Who is the client?

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In-house corporate lawyers are different from many other law practitioners.

Of course, in-house lawyers review contracts, work on business transactions, handle litigation, manage corporate risk, oversee compliance activities and advise on the many legal issues corporations face. They have to be generalists across a range of subjects and specialists in the areas of law that most affect their organizations.

But some in-house lawyers, such as the corporation’s general counsel, play another significant role in the organization. They do precisely what the word “counsel” connotes: provide business advice, troubleshoot problems, mediate disputes among corporate officials and support the organization’s strategic initiatives while trying to keep it out of trouble.

Typically a close adviser to the organization’s top officials, the general counsel’s value to the corporation is directly related to the amount of trust those officials place in him or her, a trust earned through competence, discretion, and, most of all, sound judgment.

A key question for in-house counsel, one rarely faced by lawyers in private practice, is, “Who is the client?” Another is, “How do I respond to directives from superiors with whom I disagree?”

Those questions can be especially troublesome when the corporation is in crisis. After all, the in-house lawyer is a corporate employee and can be fired.

The general counsel in particular may receive direction from the CEO, from other corporate officers such as the CFO, and even from the board of directors. Insubordination is not usually welcomed within the corporation.

Thus, counsel who lacks confidence or fears being fired can be tempted to forgo critical analysis and respond too eagerly to direction.

The power of good judgment

Michigan’s Rules of Professional Conduct clearly answer the two key questions. First, rule 1.13(a) says the client is defined to be the organization itself: “A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders, or other constituents.”

Other subparts of rule 1.13 advise counsel on how to respond when a corporate actor violates the law.

Second, although the in-house lawyer is a corporate employee, he or she must nevertheless employ independent professional judgment. “In representing a client,” MRPC rule 2.1 says, “a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social, and political factors that may be relevant to the client’s situation.”

Most states have similar provisions on the books. Good in-house lawyers know their most useful tool in times of trouble is their own reputation for sound judgment and professionalism, especially their adherence to the rules of professional conduct.

Although judges and bar-association presidents routinely call for increased professionalism, cynics might suggest that lawyers find little to be gained from heeding those calls, other than to avoid a grievance.

Yet, and as I have taught students in my classes, it not only is good to follow the rules of professionalism, but it actually pays to do so because people will trust you more than if you waver, value your judgment more, and be willing to compensate you more for it.

Indeed, the respected in-house counsel is the lawyer who can be of greatest value to the corporation in troubled times.

Corporate officials may legitimately disagree on difficult problems the corporation faces. CEOs sometimes fall out of favor with board members. There can be a power play among factions.

What may result is an internal crisis for the corporation. Or, an external crisis can arise from a product failure, a governmental investigation or events beyond corporate control.

So, during a corporate crisis, what happens if the CEO directs you, as in-house counsel, to do one thing while the chair of the board directs the opposite? Who is the client here?

Or, what if a corporate official, acting in good faith, directs you to take action that you believe is against the best interests of the corporation? How do you employ independent judgment without risking your job?

You can be facing complex legal and business issues intertwined with corporate politics and management problems. Your review of the professional conduct rules may not provide clear guidance.

Practicing ‘practical wisdom’

In his 1993 book “The Lost Lawyer,” former Yale Law School Dean Anthony T. Kronman suggested that the lawyer best equipped to solve these tough legal, business and interpersonal issues is what he calls the “lawyer-statesman.”

Kronman was talking about a lawyer with great “practical wisdom,” a lawyer possessing exceptional judgment in addition to legal expertise.

Two important characteristics of a corporate lawyer-statesman are the consistent practice of independent judgment and the commitment to the organization, which are precisely what MRPC 1.13 and 2.1 require.

An in-house lawyer-statesman can have a profound effect on a difficult corporate situation. He or she can more readily influence decision-makers, point out flaws in their positions, and appeal to their sense of responsibility to the institution.

The lawyer-statesman has standing to persuade entrenched constituencies to re-evaluate their positions and reopen lines of communication. He or she can convincingly insist that the corporation itself is the client — see particularly MRPC 1.13(d) — and can powerfully demonstrate to doubters the importance of independent advice.

He or she will be given latitude in recommending alternatives, even by those who disagree. And when the corporation’s officials understand that their in-house counsel has no vested interest in the dispute other than the best interests of the corporation, his or her dispassionate view is very likely to receive substantial deference and consideration.

Thus, the in-house lawyer-statesman can be exceptionally valuable to the corporation in resolving its problems effectively, with reduced potential for litigation and public dispute.

Such power and influence stem from having known who the client is and scrupulously employing independent professional judgment in its best interest.

James D. Robb is associate dean for development and alumni relations and general counsel for the Thomas M. Cooley Law School.