June 1991

Statement of Facts

An attorney is employed by a membership organization as a member of the organization's staff. The attorney is employed primarily to assist members of the organization in legal matters, but also is called on from time to time to provide counseling for the organization. The attorney does not provide counseling for the board of directors.

One of the options the attorney has in assisting organization members is to refer them to outside counsel, who are paid under a legal insurance policy that each member is insured under as a part of their dues payment. While the member's interest is to be provided access to the best legal counsel available, whenever necessary, the interest of the organization is to keep insurance claims down in order to ensure low premiums and thus low dues payment for its members. The organization does not instruct the attorney to limit the referrals nor does it interfere in any way with the judgment of the attorney in handling of member problems.

Questions Presented

1. Does the attorney have a conflict of interest between the organization's interest and the interest of the individual members?

2. Does Rule 1.12 (organization as a client) supersede any arrangement the attorney may have had with the organization as to whose interest the attorney        represents?

3. Is Comment 12 to Rule 1.06 affected when the payment by a third party consists of a salaried position with the third party?


Rule 1.01(a) provides: "A lawyer shall not accept or continue employment in a legal matter which the lawyer knows or should know is beyond the lawyer's competence, unless: (1) another lawyer who is competent to handle the matter is, with the prior informed consent of the client, associated in the matter; or (2) the advice or assistance of the lawyer is reasonably required in an emergency and the lawyer limits the advice and assistance to that which is reasonably necessary in the circumstances."

Moreover, Rule 1.01(b) provides that: "In representing a client, a lawyer shall not: (1) neglect a legal matter entrusted to the lawyer; or (2) frequently fail to carry out completely the obligations that the lawyer owes to a client or clients."

Moreover, Rule 2.01 provides that: "In advising or otherwise representing a client, a lawyer shall exercise independent professional judgment and render candid advice."

When a lawyer is not competent to represent a member of the organization, the lawyer's duty to the client requires referral to a competent attorney (with the member's consent) in spite of the increased cost to the organization occasioned by such referral.

Since the organization does not instruct the organization attorney to limit referrals and does not interfere with the attorney's judgment in handling member problems, no conflict of interest exists. However, should the organization directly or indirectly interfere with the attorney's judgment in handling member problems or in limiting member referrals to other attorneys, then Comment 12 under Rule 1.06 is applicable: "A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer's duty of loyalty to the client." (See Rule 1.08(e)). For example, when an insurer and its insured have conflicting interests in a matter arising from a liability insurance agreement, and the insurer is required to provide special counsel for the insured, the arrangement should assure the special counsel's professional independence. So also, when a corporation and its directors or employees are involved in a controversy in which they have conflicting interests, the corporation may provide funds for separate legal representation of the directors or employees, if the clients consent after consultation and the arrangement insures the lawyer's professional independence.

Rule 1.08(e), provides that: "A lawyer shall not accept compensation for representing a client from one other than the client unless (1) the client consents; (2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; and (3) information relating to representation of a client is protected as required by Rule 1.05."


Since the attorney is specifically hired to render legal services to the members of the organization, and does not represent the board of directors of the organization, and has an agreement with the organization prohibiting the organization's interference, in this fact situation the attorney is not representing the organization as an entity so that Rule 1.12 (organization as a client) is inapplicable.