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By Samson Habte
A company with multiple subsidiaries may wish to obtain “advanced conflict waivers” if it wants in-house lawyers at one subsidiary to perform work for other entities in the corporate family, the Illinois bar’s ethics committee advised in its most recent opinion (Ill. State Bar Ass’n Comm. on Prof’l Ethics, Op. 17-05, 5/17).
The opinion, approved in May and published in August, addresses the ethical issues surrounding “intra-family corporate representation"—a subject that receives “very general treatment” in the rules of professional conduct, the committee said.
The opinion responded to an inquiry from an in-house lawyer who works for a company that has a corporate parent and has been asked to perform work for a subsidiary in the corporate family.
The lawyer asked whether he may do that work, and the committee answered “yes.”
But the panel was quick to add that its analysis was fairly uncomplicated because it was based on the limited facts presented by the in-house lawyer who requested the guidance.
That inquirer, the committee noted, didn’t identify any “conflict or adversity” between his current employer and the corporate affiliate that he was asked to assist. The in-house lawyer also didn’t suggest that he would be required to share confidential information about his primary employer with the subsidiary he’s been asked to help.
“Therefore, in answering the specific question posed, the Committee concludes that [the inquirer’s] representation of subsidiaries A and X in wholly unrelated matters would not be prohibited,” the opinion said. “The Committee declines to speculate about potential ethical concerns that are not present in the inquiry.”
The committee noted that there are “few” provisions in the Illinois Rules of Professional Conduct that are “specifically tailored to in-house lawyers and intra-family corporate representation.”
The “very general treatment of in-house lawyers” in the rules “belies the complexity of many issues” those attorneys confront, the committee said. The “most problematic” issues, it added, “revolve around client identity, conflicts of interest, and preserving client confidences.”
Although this inquiry didn’t implicate many of those issues, the committee did point to authorities that provide more in-depth treatment of questions relating to intra-family corporate representation.
Rule 1.13, which deals with duties to organizational clients, and a comment to Rule 1.7, which deals with conflicts of interest, suggest that a lawyer who represents a corporation or organization does not, by virtue of that representation, necessarily represent any affiliates, such as a parent or subsidiary.
But that doesn’t mean that an in-house lawyer will never be viewed as representing corporate affiliates, the committee said. Rather, the question of client identity “may change depending on the circumstances of the representation,” the committee said.
“For practical purposes, treating subsidiaries as distinct clients would seem the better practice if for no other purpose than to focus the in-house lawyer’s attention on identifying and addressing problematic legal and ethical issues,” the committee said.
On the other hand, an in-house lawyer “called upon to provide legal services to a related corporate entity” must “be careful to recognize the potential for competing interests,” the committee cautioned.
If the interests of an in-house lawyer’s primary employer do diverge from those of a corporate affiliate he has been asked to assist, the lawyer “can consider a number of actions to address and resolve the conflict,” the committee said.
“First and foremost is to obtain, if possible, the subsidiary’s and parent’s consent to the representation,” the committee said. “Counsel may also consider obtaining advance conflict waivers, limiting the scope of the representation to eliminate the potential conflict, or retaining outside counsel.”
Intra-family corporate representation can raise concerns about confidentiality that may be “even thornier” than those that relate to conflicts, the committee said.
A Virginia ethics opinion concluded that “an in-house lawyer must maintain a subsidiary’s confidences unless the subsidiary consents to disclosure,” the committee noted. However, it said, “In most corporate contexts, maintaining this confidentiality from the corporate parent, and perhaps other subsidiaries, is likely unworkable and doesn’t reflect the work of an in-house legal department.”
One “prudent” course, the committee said, is to take the same steps that might be taken to overcome potential conflicts of interest: “memorialize in writing how confidential information will be treated, obtain advance consent for disclosure, or retain outside counsel.”
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