9.3.1Rule 1.13: Organization as client

Rule 1.13 — Organization as client

The lawyer represents the organization acting through its duly authorized constituents, not those constituents personally (Rule 1.13(a)). Whenever the lawyer knows or reasonably should know that the organization's interests run against those of the constituent the lawyer is dealing with, the lawyer must make plain who the actual client is — the entity, not the individual (Rule 1.13(f)).

Comment [10] — Warning an adverse constituent: where the organization's interests are or become adverse to a constituent's, the lawyer should advise that constituent of the conflict or potential conflict of interest, that the lawyer cannot represent the constituent, and that the person may wish to obtain independent representation, taking care that the individual understands that discussions between the organization's lawyer and the individual may not be privileged. Whether such a warning should be given may turn on the facts of each case (cmt [11]).

Corporate family: Representing a corporation or other organization does not, by virtue of that representation, necessarily make its parent, subsidiary or other affiliate a client, so the lawyer is not barred from accepting a matter adverse to an affiliate in an unrelated matter — unless the circumstances are such that the affiliate should also be considered a client, there is an understanding that the lawyer will avoid representation adverse to the client's affiliates, or the lawyer's obligations to either client are likely to limit materially the representation of the other (Rule 1.7, Comment [34]).

Employees in internal investigations: Rule 1.6's confidentiality shield covers what employees share during internal investigations, but that shield does not turn employees into clients, and the lawyer cannot let an employee's interests take charge of the representation.

Lawyer on the board: where the entity's lawyer also serves as one of its directors, Chapter 19 carries the two-role problem — privilege does not attach to what the lawyer does in the director capacity, and where the two roles together carry a substantial conflict risk the response is to step down from one of them.

Simultaneous representation of entity and constituent (Rule 1.13(g)). 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 — so run Rule 1.7:

• The concurrent-conflict analysis and all four Rule 1.7(b) waiver conditions (Chapter 8) govern:

  • the lawyer reasonably believes they can provide competent and diligent representation to each affected client;
  • the representation is not prohibited by law;
  • it does not involve the assertion of a claim by one client against another client the lawyer represents in the same litigation or other proceeding before a tribunal; AND
  • each affected client gives informed consent, confirmed in writing;

  and

• Where Rule 1.7 requires the organization's consent to the dual representation, that consent must be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.

Reporting up: protecting the organization (Rule 1.13(b)). When the lawyer has actual knowledge that a constituent is engaged in action, intends to act, or refuses to act in a matter related to the representation in a way that breaches a duty owed to the entity, or violates law in a way that might reasonably be imputed to it, and that is likely to cause substantial injury to the entity, the lawyer must proceed as is reasonably necessary in the best interest of the organization.

Comment [4] — Asking the constituent to reconsider is an option the comment offers, not a required first step: in some circumstances it may be appropriate for the lawyer to ask the constituent to reconsider the matter, but referral to higher authority may be necessary even if the lawyer has not communicated with the constituent.

1. Report up: referral to higher authority in the organization is the default — the lawyer shall refer the matter unless the lawyer reasonably believes it is not necessary in the best interest of the organization to do so — including, if warranted by the circumstances, to the highest authority that can act on behalf of the organization as determined by applicable law;
2. Report out (permissive only) (Rule 1.13(c)): If, despite the lawyer's efforts under paragraph (b), the highest authority insists upon, or fails to address in a timely and appropriate manner, an action or refusal to act that is clearly a violation of law, and the lawyer reasonably believes substantial injury to the entity is reasonably certain to follow, the lawyer may reveal confidential information to appropriate persons outside the organization, to the extent necessary to prevent the injury. This external-disclosure permission falls away where the lawyer's engagement was specifically to investigate or mount a defense against the alleged violation (Rule 1.13(d)).
3. Discharge or withdrawal (Rule 1.13(e)): Where the lawyer reasonably believes the discharge followed from actions taken under paragraph (b) or (c) — or where the lawyer withdraws in circumstances that require or permit such action — the lawyer must proceed as reasonably necessary to assure that the organization's highest authority is informed of the discharge or withdrawal.

Report-out under step 2 is permissive: this Rule never requires the lawyer to report outside the organization, and Rule 1.13(c) opens only after the highest authority insists upon or fails to address the violation. Both limits belong to Rule 1.13 alone. Comment [6] — this Rule does not limit or expand the lawyer's responsibility under Rules 1.8, 1.16, 3.3 or 4.1, and paragraph (c) supplements Rule 1.6(b) rather than modifying, restricting or limiting it: so Rule 3.3(b) can still require disclosure to a tribunal, and where the lawyer's services are being used to further a crime or fraud by the organization, Rules 1.6(b)(2) and 1.6(b)(3) may permit disclosure with no trip to higher authority at all.