With regards to the discussion we had at the beginning of last class around ethics, I feel it is helpful to point out 3.2-7 & 3.2-8 of the BC Law Society ‘s Code of Professional Conduct.
They read as follows:
“DISHONESTY, FRAUD BY CLIENT
3.2-7 A lawyer must not engage in any activity that the lawyer knows or ought to know assists in or encourages any dishonesty, crime or fraud.
DISHONESTY, FRAUD WHEN CLIENT AN ORGANIZATION
3.2-8 A lawyer who is employed or retained by an organization to act in a matter in which the lawyer knows or ought to know that the organization has acted, is acting or intends to act dishonestly, criminally or fraudulently, must do the following, in addition to his or her obligations under rule 3.2-7:
(a) advise the person from whom the lawyer takes instructions and the chief legal officer, or both the chief legal officer and the chief executive officer, that the proposed conduct is, was or would be dishonest, criminal or fraudulent and should be stopped;
(b) if necessary because the person from whom the lawyer takes instructions, the chief legal officer or the chief executive officer refuses to cause the proposed conduct to be stopped, advise progressively the next highest persons or groups, including ultimately, the board of directors, the board of trustees, or the appropriate committee of the board, that the proposed conduct was, is or would be dishonest, criminal or fraudulent and should be stopped; and
(c) if the organization, despite the lawyer’s advice, continues with or intends to pursue the proposed wrongful conduct, withdraw from acting in the matter in accordance with section 3.7.”
With this in mind, it provides further context to why boards and upper management of a corporation may intentionally hide questionable activities from their counsel because, assuming all BC counsel will abide by the Code, counsel must act in an up-the-ladder reporting manner.
This ethical obligation of reporting for BC lawyers makes the phrase “where were the lawyers?” resonate with me further given that even though senior management are not bound by ethical obligations nor are required to have any education or training on the matter, at least the lawyers in the organization do and must act accordingly. That being said what can be characterized as “dishonest, criminal and fraudulent” is very grey and so I am not too sure how these ethical obligations specifically affect practice in the real world.
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I agree with you that managers and directors would not want those annoying lawyers to know about their secret schemes just in case they would get in the way.
Indeed, I hope that most lawyers would be the “annoying lawyer” who would get in the way of corporate crimes.
But I just had couple of things that I wanted to add.
If my memory serves me correctly, most companies would have lawyers as board members and also in the upper management levels. Would it not be pretty difficult for corporate lawyers (in many cases) to not know the wrongful and deceitful behaiours of corporate management in many cases? In fact, in the Enron scandal and in many American corporate scandals, lawyers actively participated in the white collar crimes.
Also, what do you think the “ought to know” language implies? To me it seems that the code implies that lawyers should be very diligent in their service to the corporation because the code sets a standard in which not only your actual knowledge is considered, but also perceived knowledge is considered in determining a lawyer’s duty to report unscrupulous corporate actions. “I didn’t know about that….” would presumably would not answer the question “where were the lawyers?”
In light of more recent classes on the obligations owed by directors, it seems to me that a lawyer sitting as director of a corporation for which she also acts as in house counsel could get herself into trouble. Would it be possible that the lawyer’s ethical obligation to the Bar conflict with her obligations to the company?
I admit that this is hard to imagine as that would require that the lawyer were somehow bound to do something “dishonest, criminal, or fraudulent” in the interests of the corporation. 3.2-8 is more interesting. If the lawyer is herself the Chief Legal Officer and a director, I would assume she then goes directly to the CEO with any ethical concerns. If the CEO does not listen is the lawyer then obliged to withdraw in all capacities? Could she stay as director acting in a non-legal-advisor capacity?
It seems plain that she would have to withdraw as director as well. It would seem quite the fiction for the court to allow a known lawyer and former in house counsel to the corporation to then shed those hats and wear only the director’s hat. It’s quite clear that others, aware of her professional status, would take especial cues from her. Additionally, one would imagine that her placement as director is inextricably tied to her former legal advisory position. Again, it would seem fiction of the highest order to pretend that were not the case.
Having said that, I fully expect to find a case that proves me wrong.