Common ethical issues facing in-house counsel

In this series, we hope to alert in-house counsel to the sometimes unusual ways ethics issues crop up for in-house attorneys. Below we provide an overview of a few of the most common ethical issues in-house counsel confront, and in future articles we will explore these and other issues in depth. We welcome your feedback.
Rules for practicing in the jurisdiction where you work
Many in-house counsel have moved to their current jobs from another jurisdiction and are not admitted in the jurisdiction of their new employment. More than half of the states have adopted some rule or license requirement governing practice by in-house lawyers.
Rule 5.5 of the Model Rules of Professional Conduct specifically authorizes a lawyer to provide legal services (other than those requiring pro hac vice admission) to his or her employer, without being admitted in the jurisdiction, provided the lawyer is admitted in some United States jurisdiction and is not disbarred or suspended in any jurisdiction. Patent, copyright and other in-house lawyers who have an exclusively “federal” practice may also practice in jurisdictions that have adopted the model rule.
The model rule has been adopted in some form in approximately a dozen states, and forms of limited admission exist for in-house counsel in about the same number of jurisdictions.
Two words of caution to all practicing under the protection of Rule 5.5 or similar version: (1) Many states that have adopted the rule nevertheless require registration and the payment of annual fees. (2) These rules only authorize the provision of legal services to your companies. They do not authorize giving personal legal advice or services to individuals within the companies.

Ramifications of your company being your only client
In-house attorneys know their clients are the organizations by whom they are employed. (Mass. R. Prof. C. and Model Rule 1.13(a).) But “organizational” clients exist as creatures of law. They act through real people. The officers, directors and managers who control the operations of the organization are the personification of the in-house attorney’s client, the source of her direction and, perhaps, of her job.
Nevertheless, the attorneys’ loyalties and independent judgments are owed to their companies, not to those who run them. One can easily imagine that this distinction is not without practical consequences.
Two typical examples are conflicts of interest and giving advice to company employees.
Conflicts of interest. Despite having only one client, in-house lawyers are often faced with conflicts of interest; and they are an example of the unusual ways ethical issues arise for in-house lawyers.
In its simplest form, the issue arises where the best interests of the company may not be in the best interests of the individual who has been the only person with whom the attorney has dealt during her employment. Another example arises when there is an internal dispute over control of the corporation. There, in-house counsel must stay neutral, and not assist either side.
Nevertheless, she must also continue to advise the company through its management team, who are quite likely participants in the dispute and maybe even at odds with one another.

‘Miranda warnings’ when providing advice to company employees
A related matter concerns in-house counsel’s duty to ensure those individuals with whom she deals on a daily basis clearly understand the limits imposed when providing legal advice about company matters that may affect the individuals personally, or about personal matters that may affect the company.
Recalling that the company is her one and only client, in-house counsel in such situations must consider both the rules against conflicts of interest and make sure that the individuals understand that they are not the clients.
Two rules of professional conduct apply. Model Rule 1.13(d) states: “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 knows or reasonably should know that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.”
The comments to this rule also suggest advising the constituents that their discussions with in-house counsel may not be privileged and that they should consider seeking independent counsel.
Model Rule 4.3 applies to all instances where an attorney is dealing with an unrepresented person which, of course, includes most of those instances where in-house attorneys are dealing with constituents. The rule prohibits in-house attorneys from stating or implying to a constituent that they are disinterested and, if there is a reasonable possibility of a conflict of interests between the company and the individual, prohibits the attorneys from giving legal advice if the individual is unrepresented.

General counsel’s obligations as supervisor, and subordinate counsel’s independent duty to act ethically
General counsel and others in their law departments with supervisory authority,
like partners in a law firm, cannot close their eyes to the unethical conduct of their subordinates. To the contrary, Model Rule 5.1 imposes an affirmative responsibility to make reasonable efforts to adopt measures that ensure all lawyers in their departments conform to the Rules of Professional Conduct, and imposes responsibility on the supervising attorney for a subordinate’s ethical breaches in certain circumstances.
What constitutes “reasonable efforts” depends on circumstances, but the minimum should be fostering a culture in which subordinate lawyers are encouraged to openly discuss ethical questions and concerns with their supervisors.
The Model Rules do not allow subordinate lawyers in the law department to hide behind the direction of their supervisors. All lawyers are bound by the Rules of Professional Conduct and it is no defense that they acted at the direction of a superior. The only exception is when subordinate lawyers follow the instructions of a supervisor who has directed a reasonable resolution of an arguable ethical issue. See Model Rule 5.2.
Thomas Sartory and Richard Zielinski are directors in Goulston & Storrs’ Professional Liability Group. The group regularly defends large law firms in malpractice, disciplinary and partnership disputes and provides ethics advice to both law firms and in-house counsel. Tom can be reached at 617.574.6411 or [email protected]. Richard can be reached at 617.574.4029 or [email protected].