Sitting on vs. sitting in on your client's board of directors

Smith, Bethany

INTRODUCTION

Imagine that you are an associate, or even a partner, in a major nationwide law firm. You work in the corporate department and have good relationships with all of your clients. One of them invites you to become part of an elite team which formulates the management policies and direction of the company. This elite team is the board of directors. While this role is very prestigious and could be very lucrative for you and your firm, there are certain drawbacks to be considered. Should you accept the position?

The question of whether outside corporate counsel should serve on a client's board of directors has been debated for over two decades by the American Bar Association ("ABA") and scholars in the field. Many articles have been written on the subject in order to inform corporate counsel of the advantages and disadvantages that go along with accepting such a role in a client's organization. Some of the main advantages for the client that have been identified include having ready access to legal advice when questions come up in board meetings, and having a member of the board who is able to spot legal issues before they become legal problems. The main advantage for the lawyer serving as director is a better (i.e., more lucrative) relationship between his firm and the client.

Despite these obvious advantages, there are some disadvantages to both the client and the law firm that may not be easily perceived. For instance, when a lawyer-director gives advice to the board, is he giving legal advice or business advice? How do you tell? These questions do not always have clear-cut answers, yet the distinction is important. If the advice is perceived to be business advice, then the communication will not be protected by the attorney-client privilege and will therefore be discoverable in a lawsuit. In addition to the potential loss of privilege, the lawyer-director may be conflicted out of representing the corporation in a given matter. For instance, if the board of directors is sued, the lawyer-director may be called as a necessary witness in the matter and according to the American Bar Association's Model Rules of Professional Conduct ("Model Rules"), would be disqualified from representing the corporation in the litigation. Instances may also arise where the lawyer is disqualified from fulfilling his directorial role based on conflicts of interest. Any such disqualification may impose a significant hardship on the client. For the law firm involved, respondeat superior liability may attach for the lawyer's actions while serving on the board.

This Note will give detailed consideration to the question of whether outside corporate counsel should serve on a client's board of directors. Part I will address some preliminary considerations, including defining who the client is in the corporate law setting and what the ethical concerns may be. Advantages to the practice will be discussed in detail in Part II and disadvantages will be considered in Part III. Some scholars believe that it is not a problem for corporate counsel to undertake this role, while others believe a per se rule against the practice is necessary. These views and other proposed solutions will be discussed in Part IV.I

1. PRELIMINARY CONSIDERATIONS

The corporation is a legal fiction, a non-human entity that cannot be treated in the same way as an individual client. Unique and complex issues arise when trying to determine what "client" means when the "client" is an organization. This section considers that preliminary question. Additionally, this section covers some of the ethical considerations of corporate representation, especially when the outside attorney wishes to serve on a client's board of directors.

A. CORPORATION AS CLIENT

The first attempt to give professional guidance to attorneys was the Canons of Professional Ethics, promulgated in 1908. The Canons contained no reference to corporation or organizational representation, leaving attorneys representing corporations with little ethical guidance. The ABA Model Code of Professional Responsibility ("Model Code"), adopted in 1969, contains Ethical Consideration 5-18, which states that corporate lawyers owe allegiance to the entity, not any person connected with the entity.3 This provision lacked enforcement and disciplinary mechanisms, and it also left some corporate representation questions unanswered.4 Finally, the Model Rules were adopted in 1983. They contained Rule 1.13, which was designed to give significant guidance to corporate attorneys.

Model Code EC 5-18 adopts what is known as the corporation-as-entity concepts According to this concept, the corporation is seen as a separate person and therefore the attorney represents no one person associated with the corporation. This becomes complicated in light of the fact that in everyday corporate activities, it is not the corporation that signs documents and negotiates deals, but instead it is actual people working for the corporation who perform these tasks. In actuality, the corporate attorney will develop relationships with senior executives and the members of the board of directors, who become the corporation for all intents and purposes.6

Additionally, EC 5-18 lends itself well to the traditional corporate hierarchy, but may not serve the needs of a closely held corporation or a partnership. Even within the traditional corporate hierarchy, what happens when the directors of the company cannot decide what is in the corporation's best interest?7 These issues are left open by the Model Code.

