RI-345

October 24, 2008

SYLLABUS

An officer of a corporation has informed the corporation's lawyer of his intent to destroy documents that are subject to a judicial discovery order, and asks the lawyer to return copies of those documents in the lawyer's possession. The lawyer should first attempt to dissuade the officer from the threatened misconduct. If the officer does not recant, the lawyer should refer the matter to higher authority in the organization. The lawyer should decline to return copies of the documents in his possession until the matter is resolved so as not to assist in the unlawful destruction or concealment of evidence. The lawyer may continue representing the corporation and is not required to withdraw merely because the officer suggests improper conduct.

REFERENCES:

MRPC 1.2(c), 1.4(b), 1.6, 1.13, 1.16, 3.4; Restatement of the Law Governing Lawyers, 3d § 96.

TEXT

A corporation is engaged in litigation. The chief executive officer (CEO) of the corporation has informed the corporation's litigation attorney that he intends to destroy documents relevant to the dispute that are subject to a court discovery order. The corporation is closely held but has a board of directors to which the CEO is accountable; and the CEO is not the sole shareholder. The CEO has directed the lawyer not to produce the documents in response to the order and has threatened to terminate her if she does. The lawyer possesses copies of the documents, and the CEO has requested that she return them to the corporation. The lawyer asks what steps should be taken under the ethical rules to address the CEO's threatened misconduct.

The lawyer's obligations are to the corporation. Although in most instances, the Rules of Professional Conduct defer to other law in determining who is the client, Michigan Rule of Professional Conduct ("MRPC") 1.13(a) provides that the client is the corporation, not the CEO:

A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders, or other constituents.

In representing the corporation, the lawyer is to communicate with the client so as to permit informed decisions regarding the representation under MRPC 1.4(b), and is to take steps to prevent reasonably foreseeable harm to the client, as set forth in MRPC 1.13(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 that 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 person 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.

The Committee assumes that the CEO's threat to destroy documents that are subject to a discovery order, if carried out, would be "a violation of law which reasonably could be imputed to the organization, and that is likely to result in substantial injury to the organization . . . ." [1] Accordingly, the lawyer is required to proceed as reasonably necessary to protect the best interest of the corporation, taking into account MRPC 1.13(b) and other relevant considerations. The particular steps required of the lawyer will depend on such factors as the governance structure of the organization, the degree of independence of the board, and the CEO's relationship with higher authority.

The lawyer should first attempt to dissuade the CEO from the threatened course of conduct. In asking the CEO to reconsider, the lawyer may discuss such matters as the corporation's duty to comply with court orders and applicable law, any relevant corporate policies such as those involving ethical obligations and document retention, the lawyer's recommendation that a second opinion be obtained regarding the implications of the threatened conduct, and the lawyer's intent to refer the matter to higher authority in the corporation if the CEO does not recant.

If the CEO cannot be dissuaded, the lawyer should consult with higher authority, here presumably the corporation's board of directors.[2] If the CEO is a member of the board, the lawyer should exercise care to assure that any independent directors are duly informed.[3] In referring the matter to higher authority, the lawyer may, as necessary, advise the board that the lawyer's ethical obligations would likely require withdrawal from representing the corporation, and appropriate disclosure to the tribunal, if the CEO carries out the threat and the misconduct is not otherwise rectified[4].

The objectives of MRPC 1.13 are met if the lawyer's referral to higher authority redresses the CEO's threatened misconduct. However, if the lawyer reasonably believes after counseling and remonstrating with the client that the CEO has not retracted his threat, the lawyer should preserve any pertinent documents, or copies thereof, in her possession until the matter of discovery compliance is resolved. Otherwise, the lawyer risks violating MRPC 3.4(a), which provides that a lawyer shall not "unlawfully obstruct another party's access to evidence; unlawfully . . . destroy or conceal a document . . . or assist another person to do any such act." The Comment to the Rule emphasizes that:

[d]ocuments and other items of evidence are often essential to establish a claim or defense . . . [T]he right of an opposing party . . . to obtain evidence through discovery or subpoena is an important procedural right. The exercise of that right can be frustrated if relevant material is . . . concealed or destroyed. Other law makes it an offense to destroy material for purpose of impairing its availability in a pending proceeding or one whose commencement can be foreseen.[5]

The lawyer should decline to return the documents to the CEO or the corporation. Doing so with the knowledge of the CEO's intentions could be considered assisting the client in destroying or concealing a document having potential evidentiary value in violation of MRPC 3.4(a). Returning the documents may serve also to assist the client in conduct the lawyer knows to be illegal or fraudulent, addressed in MRPC 1.2(c).[6]

The lawyer may continue the representation of the corporation notwithstanding the CEO's threat to destroy documents. The Comment to MRPC 1.16 counsels that "[t]he lawyer is not obliged to . . . withdraw simply because a client suggests such a course of conduct [that is illegal or violates the Rules of Professional Conduct or other law]." MRPC 1.16(a)(1) provides that a lawyer shall withdraw if "the representation will result in violation of the Rules of Professional Conduct or other law." Faced with the CEO's threatened misconduct, however, continued representation of the corporation is consistent with the lawyer's previously discussed obligations under MRPC 1.13(b). Such representation will not result in violation of the Rules or other law, but fulfills the lawyer's ethical duties and may forestall a violation of law by the client.

[1] Determining when destruction of evidence is a violation of law and analyzing applicable legal authorities are outside of the Committee's jurisdiction. For purposes of this Opinion, we assume that the CEO's threatened misconduct, if carried out, would be a violation of law regarding preservation of evidence subject to a court order.

[2] This opinion is applicable to any corporation. When the corporation has a single shareholder and single member board, the process described above under MRPC 1.13 is unnecessary.

[3] The lawyer's duty to maintain the confidentiality of client secrets does not, of course, prohibit the lawyer from disclosing communications with the CEO to higher authority within the client corporation. This is true even if the disclosure is against the interests of the CEO or other constituents of the corporation. See generally Restatement of the Law Governing Lawyers, 3d § 96.

[4] A discussion of a lawyer's ethical duties when faced with a client's actual, as opposed to threatened, misconduct is beyond the scope of this opinion.

[5] The reference to "other law" in the comment does not identify the external law defining "unlawful" conduct, and such analysis is beyond the scope of this opinion. See e.g., J. Gorelick, S. Marzon & L. Solum, Destruction of Evidence, Ch 5 (1989 & Supp 1991); 18 USC § 1503, which makes it a crime to "corruptly" obstruct the "due administration of justice," including the intentional destruction of evidence relevant to pending judicial proceedings; United States v. Berkowitz 927 F2d 1376 (CA 7, 1991); 18 USC § 401 (1995), (punishing disobedience of court orders and process). Legal scholars have suggested that the term "unlawful" in Rule 3.4(a) reaches conduct that violates discovery obligations. E.g., 1 G. Hazard & W. Hodes, The Law of Lawyering, § 3.4:201 at 626-627 (2nd ed Supp 1992); J. Gorelick et al., Destruction of Evidence, supra, § 7.7 at pp 258-60; C. Wolfram, Modern Legal Ethics, § 12.3.5 at p 644 (1986).

[6] We note that the threat to destroy the documents is itself not an illegal or fraudulent act (MRPC 1.2(c)) or unlawful destruction (MRPC 3.4(a)). . However, surrendering control of the copies that could substitute for the documents that may be destroyed in the face of such a threat if carried out would expose the lawyer to the substantial risk of such an assertion.