Can a firm represent a corporation when the corporation's CEO is also a paid consultant to the firm?

Plain-English summary

The firm asked whether it could represent a corporation whose CEO is also a consultant to the firm on technical matters. The committee assumed the firm's proposed client is the corporation and that no attorney-client relationship exists with the CEO. It said the firm must examine its relationship with the CEO as an independent contractor or consultant, and that relationship must not interfere with the independent judgment the firm renders on behalf of the corporation. Assuming the firm is satisfied on an objective basis that it can meet that standard, RPC 1.7(b) would require disclosure of the relationship as a potential conflict and a written waiver by the corporation. Given the potential interference, the waiver should be accomplished by the corporation's board (and, in a closely held corporation, by the shareholders as well) rather than by the CEO acting alone.

The committee added that the firm should give notice to both the corporation and the CEO defining the differing relationships: the non-representation of the CEO individually; the severability of the CEO's consultancy from the representation of the corporation (the two are unrelated, and one could cease without the other); and the limits of confidentiality under RPC 1.6. For example, if the firm learned information about the CEO while using the CEO as a consultant, that information would not be confidential from the corporation and would have to be passed on, even though adverse to the CEO. The committee also said there should be a warning under RPC 1.7(b) that, should a dispute arise between the firm and the CEO in the consultancy, it might require the firm's withdrawal from representing the corporation.

Currency note

This opinion was issued in 1997, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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. Washington's cited rules correspond to ABA Model Rules 1.6 (confidentiality) and 1.7 (conflicts of interest).

Common questions

Q: Can the firm take the corporation as a client when its CEO consults for the firm?

A: The committee concluded the firm may, provided the consulting relationship will not interfere with the firm's independent judgment for the corporation and RPC 1.7(b) is satisfied.

Q: Who can waive the conflict?

A: The committee said the written waiver should be accomplished by the corporation's board, and in a closely held corporation by the shareholders as well, rather than by the CEO acting alone.

Q: Is information the firm learns about the CEO kept from the corporation?

A: No. The committee said information learned about the CEO while using the CEO as a consultant would not be confidential from the corporation and would have to be passed on, even though adverse to the CEO.

Q: What if the firm and the CEO later fall out over the consultancy?

A: The committee said there should be a warning under RPC 1.7(b) that a dispute in the consultancy might require the firm to withdraw from representing the corporation.

Background and rules framework

The opinion applied RPC 1.7(b) (the material-limitation branch of the conflicts rule, corresponding to ABA Model Rule 1.7) and RPC 1.6 (confidentiality, corresponding to ABA Model Rule 1.6) to a firm representing a corporate client whose CEO is a paid consultant to the firm. The committee anchored the analysis in the firm's independent judgment, an informed written waiver at the board (and shareholder) level, and notice that separates the CEO's individual position from the corporate representation and spells out that consultant-derived information flows to the corporation.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.6 (confidentiality); Washington RPC 1.6
• ABA Model Rule 1.7 (conflicts of interest); Washington RPC 1.7(b)

See also

• WA Ethics Op. 1739: Friendship Limits HOA Representation
• WSBA Ethics Op. 1718: Leaving In-House for a Rival Field
• WA Ethics Op. 1740: 'Of Counsel' to Two Firms

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=812

Original opinion text

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

Advisory Opinion: 1743
Year Issued: 1997
RPC(s): RPC 1.6; 1.7(b)
Subject: Conflict of interest; representation of corporation whose CEO is consultant to law firm

You wish to know whether your firm can represent a corporation where the CEO of the proposed client corporation is also a consultant to the law firm on technical matters. The Committee assumes for the purposes of this inquiry that the law firm's proposed client is the corporation and no attorney-client relationship exists with the CEO. The law firm needs to examine the relationship it has with the CEO as an independent contractor or consultant. That relationship must not interfere with the independent judgment rendered by the firm on behalf of the corporation. Assuming that the firm is satisfied, on an objective basis, that it can meet this standard, RPC 1.7(b) would require disclosure of the relationship as a potential conflict and a waiver by the corporation in writing. Under the circumstances of the potential interference of independent judgment because of the relationship between the law firm and the CEO, waiver should be accomplished by the Board of the corporation (if a closely held corporation, by the shareholders as well) rather than simply by the CEO acting on behalf of the corporation.

Next, the law firm should give notice to both the corporation and the CEO defining the differing relationships. Those differing relationships include the non-representation of the CEO individually, the severability of the CEO's relationship as an outside consultant to the firm from the representation of the corporation (the two are unrelated and one could cease [one] without ceasing the other) and the limits of confidentiality under RPC 1.6. For example, if the firm learned of information about the CEO while using the CEO as a consultant, that information would not be confidential from the corporation and would have to be passed on to the corporation even though adverse to the CEO. There should also be a warning under RPC 1.7(b) that should a dispute arise between the law firm and the CEO in the consultancy relationship, this might also require a withdrawal of the law firm from representing the corporation.