Representing Organizations and Reporting Client Problems

In representing organizations, who is my client and what obligations do I have to report problems that I discover?

Lawyers routinely represent organizations, whether they are private businesses, governmental entities, or non-profits. Fundamentally, a lawyer who is retained to represent an organization represents only the organization—and not its officers, managers, or employees—unless, with the organization’s consent and in the absence of a conflict of interest, the organization’s people should also be represented.

Lawyers for the organization should exercise care in dealing with the organization’s constituents (officers, managers, employees, etc.) so as not to create an unwarranted impression that the lawyer represents those constituents separately from—or in addition to--the entity. Where a lawyer learns of misconduct by a constituent that will likely harm the entity, the lawyer is required to take remedial steps after assessing the situation. The lawyer’s obligations to the organization are described in Rule 1.12, Texas Disciplinary Rules of Professional Conduct.

1. Representing Organizations and Reporting Client Problems

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Rule 1.12, Texas Disciplinary Rules of Professional Conduct, states:

(a) A lawyer employed or retained by an organization represents the entity. While the lawyer in the ordinary course of working relationships may report to, and accept direction from, an entity's duly authorized constituents, in the situations described in paragraph (b) the lawyer shall proceed as reasonably necessary in the best interest of the organization without involving unreasonable risks of disrupting the organization and of revealing information relating to the representation to persons outside the organization.

(b) A lawyer representing an organization must take reasonable remedial actions whenever the lawyer learns or knows that:

(1) an officer, employee, or other person associated with the organization has committed or intends to commit a violation of a legal obligation to the organization or a violation of law which reasonably might be imputed to the organization;

(2) the violation is likely to result in substantial injury to the organization; and

(3) the violation is related to a matter within the scope of the lawyer’s representation of the organization.

(c) Except where prior disclosure to persons outside the organization is required by law or other Rules, a lawyer shall first attempt to resolve a violation by taking measures within the organization. In determining the internal procedures, actions or measures that are reasonably necessary in order to comply with paragraphs (a) and (b), a lawyer shall give due consideration to the seriousness of the violation and its consequences, the scope and nature of the lawyers representation, 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. Such procedures, actions and measures may include, but are not limited to, the following:

(1) asking reconsideration of the matter;

(2) advising that a separate legal opinion on the matter be sought for presentation to appropriate authority in the organization; and

(3) referring the matter to higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest authority that can act in behalf of the organization as determined by applicable law.

(d) Upon a lawyers resignation or termination of the relationship in compliance witRule 1.15, a lawyer is excused from further proceeding as required by paragraphs (a), (b) and (c), and any further obligations of the lawyer are determined by Rule 1.05.

(e) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when it is apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing or when explanation appears reasonably necessary to avoid misunderstanding on their part.