Ind. Prof. Cond. Rule 1.13

Effective January 1, 2005

(a) A lawyer employed or retained by an organization represents the organization acting

through its duly authorized constituents.

(b) If a lawyer for an organization knows that an officer, employee or other person associated

with the organization is engaged in action, intends to act or refuses to act in a matter related

to the representation that is a violation of a legal obligation to the organization, or a violation

of law which reasonably might be imputed to the organization, and that is likely to result in

substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is

not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances to the

highest authority that can act on behalf of the organization as determined by applicable law.

(c) Except as provided in paragraph (d), if

(1) despite the lawyer's efforts in accordance with paragraph (b) the highest authority that

can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a violation of law and

(2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal information relating to the

representation whether or not Rule 1.6 permits such disclosure, but only if and to the

extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.

(d) Paragraph (c) shall not apply with respect to information relating to a lawyer's representation of an organization to investigate an alleged violation of law, or to defend the

organization or an officer, employee or other constituent associated with the organization

against a claim arising out of an alleged violation of law.

(e) A lawyer who reasonably believes that he or she has been discharged because of the lawyer's actions taken pursuant to paragraphs (b) or (c), or who withdraws under circumstances

that require or permit the lawyer to take action under either of those paragraphs, shall proceed as the lawyer reasonably believes necessary to assure that the organization's highest

authority is informed of the lawyer's discharge or withdrawal.

(f) In dealing with an organization's directors, officers, employees, members, shareholders or

other constituents, a lawyer shall explain the identity of the client when the lawyer knows or

reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.

(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. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual

who is to be represented, or by the shareholders.

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 corporate 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 organizational client communicates with the organization's lawyer in that person's organizational capacity, the communication is protected

by Rule 1.6. Thus, by way of example, if an organizational client requests its lawyer to

investigate allegations of wrongdoing, interviews made in the course of that investigation

between 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 lawyer. The lawyer 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

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 concerning 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), knowledge 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 consideration to the seriousness of the violation and its consequences, the responsibility in

the organization and the apparent motivation of the person 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 circumstances, however, it may

be appropriate for the lawyer to ask the constituent to reconsider the matter; for example,

if the circumstances involve a constituent's innocent misunderstanding of law and subsequent acceptance of the lawyer's advice, the lawyer may reasonably conclude that the

best interest of the organization does not require that the matter be referred to higher

authority. If a constituent persists in conduct 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 seriousness and importance or urgency to

the organization, referral to higher authority in the organization may be necessary even if

the lawyer has not communicated with the constituent. Any measures taken should, to the

extent practicable, minimize the risk of revealing information relating to the representation

to persons outside the organization. Even in circumstances where a lawyer is not oblig-

ated 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 warrant doing so in the best interest of the organization.

[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 warranted by the circumstances, the

highest authority that can act on behalf of the organization under applicable law. 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.

Relation to Other Rules

[6] The authority and responsibility provided in this Rule are concurrent with the authority

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 sup-

plements Rule 1.6(b) by providing an additional 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)--(6). 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 substantial 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) and 1.6(b)(3) may permit the lawyer to disclose confidential information. In such circumstances Rule 1.2(d) may also be applicable,

in which event, withdrawal from the representation under Rule 1.16(a)(1) may be

required.

[7] Paragraph (d) makes clear that the authority of a lawyer to disclose information relating to a representation in circumstances described 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 organization or an officer, employee or other

person associated with the organization against a claim 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 under either of these paragraphs, must proceed as the lawyer reasonably believes necessary to assure that the

organization's highest authority is informed of the lawyer's discharge or withdrawal.

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 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 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 confidentiality and assuring that the

wrongful act is prevented or rectified, for public business is involved. In addition, duties of

lawyers employed by the government or lawyers in military service may be defined by statutes and regulation. This Rule does not limit that authority. See Scope.

Clarifying the Lawyer's Role

[10] 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 lawyer should advise any

constituent, whose interest the lawyer finds adverse 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 representation. Care must be taken to

assure that the individual understands that, when there is such adversity of interest, the

lawyer for the organization 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 principal 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 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.

[14] The question can arise whether counsel 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 incident of an organization's affairs, to be

defended by the organization's lawyer 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 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.