| The concept of organizational representation has existed for decades,
although Rule of Professional Conduct 3-600 was only enacted in 1989. The rule offers some
guidance when the client is an entity or a legal fabrication. "Organization" is
not defined within the parameters of the rule, but commonly includes corporations,
partnerships, political groups, unions and joint ventures, essentially any organizational
construct that is legally recognized. The most critical inquiry the attorney must make
at the initiation of the representation is the identity of the client. Failure to clearly
make this determination can result in fee forfeiture, disqualification and discipline.
 Real people have
only a vague notion of what an "entity" is. In small, closely held entities,
most individuals believe that they are the client and that the entity is just some
artificial thing for tax purposes. This is a compelling argument that juries in legal
malpractice or breach of fiduciary duty cases often buy. The argument is enhanced if the
attorney failed to draw clear lines or distinct boundaries around the representational
obligations.
The attorney must be ever vigilant to remind the participants that he or she represents
the entity and not the principals, if that is indeed the case. Concurrent representation
of the principals is not prohibited by this rule (3-600(E)), with the appropriate written
consents. Lawyers have affirmative obligations not to mislead constituents (3-600(D)),
especially in the closely held circumstance, such as to the identity of the client or the
confidentiality of their communications.
One of the biggest problems in this area is that most lawyers are gregarious. We
develop friendships with employees or agents of the entity, who forget that we have
"entities' lawyer" embossed upon our foreheads in flashing red neon. Your
"friend" discloses that he or she was arrested for a second DUI, and you know
that he or she drives a truck for the entity, which hauls toxic waste. Now you are
obligated to disclose the information to the entity's officer/director and destroy the
friendship in the process.
The risk of confusion is particularly acute in the closely held entity, where necessity
almost compels the lawyer to take aggressive steps to dispel any confusion that could be
engendered in the minds of putative clients. There are a number of techniques to quell any
reasonable claims of confusion.
Normally, the fee agreement clarifies the identity of the client. However, it could
also indicate who is not the client. If there are corporate minutes, the client's identity
could be reiterated on a regular basis within this document, giving the principals ongoing
notice. Another suggestion is a Miranda-type warning to be executed by each constituent
with whom the lawyer consults, to eradicate any illusion that the attorney is representing
that person.
 Diane Karpman of Los Angeles represents
attorneys at the State Bar and is an expert witness in legal malpractice, conflicts of
interest and partnership dissolutions.
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