Representing Organizations: Defining the Client and Managing Conflicts

One of the most complex areas of legal ethics involves representing an organization. Whether the entity is a corporation, an LLC, a municipality, or a government agency, the attorney’s role is governed by a specific set of duties that differ significantly from representing an individual.

The following guide outlines the foundational rules, the challenges of identifying the “client,” and the critical steps attorneys must take when interests diverge.

The Foundational Rule: The Entity is the Client

The core principle of organizational representation is found in SCR 20:1.13(a). This rule states that a lawyer employed or retained by an organization represents the organization itself, acting through its “duly authorized constituents”.

This distinction is vital. While attorneys interact daily with officers, directors, employees, and board members, those individuals are not the client. The client is the legal entity—the corporation, the LLC, the municipality, or the government agency. Consequently, the attorney’s duties of loyalty and confidentiality are owed strictly to the organization, not to the individual with whom the attorney engages.

Defining the Client: Private vs. Public Sector

Applying the “entity” theory depends heavily on the context of the representation.

• The Private Sector: In the context of a corporation or LLC, the client is clearly defined (e.g., “ABC Corp.” or “Medical Group, LLC”).
• The Public Sector: Defining the client in the government context is much murkier. The client could be a specific board (like a zoning committee), the government as a whole (like “The Town of Badger”), or even the “public interest.”

Pre-Incorporation Representation It is important to note that the entity rule applies retroactively. In the case of Jesse v. Danforth, the Wisconsin Supreme Court held that a law firm’s work helping doctors form an LLC was deemed representation of the entity, not the individual doctors.

The “Corporate Miranda Warning”

Because constituents often believe the organization’s lawyer represents them personally, attorneys must clarify their role to avoid ethical breaches. Under SCR 20:1.13(f), a lawyer must explain the identity of the client when it becomes apparent that the organization’s interests are adverse to those of the constituent.

This warning—sometimes called the “Corporate Miranda Warning”—is mandatory, not optional. It should be given when:

• An employee or officer’s interests appear to diverge from the organization’s.
• Conducting internal investigations.
• An official asks for advice on actions that may violate their duty to the organization.
• An individual might personally benefit from advice at the organization’s expense.

What to Say A proper warning clarifies that the attorney represents the company, not the individual; that the conversation is privileged for the organization (which can waive that privilege); and that the individual should seek independent counsel.

Responding to Misconduct: The Duty to “Report Up”

Under SCR 20:1.13(b), if an attorney knows a constituent is acting in a way that violates the law and is likely to cause “substantial injury” to the organization, the attorney cannot ignore it. The attorney must proceed as reasonably necessary in the best interest of the organization.

The primary mechanism for this is “reporting up” the chain of command. Consider the following examples in the private and public sectors:

• Private Sector: Reporting fraud by a VP to the CEO or Board of Directors.
• Public Sector: Reporting a committee chair’s violation of open meetings law to the full City Council.

The “Nuclear Option”: If the highest authority in the organization fails to act on a clear violation of law that is reasonably certain to result in substantial injury, SCR 20:1.13(c) permits the attorney to break confidentiality. This “permissive disclosure” allows the attorney to reveal information only to the extent necessary to prevent substantial injury to the organization.

The Risks of Dual Representation

An attorney may represent an organization and one of its constituents simultaneously under SCR 20:1.13(g); however, such dual representation is subject to strict conflict of interest rules.

Dual representation (e.g., representing both a Town and its Chair in a lawsuit) poses significant risks, as the best defense for one may be adverse to the other. To proceed, the attorney must obtain informed consent, confirmed in writing, from both clients. Crucially, the consent for the organization must be given by an official other than the individual being represented.

Key Takeaways

• The Entity is the Client: Your primary duty of loyalty is to the organization, not the people you work with.
• Clarify Your Role: When interests diverge, you must provide the “Corporate Miranda Warning.”
• Report Misconduct: You have an affirmative duty to report violations up the ladder to protect the organization.

Beware Dual Representation: Representing the entity and a constituent is a conflict that requires a valid, disinterested waiver.