Ethics Opinions
Iowa Supreme Court Board of Professional Ethics and Conduct
Date of Opinion:
03/12/2003
Opinion Number:
03-01
Title:
BOARD MEMBER AND OFFICER OF CORPORATION SERVING AS ITS ATTORNEY
Opinion:
You are on the board of directors and serve as secretary-treasurer of a corporation and now ask whether it is permissible for you to accept the position of corporate attorney while remaining a director and officer. The primary ethical rule implicated in such situations is DR 5-104(A): “A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise professional judgment therein for the protection of the client, unless the client has consented after full disclosure.”
The Board has previously indicated that there is no per se ethical violation when an attorney who serves as trustee of a college corporation also acts as its attorney. Opinion 68-4. Furthermore, when asked whether a bank director who is also a lawyer may handle affairs for the bank as a lawyer, the Board has answered that there is no prohibition of this and that there are many lawyers representing corporations on whose board they also serve. Opinion 80-17. The potential for conflict of interest, however, is inevitable. The Board agrees with the following Comment to Rule 1.7 of the ABA Model Rules of Professional Conduct:
A lawyer for a corporation . . . who is also a member of its board of directors should determine whether the responsibilities of the two roles may conflict. The lawyer may be called on to advise the corporation in matters involving actions of the directors. Consideration should be given to the frequency with which such situations may arise, the potential intensity of the conflict, the effect of the lawyer’s resignation from the board and the possibility of the corporation’s obtaining legal advice from another lawyer in such situations. If there is material risk that the dual role will compromise the lawyer’s independence of professional judgment, the lawyer should not serve as a director or should cease to act as the corporation’s lawyer when conflicts of interest arise. The lawyer should advise the other members of the board that in some circumstances matters discussed at board meetings while the lawyer is present in the capacity of director might not be protected by the attorney-client privilege and that conflict of interest considerations might require the lawyer’s recusal as a director or might require the lawyer and the lawyer’s firm to decline representation of the corporation in a matter.
The problems mentioned in the above Comment are further explained in Wolfram,
Modern Legal Ethics
§ 13.7:
The burdens assumed by a lawyer who becomes a client’s director are substantial. The relationship is a decided threat to the professional independence of counsel. The lawyer puts his or her own legal advice to the vote of the rest of the board under circumstances in which the pressures are inevitably great to conform to the board’s preferred, business-dictated conception of legal obligations. The board’s probable preference for collegiality and deference to management prerogatives and the will of the board’s majority clashes with the lawyer’s duty to act on occasion as the corporate nag, or conscience. What is good for business and what the law requires may be very different things, but the need to draw this distinction is particularly great for a person who purports to draw upon both kinds of expertise and make both kinds of judgments.
Thus, it may be wishful thinking to believe that a corporate director and officer can maintain professional independence in his role as counsel. The Board discourages this dual relationship. However, as Wolfram states, “The lawyer codes do not prohibit the dual role unless the lawyer is unable to exercise independent professional judgment.”
Id
. at § 8.3.3.