Opinion 96-11
(October 1996)
You have asked the Committee for an opinion concerning the ethical implications of the following situation:
You have recently become the Executive Director of a nonprofit organization that advocates the rights of a special interest group. You anticipate that you will have occasion to act as the nonprofit organization's attorney, specifically in class action litigation in which the organization may become involved. You also anticipate that members of the organization may seek your counsel and representation concerning individual matters. You have stated your intent to conduct both types of representation as a sole practitioner rather than as the Executive Director of the nonprofit organization.
You have asked the Committee to review the potential ethical implications of your roles as Executive Director for the nonprofit organization, as counsel to the organization, and as counsel on an individual basis to some of the organization's members. Your specific concerns focus upon potential conflicts and situations that may jeopardize your professional integrity.
We have concluded that, provided you carefully implement safeguards and follow specific guidelines, under most circumstances you may ethically act in the three capacities outlined above.
Your first potential for ethical violations occurs in the context of your dual roles as Executive Director and as counsel for the nonprofit organization. You must ensure, pursuant to Rule 5.4(a), that you do not share the fees you earn from your representation of the organization with the organization itself. Although the organization's payment of your salary or fees and expenses generally would not lead to such a circumstance, your fees may occasionally be derived from other sources, such as deriving your fee from a percentage of a contingency recovery. Another potential situation where this may occur is in the class action context, where the court typically awards counsel fees based upon class counsel's fee petition, and the fees either are paid directly by the defendants or awarded as a portion of the common fund recovered on behalf of the Class. Irrespective of the source of your legal fees, you are forbidden to share any portion of those fees with the nonprofit organization, in any manner or at any time.
Your role as counsel for members of the organization presents considerably more grounds for ethical concern. Rule 1.6(a) requires you to preserve the separate confidentialities of each of your clients. And, whether in the context of your representation of members or of the organization itself, you must supervise the conduct of any assistants you use, to ensure that their conduct conforms to the requirements of Rules 5.3 and 5.5.
Rules 1.7 and 1.13 govern your conduct in potential conflict of interest situations. Rule 1.13(e) permits you to represent both the organization and its members, provided that Rule 1.7 is adhered to. Rule 1.7(a) prohibits you from representing two clients whose positions are directly adverse to one another, unless you reasonably believe that neither representation will adversely affect your relationship with the other client, and each client consents after consultation. Rule 1.7(b) prohibits you from representing one client if the representation may be materially limited by your responsibilities to another client, unless you reasonably believe that neither representation will adversely affect your relationship with the other client, and each client consents after full disclosure and consultation. Although the variations in which this type of conflict may occur are endless, your situation presents one likely conflict that bears discussion. If your representation of an individual member is of great interest to the organization, the member's best interests may be served by settlement of litigation whereas the organization's interest may best be served by pursuing the litigation to its conclusion as a test case. In that circumstance, your first duty must be given to the member, and if the organization cannot accept your performance of this duty, you may be required to withdraw from the member's representation. It would be advisable, then, for you to inform each member in advance of your representation, that if a conflict should arise, you will withdraw from representation of the member. You may also consider obtaining a confidentiality waiver from the prospective client, that provides that information divulged during your first interview will not be considered confidential. See ABA Formal Opinion 90-358.
Rule 1.13(d) also may be implicated in your dealings with the organization's members. When you have occasion to deal with a member concerning matters in which you represent the organization, if the member's interests diverge from the organization's you need to clearly identify that under those circumstances your client is the organization, not the individual member.
Particularly with respect to your representation of members of the organization, you must ensure that your professional independence is preserved. The organization cannot exercise any control over your representation of its members (Rule 5.4(c)). Should the organization pay any portion of the fee involved in your representation of a member (or allow you to take the case on a pro bono basis and receive your compensation in the form of a salary from the organization), you must ensure that the organization does not direct, regulate, or interfere with your professional judgment or the representation (Rules 1.8(f) and 5.4(c)) and that the member consents to the arrangement (Rule 1.8(f)).
Another potential ethical problem, again avoided with careful planning, involves the organization's solicitation of its members and potential members on your behalf. Rule 7.3 permits you or the organization to contact its members and potential members in writing to inform them of your professional services, but contact in person or by telephone is impermissible for either you or the organization because you have no prior professional relationship with the members. Any advertising or other communications the organization undertakes with respect to you must also comply with Rules 7.1 (regarding false or misleading statements) and 7.2 (regarding advertising). In particular, Rule 7.2(c) prohibits you from giving anything of value to the organization for the referrals attributable to its recommendations.
Provided that you closely adhere to the Rules of Professional Conduct and ensure that the organization also obeys those provisions directly relevant to it (particularly concerning your professional independence and solicitations on your behalf), you can represent both the organization and its members.
The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.