New Rule 1.13 of the approved
Oregon Rules of Professional Conduct
By Chris Mullmann
On Oct. 16, 2004, the House of Delegates voted to recommend to the Oregon Supreme Court the adoption of the Oregon version of the Model Rules of Professional Conduct. They will be referred to as the Oregon Rules of Professional Conduct. (The official reference to the new rules will be the Oregon RPC to avoid any confusion with the Oregon Rules of Civil Procedure or ORCP.) Although a formal order had not been issued at the time of writing this article, the Oregon Supreme Court approved the new rules at its public meeting on Oct. 26, 2004. It is anticipated that the rules will become effective Jan. 1, 2005.
Over the next few months, this column will discuss various aspects of the new rules in order to familiarize Oregon lawyers with differences between the current Oregon Code of Professional Responsibility and the new Oregon RPC.
This article will focus on Oregon RPC 1.13. While this rule has no counterpart in the current Oregon Code of Professional Responsibility, it is essentially a codification of existing case law now set forth in the new rule in seven paragraphs. While the Oregon RPC will not incorporate adoption of the comments to the ABA Model Rules of Professional Conduct, this article will refer to some of them, as they are instructive when analyzing the new rules.
It has been the long established rule of law in Oregon that an attorney who represents a corporation is deemed to represent only the corporation and not its officers, directors, shareholders or employees as such. In re Kinsey, 294 Or 544, 556 n 4, 660 P2d 660 (1983). Oregon RPC 1.13 (a) now codifies that proposition, noting that the attorney represents the entity acting through its duly authorized "constituents." Comment 1 to rule 1.13 in the ABA Model Rules makes clear that constituents means positions equivalent to officers, directors, employees and shareholders held by persons acting for organizational clients that are not corporations. Of course, lawyers still need to be careful not to represent constituents of organizations if the situation is to only represent the organization. See, i.e., In re Brownstein, 288 Or 83, 602 P2d 655 (1979) and In re Banks, 283 Or 459, 584 P2d 284 (1978). Letters of representation and non-representation might be used in appropriate circumstances. See, also, Oregon RPC 1.13 (f).
When a constituent communicates with the organization’s lawyer in that person’s organizational capacity, the communication is protected by the attorney client privilege of section 503 of the Oregon Evidence Code as well as Oregon RPC 1.6, which protects client confidences and secrets. (former DR 4-101). As noted in Comment 2 to ABA Model RPC 1.13, if an organization client requests its lawyer to investigate allegations of wrongdoing, interviews may be made in the course of that investigation between the lawyer and the client’s employees or other constituents, and those interviews will be protected as confidences and secrets of the organization client. That does not mean, however, that constituents of an organizational client are clients of the lawyer. The lawyer may not disclose to such constituents information relating to the representation unless explicitly or impliedly authorized by the organizational client in order to carry out the representation or as otherwise permitted by rule 1.6.
Oregon RPC 1.13 (b) sets forth a lawyer’s responsibility when the lawyer knows that an individual associated with an organization intends to act or refuses to act in a matter related to the representation that is a violation of the legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization and is likely to result in substantial injury to the organization. As defined in Oregon RPC 1.0(h), knowledge can be inferred from circumstances and a lawyer cannot ignore the obvious. Under those circumstances the lawyer must proceed as reasonably necessary in the best interest of the organization. Unless the lawyer reasonably concludes that it is not necessary to do so, the lawyer shall report the matter up the ladder. In other words, when it is reasonably necessary to enable the organization to address the issue in a timely and appropriate manner, the lawyer must refer the matter to a higher authority, and if warranted under the circumstances, to the highest authority that can act on behalf of the organization under applicable law. See also, Comment 5 to ABA Model RPC 1.13.
In determining how to proceed in such a situation, the lawyer should give due consideration to the seriousness of the violation and its consequences, the person’s responsibility in the organization and apparent motivation, as well as the policies of the organization concerning such matters. In some circumstances it may be simple enough to ask the constituent to reconsider the matter based on a misunderstanding of law or fact. If the constituent accepts the lawyer’s advice, the lawyer may reasonably conclude that referral to a higher authority in not required. If the individual persists in ignoring the lawyer’s advice, it will be necessary to have the matter reviewed by a higher authority in the organization. Any measures taken under this rule should, to the extent practicable, minimize the risk of revealing information relating to the representation to individuals outside the organization. See Comment 4 to ABA Model RPC 1.13.
But, what is the lawyer’s duty if the highest authority that can act for the corporation refuses or fails to address the act when the act is clearly a violation of law? If the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal the information 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. Oregon RPC 1.13 (c) (2).
According to Comment 7 to ABA Model RPC Rule 1.13, paragraph (d) of this rule makes clear that the authority of a lawyer to disclose information relating to a representation in circumstances described in paragraph (c) of the rule 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.
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 such a constituent of the conflict or potential conflict of interest such that the lawyer cannot represent the constituent, and that the constituent should 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. See, Comment 10 to Model Rule 1.13.
While there is no counterpart in the current Code of Professional Responsibility to Oregon RPC 1.13, it is not likely to create significant issues for the practicing lawyer. However, as suggested above, in order to prevent any confusion as to who the lawyer represents, letters of representation and non-representation are encouraged when representing an organizational client — to clearly identify the client and avoid any potential claim of a conflict of interest.
Note: By early November 2004 all members of the bar should have received a "Study Guide" designed to assist members in the transition from the Current Code of Professional Responsibility and the new Oregon RPC. If you have not received a copy please contact Judy Coons at the bar at 503-620-0222, ext. 334, or toll-free in Oregon at (800) 452-8260, ext. 334.
© 2004 Chris Mullmann
ABOUT THE AUTHOR
Chris Mullmann is assistant general counsel and manager of the Client Assistance Office for the Oregon State Bar. He can be reached at (503) 620-0222 or toll-free in Oregon at (800) 452-8260, ext. 392, or by e-mail at email@example.com.