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Rule 1.13

Rule 1.13. Organization as a Client.

(a) A lawyer employed or retained by an organization represents theorganization acting through its duly authorized constituents.

(b) If a lawyer for an organization knows that an officer, employee or otherperson associated with the organization is engaged in action, intends to act orrefuses to act in a matter related to the representation that is a violation ofa legal obligation to the organization, or a violation of law that reasonably mightbe imputed to the organization, and that is likely to result in substantialinjury to the organization, then the lawyer shall proceed as is reasonablynecessary in the best interest of the organization. Unless the lawyerreasonably believes that it is not necessary in the best interest of theorganization to do so, the lawyer shall refer the matter to higher authority inthe organization, including, if warranted by the circumstances, to the highestauthority that can act on behalf of the organization as determined byapplicable law.

(c) Except as provided in paragraph (d), if,

(c)(1) despite the lawyer's efforts in accordance with paragraph (b), thehighest authority that can act on behalf of the organization insists upon orfails to address in a timely and appropriate manner an action, or a refusal toact, that is clearly a violation of law, and

(c)(2) the lawyer reasonably believes that the violation is reasonablycertain to result in substantial injury to the organization, then the lawyermay reveal information relating to the representation whether or not Rule 1.6permits such disclosure, but only if and to the extent the lawyer reasonablybelieves necessary to prevent substantial injury to the organization.

(d) Paragraph (c) shall not apply with respect to information relating to alawyer?s representation of an organization to investigate an alleged violationof law or to defend the organization or an officer, employee or otherconstituent associated with the organization against a claim arising out of analleged violation of law.

(e) A lawyer who has been discharged and reasonably believes the dischargewas because of the lawyer?s actions taken pursuant to paragraphs (b) or (c), orwho withdraws under circumstances that require or permit the lawyer to takeaction under either of those paragraphs, shall proceed as the lawyer reasonablybelieves necessary to ensure that the organization?s highest authority isinformed of the lawyer?s discharge or withdrawal.

(f) In dealing with an organization's directors, officers, employees,members, shareholders or other constituents, a lawyer shall explain theidentity of the client when the lawyer knows or reasonably should know that theorganization?s interests are adverse to those of the constituents with whom thelawyer is dealing.

(g) A lawyer representing an organization may also represent any of itsdirectors, officers, employees, members, shareholders or other constituents,subject to the provisions of Rule 1.7. If the organization's consent to thedual representation is required by Rule 1.7, the consent shall be given by anappropriate official of the organization other than the individual who is to berepresented, or by the shareholders.

(h) A lawyer elected, appointed, retained or employed to represent agovernmental entity shall be considered for the purpose of this rule asrepresenting an organization. The government lawyer's client is thegovernmental entity except as the representation or duties are otherwiserequired by law. The responsibilities of the lawyer in paragraphs (b) and (c)may be modified by the duties required by law for the government lawyer.


The Entity as the Client

[1] An organizational client is a legal entity, but it cannot act exceptthrough its officers, directors, employees, shareholders and otherconstituents. Officers, directors, employees and shareholders are theconstituents of the corporate organizational client. The duties defined in thisComment apply equally to unincorporated associations. "Other constituents"as used in this Comment means the positions equivalent to officers, directors,employees and shareholders held by persons acting for organizational clientsthat are not corporations.

[2] When one of the constituents of an organizational client communicates withthe organization's lawyer in that person's organizational capacity, thecommunication is protected by Rule 1.6. Thus, by way of example, if anorganizational client requests its lawyer to investigate allegations ofwrongdoing, interviews made in the course of that investigation between thelawyer and the client's employees or other constituents are covered by Rule1.6. This does not mean, however, that constituents of an organizational clientare the clients of the lawyer. The lawyer may not disclose to such constituentsinformation relating to the representation except for disclosures explicitly orimpliedly authorized by the organizational client in order to carry out therepresentation or as otherwise permitted by Rule 1.6.