The Model Rules provide more realistic guidance to the corporate lawyer. Under the Model Rules, the organization is still considered the client, but there is a recognition that it cannot act except through its officers, directors, employees, and other constituents.8 Model Rule 1.13, like its predecessor EC 5-18, is based on the entity theory of liability, whereby the corporation has a separate legal status apart from its constituents. Therefore, the corporation's attorney must pursue organizational goals, even if constituents disagree.9

Professor Kim points out that this creates a "Triangular Relationship" between the lawyer, the corporation, and the constituents-because the corporation is a non-human entity, the lawyer must deal on a day-to-day basis with the corporation's agents, who are not truly the client.10 The lawyer must develop a level of trust and intimacy with these agents that is normally associated with individual clients, even though these agents do not enjoy "client" status: "It seems disjunctive that 'a person who is, in fact a confidential intimate shall nevertheless be regarded in law as a total stranger.' "11 When these agents' goals are not congruent with the corporation's goals, Model Rule 1.13 directs the corporate attorney up the chain of command to the board of directors, who can be regarded as the ultimate voice of the corporation. Because of the intimate relationship between the agents and the lawyer, the agents may feel resentful or betrayed when the attorney makes it clear that only the corporation's goals will be represented in hard times.12

Clearly, some tension exists between Model Rule 1.13's dictate that the corporation itself is the client and the everyday reality that a corporation cannot act without humans, and it is these humans with whom the attorney interacts. Despite this tension, the Model Rules are clear that the corporation's interests will be represented, not the individuals'.

B. ETHICAL ISSUES TO CONSIDER

Once it has been determined what it means to represent a corporation, the next question becomes what should you do, according to available ethical guidelines, when the corporation invites you to become a member of the board of directors? The Model Code, Model Rules, and all state courts that have examined the issue permit dual service.13 This section will focus on the Model Rules' treatment of the issue because, as stated above, the Model Code provides little guidance in this area.

Whether an attorney is ethically prohibited from serving on a client's board of directors or not is governed by Model Rule 1.7, comment 14, which states:

A lawyer for a corporation or other organization who is also a member of its board of directors should determine whether the responsibilities of the two roles may conflict. The lawyer may be called upon to advise the corporation in matters involving actions of the directors. Consideration should be given to the frequency with which such situations may arise, the potential intensity of the conflict, the effect of the lawyer's resignation from the board and the possibility of the corporation's obtaining legal advice from another lawyer in such situations. If there is a material risk that the dual role will compromise the lawyer's independence of professional judgment, the lawyer should not serve as a director. 14

These considerations are complicated by the differing roles that directors and lawyers must fill. For instance, a director owes a duty of loyalty to shareholders and other corporate constituents, while a lawyer owes a duty of loyalty only to the corporation.15 Also, directors owe the corporation a duty of care when making decisions, although a lawyer-director will be held to a higher standard of care than an ordinary outside director.16 This makes it more likely that the lawyer-director will be held liable for directorial decisions than other directors. Based on principles of respondeat superior, this also exposes the lawyer-- director's law firm to liability.

It is possible that a lawyer-director will run into numerous occasions where he will be conflicted out of representing his client due to Model Rule 1.7's prohibitions. More specifics will be covered later in this Note, but it may be noted here that any time a question arises in the board room regarding outside legal counsel, a conflict of interest will result for the lawyer-director who would like to see his firm chosen for the job. 17 Model Rule 1.7 prohibits representation any time the lawyer's representation will be "materially limited" to obligations to his firm, himself, or other clients-a discretionary and lenient standard that allows attorneys to decide for themselves whether inevitable conflicts of interests will in fact "materially limit" their representation of the corporation. Additionally, the American Bar Association's Formal Opinion 98-410, (discussed in detail in Part IV) gives little real guidance on this question.

This same discretionary standard is not available for accountants-their professional code of ethics prohibits dual service.18 This prohibition was designed to preserve accountants' independent professional judgment when reviewing clients' financial statements.'9 Twenty-five years ago, commentators believed that a per se rule for lawyers prohibiting dual service was needed in order to preserve attorney independence and to draw a clear line between the role as legal advisor and business decision maker.20 At the time, it seemed inevitable that lawyers would also be ethically prohibited from dual service. One speaker at a symposium stated, "I think the expectation is emerging that the lawyer will come closer to being required to have the same measure of independence [as accountants]. We are not there yet, but if we were having this meeting in the year 2000, I suspect we would be."21 This prediction proved to be erroneous.

Again, the problem of independent professional judgment emerges. The accountants clearly thought it was necessary to have a per se rule against serving on clients' boards of directors in order to preserve their independent judgment. The question that arises is: Why do accountants need the protection of a per se rule while lawyers are free to exercise their own judgment on the matter? Lawyers possess strong analytical skills, an inquisitive and probing nature, and broad professional training and experience that make them uniquely qualified and able to make positive contributions as directors of corporations.22

Lawyers are still subject, however, to a weakening of their professional judgment due to the conflicts of interest inherent in the dual role. For instance, a lawyer may be called upon to give guidance to the board. Then, as a director, the lawyer must act on his own advice. Essentially, the lawyer-director is his own client.23 Justice Stewart called for a clear line to delineate which functions the lawyer serves as counsel to his client, and which functions are served by corporate management.24

