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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


New Jersey Legal Ethics

1.13   Rule 1.13 Organization as Client

1.13:100   Comparative Analysis of New Jersey Rule

Primary New Jersey References: NJ Rule 1.13
Background References: ABA Model Rule 1.13, Other Jurisdictions
Commentary:
NJ Commentary:

RPC 1.13(b), which is identical to Model Rule 1.13(b), sets forth in detail the steps that must be taken and the factors that must be considered when a lawyer representing an organization becomes aware that one of the organization’s decision-makers is taking or is preparing to take action that is likely to harm the organization.

Unlike New Jersey’s RPC 1.13, the ABA Model Rule lacks a definitional section but achieves the same broad scope through the commentary to the rule.

1.13:101      Model Rule Comparison

When the New Jersey Supreme Court adopted the RPCs in 1984, Model Rule 1.13 was adopted in its entirety. RPC 1.13 was revised in 1996 following recommendations by a Special Committee appointed by the New Jersey Supreme Court to review ex parte communications. As amended, RPC 1.13(a) distinguishes between the organization and its directors, officers, employees, members, shareholders or other constituents. The amendments then, for purposes of RPCs 4.2 and 4.3, adds a definition of the phrase “ litigation control group” as follows:

current agents and employees responsible for, or significantly involved in, the determination of the organization’s legal position in the matter … provided, however, that “significant involvement” requires involvement greater, and other than, the supplying of factual information or data respecting the matter.

This definition is not contained in the ABA Model Rule 1.13.

Paragraph (c) of RPC 1.13 differs substantially from the ABA Model Rule 1.13. Pursuant to RPC 1.13, when the highest authority in the organization insists upon a course of action that is clearly a violation of the organization’s legal obligation, law or would result in substantial injury to the organization, the lawyer may take remedial action that he or she believes is in the best interests of the organization, including revealing information otherwise protected by RPC 1.6, if certain conditions are satisfied. In contrast, ABA Model Rule 1.13(c) provides that in such a situation, the lawyer may resign in accordance with RPC 1.16.

In paragraph (d) of RPC 1.13, the time when a lawyer must provide an explanation of the identity of the client is more rigorous than that of the Model Rule 1.13. In New Jersey, the lawyer must provide such an explanation “when the lawyer believes that such an explanation is necessary to avoid a misunderstanding on [the part of the organizations directors, officers, employees, members, shareholders or other constituents’] part.” Pursuant to the Model Rule 1.13(d), this explanation is give “when it is apparent that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.”

Unlike the Model Rule 1.13, RPC 1.13 has a paragraph (f) that defines the term “organization.”

1.13:102      Model Code Comparison

There is no direct counterpart in the New Jersey RPCs.

1.13:200   Entity as Client

Primary New Jersey References: NJ Rule 1.13(a)
Background References: ABA Model Rule 1.13(a), Other Jurisdictions
Commentary: ABA/BNA § 91:2001, ALI-LGL §§ 155, 156, Wolfram § 8.3
NJ Commentary:

[The discussion of this topic has not yet been written.]

1.13:210      Lawyer with Fiduciary Obligation to Third Person

There is no explicit authority in RPC 1.13 permitting an organizational lawyer to reveal information in order to prevent the organization from injuring a third party. However, the comments to the Model Rule state that the rule was not intended to "limit or expand" the lawyer's responsibilities under other rules, particularly Rule 1.6. See ABA Model Rule 1.13 comment, supra. In addition, when the Debevoise Committee recommended the adoption of RPC 1.13, it noted “the correlation and consistency between paragraph (c) of this Rule and Rules 1.6(b)(1) and 1.6(b)(2).” Debevoise Committee Report, 112 N.J.L.J., July 28, 1983, supp. at 10.

It seems clear, therefore, that a lawyer’s disclosure obligations under RPC 1.6(b) apply in the organizational context as well. Cf. N.J. Advisory Comm. on Professional Ethics Op. 664 (July 13, 1992). This opinion assumes that RPC 1.6 applies in the organizational context, although disclosure was not required in the scenario presented. See Section 14:4-4, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.13:220      Lawyer Serving as Officer or Director of an Organization

[The discussion of this topic has not yet been written.]

1.13:230      Divers Kinds of Entities as Organizations

The principles of RPC 1.13 apply to all “organizations,” not only to traditional business corporations. RPC 1.13(f) defines the term “organization” broadly:

For purposes of this rule “organization” includes any corporation, partnership, association, joint stock company, union, trust, pension fund, unincorporated association, proprietorship or other business entity, state or local government or political subdivision thereof, or non-profit organization.

