As published in The Daily Report

Attorneys may want to serve as on a board of directors for an outside organization to engage in their community, support a cause of personal interest or develop certain business skills and relationships. Similarly, outside organizations may seek attorneys for their boards to gain connections within the business community and valuable judgment in complex situations. 

Although such service is commonplace, there can be risks. Imagine an attorney on a board for a company supporting a green initiative in the community. That initiative could advocate for policies that are opposed by other companies in the area, including some clients of the attorney’s law firm. The attorney may then receive a call from firm management, saying that a client of the law firm is furious that “their” law firm is involved in this initiative. Although such service would not necessarily constitute a legal conflict of interest, it could frustrate the attorney and ruffle feathers of firm clients or colleagues.   

While there is nothing inherently unethical about attorneys serving on boards, watch out for these potential risks to ensure that both the attorneys and law firms are protected while enjoying the benefits of board membership. Here are some tips.

Define Your Role

It can be helpful for the attorney acting as a board member to clarify at the outset whether they are acting as counsel to the board or whether they are simply a member of the board with a law degree. It is common for attorneys serving on boards generally to act only in their capacity as board members, but attorneys on boards may feel tempted to behave like an attorney and advise the organization regarding the legal implications of a particular business decision under consideration. Likewise, it is possible that other members of the board may even solicit the attorney’s opinion as to the legality of the organization’s plans. As a result, this can create risk, as it can be difficult to distinguish whether an attorney is simply acting as a board member or providing legal services to the organization in the context of an attorney-client relationship.

This distinction is important both for liability purposes and potential insurance coverage issues, as addressed below. Further, other board members may assume that communications with the attorney board member are automatically protected by the attorney-client privilege, which may not be the case. 

At the outset of the board membership, attorneys can consider confirming the following with the organization for those situations in which the attorney is simply acting as another board member:

1. The attorney will act solely in a business capacity;
2. No attorney-client relationship exists between the law firm and the organization; and
3. No communications with the attorney will be protected by the attorney-client privilege.

It can also be helpful to confirm at the outset any other details bearing on the attorney’s role with the organization, such as whether any compensation is retained by the individual or whether it is paid to the attorney’s law firm that, if unresolved, could lead to misunderstanding.

Even with this confirmation, in the event that legal issues arise, it can be helpful for the attorney to remind board members that he or she is acting solely in a business capacity and recommend that the organization retain outside counsel, where practicable.

Evaluate Potential Conflicts of Interest

An attorney’s service on a board can give rise to alleged conflicts of interest for the attorney and the attorney’s law firm, regardless of whether there is an attorney-client relationship between the attorney and the organization. That is because Rule 1.7 of the ABA Model Rules of Professional Conduct provides that a lawyer shall not represent a client if “there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to…a third person or by a personal interest of the lawyer.” Thus, even if the organization is not a client of the attorney or firm, the attorney’s service on the board may result in unexpected allegations of potential conflicts of interest or allegations of business conflicts. 

Although not required by the rules of professional conduct, law firms could consider whether to require that the attorney obtain firm approval prior to any board membership service, while also retaining the right to revoke approval. This would allow law firms to evaluate the pros and cons of the attorney’s service on the board from a client service or even a public relations perspective. Further, the policy could vary depending on whether the entity is for-profit or non-profit, or whether the organization is a client of the firm. It may also be worth noting the attorney’s relationship with the organization in the firm’s conflicts clearance database to avoid any potential conflicts with current or future clients.

Be Mindful of Branding and Firm Association

When an attorney serves on the board of an organization, the attorney’s law firm may be viewed as supporting or having an association with the organization. The general public could even draw this inference, regardless of the true relationship, if that outside organization uses the firm’s logo or branding in identifying its board members. While it may be typically acceptable to identify the board member’s association with the law firm on the organization’s website, law firms may consider implementing restrictions on the use of their name or logo, particularly for organizations that have specific viewpoints regarding which the law firm is neutral (or of which the firm is not supportive).   

Consider Insurance Coverage

Where an attorney is acting as a board member and not as legal counsel, there could be complications with the professional liability insurance that would cover the attorney’s work at their law firm in the event of a claim against the firm relating to the attorney’s conduct. If the attorney receives a claim regarding their role as a board member, questions of insurance coverage could become complicated. For example, the organization’s directors and officers liability insurance carrier may argue that coverage is unavailable because the attorney was acting in his or her capacity as an attorney, while the attorney’s professional liability insurer may conversely argue that coverage is precluded due to the attorney’s nonlawyer role in the organization. However, any potential gaps in insurance coverage can be addressed in advance of service. Many attorneys in this position will confirm that the organization has adequate directors and officers insurance and appropriate indemnification provisions for board members.