Colo. RPC 1.13

History

Source: Entire Appendix repealed and readopted April 12, 2007, effective January 1, 2008; Comment [3] amended, effective April 6, 2016. 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. Officers, directors, employees and shareholders are the constituents of the corpo- rate organizational client. The duties defined in this Comment 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. [2] When one of the constituents of an or- ganizational client communicates with the orga- nization’s lawyer in that person’s organizational capacity, the communication is protected by Rule 1.6. Thus, by way of example, if an orga- nizational client requests its lawyer to investi- gate allegations of wrongdoing, interviews made in the course of that investigation be- tween the lawyer and the client’s employees or other constituents are covered by Rule 1.6. This does not mean, however, that constituents of an organizational client are the clients of the law- yer. The lawyer may not disclose to such con- stituents information relating to the representa- tion except for disclosures explicitly or impliedly authorized by the organizational cli- ent in order to carry out the representation or as otherwise permitted by Rule 1.6. [3] When constituents of the organization make decisions for it, the decisions ordinarily must be accepted by the lawyer even if their utility or prudence is doubtful. Decisions con- cerning policy and operations, including ones entailing serious risk, are not as such in the lawyer’s province. Paragraph (b) makes clear, however, that, when the lawyer knows that the organization is likely to be substantially injured by action of an officer or other constituent that violates a legal obligation to the organization or is in violation of law that might be imputed to the organization, the lawyer must proceed as is reasonably necessary in the best interest of the organization. As defined in Rule 1.0(f), knowl- edge can be inferred from circumstances, and a lawyer cannot ignore the obvious. [4] In determining how to proceed under paragraph (b), the lawyer should give due con- sideration to the seriousness of the violation and its consequences, the responsibility in the orga- nization and the apparent motivation of the per- son involved, the policies of the organization concerning such matters, and any other relevant considerations. Ordinarily, referral to a higher authority would be necessary. In some circum- stances, however, it may be appropriate for the lawyer to ask the constituent to reconsider the matter; for example, if the circumstances in- volve a constituent’s innocent misunderstanding of law and subsequent acceptance of the law- yer’s advice, the lawyer may reasonably con- clude that the best interest of the organization does not require that the matter be referred to higher authority. If a constituent persists in con- duct contrary to the lawyer’s advice, it will be necessary for the lawyer to take steps to have the matter reviewed by a higher authority in the organization. If the matter is of sufficient seri- ousness and importance or urgency to the orga- nization, referral to higher authority in the orga- nization may be necessary even if the lawyer has not communicated with the constituent. Any measures taken should, to the extent practi- cable, minimize the risk of revealing informa- tion relating to the representation to persons outside the organization. Even in circumstances where a lawyer is not obligated by Rule 1.13 to proceed, a lawyer may bring to the attention of an organizational client, including its highest authority, matters that the lawyer reasonably believes to be of sufficient importance to war- rant doing so in the best interest of the organi- zation. [5] Paragraph (b) also makes clear that when it is reasonably necessary to enable the organization to address the matter in a timely and appropriate manner, the lawyer must refer the matter to higher authority, including, if war- ranted by the circumstances, the highest author- ity that can act on behalf of the organization under applicable law. The organization’s high- est authority to whom a matter may be referred ordinarily will be the board of directors or simi- lar governing body. However, applicable law may prescribe that under certain conditions the highest authority reposes elsewhere, for ex- ample, in the independent directors of a corpo- ration. Relation to Other Rules [6] The authority and responsibility pro- vided in this Rule are concurrent with the au- thority and responsibility provided in other Rules. In particular, this Rule does not limit or expand the lawyer’s responsibility under Rules 1.8, 1.16, 3.3 or 4.1. Paragraph (c) of this Rule supplements Rule 1.6(b) by providing an addi- tional basis upon which the lawyer may reveal information relating to the representation, but does not modify, restrict, or limit the provisions of Rule 1.6(b)(1) - (7). Under paragraph (c) the lawyer 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 lawyer reasonably believes necessary to prevent reasonably certain substan- tial injury to the organization. It is not necessary that the lawyer’s services be used in furtherance of the violation, but it is required that the matter be related to the lawyer’s representation of the