Organizational Lawyers and the Organization/Constituent Divide: Five Takeaways from ABA Formal Opinion 514

The American Bar Association’s (ABA) Formal Opinion 514, issued on January 8, 2025, provides guidance on the ethical responsibilities of lawyers when advising organizational clients concerning future actions or conduct that may pose legal risks to the organization’s constituents, including employees, officers, or board members. The opinion emphasizes that while the organization is the lawyer’s client, the lawyer’s advice by necessity must be conveyed to the organization through duly authorized individual constituents who may have their own distinct legal interests. The fundamental challenge for the lawyer lies in ensuring these constituents understand the lawyer’s role – namely, that the advice is given solely in the organization’s interest and does not constitute personal legal counsel. The opinion emphasizes the importance of lawyers clearly defining their role as representatives of the organization to prevent misunderstandings that could lead to the organization’s constituents mistakenly relying on the lawyer’s advice in their personal capacities.

I. Challenges in the Lawyer’s Role in Organizational Representation

When representing an organization, lawyers necessarily must communicate through its constituents, such as employees, officers, or board members. This dynamic can lead to misunderstandings by the constituents regarding the lawyer’s role, especially when the organization’s decisions concerning future actions or conduct may have legal implications for the individuals.

For example, a constituent making representations on behalf of the organization to the government or a private party may face civil or even criminal liability if the representations are false or misleading. In many cases, the organization and the constituent have similar interests in avoiding misrepresentations. In some cases, however, the organization and constituent may have divergent interests regarding such representations, such as in situations where the organization may find taking a more aggressive approach in the interest of the organization, but the constituent may find that taking a more cautious approach and avoiding the potential personal consequences is in his or her personal interests. The divergence of interests may be driven in part by the availability of certain legal defenses, such as the advice-of-counsel defense, that may be available to the organization but unavailable to the individual constituent.

Formal Opinion 514 addresses this issue by highlighting the necessity for lawyers to clarify their role to avoid any misunderstandings. The opinion references several ABA Model Rules of Professional Conduct to outline the lawyer’s duties in such scenarios, including ABA Model Rules 1.1 (Competent Representation), 1.4 (Communication), 1.13 (Organization as Client), 2.1 (Candid Advice), 4.1 (Truthfulness to Others), and 4.3 (Dealing with Unrepresented Persons).

The opinion acknowledges that interactions between organizational lawyers and constituents can be complex and require the lawyer to exercise judgment, particularly when the lawyer’s advice to the organization may expose constituents to legal risks. For instance, if a lawyer advises an organization on a course of action that could result in legal liability for an employee executing that action, the employee might mistakenly believe the lawyer also represents their personal interests. Such misunderstandings can lead to unintended personal reliance by the constituent on the lawyer’s advice, potentially resulting in adverse consequences for the constituent and potential legal disputes down the line between the lawyer and the mistaken constituent.

To mitigate potential misunderstandings, Formal Opinion 514 recommends that lawyers proactively clarify their role to the organization’s constituents. This involves informing constituents that the lawyer represents the organization and not them individually. The opinion suggests that lawyers should provide this clarification “early and often” during their interactions with constituents, not solely when a conflict of interest arises. By doing so, lawyers can prevent constituents from mistakenly believing they can rely on the lawyer’s advice for personal legal matters.

II. Practical Tips for Practicing Attorneys

Based on the guidance from Formal Opinion 514, here are five takeaways for attorneys representing organizations

1. Clarify Your Role: Inform the organization and its constituents that you represent the organization, not the constituents individually. This clarification should be done early, not just when potential conflicts arise, and reiterated as necessary to prevent any misunderstandings. Develop a standard practice of explaining your role during initial interactions and subsequent meetings.
2. Identify Potential Legal Risks to Constituents: When advising the organization on proposed future actions or conduct, carefully assess and, when appropriate, communicate any potential legal risks these actions may pose to individual constituents, which will enable informed decision-making. This does not mean providing personal legal advice to the constituent but rather informing the organization through its decision-makers so that they understand the broader implications of their proposed future conduct or actions on the organization and constituents. As discussed further in the opinion, the question of whether the lawyer is obligated to identify the risks to constituents is a question of fact that varies depending on the circumstances.
3. Use Clear Disclaimers: When communicating with constituents of the organization concerning the legal implications of future contemplated organizational actions, provide disclaimers that clarify your role and inform them, where necessary, to seek independent legal counsel for personal matters, especially when their interests may not align with those of the organization. Such disclaimers may include that the lawyer represents only the organization, that constituents may have personal legal risks, that the advice is given solely from the organization, and that individual constituents may wish to seek independent counsel if concerned about personal legal issues.
4. Document Communications: Maintain thorough records of communications with both the organization and its constituents relating to your efforts to avoid misunderstandings in order to protect against potential present and future disputes regarding your role. These documentation practices can serve as crucial evidence of your scope of representation if questions arise later.
5. Seek Guidance When Uncertain: If you encounter complex situations where the distinction between organizational and individual representation becomes blurred, seek guidance from your firm’s ethics or general counsel or outside counsel.

Conclusion

Formal Opinion 514 serves as a crucial reminder for lawyers representing organizations to diligently clarify their role to the organization’s constituents. It provides a framework for organizational lawyers to navigate the complex ethical terrain of representing an organization while interacting with its constituents. The key is maintaining transparency, proactively managing expectations, and consistently reinforcing the boundaries of legal representation. By implementing these practical strategies and implementing proactive measures to prevent misunderstandings, attorneys can fulfill their professional obligations, protect their clients’ interests, and maintain the highest standards of ethical practice.