When representing new clients, lawyers may overlook some preliminary, fundamental questions as they jump right into the matter at hand. One such question, often overlooked, is “who is my client?” Failure to ask and answer this question can lead to ethical dilemmas, and possible malpractice down the road. ABA Model Rule 1.13(f) states, “a lawyer shall explain the identity of the client when the lawyer knows, or reasonably should know that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.” This means the lawyer should first know the identity of their client.
In this article, I will provide an example of and discuss three potential answers to the preliminary, yet perilous question: “who is my client?” A man I greatly respect, AJ Singleton, also wrote on the issue. You can find his thoughtful commentary here. In my article, we will discuss the following example situation: three individuals approach me to form an LLC for their business. The LLC does not exist yet. Who is my client?
Three Possible Answers
Our hypothetical situation has several potential answers to my question. First, I can represent all three in the engagement. The Law of Lawyering describes this as an “all-or-nothing” approach, wherein the lawyer “must represent all of the would-be partners or incorporators or none of them.” Naturally, this solution carries with it the issues congruent with joint representation. Each of the jointly represented clients is owed equal duties of confidentiality and loyalty from their attorney. If this “all-or-nothing” approach to the representation is undertaken, I need to secure the informed consent, confirmed in writing, of all the jointly represented clients.
Second, I can represent “the entity to be formed.” This proffers a metaphysical quandary, as how does one represent an entity that does not yet exist? The Wisconsin Supreme Court has grappled with this question and accepted the representation of “the entity to be formed” approach, with other jurisdictions acquiescing as well. See Jesse v. Danforth, 169 Wis.2d 229, 485 N.W.2d 63, 66-67 (1992). See also Manion v. Nagini, 394 F.3d 1062 (2005). Regarding Rule 1.13, the Jesse Court states: “If a person who retains a lawyer for the purpose of organizing an entity is considered the client, however, then any subsequent representation of the corporate entity by the very lawyer who incorporated the entity would automatically result in dual representation. This automatic dual representation, however, is the very situation the entity rule [i.e., Rule 1.13] was designed to protect corporate lawyers against. We thus provide the following guideline: where (1) a person retains a lawyer for the purpose of organizing an entity and (2) the lawyer’s involvement with that person is directly related to that incorporation and (3) such entity is eventually incorporated, the entity rule applies retroactively such that the lawyer’s pre-incorporation involvement with the person is deemed to be representation of the entity, not the person.” Essentially, this means that the court will retroactively apply Rule 1.13’s entity rule with respect to entity formation. Importantly, relying on Rule 1.13, the Wisconsin Supreme noted that, when an attorney represents an entity, the entity itself is the client under Rule 1.13 and the individual constituents of said entity are not.
For the third answer, I can (1) represent the individual client(s) (plural if all-or-nothing approach); then (2) upon formation, terminate my representation of the individual client(s) and represent the entity itself. AJ Singleton remarks that this is “[p]erhaps the ideal answer to this quandary”. This third approach solves many of the above-noted issues. At no time will I be in an attorney-client relationship with the other members of the entity to-be-formed. Significantly, it is advantageous to go a step further and send an “I’m not your lawyer” letter to any non-clients. A variation of this approach is for the attorney who is representing the single individual member in the formation to clarify that he or she does not represent the entity.
Considerations
Regardless of the chosen approach, clear, written communication from the lawyer to the various members—plus actions consistent with such disclaimers of attorney-client relationships—will help navigate any future claims represented to members or entities we never intended to represent. I must regularly remind myself to slow down and ask, “who is my client?”
For more information on ethics rule implications, call our office at (425) 776-4100 or send me an email at info@beresfordlaw.com.
This article was co-authored by Beresford Booth Law Clerk Drew Tingstad.