[3] When constituents of the organization make decisions for it, thedecisions ordinarily must be accepted by the lawyer even if their utility orprudence is doubtful. Decisions concerning policy and operations, includingones entailing serious risk, are not as such in the lawyer?s province.Paragraph (b) makes clear, however, that when the lawyer knows that theorganization is likely to be substantially injured by action of an officer orother constituent that violates a legal obligation to the organization or is inviolation of law that might be imputed to the organization, the lawyer mustproceed as is reasonably necessary in the best interest of the organization. Asdefined in Rule 1.0(f), knowledge can be inferred from circumstances, and alawyer cannot ignore the obvious.

[4] In determining how to proceed under paragraph (b), the lawyer shouldgive due consideration to the seriousness of the violation and itsconsequences, the responsibility in the organization and the apparentmotivation of the person involved, the policies of the organization concerningsuch matters, and any other relevant considerations. Ordinarily, referral to ahigher authority would be necessary. In some circumstances, however, it may beappropriate for the lawyer to ask the constituent to reconsider the matter; forexample, if the circumstances involve a constituent?s innocent misunderstandingof law and subsequent acceptance of the lawyer?s advice, the lawyer mayreasonably conclude that the best interest of the organization does not requirethat the matter be referred to higher authority. If a constituent persists inconduct contrary to the lawyer?s advice, it will be necessary for the lawyer totake steps to have the matter reviewed by a higher authority in theorganization. If the matter is of sufficient seriousness and importance orurgency to the organization, referral to higher authority in the organizationmay be necessary even if the lawyer has not communicated with the constituent.Any measures taken should, to the extent practicable, minimize the risk ofrevealing information relating to the representation to persons outside theorganization. Even in circumstances where a lawyer is not obligated by Rule1.13 to proceed, a lawyer may bring to the attention of an organizationalclient, including its highest authority, matters that the lawyer reasonablybelieves to be of sufficient importance to warrant doing so in the bestinterest of the organization.

[5] Paragraph (b) also makes clear that when it is reasonably necessary toenable the organization to address the matter in a timely and appropriatemanner, the lawyer must refer to higher authority, including, if warranted bythe circumstances, the highest authority that can act on behalf of theorganization under applicable law. The organization?s highest authority to whoma matter may be referred ordinarily will be the board of directors or similargoverning body. However, applicable law may prescribe that under certainconditions the highest authority reposes elsewhere, for example, in theindependent directors of a corporation.

Relation to Other Rules

[6] The authority and responsibility provided in this Rule are concurrentwith the authority and responsibility provided in other rules. In particular,this Rule does not limit or expand the lawyer's responsibility under Rules,1.8, 1.16, 3.3 or 4.1. Paragraph (c) of this Rule supplements Rule 1.6(b) byproviding an additional basis upon which the lawyer may reveal informationrelating to the representation, but does not modify, restrict or limit the provisionsof Rule 1.6(b)(1) ? (6). Under paragraph (c) the lawyer may reveal suchinformation only when the organization?s highest authority insists upon orfails to address threatened or ongoing action that is clearly a violation oflaw, and then only to the extent the lawyer reasonably believes necessary toprevent reasonably certain substantial injury to the organization. It is notnecessary that the lawyer?s services be used in furtherance of the violation,but it is required that the matter be related to the lawyer?s representation ofthe organization. If the lawyer's services are being used by an organization tofurther a crime or fraud by the organization, Rules 1.6(b)(2) and 1.6(b)(3) maypermit the lawyer to disclose confidential information. In such circumstances,Rule 1.2(d) may also be applicable, in which event, withdrawal from therepresentation under Rule 1.16(a)(1) may be required.

[7] Paragraph (d) makes clear that the authority of a lawyer to discloseinformation relating to a representation in circumstances described inparagraph (c) does not apply with respect to information relating to a lawyer?sengagement by an organization to investigate an alleged violation of law or todefend the organization or an officer, employee or other person associated withthe organization against a claim arising out of an alleged violation of law.This is necessary in order to enable organizational clients to enjoy the fullbenefits of legal counsel in conducting an investigation or defending against aclaim.

