaks. The subordinate lawyer's responsibilities to the general counsel do not include the responsibility to share with the general counsel the concerns expressed by the CEO.
As Rule 1.13 provides and observes, an organization can speak and decide only through agents, such as its officers or employees. The client-lawyer relationship is maintained through an intermediary, such as the CEO here. The lawyer is concerned about whether the CEO legitimately represents the client. However, the CEO regularly deals with the lawyer, and other lawyers on the corporate staff, as a client would deal with his/her lawyer and with the same expectations of confidentiality. It is clear by our facts that the CEO does not intend that the subordinate lawyer share with the general counsel the concerns that have been disclosed by the CEO. It is probable that the corporation speaks to its legal staff through the CEO on a regular basis and, to that extent, the CEO speaks for the corporation.
The subordinate lawyer may give advice to the CEO regarding employment of the general counsel in spite of the subordinate lawyer's duties to the general counsel for the reason that the lawyer's fiduciary duties to the corporation rise above those duties to the general counsel.
On the chance that the CEO may not understand that the he/she is not the client and that the corporation is the client, the lawyer should explain to the CEO that the lawyer represents the corporation and not the CEO and, further, that to the extent that the CEO has opinions and concerns which conflict with those of the board of directors, or to the extent that the CEO's concerns do not advance the corporation's interests, the lawyer must distance himself/herself from the issues involving the general counsel.
Even upon the subordinate lawyer's recognition that his/her duties run to the corporation, and not the general counsel, MRPC 1.7 would require the lawyer to refrain from giving advice to the CEO concerning the employment of the general counsel if the subordinate lawyer believes that his/her advice would be materially limited by his/her interests (not alienating the supervisor, the general counsel).
However, if the lawyer believes that he/she could recommend an appropriate course of action to the CEO regardless of his/her employment relationship with the general counsel, the lawyer may render his/her opinion and give the advice sought.
Under the facts that have been presented, the subordinate lawyer does not have a duty to bring the matter to the attention of the corporate board. As MRPC 1.13 observes, although the lawyer employed by an organization represents that organization as distinct from its officers, employees, and others, MRPC 1.8 observes that the organization can speak and decide only through agents, such as its officers. The CEO is an officer of the corporate client, deals with the corporate legal staff, and for all intents and purposes is "the client" unless the corporation has given notice that it has removed that authority from the CEO. That has not occurred under our facts and even though the subordinate lawyer believes that the corporate board has, in the past, shown confidence in the general counsel, it may well be aware of the concerns of the CEO and may have authorized the CEO to make the inquiries of the subordinate lawyer that have been expressed.
It might be instructive at this point to observe that there are circumstances under which it would be appropriate for the lawyer to bring a matter to the attention of the board where the lawyer 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 that is likely to result in substantial injury to the organization . . . ." MRPC 1.13(b). In addition, "when the organization's highest authority insists upon action, or refuses to take action, that is clearly a violation of their legal obligation to the organization or a violation of law which reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, the lawyer may take further remedial action that the lawyer reasonably believes to be in the best interests of the organization. MRPC 1.13(c). Neither of these circumstances exists in this case under the facts presented.
Without further communications from the board to the contrary, the subordinate lawyer has no duty to bring this matter to its attention. The lawyer's independent professional judgment in considering his/her alternatives is clearly affected by the information that the lawyer has received from the CEO. The CEO may, upon further conversation from the subordinate lawyer clarifying the identity of the client and the obligations of the subordinate lawyer, attempt to direct the subordinate lawyer's professional judgment as to the role the professional lawyer should play under the circumstances of these facts. The subordinate lawyer may not allow that to occur, as provided by MRPC 5.4.