Md. R. Att'y 19-301.13
Md. R. Att'y 19-301.13
COMMENT
The Entity as the Client--[1] An organizational client is a legal entity, but it cannot act except through its officers, directors, employees, shareholders and other constituents.
[2] Officers, directors, employees and shareholders are the constituents of the corporate organizational client. The duties created by this Rule apply equally to unincorporated associations. "Other constituents as used in this Comment means the positions equivalent to officers, directors, employees and shareholders held by persons acting for organizational clients that are not corporations.
[3] When one of the constituents of an organizational client communicates with the organization's attorney in that person's organizational capacity, the communication is protected by Rule 19-301.6 (1.6). Thus, for example, if an organizational client requests its attorney to investigate allegations of wrongdoing, interviews made in the course of that investigation between the attorney and the client's employees or other constituents are covered by Rule 19-301.6 (1.6). This does not mean, however, that constituents of an organizational client are the clients of the attorney. The attorney may not disclose to such constituents information relating to the representation except for disclosures explicitly or impliedly authorized by the organizational client in order to carry out the representation or as otherwise permitted by Rule 19-301.6 (1.6).
[4] When constituents of the organization make decisions for it, the decisions ordinarily must be accepted by the attorney even if their utility or prudence is doubtful. Decisions concerning policy and operations, including ones entailing serious risk, are not as such in the attorney's province. However, different considerations arise when the attorney knows that the organization is likely to be substantially injured by action of a constituent that is in violation of law. In such a circumstance, it may be reasonably necessary for the attorney to ask the constituent to reconsider the matter. If that fails, or if the matter is of sufficient seriousness and importance to the organization, it may be reasonably necessary for the attorney to take steps to have the matter reviewed by a higher authority in the organization, depending on the seriousness of the matter and whether the constituent in question has apparent motives to act at variance with the organization's interest. Review by the chief executive officer or by the board of directors may be required when the matter is of importance commensurate with their authority. At some point it may be useful or essential to obtain an independent legal opinion.
[5] The organization's highest authority to whom a matter may be referred ordinarily will be the board of directors or similar governing body. However, applicable law may prescribe that under certain conditions the highest authority reposes elsewhere; for example, in the independent directors of a corporation.
[6] If an attorney can take remedial action without a disclosure of information that might adversely affect the organization, the attorney as a matter of professional discretion may take such action as the attorney reasonably believes to be in the best interest of the organization. For example, an attorney for a close corporation may find it reasonably necessary to disclose misconduct by the Board to the shareholders. However, taking such action could entail disclosure of information relating to the representation with consequent risk of injury to the client; when such is the case, the organization is threatened by alternative injuries; the injury that may result from the governing Board's action or refusal to act, and the injury that may result if the attorney's remedial efforts entail disclosure of confidential information. The attorney may pursue remedial efforts even at the risk of disclosure in the circumstances stated in subsections (c)(1) and (c)(2) of this Rule.
Relation to Other Rules--[7] The authority and responsibility provided in this Rule are concurrent with the authority and responsibility provided in other Rules. Section (c) of this Rule supplements Rule 19-301.6(b) (1.6) by providing an additional basis upon which the attorney may reveal information relating to the representation, but does not modify, restrict, or limit the provisions of Rule 19-301.6(b)(1)-(6) (1.6). Under section (c) of this Rule the attorney may reveal such information only when the organization's highest authority insists upon or fails to address threatened or ongoing action that is clearly a violation of law, and then only to the extent the attorney reasonably believes necessary to prevent reasonably certain substantial injury to the organization. It is not necessary that the attorney's services be used in furtherance of the violation as it is under Rules 19-301.6(b)(2) (1.6) and 19-301.6 (b)(3) (1.6), but it is required that the matter be related to the attorney's representation of the organization. In particular, this Rule does not limit or expand the attorney's responsibility under Rules 19-301.8 (1.8), 19-301.16 (1.16), 19-303.3 (3.3) or 19-304.1 (4.1). If the attorney's services are being used by an organization to further a crime or fraud by the organization, Rules 19-301.6(b)(2) (1.6) and 19-301.6 (b)(3) (1.6) may permit the attorney to disclose information otherwise protected by Rule 19-301.6(a) (1.6). In such circumstances, Rule 19-301.2(d) (1.2) may also be applicable.
Government Agency--[8] The duty defined in this Rule applies to governmental organizations. Defining precisely the identity of the client and prescribing the resulting obligations of such attorneys may be more difficult in the government context and is a matter beyond the scope of these Rules. See Scope [18]. Although in some circumstances the client may be a specific agency, it may also be a branch of government, such as the executive branch, or the government as a whole. For example, if the action or failure to act involves the head of a bureau, either the department of which the bureau is a part or the relevant branch of government may be the client for purposes of this Rule. Moreover, in a matter involving the conduct of government officials, a government attorney may have authority under applicable law to question such conduct more extensively than that of an attorney for a private organization in similar circumstances. Thus, when the client is a governmental organization, a different balance may be appropriate between maintaining confidentiality and assuring that the wrongful act is prevented or rectified, for public business is involved. In addition, duties of attorneys employed by the government or attorneys in military service may be defined by statutes and regulation. This Rule does not limit that authority. See Scope.
Clarifying the Attorney's Role--[9] There are times when the organization's interest may be or become adverse to those of one or more of its constituents. In such circumstances the attorney should advise any constituent, whose interest the attorney finds adverse to that of the organization of the conflict or potential conflict of interest, that the attorney cannot represent such constituent, and that such person may wish to obtain independent representation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the attorney for the organization cannot provide legal representation for that constituent individual, and that discussions between the attorney for the organization and the individual may not be privileged.
[10] Whether such a warning should be given by the attorney for the organization to any constituent individual may turn on the facts of each case.
Dual Representation--[11] Section (e) of this Rule recognizes that an attorney for an organization may also represent a principal officer or major shareholder.
Derivative Actions--[12] Under generally prevailing law, the shareholders or members of a corporation may bring suit to compel the directors to perform their legal obligations in the supervision of the organization. Members of unincorporated associations have essentially the same right. Such an action may be brought nominally by the organization, but usually is, in fact, a legal controversy over management of the organization.
[13] The question can arise whether an attorney for the organization may defend such an action. The proposition that the organization is the attorney's client does not alone resolve the issue. Most derivative actions are a normal incident of an organization's affairs, to be defended by the organization's attorney like any other suit. However, if the claim involves serious charges of wrongdoing by those in control of the organization, a conflict may arise between the attorney's duty to the organization and the attorney's relationship with the board. In those circumstances, Rule 19-301.7 (1.7) governs who may represent the directors and the organization.
Model Rules Comparison: Rule 19-301.13 (1.13) retains elements of existing Maryland language, incorporates further revisions, and incorporates language in Rule 1.13(d) and Comments [5] and [8] from the Ethics 2000 Amendments to the ABA Model Rules.