Constituents Are Not Automatically Clients

Constituents Are Not Automatically Clients

A lawyer retained by an organization represents the organization, which acts through its duly authorized constituents.¹ The lawyer's client is therefore not the president who gives the instructions, the officer who attends every meeting, or the director named alongside the company in the same lawsuit. Courts treat this as a default. A constituent who wants to be a client must show that the lawyer agreed to act for the constituent personally.

Innes v. Howell Corp. shows the default at work. Innes, the president of Lake Coal, was named as a defendant in an environmental proceeding against the company. He later argued that Cook, the lawyer the company had retained for that matter, was also his personal counsel in it. The court called that argument incorrect. An attorney for a corporation does not automatically represent the corporation's constituents in their individual capacities, even on the same matters, and there must be clear consent.²

The court's treatment of the surrounding facts shows how little Innes had proved. He claimed that Cook helped bring about his removal by reporting his receipt of payments to Steven Howell. Unless Innes could show an express or implied agreement with Cook, by words or conduct, Cook had no ethical obligation to refrain from making that report. The court added that Cook's obligations to Lake Coal would presumably have required him to report. Innes's exposure to personal liability in the environmental case did not change the analysis, because Cook would have needed to act on Innes's personal behalf and not merely for the general good of the corporation. The jury found that no express or implied agreement existed between the two men.³

A Kentucky decision frames the question the same way. It calls the attorney-client relationship "a contractual one, either expressed or implied by the conduct of the parties," and concludes that its existence hinges on mutual assent, explicit or tacit. The court distinguished that question of formation from the special ethical rules that govern a lawyer's conduct once a relationship exists, and it held that only the latter is a proper subject for expert opinion.⁴

The default also protects the lawyer's ability to serve the organization. Cook's duties to Lake Coal would presumably have required him to report Innes. Had every officer been presumed a client, the lawyer's duty to the company could have collided with a duty to the officer at the first moment the officer's conduct became a problem for the company. Requiring real assent confines personal duties to cases in which the constituent actually sought personal help and the lawyer accepted that role. The implied route keeps the default from becoming a trap for laypeople. Someone who reasonably relies on the lawyer for personal help, and whom the lawyer knowingly lets rely, is not left without a remedy.

Chem–Age Ind., Inc. v. Glover supplies the working test. The South Dakota court said that an attorney-client relationship may arise expressly or impliedly from the parties' conduct, and it identified three elements. Run them in order against any constituent who claims the organization's lawyer was also personally hers or his:⁵

The third step does most of the work, because assent need not be spoken. A court may find the agreement through detrimental reliance, which exists when the person seeking legal services reasonably relies on the lawyer to provide them and the lawyer, aware of that reliance, does nothing to negate it.⁶ Reliance the lawyer does not know about adds nothing, and neither does reliance no reasonable person would hold. A director who privately assumes the company's lawyer is also looking out for her has not formed a relationship until the lawyer learns of the assumption and lets it stand.

The claimants in Chem–Age failed at the first step. The lawyer, Glover, was the long-time lawyer of a man named Dahl. The individual plaintiffs, Pederson and Shepard, alleged that Glover and Dahl had improperly arranged the sale of corporate assets, which Dahl then converted to his own use. The court found that the individual plaintiffs sought no advice from Glover and that Glover never agreed to advise or assist them. He never sent them a bill. Apart from a brief introduction to them, his only communication was with Dahl, and he had no personal consultation with them in creating the corporation.⁷ Innes and Chem–Age fail for the same reason, the absence of assent, but they reach it from different positions. Innes shared the company's legal exposure but never obtained personal service. Pederson and Shepard had almost no dealings with the lawyer at all.

The investors' failure did not settle the lawyer's duties to everyone. The corporation's status was a separate question. If Glover was shown to have represented the corporation, he owed the client corporation a duty regarding the asset sales.⁸ An organization can be a client when none of its individual constituents is, and in that case the lawyer's duties run to the entity.

An exam stem built on this doctrine usually stresses that the constituent is personally exposed, or that the lawyer deals mostly with that constituent, and then invites the conclusion that the lawyer represents the constituent. Exposure and frequent contact are the facts that Innes found insufficient. What counts is a request for personal help within the lawyer's competence and the lawyer's agreement, spoken or implied, to give it. A lawyer who understands how an implied relationship forms also knows how to avoid creating one by accident, which is to say early and plainly whom the lawyer represents. That duty is the subject of the next section.