Can a lawyer who sits on a corporation's board of directors or trustees also serve as the corporation's lawyer?

Plain-English summary

The Commission was asked whether a lawyer who sits on the board of directors or trustees of a for-profit or nonprofit corporation is precluded, by holding that office, from representing the corporation as a client. The Commission noted the practice is common and then catalogued the difficulties it can create.

The opinion identified at least four. First, the lawyer-director becomes part of corporate management and in a sense is both client and lawyer at once. Second, counsel represents the entity, not any one component (shareholders, members, officers, or directors), so when those components work at cross-purposes the lawyer must keep his independent judgment fixed on the entity as a whole, a task board membership makes harder and can make suspect. Third, a director is more likely to be named as a party or witness in litigation over corporate affairs (as may be his firm), which can require additional counsel and strain his objectivity. Fourth, the lawyer-director probably should not participate in choosing the corporation's counsel if he is a candidate, nor pass on his own compensation; while 13A M.R.S.A. section 717 and 13B M.R.S.A. section 713 do not require outright disqualification and the Bar Rules arguably do not apply to those management decisions, abstention is the prudent course.

Despite these problems, the Commission concluded that dual service as director and counsel is not, without more, a violation of any bar rule. Because only one client is involved, Rules 3.4(b), 3.4(c), and 3.4(d) do not apply. The arrangement may be governed by Rule 3.4(f), which cautions against accepting employment, and requires the client's informed written consent, where an interest of the lawyer may affect the exercise of professional judgment; but Rule 3.4(f) imposes no absolute bar. The Commission observed that a director owes the entity duties of fidelity, independence, and judgment not unlike a lawyer's, so it will not be clear in every case that the lawyer's director interest will or even might affect his professional judgment as counsel. The opinion flagged the situations in which counsel must stay alert to that possibility.

Currency note

This opinion was issued in 1985, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Is it a per se ethics violation for a corporation's lawyer to also sit on its board?

A: The opinion concluded no. Dual service as director and counsel is not, without more, a violation of any bar rule.

Q: Why don't the multiple-client conflict rules apply?

A: The opinion concluded that because only one client (the corporate entity) is involved, Rules 3.4(b), 3.4(c), and 3.4(d) do not apply; the relevant provision is Rule 3.4(f), addressing the lawyer's own interest.

Q: When does Rule 3.4(f) come into play for a lawyer-director?

A: The opinion concluded Rule 3.4(f) applies where the lawyer's interest as a director may affect his exercise of professional judgment for the corporation, in which case it calls for the client's informed written consent; it is not an absolute bar.

Q: Should the lawyer-director vote on choosing counsel or on his own fees?

A: The opinion concluded he probably should not participate in selecting corporate counsel if he is a candidate, nor pass on his own compensation; though the statutes do not require disqualification, abstention is the prudent course.

Background and rules framework

The opinion interprets former Maine Bar Rule 3.4(f) (employment where the lawyer's own interest may affect professional judgment) and notes that Rules 3.4(b), 3.4(c), and 3.4(d) (multiple-client conflicts) do not apply when only the entity is the client. These correspond to ABA Model Rule 1.7 (conflicts of interest, including personal-interest conflicts) and Model Rule 1.13 (organization as client). The opinion also references the Maine corporation statutes, 13A M.R.S.A. section 717 and 13B M.R.S.A. section 713, on interested-director transactions.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 (conflicts of interest); Model Rule 1.13 (organization as client)
• Maine Bar Rules 3.4(f), 3.4(b), 3.4(c), 3.4(d)

Statutes:

• 13A M.R.S.A. section 717 (interested directors, business corporations)
• 13B M.R.S.A. section 713 (interested directors, nonprofit corporations)

See also

• ABA Formal Op. 98-410: Lawyer as Client's Director

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=91019

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Issued by the Professional Ethics Commission

Date Issued: March 14, 1985

Question

Is an attorney who is a member of the Board of Directors or Trustees of a profit or nonprofit corporation precluded, by holding that office, from representing the corporation as a client?

Opinion

Attorneys who advise and represent corporations of all kinds are commonly asked to serve and frequently do serve as Directors of Trustees of the corporation. The prevalence of this practice suggests that the difficulties it can create for the attorney-director are either not often acknowledged, or not often deemed a serious impediment. These difficulties include at a minimum, the following:

First, the lawyer-director becomes part of corporate management and therefore in a sense becomes client and lawyer at the same time.

Second, the lawyer joins one component of a client entity having shareholders or members and officers as additional components. As counsel to the corporation, of course, the attorney represents the entity, not any of its components. When these components work at cross-purposes, as sometimes happens, corporate counsel must insure that his independent professional judgment is exercised for the entity as a whole, not the director component alone. Membership on the Board is likely to make the judgments facing a lawyer in these circumstances much more difficult and can make them suspect.

Third, being a director the attorney will be more likely to be named as a party to litigation over corporate affairs or as a likely witness. His firm, if any, may be named as well. Additional counsel retained for this litigation may be required. Even if the attorney is not named as a party, the litigation may involve business decisions in which he was a participant. At a minimum this would strain his objectivity representing the corporation in litigation.

Fourth, the attorney-director probably should not participate in the decision to choose counsel for the corporation, if he is one of the candidates, and should not pass on his own compensation. 13A M.R.S.A. section 717 and 13B M.R.S.A. section 713 do not require outright disqualification, and it may be argued that the Bar Rules do not apply, since the attorney is not acting as such in making these decisions, but abstention would seem to be the prudent course.

Notwithstanding these problems, and although the wisdom of the practice has been questioned,[1] dual service as a director and as counsel to a corporation is not, without more, a violation of any bar rule. Since only one client is involved, neither Rule 3.4(b), nor 3.4(c) or (d) is applicable. The attorney-director case may be governed by Rule 3.4(f), which cautions against accepting employment, and requires informed written consent of the client, if an interest of the lawyer may affect the exercise of professional judgment on behalf of the client. Rule 3.4(f) does not, however, impose an absolute bar. Moreover, a director owes duties of fidelity, independence and judgment to the corporate entity not dissimilar to the duties of lawyers. Hence, it will not be clear in all cases that the lawyer's interest as director will or even might affect the exercise of the professional judgment of counsel to the corporation. We merely note some of the number of situations in which counsel must be alert to that possibility.

Footnote

[1] Brandeis, Other People's Money and How the Bankers Use it, 198, 1932 Ed.; 2 Swaine, The Cravath Firm and Its Predecessors, 1819-1949, 910 (1948); Rostow, "The Lawyer and His Client", 48 A.B.A. J. 146, 147 (1962).