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A lawyer’s obligations when advising an organization about conduct that may create legal risks for the organization’s constituents

2/3/25

By: Kevin R. Stone

The American Bar Association recently issued a Formal Opinion. This blog presents a summary of that Opinion. The Opinion addresses situations in which (1) a lawyer gives advice to a client-organization through its constituents; (2) the lawyer knows or should know the constituents have their own legal interests at stake; and (3) the lawyer does not intend to create a client-lawyer relationship with the constituents.

In that situation, does a lawyer have a duty to advise an organization about legal implications for its constituents? Do the Rules require the lawyer to take steps to avoid or correct a misunderstanding of the lawyer’s role or mistaken belief that the lawyer is protecting the constituent’s interests? 

Of course, as with most things law, the answer to both questions is, “it depends.”

Lawyers’ duty to give advice to the organization about constituents’ legal interests 

The ABA explains whether an organization must be advised of how its proposed conduct will affect the organization’s constituents may turn on (1) the extent and gravity of the risk to the constituents; and (2) whether the lawyer knows the organization would want to be told when its conduct has legal implications for its constituents. When in doubt, the lawyer should simply ask whether the organization wants to know of legal risks to its constituents.

A lawyer should not merely assume, however, that an organization’s decision-makers are indifferent to legal risks to its constituents. Obvious reasons for this include the practical reality that organizations will likely want to know costs and disruption if their constituents encounter legal problems because of a lawyer’s work for the organization. For example, the organization may have duties of indemnification to its constituents that could be relevant to the risk to the organization itself. 

Lawyers’ responsibility to non-client constituents when giving advice to the organization 

A more nuanced situation arises when a lawyer’s advice implicates liability of the individuals through whom the lawyer gives advice to the organization. Those individuals are not the client, and therefore, lawyers do not owe them duties they owe to the client (i.e., the organization). Even so, lawyers may have obligations in those situations because they are officers of the legal system, not just representatives of clients. 

Thus, the Rules require lawyers to avoid misleading a nonclient or exploiting a nonclient’s misunderstanding about the lawyer’s role. That is because quite often, non-clients may believe a lawyer is disinterested in loyalties. In order to avoid such a misunderstanding, lawyers typically need to identify the client and, where necessary, explain the client has interests opposed to those of the unrepresented person (i.e., the organization’s constituents through whom the lawyer is giving advice to the organization). Thus, when a lawyer deals with an organization through its constituents, the lawyer shall explain that he or she is representing the organization only, not the constituents.

This is especially true when the organization’s interest may be or become adverse to those of its constituents. For example, an organization may choose to engage in conduct that poses risks for both the organization and its constituents. Such risks may be less consequential for the organization than the individuals, and the organization may have defenses that are unavailable to unrepresented individual constituents. In such a situation, the lawyer should be clear that he or she does not and cannot represent the constituent, and that such person should obtain independent representation. The ABA explains that the “objective is not to advise constituents about how to act in light of personal legal risks but simply to give them information to prevent them from erroneously relying on misunderstandings of the lawyer’s role.” 

Every situation is unique. It is important for lawyers to be sensitive to ambiguities in their advice-giving role and to approach each situation in a manner that avoids obvious or likely confusion on the part of the constituents who receive the lawyers’ advice on behalf of the organization.

The full ABA opinion is available here: https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-514.pdf 

For more information, please contact Kevin R. Stone at kevin.stone@fmglaw.com or your local FMG attorney.