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August 2007The “Who Is the Client?” Question Revisitedby Mark J. Fucile In March 2006, I wrote a column called the “‘Who Is the Client?’ Question” that looked at two related questions in the context of representing organizational clients. First, who is your client when you represent an entity such as a corporation, a partnership, or a governmental unit? Second, how does the “no contact” rule work in the organizational setting? I noted at the time that a potentially significant clarification was in the offing in this area, because the then-proposed amendments to the Washington Rules of Professional Conduct included a specific rule on entity representation. The Supreme Court approved the amendments last year, including the new entity-representation rule — RPC 1.13 — and they became effective in September 2006. Given that change, it seemed appropriate to revisit the two questions I posed in my earlier column to see how the new rule impacts the answers. Entity Representation Under RPC 1.13 When Washington moved from the Code of Professional Responsibility to the Rules of Professional Conduct in 1985, the drafters rejected an earlier proposed version of ABA Model Rule 1.13 which specifically addressed entity practice. The legislative history from the time reflects that the drafters felt that this was an area better left for development through case law rather than a professional rule.1 The case law, however, didn’t develop as anticipated, and Washington lawyers and judges alike more often looked to the ABA Model Rule and a series of ABA formal ethics opinions interpreting that rule in analyzing entity representation issues.2 When the ABA revised its Model Rules in 2002 and 2003, it expanded Model Rule 1.13 to address confidentiality issues in the entity context in light of the Enron scandal and the Sarbanes-Oxley Act (and the accompanying regulations). But the ABA kept the core idea behind Model Rule 1.13: A lawyer representing an entity represents the organization alone and not its constituents (such as officers and employees). When we revised our own RPCs, the Ethics 2003 Committee recommended that Washington adopt a specific entity-practice rule patterned on ABA Model Rule 1.13. With a few Washington-specific modifications, the Supreme Court did so last year, and we now have our own Washington professional rule on entity representation: RPC 1.13. Washington RPC 1.13 generally follows the same structure as its ABA counterpart: • Section “a” articulates the baseline principle that a lawyer representing an entity represents the organization alone. • Sections “b” through “e” address several facets of the confidentiality rule in the entity context and counsel that a lawyer who learns of a violation of the law within the organization that could result in substantial injury to the organization should report that violation “up” the entity’s chain of command and, in some circumstances, may report the violation “out” of the entity to the appropriate authorities. • Section “f” reinforces the principle of entity representation by suggesting that a lawyer for an entity explain that role to organizational constituents such as directors, officers, and employees so the constituents will not inadvertently be led to think that the lawyer also represents them as individuals by virtue of the lawyer’s representation of the entity. • Section “g” notes that a lawyer for an organization may also represent an entity constituent, but that representation would be subject to RPC 1.7’s multiple-client conflict rules. • Section “h” differs from the ABA Model Rule by incorporating former RPC 1.7(c)’s rule on governmental representation that generally limits the representation in that setting to the specific agency involved rather than the larger governmental unit of which the agency is a part. RPC 1.13 is accompanied by 15 comments that elaborate on each of its subsections. Both RPC 1.13 and its comments are available on the WSBA’s website at www.wsba.org. Because RPC 1.13 is patterned on the corresponding ABA Model Rule, the ABA formal ethics opinions exploring various facets of entity representation, such as ABA Formal Ethics Opinion 95-390 that addresses often difficult issues of corporate affiliate representation, should now also offer more direct guidance for Washington lawyers. The ABA’s ethics opinions are available on the ABA Center for Professional Responsibility’s website at www.abanet.org/cpr. Some of the WSBA’s informal ethics opinions already cited to the ABA’s ethics opinions in this area and those, too, are available on the WSBA’s website. Finally, the WSBA Legal Ethics Deskbook in Chapter 10 contains a discussion of entity representation and is being updated to reflect the new rule. Although the new rule is a very useful clarification, it is neither the sole source for entity-representation law, nor will it provide all of the answers. On the sources, the general rule for determining whether an attorney-client relationship exists in the first place remains governed by case law rather than the RPCs.3 The leading case on that point remains Bohn v. Cody, 119 Wn.2d 357, 832 P.2d 71 (1992). In Bohn, the Supreme Court articulated a two-part test for determining whether an attorney-client relationship exists. The first element is subjective: Does the client believe that an attorney-client relationship has been formed? The second element is objective: Is the client’s subjective belief objectively reasonable under the circumstances? Both elements of Bohn’s two-part test must be met for there to be an attorney-client relationship. On the lingering questions, many applications of RPC 1.13 will remain very fact-specific. As noted earlier, one of the most difficult areas in the entity context is whether representation of a corporate affiliate will be construed as representation of a broader “corporate family” for conflict purposes. As also noted earlier, ABA Formal Ethics Opinion 95-390 provides a framework for analyzing this issue, but it remains very fact-specific. 