23 Litig. 48 (1996-1997)
The Conflicting Roles of Lawyer as Director

handle is hein.journals/laba23 and id is 52 raw text is: 'Me Conflicting Roles
of Lawyer as Director
by Robert P. Cummins and Megyn M. Kelly

Once lawyers were reluctant to sue other lawyers. Those
days are gone forever. A lawyer sitting on a client's board of
directors once did not seem like a bad idea. Those days, too,
are gone forever. Instead, lawyers' memberships on their
clients' boards is on the decline, and difficulties for those still
engaged in the practice continue to rise. The practice is not
yet prohibited, so a warning given by Monroe Freedman is in
order: You Can Do It, But You Shouldn't.
Problems faced by lawyers who assume this dual role
include conflicts of interest, loss of the attorney-client privi-
lege, disqualification as litigation counsel, loss of indepen-
dence, increased risk of individual and firm liability, and loss
of insurance coverage.
Scene One: Tom is asked to serve on the board of direc-
tors of his firm's biggest client, ABC Corp. His partners are
elated. His new role will: (1) strengthen the firm's ties to the
client; (2) keep the firm better informed of the client's busi-
ness affairs; (3) improve Tom's credibility with the client; (4)
result in prestige for Tom and his firm; and (5) assist Tom in
developing corporate contacts outside of ABC Corp., which
will likely generate business for his firm.
As a director, Tom will vote on most corporate decisions.
Above all, he will be expected to advance the ultimate finan-
cial goal of the company-to maximize profits. But as an
attorney, Tom's priority must be to provide competent legal
advice to the businesses which retain him. In that role, Tom
would be asked to identify risks and inform the board of the
legal consequences of such risks. While these distinct
responsibilities may be consistent, too often, they conflict.
For example, Tom may be asked as a director to vote on
whether or not the corporation should pursue an opportunity
which would improve its bottom line, but which Tom, as an
attorney, would normally advise the client to avoid. In order
to make a decision, Tom would be forced to reject one oblig-
ation in favor of the other. Alternatively, Tom could abstain
Robert P Cummins and Megyn M. Kelly are in the Chicago office of the
firm of Bickel & Brewer

from voting altogether. The first option is clearly improper;
the second unfairly deprives the corporation of the very tal-
ents which Tom brought to the board in the first place-his
professional acumen and opinion.
Another conflict arises if Tom is requested to vote on
whether to retain his law firm as outside counsel or on how
much to compensate it. Such decisions are routinely dis-
cussed and made at the board level. Similarly, Tom could be
asked to vote on whether the corporation should divest a sub-
sidiary which currently provides his law firm with substan-
tial business. Clearly, Tom is put in an untenable position; it
would be improper for him to vote on such issues. Tom's par-
ticipation in debates on such matters could be considered
self-dealing and a violation of both legal and business ethics.
Indeed, the Restatement (Third) of the Law Governing
Lawyers 216 Comment D (Proposed Final Draft No. 1,
1996) confirms the impropriety of a lawyer/director opining
on matters which affect his law firm's fees.
In fact, it may not be in ABC Corp.'s best interests for
Tom's firm to handle all or even the majority of its legal busi-
ness. While Tom's firm might have a thriving securities prac-
tice, its litigation department may not be as cost-effective or
capable as another firm being considered. But Tom's fellow
board members may feel uncomfortable voting against
retaining Tom's firm. This feeling can arise even when Tom
does not participate in the discussion or vote on the subject.
A sense of loyalty to their fellow director, and respect for
Tom's personal abilities as a lawyer, could misguide the
well-meaning board to divert legal business to Tom's firm
even when that firm is not right for the job. Tom's objective
of securing the company as a client would be advanced, but
at the expense of the corporation and in contravention of
Tom's obligations as a corporate fiduciary.
If Tom or his firm is counsel in litigation for ABC Corp.,
there is the further danger of confusion between his roles as
corporate board member and lawsuit defender. His dual role
could affect the weight afforded to his advice by other board
members. When speaking at the board meetings, Tom risks

LITIGATION Fall 1996  4     8        Volume 23 Number I

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