By Edward McIntyre
Macbeth opened the Zoom conference. “Good morning Sarah, Duncan. I understand we have a guest.”
Sarah’s square lit up. “Yes, let me introduce Josh.”
“Welcome, Josh. How can we help?”
“I’m a business lawyer. I was asked to represent a group of orthopedic surgeons. They need a revised shareholder agreement. Also, they got a letter suggesting a Medicare billing issue. Maybe an investigation. I could use some advice.”
“A revised shareholder agreement? Do they presently have a professional corporation?”
“Yes. The president is an acquaintance. He asked me to represent them.”
“First question then: Who’s your client? Corporation? Shareholders individually? Or the president?”
“I’ll listen to suggestions. But I’d prefer it be the corporation.”
“I think that’s wise.”
Sarah joined, “I agree, Josh.”
Josh spoke, “I looked at the current conflict of interest rule. Don’t quite see how it applies.”
Macbeth responded, “It doesn’t. At least not primarily. You’ll represent the corporation, an organization. So, Rule 1.13 is the principal source of your obligations. It makes clear your client is the corporation. The corporation, of course, will act through an officer. I assume it’s the president in this case?”
“It is. But do I have obligations to the doctors?”
“Excellent question. First, if you know the corporation’s interests are adverse to any surgeon with whom you’redealing, you have to explain your client is the corporation. Not the doctor.”
“Do I have to tell the doctor to get his or her own lawyer?”
“Another good question. The rule doesn’t require it. Good risk management might suggest it. But strictly speaking, it’s not required.”
“Any other duties to the docs?”
“Actually, the reverse. If you learn a surgeon is violating an obligation to the corporation, or acting unlawfully, imputable to the corporation with conduct likely to harm it, you have to report that conduct to a higher authority in the corporation.”
Sarah added, “So long as you don’t reveal information that’s confidential under section 6068(e)(1).”
Macbeth advised: “Which suggests you tell the individual with whom you’re talking not to tell you anything that’s confidential. Because your client is the corporation. Your duty of loyalty is to it.”
Sarah spoke again, “Have you ever done legal work for the president?”
“No, this is the first time I’ve represented him. Or the corporation, rather. Why do you ask?”
“If you had, Rule 1.7(c)(1) might require you to disclose to your client, the corporation, you’d had a prior professional relationship with him. Because he’ll be a party to the transaction. But here, not an issue.”
Macbeth picked up. “You mentioned a possible government investigation?”
“Yeah. After I got the shareholder agreement revised, the president asked me to do an internal investigation to see if there’s anything to worry about.”
“That brings up a provision of Rule 1.13 and also something known as an ‘Upjohn warning’ or ‘corporate Miranda.’”
“Sounds serious.”
“Under the rule, when you interview each surgeon, remind each one of them your client’s the corporation. Under the former version of this rule, you couldn’t mislead an organization’s member into believing the member could reveal confidential information to you that would not be used to the organization’s interest if it conflicted with the member’s. But that’s not in the current rule. It’s still good advice, however. Also consistent with the spirit of Rule 4.3, truthfulness to others.”
“OK. What’s the Miranda bit?”
“When you conduct the investigation, the attorney-client privilege belongs to the corporation. Each surgeon must tell you, truthfully, all the facts you need to advise the corporation. If any thinks he or she wants a lawyer, that doctor must get separate counsel. Emphasize you only represent the corporation, not the individual.”
“Makes sense. But suppose a doctor wants me to represent him or her individually?”
“You can. So long as you comply with Rule 1.7, the conflicts rule, if there’s a conflict. And also with the provision in Rule 1.13 that requires someone in the corporation other than the person seeking individual representation to give the corporation’s informed written consent.”
Duncan’s square lit up. “If a surgeon were to be the target of a government investigation, along with the practice, should the same lawyer represent both?”
“Good point, nephew. Depending on the facts, and the corporation’s knowledge and defenses, it might lead to an unwaivable conflict. Especially if the investigation moved to litigation. Tactically, separate counsel might also be better. But we’ve strayed beyond ethics. Josh, is there anything else we can help with?”
“Thank you, all. This has been great.”
“We’re glad to help.”
A round of “Goodbyes and stay well.”
Editorial Note: The predecessor to Rule 1.13 is Rule 3-600. Upjohn v. U.S., 449 U.S. 383 (1981) gave rise to the expression “Upjohn warning.”
Edward McIntyre (edmcintyre@ethicsguru.law) is a professional responsibility lawyer and co-editor of San Diego Lawyer.