See Section 19:3-1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.13:300   Preventing Injury to an Entity Client

Primary New Jersey References: NJ Rule 1.13(b) & (c)
Background References: ABA Model Rule 1.13(b) & (c), Other Jurisdictions
Commentary: ABA/BNA § 91:2001, ALI-LGL § 155, Wolfram § 13.7
NJ Commentary: Section 14:4-4, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000)

If an organizational lawyer has brought a matter to the attention of the organization’s highest authority, which has then refused to cease the action in question or to take appropriate remedial measures, the lawyer may be permitted by RPC 1.13(c) to reveal client information to the extent necessary to protect the organization’s best interests. The disclosure option under the rule is extremely narrow, however, applying only when the lawyer reasonably believes that the organization’s highest authority has acted to further the interests of the members at the expense of the organization.

1.13:310      Resignation Versus Disclosure Outside the Organization

See Section 1.13:210 above.

1.13:400   Fairness to Non-Client Constituents Within an Entity Client

Primary New Jersey References: NJ Rule 1.13(d)
Background References: ABA Model Rule 1.13(d), Other Jurisdictions
Commentary: ABA/BNA § 91:2001, ALI-LGL § 163, Wolfram § 13.7.5
NJ Commentary: Section 14:4-5, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000)

RPC 1.13(d) applies primarily when the organization’s interests are adverse or potentially adverse to an employee’s or other constituent’s interests. The employee or other constituent may mistakenly assume that the organizational lawyer is able to represent, or is actually representing, him or her. In such a situation, the lawyer must ensure that the employee or other constituent understands the potential conflict; the fact that the lawyer is not representing that individual; the fact that statements may not be privileged, especially when they relate to the organization’s business; and the advisability of obtaining independent counsel.

1.13:500   Joint Representation of Entity and Individual Constituents

Primary New Jersey References: NJ Rule 1.13(e)
Background References: ABA Model Rule 1.13(e), Other Jurisdictions
Commentary: ABA/BNA § 91:2601, ALI-LGL §§ 156, 212, Wolfram § 13.7
NJ Commentary: Section 14:4-5, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000)

Paragraphs (d) and (e) of RPC 1.13 provide:

(d) In dealing with an organization’s directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer believes that such explanation is necessary to avoid misunderstanding on their part.

(e) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of RPC 1.7. If the organization’s consent to the dual representation is required by RPC 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented or by the shareholders.

RPC 1.13(d) applies primarily when the organization’s interests are adverse or potentially adverse to an employee’s or other constituent’s interests. The employee or other constituent may mistakenly assume that the organizational lawyer is able to represent, or is actually representing, him or her. In such a situation, the lawyer must ensure that the employee or other constituent understands the potential conflict; the fact that the lawyer is not representing that individual; the fact that statements may not be privileged, especially when they relate to the organization’s business; and the advisability of obtaining independent counsel. See ABA Model Rule 1.13 comment, supra. See also the language of Model Rule 1.13(d), specifically noting the applicability of the rule “when it is apparent that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.” And see Advisory Comm. Op. 327 (Apr. 8, 1976), a pre-RPC opinion holding that an attorney for a school board owes his or her primary allegiance to the board. Thus, when an individual board member consults privately with the lawyer on school board business, the lawyer may have an obligation to reveal the substance of those discussions to the entire board if requested to do so.

1.13:510      Corporate Counsel's Role in Shareholder Derivative Actions

Another area in which a conflict of interest may develop is in a shareholder’s derivative action. Derivative actions generally arise out of a controversy over management of an organization. In such an action, the shareholders of an organization bring suit on behalf of the corporation to remedy an alleged wrong to the entity. In most cases, the organization’s lawyer may defend a derivative action. If the action involves charges of serious wrongdoing by the organization’s governing body, however, there may be a conflict between the lawyer’s duty to the organization and his or her relationship with the members of the governing body. In such a situation, the principles of RPC 1.7 dictate whether the lawyer must refrain from representing the organization in the derivative action. See ABA Model Rule 1.13 comment. See Section 14:4-5, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.13:520      Representing Client with Fiduciary Duties

[The discussion of this topic has not yet been written.]

1.13:530      Representing Government Client

[The discussion of this topic has not yet been written.]