The drafters of the Model Rules considered a prohibition on dual service in the Initial Draft that was designed to protect the independent professional judgment of attorneys.25 The proposed rule would have prohibited dual service unless informed consent was obtained from "all persons having an investment in the enterprise."26 In large, publicly-traded corporations, the unanimous consent requirement would have sounded the death knell for dual service. The next version, the Discussion Draft, would have prohibited the practice only for attorneys with continuous representation of the corporation, but would allow the dual service for any attorney serving the client only in limited circumstances.27 In the end, however, a lack of consensus lead the ABA to adopt Model Rule 1.7, containing the innocuous comment 14 quoted above.28

So, is it a lawyer's unique analytical skills, inquisitive and probing nature, or broad professional training and experience that distinguishes them from accountants such that accountants' professional judgment can only be protected by a per se ban on dual service while attorneys can decide for themselves when their professional responsibility or professional judgment is compromised? Or is it simply a lack of consensus in the area?

II. THE ADVANTAGES OF DUAL SERVICE

There are several advantages to the client, the lawyer-director, and the lawyer-director's firm that result from dual service. The main advantages to the client that will be discussed below include the lawyer's ability to identify risks and benefits that would otherwise be overlooked, the lawyer's ability to render legal advice when issues arise before they become problems, greater trust and confidence in the lawyer's advice because he is subject to the same liability as other directors, and more effective legal advice due to the increased knowledge of counsel. For the lawyer-director, the relationship between his firm and the client will be strengthened by his service on the board. Thus, the main advantage for the lawyer-director and his firm is financial.29

A. ADVANTAGES TO THE CLIENT

As was mentioned above in Part I, lawyers possess "strong analytical skills, [an] inquisitive and probing nature, [and] broad professional training and experience"30 that make them excellent candidates for a board position. If all other board members are businessmen without legal training, some of the risks and benefits of any given course of action may be overlooked. The lawyer-director will ensure that all relevant issues will be considered.31 A lawyer's tendency to ask "probing questions and to scrutinize proposed plans"32 can also enhance the board deliberations on a given matter and propose creative solutions otherwise not considered by non-lawyer board members.

Clients may also benefit by having immediate access to legal advice from the lawyer-director. Some consider this "free" advice-the client has the advantage of having counsel in the room when corporate policies and decisions are made.33 The lawyer-director serves a preventive role here by giving legal advice before legal problems arise. Warnings can be given at an early stage where they can be helpful in preventing the client from undertaking a course of action that is likely to result in liability.34 Since the lawyer giving advice to the corporation is also a member of the board, the advice is based on a more complete and informed assessment of the client's business affairs, and is arguably more effective.

The higher standard of care to which the lawyer-director is subject36 may also provide a benefit to the corporate client. Because of the lawyer-director's risk of personal liability for his directorial actions, his fellow board members may have greater confidence in his legal advice.37 In addition, the lawyer-director is likely to be more diligent than he might otherwise be when advising the board on a potential course of action due to his exposure to personal liability.311 The risk of personal liability will increase the chance that the lawyer has "done his homework" on an issue and will lead the rest of the board members to take his advice seriously and weigh it heavily in their deliberations.39

When outside counsel is invited to serve on his client's board of directors, he generally begins his service with a base of knowledge gained through years of representing the client's interests in numerous situations. This gives the lawyer-director an advantage over other outside directors invited on to the board, at least initially. The familiarity with the client's business affairs continues to be strengthened by the lawyer-director's dual service which arguably makes him more effective when rendering legal advice. His service will lead to more careful review of proposed courses of action by the board as a whole, especially for the rare corporation that does not understand the need to have counsel present at all board meetings. The lawyer-director will be able to identify risks and benefits not otherwise identified by the board members, and since he is also exposed to personal liability for board actions, he will be more careful in his analysis of issues and will have greater trust from the other board members.

B. ADVANTAGE TO THE LAWYER AND LAW FIRM

The benefits of dual service for the lawyer-director and his law firm are mainly financial. By serving on the client's board, the lawyer-director can strengthen his ties to the corporation, which will likely generate business for his firm.40

For better or worse, saying no to a client's invitation to sit on their [sic] board would not be very good for business. . . . Having one of our attorneys on a client's board is a pretty good way of establishing a relationship with the client that will be lasting (read: financially rewarding). Having said that, it is also a great way to learn about our client's business from the inside and, in doing so, being [sic] able to provide better service to that client.41

As this statement suggests, the lawyer and the law firm benefit financially from the dual service, and saying no to a client's request to join the board may not be good for business.

As the statement makes clear, serving on a client's board of directors may help the attorney fulfill his duty to provide competent representation to the client.42 The attorney will have access to factual information necessary to pursue the client's interests in negotiations, complex transactions, or litigation, if it should arise.

