When a lawyer is retained as counsel by the founders of a new business, it is fundamentally important that the lawyer determine who is—and who is not—the client for purposes of the engagement. And because the various constituents may reasonably have different views as to the identity of the client(s), it is also important that the lawyer communicate clearly to such constituents whether or not they are clients.
Lawyers should be familiar with Rule 1.13 (Organization as Client) of the American Bar Association’s Model Rules of Professional Conduct. Paragraph (a) of Rule 1.13 provides that a “lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” But, as made clear by paragraph (g) of Rule 1.13, such retention does not mean that the lawyer cannot also represent other constituents: “A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7 [Conflict of Interest: Current Clients].”
Further, paragraph (f) of Rule 1.13 makes clear that “[i]n dealing with an organization’s directors, officers, employees, members, shareholders or other constituents, 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.”