Opinion #54. Attorney for Corporation Who Also Serves as Director or Trustee

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. §717 and 13B M.R.S.A. §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, 18191949, 910 (1948); Rostow, “The Lawyer and His Client”, 48 A.B.A. J. 146, 147 (1962).


Enduring Ethics Opinion