III. DISADVANTAGES OF DUAL SERVICE

While there are advantages to the client and lawyer-director resulting from dual service, there are significant disadvantages to the practice. Disadvantages to the client include the loss of attorney-client privilege and the loss of attorney services at critical points due to conflicts of interest. Many of the disadvantages to the lawyer-director and his law firm concern liability. The lawyer-director will be held to a higher standard of care for his actions on the board and liability may be imputed to his firm under respondent superior principles. As noted above, another significant disadvantage to the lawyer-director is the potential loss of independent professional judgment.43

A. DISADVANTAGES TO THE CLIENT

The potential loss of the attorney-client privilege is an important disadvantage to dual service. While in the boardroom, the lawyer-director may be asked his opinion on a proposed course of conduct. Whether the lawyer-director answers the question as a lawyer or as a director has important implications for the client, as legal advice is protected by the attorney-client privilege, while business advice is not.

For instance, in United States v. International Business Machines Corporation,44 the court examined whether subpoenaed documents had to be turned over to the government in an antitrust case against IBM, and determined that, as a preliminary matter, the attorney-client privilege attaches to legal advice, but not to business advice. Therefore, each document at issue had to be examined to determine whether it contained legal or business advice.45 The court held that any communication regarding company policy was not subject to protection under the attorney-client privilege, while communications revealing confidential information communicated by the client to the lawyer were protected.46 To fall within the scope of privilege, the lawyer must be responding to a request made primarily for the purpose of securing legal advice. Finally, if the lawyer-director prepared a document for simultaneous review by legal and non-legal personnel, the document would not be privileged.47

Similarly, In re Robinson 48 dealt with a lawyer-director's refusal to answer questions posed to him in a grand jury investigation on the grounds of privilege. In denying his claim of privilege, the court explained, "[w]hen the corporation made him a director, and he accepted that office, such acceptance necessarily removed him from the relation of attorney or counsel to its officers, so far as the corporate affairs were concerned."49

With these guidelines in mind, it seems important for the client to separate the lawyer-director's advice into the discrete categories of legal or business advice. However, when lawyers serve as directors, it is very difficult to categorize individual pieces of advice.50 For instance, one requirement of the attorney-client privilege is confidentiality. If the client reveals confidential communications to third parties, she has waived privilege. The risk of waiver is great if the board members perceive a given piece of advice as business advice, rather than legal advice. The directors could possibly reveal the advice to others in the corporation and inadvertently waive privilege.51

Additionally, advice may not be protected due to evidentiary problems. In order for advice to be protected it must be shown that: the communication was legal, rather than business related; the communication was made as a legal advisor, rather than as a businessman; and the other directors intended their communications to be confidential, rather than a discussion among businessmen.52 To avoid this problem, the lawyer-director may be able to explicitly state during a meeting: "Now, I am giving advice as a lawyer," and this advice will not be reflected in the minutes of the meeting. If an explicit statement is not made and legal advice is inadvertently included in the meeting minutes, the lawyer-director can have the information stricken before the final minutes are adopted. However, draft minutes are discoverable in a shareholder derivative lawsuit-therefore, the information will likely be revealed.53 To complicate matters, the lawyer-director may have a duty to disclose information to third parties that he could not disclose without consent in his role as attorney.54

A further, more minor problem that may result from the lack of distinction between business and legal advice is that the directors will not be able to give proper consideration to advice from the lawyer-director. Presumably, business advice is weighed in directors' minds differently than legal advice, and improper weight may be given to a piece of advice from the lawyer-director.55

In addition, there is significant potential for conflicts of interest in the lawyer-director situation. It is a major disadvantage to the corporation if the lawyer-director is disqualified from representing the corporation in a given matter, or has to recuse himself from participating in debate in the boardroom due to a conflict of interest.

In one example, the stockholders of Weirton Steel Corporation forced the resignation of Harvey Sperry, a respected corporate attorney and director of Weirton Steel for over ten years.56 Sperry's firm made a significant amount of money representing Weirton; however, the firm also represented about two dozen competitors. Because Sperry's firm was interested in seeing the competitors of Weirton do well, it would be impossible for Sperry to keep the best interests of Weirton in mind. His duties both as attorney and as director were likely hindered.57 Other such cases exist, but the case law is sparse due to the high frequency of settlements in conflict situations.58

