Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
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What are the ethical considerations when a member, representing an individual pursuing a civil cause of action against a corporation, communicates with a dissident director, without first receiving consent of corporate counsel?
It is improper for a member to have ex parte communication with the dissident director concerning the subject of the representation, regardless of who initiates the communication.
Rule 2-100 of the Rules of Professional Conduct of the State Bar of California.
Evidence Code sections 952 and 1222.
Corporation has commenced litigation against a dissident director who, at all relevant times, was employed by the corporation. The member represents an individual pursuing a civil claim against the corporation. The dissident director is represented by independent counsel who consents to the communication between the dissident director and the member. The corporation's counsel has not authorized the communication.
Rule 2-100 provides, in relevant part, that:
(A) While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer.
(B) For purposes of this rule, a "party" includes:
(1) An officer, director, or managing agent of a corporation . . . .
The Discussion, in rule 2-100, goes on to state, in relevant part, that the rule is ". . . intended to control communications between a member and persons the member knows to be represented by counsel unless a statutory scheme or case law will override the rule."
It is clear that the dissident director and the corporation are governed by rule 2-100 and that they are to be treated as one and the same for the purpose of the attorney work product rule and the attorney-client privilege. (Upjohn Co. v. United States (1981) 449 U.S. 383, 395-396 [101 S.Ct. 677, 66 L.Ed.2d 584].)
The corporation seeks to preserve the attorney-client privilege as provided in Evidence Code section 952. The corporation also has an interest in seeing that information or knowledge obtained by an employee in the course of the employment is not released to a party with an interest inimical to the corporate employer without the protection and advice of counsel. Admissions made by the director may be binding on the corporation pursuant to Evidence Code section 1222.
The individual having a civil cause of action against the corporation wants to speak to the dissident director, has received consent to the communication by the director's counsel and does not want to first obtain the consent of corporate counsel which would likely not be given.
Although independent counsel can protect the director from the feared intrusive acts of the individual client's attorney, the director's attorney does not represent the corporation and likely would take no action to protect the corporation which is adverse to his dissident director client.
There are several instances when rule 2-100 would not prohibit the ex parte communication. These exceptions include (1) if the member seeks to communicate with the director about something other than "the subject of the representation;" (2) if there is a statutory scheme or case law permitting the communication; or (3) if the dissident director was not employed by the corporation at the time of the communication.
It must be assumed that "subject of the representation" involves matters concerning the individual client having the action against the corporation as opposed to matters between the individual client and the dissident director. Clearly, if the communication exclusively involves matters concerning the individual client pursuing a claim against the dissident director for acts performed outside of the director's employment, the corporation would have no interest in prohibiting the communication and rule 2-100 would not prohibit the ex parte communication.
The Committee is aware that the rule prohibits ex parte contact with the dissident director regardless of whether or not he is named as a party in the action by the individual client against the corporation. A strict interpretation would also prevent ex parte settlement discussions with the dissident director if the dissident director was a named party in the individual client's action against the corporation. These similar issues were addressed in the matter of Mills Land and Water Company v. Golden West Refining Company (1986) 186 Cal.App.3d 116 [230 Cal.Rptr. 461]. In that case, the trial court disqualified an attorney and his law firm from participating in an unlawful detainer action for conduct of the attorney in violating the rule which prohibits communications directly or indirectly with a party known to be represented by counsel on a subject of controversy, without the express consent of such counsel. In that matter, the party affected was a corporation, and the offending counsel directly contacted the corporation's former president, who remained a member of the board of directors and a shareholder.
The Court of Appeal affirmed the disqualification of the individual attorney but reversed the trial court's disqualification of the entire law firm. The Court of Appeal noted that a director embodies a corporation to an even greater extent than does a salaried employee. (Mills Land and Water Company v. Golden West Refining Company, supra, 186 Cal.App. 3d at p. 129). The directors, by definition, control the corporation, including litigation in which it is involved. (Id.) Ex parte contact has a great potential for compromising the interests of the corporation and corporate counsel's ability to direct the litigation. (Id.) A director who makes a statement in the course and scope of employment may bind the corporation. (Id.)
Therefore, if the communication with the dissident director involves corporate activities or the director's performance within the scope of the director's employment, the ex parte communication is prohibited. This prohibition applies equally to the situation when the dissident director seeks to communicate with the member.
The American Bar Association Model Rules of Professional Conduct dictate a different result. Rule 4.2 provides that:
In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.
The comments to the American Bar Association Model Rules provide that:
[2] In the case of an organization, this Rule prohibits communications by a lawyer for one party concerning the matter in representation with persons having a managerial responsibility on behalf of the organization, and with any other person whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization. If an agent or employee of the organization is represented in the matter by his or her own counsel, the consent by that counsel to a communication will be sufficient for purposes of this Rule. (Emphasis added.)
This Committee has held that the American Bar Association Model Rules do not supersede the California Rules of Professional Conduct. (See State Bar Formal Opinion No. 1983-71.)
Therefore, unless there is an exception, rule 2-100 prohibits the ex parte communication. This rule has no affect on the civil and legal issues raised if and when information is received from a dissident director which is privileged and which may only be waived by the holder of the privilege.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding upon the courts, the State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
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