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Prof Responsibility • Confidentiality
PR#063
Legal Definition
Under Rule 1.13, if a lawyer for an organization knows that an officer, employee, or other person associated with the organization is engaged in action, intends to act, or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances, to the highest authority that can act on behalf of the organization as determined by applicable law. If, despite the lawyer's efforts, (1) the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a violation of law, and (2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.
Plain English Explanation
When a lawyer works for a company, they represent the entire organization, not just any one person in it. If the lawyer discovers that someone in the company, like an employee or a manager, is planning to do something illegal or against the company’s rules, the lawyer has a responsibility to act in the company's best interest.
First, the lawyer should try to solve the problem within the company by informing higher authorities, such as the board of directors, about the issue. The goal here is to stop the wrongdoing before it happens or to correct it if it has already started. The lawyer does this because the law expects them to protect the organization, even if it means going against the wishes of individual employees.
If the lawyer has done all they can but the problem continues, and if it looks like the illegal action could seriously harm the company, the lawyer may need to take further steps. This could include reporting the issue to someone outside the organization, even if that means sharing information that would normally be kept confidential. However, this is only allowed when the lawyer genuinely believes it's necessary to prevent significant harm to the company.
First, the lawyer should try to solve the problem within the company by informing higher authorities, such as the board of directors, about the issue. The goal here is to stop the wrongdoing before it happens or to correct it if it has already started. The lawyer does this because the law expects them to protect the organization, even if it means going against the wishes of individual employees.
If the lawyer has done all they can but the problem continues, and if it looks like the illegal action could seriously harm the company, the lawyer may need to take further steps. This could include reporting the issue to someone outside the organization, even if that means sharing information that would normally be kept confidential. However, this is only allowed when the lawyer genuinely believes it's necessary to prevent significant harm to the company.
Hypothetical
Hypo 1: Bob is the lawyer for a tech company. Sam, the company's CFO, tells Bob that he plans to falsify the company's financial records to make the company look more profitable. Bob tells Sam that this is illegal and could hurt the company. When Sam refuses to stop, Bob informs the CEO, but the CEO does nothing. Result: Bob may then report the issue to the SEC, even if this means revealing confidential information because it could prevent serious harm to the company.
Hypo 2: Bob is a lawyer for a manufacturing company. Sam, the production head, decides to ignore environmental regulations to cut costs. Bob warns Sam and then informs the company’s president, who decides to take no action. Result: Since ignoring environmental laws could lead to severe fines and damage to the company’s reputation, Bob may need to report this outside the company to prevent serious harm.
Hypo 2: Bob is a lawyer for a manufacturing company. Sam, the production head, decides to ignore environmental regulations to cut costs. Bob warns Sam and then informs the company’s president, who decides to take no action. Result: Since ignoring environmental laws could lead to severe fines and damage to the company’s reputation, Bob may need to report this outside the company to prevent serious harm.
Visual Aids
Related Concepts
How does California's Rule 1.13 regarding Organizations as Clients differ from the ABA rules?
If an attorney in California becomes aware that their client is violating state or federal securities law, what must they do?
In California, what are the three exceptions to the Duty of Confidentiality?
What are the seven permissive exceptions, under the ABA, to the Duty of Confidentiality?
What is the Duty of Confidentiality?