The serious conflict of interest encountered by Mr. Sperry and the Weirton Steel Company likely represents the exception, rather than the rule. However, conflicts of interest exist in other areas. For instance, the board may want to evaluate the fees paid to the lawyer-director's firm, or may want to consider whether to retain them as outside counsel in a given matter. Clearly, the lawyer-director has an interest in his law firm receiving high fees and additional legal work from this client.59 The other directors may also be impacted by this conflict of interest. They may feel that they cannot speak out against the law firm because a member is serving as their colleague on the board. Or, they may feel that they want the lawyer-director's firm to do well and will funnel business to that law firm without considering whether the law firm is best suited for the job.6 Litigation may cause other conflicts of interest. First, the lawyer-director may be called as a witness to testify at the trial. According to Model Rule 3.7, he would be disqualified from serving as counsel in the matter if called as a witness. In some situations, his law firm will also be disqualified.6 Also, the other directors may wish to rely on "the advice of counsel" defense. This would make the corporate defendant's interest directly adverse to the lawyer-director defendant's interest in litigation.62

Additionally, plaintiffs in a shareholder derivative suit may use the dual service as ammunition to disqualify defense counsel. In Harrison v. Keystone Coca-Cola Bottling Company,63 the plaintiffs disqualified the lawyer-director from representing the corporation in the lawsuit, although the lawyer-director's finn was not disqualified.64

Other possible conflicts arise when the lawyer-director is asked to give advice on the legality of a past board decision in which he participated. Or, the lawyer-director may be asked to give advice on a pending matter; he will have to act on his own advice. He will essentially have himself for a client.65

Not all conflict situations will be as obvious as the conflict encountered by Weirton Steel Company, but it is inevitable that the lawyer-director will face conflicts frequently in his dual service. To avoid or abate the conflict, he could step down from one of his roles; but stepping down may pose a hardship on the client who relies on the lawyer-director's advice in board meetings, or who needs the lawyer-director's zealous representation in a matter. It will pose a hardship on the corporation to hire new outside counsel in the event that a lawsuit is filed, and the lawyer-director is either a necessary witness or a co-defendant.

B. DISADVANTAGES TO THE LAWYER-DIRECTOR AND HIS LAW FIRM

Some of the disadvantages to either the lawyer-director or his law firm include increased liability exposure, unavailability of insurance to cover judgments, loss of independence and effectiveness as a director, and loss of independence and effectiveness as a lawyer.

Both the law firm and the lawyer-director are subject to increased exposure to liability due to the dual service. The lawyer-director will be subject to a higher standard of conduct than an ordinary director. His actions will be measured against those of an ordinarily prudent lawyer-director.66 Therefore, it will be easier to prove liability against the lawyer-director than against the other directors. In Escott v. BarChris,67 the court held the lawyer-director to a heightened standard of review in investigating an allegedly false and misleading registration statement because of his expertise and access to information.

Lawsuits against lawyers and law firms have been increasing over the past several years.68 Law firms are being subjected to liability for the acts of individual attorneys, particularly for the actions of attorneys serving on clients' boards of directors.69

Law firms have been subject to liability for alleged violations of Sections 11, 12, and 17(a) of the Securities Act of 1933; Sections 10(b), 14(a) and 18(a) of the Exchange Act of 1934, various state securities regulations, and federal Racketeer Influence Corrupt Organization Act.70 Various theories of liability that have been used to hold the law firm liable for the acts of lawyer-director employees serving on clients' boards of directors include control person liability, the doctrine of respondeat superior, and the deputization theory.

The Exchange Act of 1934 extends liability to anyone who controls another person who violates the Act.72 Control has been defined as "the power or potential power to influence or control the activities of the employee."73 The partnership relationship between law firms and the individual attorneys will likely be sufficient to show control under Section 20(a) of the Exchange Act of 1934.TM Once control is shown, the burden shifts to the defendant to show that he acted in "good faith and did not induce the primary violation."75 To satisfy this burden, the law firm must show that it maintained and enforced a reasonable system of supervision over the attorney to prevent violations of the securities laws.76 Thus, the good faith element acts as a defense to liability under the control person theory.

In securities cases as well as other cases, the doctrine of respondeat superior is an alternative for plaintiffs looking to hold law firms liable for the actions of their members. Here, the plaintiff need only show that the violation was caused by one of the law firm's employees while acting within the scope of his employment.77 The good faith defense is not available here. Instead, respondeat superior liability closely mirrors strict liability.