organization. If the lawyer’s services are being used by an organization to further a crime or fraud by the organization, Rules 1.6(b)(2), 1.6(b)(3) and 1.6(b)(4) may permit the lawyer to disclose confidential information. In such cir- cumstances Rule 1.2(d) may also be applicable, in which event, withdrawal from the represen- tation under Rule 1.16(a)(1) may be required. [7] Paragraph (d) makes clear that the au- thority of a lawyer to disclose information re- lating to a representation in circumstances de- scribed in paragraph (c) does not apply with respect to information relating to a lawyer’s engagement by an organization to investigate an alleged violation of law or to defend the orga- nization or an officer, employee or other person associated with the organization against a client arising out of an alleged violation of law. This is necessary in order to enable organizational clients to enjoy the full benefits of legal counsel in conducting an investigation or defending against a claim. [8] A lawyer who reasonably believes that he or she has been discharged because of the lawyer’s actions taken pursuant to paragraph (b) or (c), or who withdraws in circumstances that require or permit the lawyer to take action un- der either of these paragraphs, must proceed as the lawyer reasonably believes necessary to as- sure that the organization’s highest authority is informed of the lawyer’s discharge or with- drawal. Government Agency [9] The duty defined in this Rule applies to governmental organizations. Defining precisely the identity of the client and prescribing the resulting obligations of such lawyers 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 execu- tive 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 lawyer may have authority under applicable law to question such conduct more extensively than that of a lawyer for a private organization in similar circumstances. Thus, when the client is a governmental organization, a different balance may be appropriate between maintaining confi- dentiality and assuring that the wrongful act is prevented or rectified, for public business is involved. In addition, duties of lawyers em- ployed by the government or lawyers in mili- tary service may be defined by statutes and regulation. This Rule does not limit that author- ity. See Scope. Clarifying the Lawyer’s Role [10] There are times when the organiza- tion’s interest may be or become adverse to those of one or more of its constituents. In such circumstances the lawyer should advise any constituent, whose interest the lawyer finds ad- verse to that of the organization of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent, and that such person may wish to obtain independent repre- sentation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organi- zation cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged. [11] Whether such a warning should be given by the lawyer for the organization to any constituent individual may turn on the facts of each case. Dual Representation [12] Paragraph (g) recognizes that a lawyer for an organization may also represent a princi- pal officer or major shareholder. Derivative Actions [13] 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 asso- ciations have essentially the same right. Such an action may be brought nominally by the organi- zation, but usually is, in fact, a legal contro- versy over management of the organization. [14] The question can arise whether coun- sel for the organization may defend such an action. The proposition that the organization is the lawyer’s client does not alone resolve the issue. Most derivative actions are a normal in- cident of an organization’s affairs, to be de- fended by the organization’s lawyer like any other suit. However, if the claim involves seri- ous charges of wrongdoing by those in control of the organization, a conflict may arise be- tween the lawyer’s duty to the organization and the lawyer’s relationship with the board. In those circumstances, Rule 1.7 governs who should represent the directors and the organization. ANNOTATION Law Reviews. For article, ‘‘Am I My Broth- er’s Keeper? Redefining the Attorney-Client Relationship’’, see 32 Colo. Law. 11 (Apr. 2003). For article, ‘‘Entity Foundation: Defin- ing the Client And the Duty of Confidentiality’’, see 34 Colo. Law. 77 (July 2005). For article, ‘‘The New Rules of Professional Conduct: Sig- nificant Changes for In-House Counsel’’, see 36 Colo. Law. 71 (Nov. 2007). For article, ‘‘Attor- ney-Client Communications in Colorado’’, see 38 Colo. Law. 59 (Apr. 2009). For article, ‘‘Top 10 Things In-House Lawyers Need to Know about Ethics’’, see 45 Colo. Law. 59 (July 2016). For article, ‘‘In-House Counsel, Whistleblowing, and Ethics’’, see 49 Colo. Law. 29 (June 2020). There is no ethical violation in the attorney general suing the secretary of state where no client confidences are involved and the attorney general is representing the broader institutional concerns of the state regarding allegedly uncon- stitutional legislation enacting a congressional redistricting plan. People ex rel. Salazar v. Davidson, 79 P.3d 1221 (Colo. 2003), cert. de- nied, 79 U.S. 1221, 124 S. Ct. 2228, 159 L. Ed. 2d 260 (2004) (decided prior to 2007 repeal and readoption of the Colorado rules of professional conduct).