RI - 345
October 24,
2008
SYLLABUS
An officer of a corporation has informed the corporation’s lawyer of
his intent to destroy documents that are subject to a judicial discovery order,
and asks the lawyer to return copies of those documents in the lawyer's
possession. The lawyer should first
attempt to dissuade the officer from the threatened misconduct. If the officer does not recant, the lawyer
should refer the matter to higher authority in the organization. The lawyer should decline to return copies
of the documents in his possession until the matter is resolved so as not to
assist in the unlawful destruction or concealment of evidence. The lawyer may continue representing the
corporation and is not required to withdraw merely because the officer suggests
improper conduct.
REFERENCES:
MRPC 1.2(c), 1.4(b), 1.6, 1.13, 1.16, 3.4; 2 Restatement of the Law Governing Lawyers, 3d § 96.
A corporation is engaged in litigation. The chief executive officer (CEO) of the corporation has informed the corporation’s litigation attorney that he intends to destroy documents relevant to the dispute that are subject to a court discovery order. The corporation is closely held but has a board of directors to which the CEO is accountable; and the CEO is not the sole shareholder. The CEO has directed the lawyer not to produce the documents in response to the order and has threatened to terminate her if she does. The lawyer possesses copies of the documents, and the CEO has requested that she return them to the corporation. The lawyer asks what steps should be taken under the ethical rules to address the CEO's threatened misconduct.
The lawyer’s
obligations are to the corporation.
Although in most instances, the Rules of Professional Conduct defer to
other law in determining who is the client, Michigan Rule of Professional
Conduct ("MRPC") 1.13(a) provides that the client is the corporation,
not the CEO:
A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders, or other constituents.
In
representing the corporation, the lawyer is to communicate with the client so
as to permit informed decisions regarding the representation under
MRPC 1.4(b), and is to take steps to prevent reasonably foreseeable harm
to the client, as set forth in MRPC 1.13(b):
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 which reasonably might be
imputed to the organization, and that is likely to result in substantial injury
to the organization, the lawyer shall proceed as is reasonably necessary in the
best interest of the organization. In
determining how to proceed, the lawyer shall give due consideration to the
seriousness of the violation and its consequences, the scope and nature of the
lawyer's representation, the responsibility in the organization, and the
apparent motivation of the person involved, the policies of the organization
concerning such matters, and any other relevant considerations. Any measures taken shall be designed to minimize
disruption of the organization and the risk of revealing information relating
to the representation to persons outside the organization. Such measures may include among others:
(1) asking reconsideration of the matter;
(2) advising that a separate legal opinion on the
matter be sought for presentation to appropriate authority in the organization;
and
(3) referring the matter to higher authority in the
organization, including, if warranted by the seriousness of the matter,
referral to the highest authority that can act in behalf of the organization as
determined by applicable law.
The
Committee assumes that the CEO's threat to destroy documents that are subject
to a discovery order, if carried out, would be “a violation of law which
reasonably could be imputed to the organization, and that is likely to result
in substantial injury to the organization . . .”[1] Accordingly, the lawyer is required to
proceed as reasonably necessary to protect the best interest of the
corporation, taking into account MRPC 1.13(b) and other relevant
considerations. The particular steps
required of the lawyer will depend on such factors as the governance structure
of the organization, the degree of independence of the board, and the CEO’s
relationship with higher authority.
The lawyer
should first attempt to dissuade the CEO from the threatened course of
conduct. In asking the CEO to
reconsider, the lawyer may discuss such matters as the corporation’s duty to
comply with court orders and applicable law, any relevant corporate policies
such as those involving ethical obligations and document retention, the
lawyer’s recommendation that a second opinion be obtained regarding the
implications of the threatened conduct, and the lawyer’s intent to refer the
matter to higher authority in the corporation if the CEO does not recant.
If the CEO
cannot be dissuaded, the lawyer should consult with higher authority, here
presumably the corporation’s board of directors.[2] If the CEO is a member of the board, the
lawyer should exercise care to assure that any independent directors are duly
informed.[3] In referring the matter to higher authority,
the lawyer may, as necessary, advise the board that the lawyer's ethical
obligations would likely require withdrawal from representing the corporation,
and appropriate disclosure to the tribunal, if the CEO carries out the threat
and the misconduct is not otherwise rectified[4].