95-390 generally looks to whether the client has told the lawyer that the broader corporate family should be considered a unified whole and, if not, whether the corporate affiliate shares majority ownership with the corporate parent and whether they share common general and legal affairs management. The answers to these questions can have great practical consequence when representing corporations. The past year, for example, saw several cases turn on these issues and resulted in disqualification of the law firms involved, including Jones v. Rabanco, 2006 WL 2237708 (W.D. Wash. Aug. 3, 2006), and Ali v. American Seafoods Co., 2006 WL 1319449 (W.D. Wash. May 15, 2006). The “No Contact” Rule in the Entity Context Washington’s “no contact” rule is found at RPC 4.2. A key question in applying the “no contact” rule in the corporate context is: Who is the represented party? Or stated alternatively, if the corporation (or other entity) is represented, does that representation extend to its current and former officers and employees? The leading case in Washington on this point is Wright v. Group Health Hosp., 103 Wn.2d 192, 691 P.2d 564 (1984). Wright was decided under Washington’s former DR 7-104(A)(1). Nonetheless, Comment 10 to RPC 4.2, adopted in 2006, notes that “[w]hether and how lawyers may communicate with employees of an adverse party is governed by Wright[.]” In Wright, the Supreme Court drew a relatively narrow circle of employees who fall within the scope of corporate counsel’s representation — particularly as it relates to a line employee whose conduct is at issue: We hold the best interpretation of “party” in litigation involving corporations is only those employees who have the legal authority to “bind” the corporation in a legal evidentiary sense, i.e., those employees who have “speaking authority” for the corporation. This interpretation is consistent with the declared purpose of the rule to protect represented parties from the dangers of dealing with adverse counsel. . . . We find no reason to distinguish between employees who in fact witnessed an event and those whose act or omission caused the event leading to the action. . . . We hold current Group Health employees should be considered “parties” for the purposes of the disciplinary rule if, under applicable Washington law, they have managing authority sufficient to give them the right to speak for, and bind, the corporation. Since former employees cannot possibly speak for the corporation, we hold that CPR DR 7-104(A)(1) does not apply to them. 103 Wn.2d at 200-01 (emphasis in original). Wright’s explicit reliance on substantive evidence law produces an interesting dichotomy depending on whether the underlying case is pending in state or federal court. Professor Robert Aronson of the University of Washington notes this difference in his treatise Law of Evidence in Washington: ER 801(d)(2)(iv) provides that the statement of a party’s agent or servant is imputed to the party only if the agent or servant is “acting within the scope of the authority to make a statement for the party.” This is a more stringent requirement than FRE 801(d)(2)(D), which exempts from hearsay treatment admissions by a party’s agent “concerning a matter within the scope of his agency or employment, made during the existence of the relationship.” ER 801(d)(2)(iv) requires that the declarant be a “speaking agent.” See Comment 801(d); Kadiak Fish Co. v. Murphy Diesel Co., 70 Wn.2d 153, 422 P.2d 946 (1967). Thus, the statement of a truck driver after an accident, “Sorry, I was speeding,” would be admissible against the truck company in federal court (because it is within the scope of his authority to act), but not in Washington courts (because the truck company did not authorize him to speak on its behalf.). Robert H. Aronson, The Law of Evidence in Washington, § 801.04[3][b][v] at 801-32 through 33 (Rev. 4th ed. 2006) (emphasis in original). In other words, senior officers and directors are “off limits,” and line-level employees whose conduct is at issue may or may not be “off limits” depending on their status as “speaking agents” under applicable evidence law. By contrast, line-level employees who are simply occurrence witnesses (to borrow from Professor Aronson’s example: another company truck driver who simply observed the accident) and former employees of all stripes are “fair game.” In communicating with a former employee, however, RPC 4.4(a) and its accompanying Comment 1 suggest that the contact cannot be used to invade the former employer’s attorney-client privilege. Summing Up Even with the adoption of RPC 1.13, the “who is the client?” question will remain a very fact-specific exercise. As always, a lawyer can help answer that question by carefully defining the client in a written engagement letter and then handling the representation consistent with that engagement agreement. Mark Fucile, of Fucile & Reising LLP, handles professional responsibility, regulatory, and attorney-client privilege matters and law-firm-related litigation for lawyers, law firms, and legal departments throughout the Northwest. He is a past chair and a current member of the WSBA Rules of Professional Conduct Committee, a past member of the Oregon State Bar’s Legal Ethics Committee, and a member of the Idaho State Bar Professionalism and Ethics Section. He is a co-editor of the WSBA’s Legal Ethics Deskbook and the OSB’s Ethical Oregon Lawyer. He can be reached at 503-224-4895 or mark@frllp.com. NOTES
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