Explaining Who the Client Is

Explaining Who the Client Is

A layperson summoned to meet the company's lawyer has every reason to assume the lawyer is there to help. The lawyer is trained, the company made the introduction, and the lawyer may work with this employee every day. Model Rule 1.13(f) answers that assumption with a duty to speak: when a lawyer deals with an organization's directors, officers, employees, members, shareholders, or other constituents and knows or reasonably should know that the organization's interests are adverse to those of the constituent, the lawyer shall explain the identity of the client.¹ The previous section established that a constituent is not automatically a client. That default protects the lawyer's freedom to serve the entity, but it leaves the constituent free to believe the opposite.

The mistaken belief costs the constituent something. An employee who thinks the lawyer is on his side may speak with complete candor and admit conduct that exposes him to discipline or liability. Yet the privilege covering the conversation belongs to the company, which may surrender it.² The employee may learn only afterward that the company, and not he, decides what becomes of his words. The duty to explain replaces his assumption with accurate information while he can still stop talking or look for a lawyer of his own. The profession recognizes the same danger elsewhere. To prevent overreaching by trained advocates dealing with an unrepresented person, Model Rule 3.8(b) and (c) requires a prosecutor to take reasonable steps to facilitate the accused's access to counsel and bars a prosecutor from procuring a waiver of important pretrial rights from an unrepresented accused.³

Two conditions together trigger the duty: adversity, and the lawyer's awareness of it. Adversity matters because interests that line up cost the constituent nothing, since advice that serves one serves the other. Once the interests diverge, the same belief becomes hazardous, because the lawyer's loyalty must run to the entity. The awareness requirement has two prongs, actual knowledge and what the lawyer reasonably should know. A lawyer who has not consciously registered the conflict therefore still owes the explanation when a careful lawyer would have seen it.

Other formulations of the trigger differ in wording but point the same way. South Dakota's Rule 1.13(d) requires the explanation “when it is apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.”⁴ Another formulation, quoted in one opinion, applies when the organization's interest “may be or become adverse” and speaks of a “conflict or potential conflict of interest.”⁵ A lawyer who waits for adversity to harden into certainty risks speaking too late.

Practice has settled on a fuller script than the rule's text requires. Counsel conducting internal investigations are advised to give a “corporate Miranda warning,”⁶ and the formulation quoted above supplies a fourth element. A complete warning tells the constituent:

1. that the lawyer represents the organization and does not represent the constituent individually;
2. that the conversation is meant to let the lawyer give legal advice to the organization;
3. that the privilege belongs to the organization, which may surrender it; and
4. that the constituent may wish to obtain independent representation.⁷

Together these points remind the constituent that the lawyer is acting in the best interests of the organization, which may not be in the individual's best interests.⁸ The quoted formulation also shows how complete the explanation must be once adversity surfaces. The lawyer advises the constituent of the conflict or potential conflict, says that the lawyer cannot represent the constituent, and takes care that the individual understands that the organization's lawyer cannot provide legal representation to him and that their discussions may not be privileged.⁹ A quick recital of the client's name, offered while the constituent plainly still thinks the lawyer is a personal advocate, falls short of a standard that asks the lawyer to make sure the message lands.

A South Dakota court showed how much the explanation can matter after the fact. Quoting Rule 1.13(d), it cited Brennan v. Ruffner, where a corporation's lawyer could not be held liable to a minority shareholder for breach of fiduciary duty in drafting a shareholders' agreement, because he had told the shareholders collectively that he represented only the corporation.¹⁰ The same opinion observed that in the case before it, Dahl's interests differed from those of the corporation and its investors, “at least in hindsight.”¹¹ The two points work together. Adversity may become plain only afterward, and the explanation is the one safeguard the lawyer controls beforehand.

Such reminders are sound practice. Counsel for an entity should regularly tell directors, officers, employees, members, and shareholders that the lawyer represents the entity and not them individually, unless the lawyer is also representing a constituent in a dual representation.¹² Rule 1.13(f) turns that habit into a requirement once adversity is known or should be known. A constituent who has heard the message repeatedly will also have a harder time later claiming a reasonable belief in personal representation.

The stakes of silence reach beyond a rule violation. When lawyers conduct an internal investigation for a corporation, they must make clear to the employees that they represent only the company. If employees reasonably believe the lawyers represent them, the lawyers might inadvertently create a joint-client relationship, in which the corporation cannot waive the privilege unless the co-client employees also agree.¹³ The ethics rules independently require disclosure to the corporate agent that the lawyer represents the entity and not the agent.¹⁴ A joint-client result cuts against the arrangement in Rule 1.13(a), under which a lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.¹⁵