The third possibility available to plaintiffs is the deputization theory. This theory is used when the lawyer-director acts as a representative of his firm on the board of directors. It may be relevant where the law firm has significant ties to the corporation and has approved one of its attorneys to serve as a director.78 The deputization theory was used successfully in Feder v. Martin Marietta Corp.79 Here, Martin Marietta's President and Chief Executive George M. Bunker served on the board of Sperry Rand Corporation.80 During Bunker's service, Martin Marietta owned a substantial amount of Sperry stock, which it sold within six months of purchase. Based on these sales, the shareholders of Sperry were able to hold Martin Marietta liable under the Securities Exchange Act of 1934 16(b) based on the theory that Bunker was Martin Marietta's deputy on the Sperry board.81

Many believe that any action taken by a lawyer-director in the boardroom will be protected by one form of insurance or another. The availability of malpractice insurance for law firms and lawyers and Director and Officer ("D & 0") insurance policies for board members, may seem to eliminate liability exposure. This is a misconception. Generally, malpractice insurance will cover damages awarded against lawyers who are acting solely within their duties as counsel rendering legal advice, while D & 0 insurance will be available for the director or officer acting solely within his directorial capacity.82 Because the lawyer-director will not be acting "solely" within either capacity, he will likely not be covered by insurance for actions taken in his dual capacity. In fact, the Attorneys' Liability Assurance Society ("ALAS"), the major insurance carrier for legal malpractice, discourages dual service. ALAS offers separate insurance policies for lawyers in member firms who serve on clients' boards. These policies explicitly do not cover a lawyer serving as an executive officer of the company.83

The next disadvantage to the lawyer-director is the potential loss of independence and effectiveness as a director. To function properly as a director, one must have independence from corporate management in order to fulfill board functions such as monitoring, decision-making, and strategic planning.84 For outside lawyers, the economic interest in maintaining the corporation as a client may affect their judgment. Professor Kim argues that lawyer-directors receive such a substantial amount in fees from corporate clients that they cannot exercise their judgment objectively as directors.as The lawyer-directors will be seen as biased, therefore they cannot serve on special committees such as the audit, compensation, and nominating committees. This creates a problem for the corporation because only a few independent directors are left to serve on these important committees.86

Additionally, internal conflicts may adversely affect the lawyer-director's performance on the board. For instance, if a corporation is the target of a takeover attempt, the board may wish to resist the takeover and adopt self-protective devices. The lawyer-director's judgment may be influenced by the strong desire management has for preserving their jobs.87 Also, a lawyer may not wish to speak out too harshly against a board decision that he may be called upon to defend in court. Thus, both internal and external influences may affect the lawyer-director's ability to perform independently and effectively as a director.

In addition to the possible loss of independence and effectiveness as a director, the lawyer-director faces similar risks as a lawyer. A lawyer's primary responsibility to his client is to provide independent, objective legal advice.8 This necessarily means that the lawyer must maintain some distance from the client. No distance remains between the lawyer and client when the lawyer becomes a part of the client.89 Also, the board of directors is seen as the ultimate voice of the corporation. When the lawyer joins the board, he in effect becomes the client. He must advise himself on courses of action and strategic business planning. By serving in this dual capacity, the lawyer's independence is compromised.90 One commentator has noted, "[w]hen I am personally affected by something, I do not want to give myself legal advice [instead,] I go to another lawyer and get his judgment as to how to come out on the situation because I may be too close to the situation or too emotionally involved."91

Although other directors may feel more at ease with the lawyer-director's advice on a given matter because they all face the same liability concerns, this may affect the lawyer's ability to give objective advice,92 especially if insurance may not cover his liability. He may be overly cautious and cause the corporation to miss out on good business opportunities.

To deal with the potential loss of independence, Professor Kim advocates a per se rule against dual service, similar to the accountants' rule. To her, it is important to maintain "independence in fact and independence in appearance."93

IV. PROPOSED SOLUTIONS

Despite the few advantages to be gained by dual service in comparison to the numerous disadvantages, it is a fairly common practice for outside counsel to serve on a client's board of directors. ALAS indicates that of the 52,000 lawyers insured by their company, approximately 1,000 serve on clients' boards of directors.94 A wide range of proposed solutions have been suggested to alleviate some of the strain of the disadvantages. These proposed solutions range from "nothing needs to be done, just be more careful" to a per se rule against the practice, similar to the one adopted by the accountants.

The first, and most relaxed, solution to the problem is to allow the lawyer-director to serve on the board in all cases, but to implement procedures designed to minimize the risks.95 First, clearly demarcate what is business advice and what is legal advice in order to ensure protection under the attorney-client privilege. Then, after the conclusion of the board meeting, review the draft minutes to ensure that they do not contain confidential legal advice, and restrict access to the minutes to prevent inadvertent waivers of privilege.96 When documents are at issue, be sure to mark them "confidential" or "attorney-client privileged" and include only legal advice. Educate the board members about inadvertent waivers of privilege. Finally, evaluate the professional malpractice insurance coverage and amend the policies to fully cover any and all actions or statements made by the lawyer-director.97

This solution does not seem to do enough, however. It is unrealistic to expect the lawyer-director to always be able to delineate clearly which statements made in the boardroom are legal advice and which are business advice:

