I'm counsel to a struggling corporation and think its board can't manage its own affairs. Can I ask a court to remove the board, audit the books, and appoint a property manager?

Plain-English summary

The inquiring attorney, acting as legal counsel to a corporation (XYZ Group), asked whether the attorney may seek a court order to vacate the corporation's executive board, obtain an audit of the corporation's books, and appoint a property manager to administer the corporation's real property. XYZ Group, a corporation with three shareholders, had begun a condominium project in 1988 and turned over control at the end of 1989 to Ms. A, a sister of one of the shareholders, who hired the attorney to restore order to the corporation's chaotic financial state. The attorney believed the client was under a disability rendering it unable to care for itself and its assets, stemming from the three shareholders' inability to comply with corporate formalities, the charter, and the by-laws.

The panel took the position that the Board of Directors of the XYZ Group is the client. It concluded that the attorney may not substitute the attorney's own judgment for that of the client, and that the attorney must either comply with the directions of the Board of Directors or withdraw from further representation of the XYZ Group.

Currency note

This opinion was issued in 1991, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, which renumbered and amended several provisions, including the organization-as-client rule. 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 Treat this page as historical context, not current guidance.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 mentioned here.

Common questions

Q: Who is the client when a lawyer represents a corporation?

A: Under this opinion, the corporation acting through its Board of Directors is the client; the panel identified the Board as the client here.

Q: Can corporate counsel go to court against the company's own board?

A: The panel concluded the attorney may not substitute the attorney's judgment for the client's, so counsel must follow the Board's directions or withdraw rather than seek relief against the Board.

Q: What are counsel's options if counsel disagrees with the board?

A: The panel gave two: comply with the Board's directions, or withdraw from further representation of the corporation.

Background and rules framework

The opinion reflects the organization-as-client principle of Rule 1.13, corresponding to Model Rule 1.13, under which a lawyer for an organization represents the entity acting through its authorized constituents (here, the Board of Directors). The panel did not cite a rule by number, but its holding tracks the entity-client rule together with the lawyer's duty to follow the client's decisions or, failing that, to withdraw.

Citations and references

Rules of Professional Conduct:

• The opinion cites no Rule of Professional Conduct by number. Its analysis reflects RI RPC 1.13 / MR 1.13 (organization as client).

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 91-02: Disposing of a Joint Client File in a Divorce Dispute
• RI EAP Op. 95-51: Who the Board's Lawyer Represents
• RI EAP Op. 95-17: Representing a Corporation and Stockholder in a Buyout

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2091-29.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

Digest of Ethics Advisory Panel
Opinion #91-29
Issued May 23, 1991

An attorney seeks Panel advice as to whether the attorney, acting as legal counsel to a corporation, may seek a court order to vacate the corporation's executive board, obtain an audit of the corporation's books, and appoint a property manager to administer the corporation's real property.

The underlying facts are as follows:

In 1988, XYZ Group, a corporation with three shareholders began a condominium project. The XYZ Group ran the operation of the condominium project until the end of 1989. XYZ Group turned control of its operation over to Ms. A, a sister of one of XYZ's shareholders.

The condominium project experienced severe financial difficulties. Ms. A hired the attorney to restore order to XYZ's chaotic financial state.

The attorney believes the client, the XYZ Group, is presently under a disability which renders it unable to properly care for itself and its assets. The attorney states that the XYZ Group's problems stem from the inability of the three shareholders to comply with corporate formalities and abide by the corporation's charter and by-laws.

The Panel takes the position that the Board of Directors of the XYZ Group is the client. The attorney may not substitute his/her judgment for that of his/her client. The attorney must either comply with the directions of the Board of Directors or withdraw from further representation of the XYZ Group.

Ethics Advisory Panel advice is protective in nature. There is no requirement that an attorney abide by a Panel opinion, but if he or she does, he or she is fully protected from any charge of impropriety.