Ethical rules provide for the confidentiality of one-on-one conversations between a lawyer and their client. But what happens when the client is an organization that employs multiple people? To whom is the duty of confidentiality owed?

Most lawyers who represent corporations understand that their duties are generally owed to the company itself. But, as ABA Model Rule of Professional Conduct 1.13(a) recognizes, the organization typically acts through its “duly authorized constituents,” including officers, directors, employees, and shareholders. Thus, although the client may be the organization, pursuant to that relationship the lawyer is naturally expected to interact with the people within the organization.

Sometimes the lines of the legal relationship can become blurred, especially when a lawyer uncovers wrongdoing by employees at the organization. This article covers a lawyer’s obligations under Rule 1.13 to serve the entity’s interests, sometimes over the needs of individual employees.

Duty of Confidentiality in Representing Organizations

At the outset, the duty of lawyers to maintain client confidences, as recognized by ABA Model Rule of Professional Conduct 1.6, is one of the foundations of the attorney-client relationship. This obligation means, generally, that lawyers must safeguard confidences and secrets of clients (understood to be broader than the attorney-client privilege), unless clients provide consent for lawyers to disclose information.

Rule 1.13 recognizes that the duty of confidentiality may be extended to employees of an organization. For example, per Comment [2] to the rule, “if an organizational client requests its lawyer to investigate allegations of wrongdoing, interviews made in the course of that investigation between the lawyer and the client’s employees or other constituents are covered by Rule 1.6. This does not mean, however, that constituents of an organizational client are the clients of the lawyer.”

Notably, though, Rule 1.13 relaxes some confidentiality requirements in specific circumstances, such as when the lawyer believes an employee is engaged in wrongdoing that could harm the corporate client. Rule 1.13(c)(2) applies where a lawyer reasonably believes that an employee is going to act (or is acting) in violation of that employee’s legal obligation to the organization, or believes that the employee’s conduct could constitute a violation of law that would likely result in “substantial injury” to the organization. Then, the lawyer “may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.” This can include disclosures inside the company and, sometimes, disclosures outside the company structure in order to protect the client.

Thus, although the rules recognize that confidentiality obligations generally extend to employees of client organizations, lawyers are not always obligated to maintain confidentiality in the face of employee wrongdoing. There is a judgment call to be made regarding whether a lawyer “reasonably believes” disclosure is “necessary to prevent substantial injury” to the client. To the extent the lawyer’s services are sought or used in furtherance of the violation, the lawyer may be required to withdraw from the representation, depending on the circumstances.

Notably, Comment [7] to Rule 1.13 confirms that this potential relaxing of the confidentiality obligation does not exist where a lawyer is hired for the purpose of investigating an employee’s alleged violation of law. This makes sense because, in that circumstance, the scope of the lawyer’s duty includes taking steps “to enable organizational clients to enjoy the full benefits of legal counsel in conducting an investigation or defending against a claim.”

Reporting Internal Misconduct

Rule 1.13 also recognizes the unique situation that can arise if a lawyer charged with representing an organization’s interests learns that others within the organization are acting contrary to the client’s interests. For example, Comment [3] explains that “when the lawyer knows that the organization is likely to be substantially injured by action of an officer or other constituent that violates a legal obligation to the organization or is in violation of law that might be imputed to the organization, the lawyer must proceed as is reasonably necessary in the best interest of the organization. As defined in Rule 1.0 (f), knowledge can be inferred from circumstances, and a lawyer cannot ignore the obvious.” (emphasis added).

Part of these reasonable measures may also include notifying an employee when a lawyer feels the employee’s legal interests are diverging from the organization’s legal interests. In such instances, the lawyer may be obligated to take steps to ensure that the individual understands that the lawyer is acting on behalf of the organization and that communications between lawyer and individual may not be privileged.

The rule also recognizes that, if the lawyer believes an employee or officer is violating the law or harming the organization’s interests, that can create complications for the lawyer’s relationship with the client, particularly if the lawyer works directly with the rogue employee or officer. Sometimes, a lawyer may find that they are targeted or retaliated against by the rogue employee or officer who was perceived by the lawyer as acting contrary to the organization’s interests.

In the event that a lawyer reasonably believes they have been terminated because they took actions, as proscribed by Rule 1.13, to protect the interests of the organization from an employee’s violation of legal obligations or law, the rule also permits the lawyer to take steps “to assure that the organization’s highest authority is informed of the lawyer’s discharge or withdrawal.” Comment [8] further provides the lawyer who reasonably believes they have been terminated due to their protective actions, or where they had to withdraw under those circumstances, “must proceed as the lawyer reasonably believes necessary” in order to notify the organization’s highest authority.

Notably, this rule also applies to lawyers who represent governmental organizations. The comments to the rule recognize that in such situations, “a different balance may be appropriate between maintaining confidentiality and assuring that the wrongful act is prevented or rectified, for public business is involved.”

Lawyers representing organizations can thus consider the unique situations that can arise when they discover misconduct by individuals within that organization to help those lawyers protect their clients and act within the ethical rules.