The
objectives of MRPC 1.13 are met if the lawyer’s referral to higher authority
redresses the CEO’s threatened misconduct.
However, if the
lawyer reasonably believes after counseling and remonstrating with the client
that the CEO has not retracted his threat, the lawyer should preserve any
pertinent documents, or copies thereof, in her possession until the matter of
discovery compliance is resolved.
Otherwise, the lawyer risks violating MRPC 3.4(a), which provides that a
lawyer shall not “unlawfully obstruct another party's access to evidence;
unlawfully . . . destroy or conceal a document . . . or assist another person
to do any such act.” The Comment to the
Rule emphasizes that:
[d]ocuments and other items of
evidence are often essential to establish a claim or defense . . . [T]he right
of an opposing party. . . to obtain evidence through discovery or subpoena is
an important procedural right. The
exercise of that right can be frustrated if relevant material is . . .
concealed or destroyed. Other law makes
it an offense to destroy material for purpose of impairing its availability in
a pending proceeding or one whose commencement can be foreseen.[5]
The lawyer should decline to return
the documents to the CEO or the corporation.
Doing so with the knowledge of the CEO’s intentions could be considered
assisting the client in destroying or concealing a document having potential
evidentiary value in violation of MRPC 3.4(a).
Returning the documents may serve also to assist the client in conduct
the lawyer knows to be illegal or fraudulent, addressed in MRPC 1.2(c).[6]
The lawyer may continue the
representation of the corporation notwithstanding the CEO's threat to destroy
documents. The Comment to MRPC 1.16
counsels that "[t]he
lawyer is not obliged to . . . withdraw simply because a client suggests such a
course of conduct [that is illegal or violates the Rules of Professional
Conduct or other law].” MRPC 1.16(a)(1)
provides that a lawyer shall withdraw if "the representation will result
in violation of the Rules of Professional Conduct or other law." Faced with the CEO's threatened misconduct,
however, continued representation of the corporation is consistent with the
lawyer's previously discussed obligations under MRPC 1.13(b). Such representation will not result in
violation of the Rules or other law, but fulfills the lawyer's ethical duties
and may forestall a violation of law by the client.
[1] Determining when destruction of evidence is a violation of law and
analyzing applicable legal authorities are outside of the Committee’s
jurisdiction. For purposes of this Opinion,
we assume that the CEO’s threatened misconduct, if carried out, would be a
violation of law regarding preservation of evidence subject to a court
order.
[2] This opinion is applicable to any
corporation. When the corporation has a
single shareholder and single member board, the process described above under
MRPC 1.13 is unnecessary.
[3] The
lawyer's duty to maintain the confidentiality of client secrets does not, of
course, prohibit the lawyer from disclosing communications with the CEO to
higher authority within the client corporation. This is true even if the disclosure is against the interests of
the CEO or other constituents of the corporation. See generally Restatement of the Law Governing Lawyers, 3d § 96.
[4] A
discussion of a lawyer's ethical duties when faced with a client's actual, as
opposed to threatened, misconduct is beyond the scope of this opinion.
[5] The reference to “other law” in the comment does
not identify the external law defining “unlawful” conduct, and such analysis is
beyond the scope of this opinion. See
e.g. J. Gorelick, S. Marzon & L. Solum, Destruction of Evidence, Ch 5 (1989 & Supp 1991); 18 USC §
1503, which makes it a crime to “corruptly” obstruct the “due administration of
justice,” including the intentional destruction of evidence relevant to pending
judicial proceedings; United States v
Berkowitz 927 F2d 1376 (CA 7,
1991); 18 USC § 401 (1995), (punishing disobedience of court orders and
process). Legal scholars have suggested
that the term “unlawful” in Rule 3.4(a) reaches conduct that violates discovery
obligations. E.g., 1 G. Hazard & W.
Hodes, The Law of Lawyering, § 3.4:201
at 626-627 (2nd ed Supp 1992); J. Gorelick et al., Destruction of Evidence,
supra, § 7.7 at pp 258-60; C. Wolfram, Modern Legal Ethics, § 12.3.5 at p 644 (1986).
[6] We note
that the threat to destroy the
documents is itself not an illegal or fraudulent act (MRPC 1.2(c)) or unlawful
destruction (MRPC 3.4(a)). However,
surrendering control of the copies that could substitute for the documents that
may be destroyed in the face of such a threat if carried out would expose the
lawyer to the substantial risk of such an assertion.