The problem of being careful and documenting [which advice is legal advice] isn't so easy because the conversation is always muddled: there's a legal answer and then there's ten minutes of business answers and then there's five minutes of legal answers and then there's seven minutes of business answers, and so on. You can't try to sit there with two hats, taking them off and putting them on and taking them off and figuring out how you are going to document [the distinction].98

Also, as noted above, draft meeting minutes are discoverable, so any privileged material that inadvertently makes its way into the draft minutes will not be protected by privilege. In terms of the availability of insurance, lawyers who also wish to serve on clients' boards will have to evaluate carefully the coverage limits on both legal malpractice and D & 0 insurance policies. Dual service has resulted in a loss of $150 million to ALAS and the member firms over the past several years.99

ABA Formal Opinion 98-410 advocates that the lawyer-director identify in a full and frank discussion with the client all the potential pitfalls of the dual service.100 The lawyer should inform the client about the potential loss of attorney-client privilege and the probability of conflicts of interest. The opinion states that in the event of a conflict of interest, the lawyer-director can step down as director until the problem abates, or can recuse himself from representing the corporation in litigation. To protect the attorney-client confidences, another lawyer from the lawyer-director's law firm could attend the board meetings and render advice from the sidelines.101

There are several flaws in Formal Opinion 98-410. First, it fails to address the concerns about the potential loss of professional judgment or the threat of liability for the lawyer-director and his firm. Second, the opinion advocates inviting another lawyer to the board meetings. This would be very costly to the client who will now have to pay two outside lawyers for attending the board meeting, instead of just one. Third, if the lawyer-director will be stepping down from either of his roles due to conflicts, this will pose a hardship on the client who now may be short staffed on the board. The loss of an attorney intimately familiar with a client's legal problem will be costly in both time and money. Finally, the opinion has been criticized because the standard proposed by the ABA is weak and leaves the decision to the attorney to determine whether his representation will be materially hindered. 102 This lenient self-policing leaves too much room for abuse. 103

Leaving this important decision to the client, even after full disclosure, also has been criticized for several reasons. Full disclosure is imperative, but the board in most instances will fail to see the problem. Clients are not in a position to understand and evaluate thoughtfully what it means to lose the attorney-client privilege.104 In terms of conflict situations, it is the lawyer, not the client, who is conflicted. Also, if the client is turning to outside counsel for advice on whether the lawyer should serve on the client's board, the lawyer cannot shirk his duty to give advice to the client when asked to do so.105

Recognizing that it is the law firm and not the client who should be deciding these matters, a third proposed solution is that the law firms set up internal policies so that the decision can be made in an informed and deliberate manner. 106 Important benefits to the client and the law firm should be considered, as well as the relevant risks. Relevant ethical guidelines, including Model Rule 1.7,107 EC 5-1,108 and Restatement (Third) of the Law Governing Lawyers Sections 96 and 131, must be evaluated.'09 The following elements should be part of any law firm policy on the issue: requiring prior notice or prior approval for the dual service, because a closer nexus between the client and law firm will be established, opening the law firm up to liability; delineating who should be the billing attorney for that client and possibly having two attorneys review all bills to avoid underbilling due to the lawyer-director's conflict of interest; determining whether the individual lawyer or the law firm should receive the director's compensation; and setting up a Chinese Wall between the law firm and the lawyer-director so that he is not seen as a representative of the firm. 110 While it is wise to have a firm policy on the issue of dual service, this does not address the problems encountered by the client, such as the loss of attorney-client privilege.

The most restrictive solution proposed is the per se rule against dual service. Wolfram argues that the practice of serving as counsel and director is "unsound and should be prohibited by law."111 The threat to the lawyer's professional independence is of paramount concern, and the practice should be prohibited to protect this. Professor Wolfram also notes that the problems of liability, loss of attorney-client privilege, and disqualification due to conflicts are not outweighed by the benefits.112 This position has also been advocated by Professor Kim, who states:

The dual service question should not be viewed as one that can be resolved simply by disclosure and consent. It is a question that should be resolved by the legal profession as a self-governing body that acts in the public interest. Under that framework, the adoption of [a per se rule] would demonstrate the legal profession's commitment to independence and self-discipline.113

To Kim, the independence of lawyers is a hallmark of our profession that should be protected as an absolute value. 114

This per se ban on dual service has been criticized as unwarranted because the problems associated with dual service are more philosophical than practical.115 Because problems are so infrequent, both corporations and law firms would likely oppose any move towards total prohibition. 16 It is also overly broad - it would be over inclusive and a disservice to a client who thinks the attorney will be an asset to its board.117