[8] A discharged lawyer who reasonably believes the discharge was because ofthe lawyer?s actions taken pursuant to paragraph (b) or (c), or who withdrawsin circumstances that require or permit the lawyer to take action under eitherof these paragraphs, must proceed as the lawyer reasonably believes necessaryto ensure that the organization?s highest authority is informed of the lawyer?sdischarge or withdrawal.

Clarifying the Lawyer's Role

[9] There are times when the organization's interest may be or becomeadverse to those of one or more of its constituents. In such circumstances thelawyer should advise any constituent whose interest the lawyer finds adverse tothat of the organization of the conflict or potential conflict of interest,that the lawyer cannot represent such constituent, and that such person maywish to obtain independent representation. Care must be taken to ensure thatthe individual understands that, when there is such adversity of interest, thelawyer for the organization cannot provide legal representation for thatconstituent individual, and that discussions between the lawyer for theorganization and the individual may not be privileged.

[10] Whether such a warning should be given by the lawyer for theorganization to any constituent individual may turn on the facts of the case.

Dual Representation

[11] Paragraph (g) recognizes that a lawyer for an organization may alsorepresent a principal officer or major shareholder.

Derivative Actions

[12] Under some circumstances, the shareholders or members of a corporationmay bring suit to compel the directors to perform their legal obligations inthe supervision of the organization. Members of unincorporated associationshave essentially the same right. Such an action may be brought nominally by theorganization, but usually is, in fact, a legal controversy over management ofthe organization.

[13] The question can arise whether counsel for the organization may defendsuch an action. The proposition that the organization is the lawyer's clientdoes not alone resolve the issue. Most derivative actions are a normal incidentof an organization's affairs, to be defended by the organization's lawyer likeany other suit. However, if the claim involves serious charges of wrongdoing bythose in control of the organization, a conflict may arise between the lawyer'sduty to the organization and the lawyer's relationship with the board. In thosecircumstances, Rule 1.7 governs who should represent the directors and theorganization.

Government Agency

[13a] Utah Rule 1.13, unlike the ABA Model Rule,contains paragraph (h), which deals with the relationship between governmentlawyers and the government entities they represent. A government lawyerfollowing these legal duties in good faith will not be considered in violationof the ethical standards of this Rule. The duties defined in this Rule apply togovernment lawyers and lawyers in military service, except to the extent theresponsibilities of the government lawyers are otherwise controlled by the dutiesimposed upon them by law. Defining precisely the identity of the client andprescribing the resulting obligations of such lawyers may be more difficult inthe government context. For example, the government lawyer?s client isgenerally the governmental entity itself, but the relationship between thegovernment lawyer or lawyer in military service and the client may be furtherdefined by statute, regulation, ordinance or other law. This Rule does notlimit that authority. In addition, a lawyer for the government may have a legalduty to question the conduct of government officials and perform additionalremedial or corrective actions including investigation and prosecution. Thelawyer may also have an obligation to divulge information to persons outside thegovernment to respond to illegal or improper conduct of the organizationalclient or its constituents. Thus, when the client is a governmentalorganization, a different balance may be appropriate between maintainingconfidentiality and ensuring that the wrongful act is prevented or rectified,where public business is involved. The obligation of the government lawyer mayrequire representation of the public interest as that duty is specified by law.

[13b] When the client is a governmentallegislative body (such as the Utah Legislature, a city council, or a countycouncil or commission), a lawyer representing that legislative body mayconcurrently represent the interests of the majority and minority leadership,members and members-elect, committee members, and staff to the legislativebody. In representing the legislative body and the various interests therein,the lawyer is considered to be representing one client and the rules related toconflict of interest and required consent to conflicts do not apply.