Additionally, Professors Wolfram and Kim argue in favor of a per se ban on dual service because the possibility that the lawyer-director's independent professional judgment will be compromised. This approach, however, curtails the very independent professional judgment that they stringently argue must be protected. If the legal profession is truly guided by the rules of professional responsibility, and lawyers are charged with the ability to make tough calls when their judgment may be impaired, then they should likewise be able to determine on a case-by-case basis whether dual service is appropriate. And, they should be prepared to accept responsibility when things go wrong. As one corporate attorney has noted, "We are all big boys and girls. If everyone [including the attorney, law firm, and client] goes in with their eyes open knowing the risks involved, then you deserve what you get.118

The per se prohibition is also impracticable - no rule can be adopted that would cover all situations where a lawyer's professional judgment may be compromised. Instead of relying on black letter law, a professional must evaluate for himself whether a given course of action is appropriate, given the risks and rewards.119

Additionally, if one is to be true to the spirit, and not just the letter, of the Model Rules, one would see that a per se ban on dual service should not be adopted. For instance, the Preamble to the Model Rules recognizes that not all difficult issues of professional discretion will be covered by the Model Rules. "Such issues must be resolved through the exercise of sensitive professional and moral judgment guided by the basic principles underlying the Rules.120 While the Preamble is not binding on attorneys, it does provide useful guidance to determine what policies underlie the Model Rules by stating, "The Rules do not, however, exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile human activity can be completely defined by legal rules. The Rules simply provide a framework for the ethical practice of law."121

Looking to the text of the Model Rules also leads one to the conclusion that a per se ban on dual service is an inappropriate addition to the Model Rules. While nearly every Model Rule uses the terms "shall" or "shall not," indicating a mandatory or prohibited action,122 many of the Rules provide exceptions to the mandatory actions. For example, Model Rule 1.6 governing client confidentiality states "A lawyer shall not reveal information relating to the representation of a client unless the client consents after consultation."123 Even if the client does not consent, a lawyer may reveal the client confidences in limited circumstances.

On the other hand, only about half of the Model Rules strictly proscribe what a lawyer must or must not do, without exception. These Rules are unique in character. Rules such as Model Rule 1.1 requiring competent representation, Model Rule 1.5 mandating reasonable fees, Model Rule 3.3 requiring candor towards the tribunal, and the Model Rules governing deceptive or misleading advertising are among them. These Rules generally govern truthfulness and minimum standards of professional behavior. A per se ban on dual service does not rise to the level of importance enjoyed by the rule requiring competent representation or forbidding misleading advertising. Dual service is more analogous to conflict situations, where the client may be harmed in some way in the future if certain unknown events come to pass. Corporate clients are in a position to consent to dual service if all the disadvantages are explained to them in the same way they could consent to a lawyer representing them while the lawyer's wife represented the corporation's adversary in a given matter. No client should be put in a position to consent to incompetent representation, and presumably this is why the rule on competence does not have any exceptions. Dual service, however, is more analogous to the conflict situations, which do have exceptions where the client consents after full disclosure.

Compromise solutions are available that address the shortcomings of each of the above proposed solutions while also addressing many of the potential pitfalls of dual service. One solution would be to reword Model Rule 1.7, comment 14 124 to provide more detailed guidance. One proposed rewording would mandate that the attorney give full disclosure to the client; where material risk exists to the lawyer's professional independence, "the lawyer shall not serve as director." 125

This proposed rewording provides guidance to the lawyer-director and provides for mandatory refusal if the professional independence will be materially limited by conflicts of interest. In the alternative, a rule much like Model Rule 1.8, governing prohibited transactions, may be more appropriate, because it would not contain a mandatory refusal. Such a rule might state, "[a] lawyer shall not accept a position as a member of a current client's board of directors unless: (1) the terms of acceptance of such a position are fair and reasonable to the client and the advantages and disadvantages are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client; (2) the client is given a reasonable opportunity to seek the advice of independent counsel; and (3) the client consents in writing thereto." 126

A comment to this rule would be necessary to provide further instruction. It should state, "[w]hen an entity client requests outside counsel's participation on its board of directors or other governing body, counsel should evaluate the decision based on potential conflicts of interest, loss of attorney-client privilege that may result, and threats of liability and loss of independence for the lawyer-director. If counsel determines that the benefits to serving on the client's board could be achieved by declining a position on the board and instead attending all board meetings as outside counsel, he should decline the board position and instead attend all board meetings, thereby retaining his status as outside counsel."

The benefits to such a revision include providing clear guidance on the major issues to be considered by the attorney and client, while not mandating an outcome if the perceived risks are high in comparison to the perceived benefits.

If the lawyer determines that declining a seat on the board in favor of sitting in on all board meetings is the wiser course, the lawyer more easily retains the distinction between legal and business advice. The attorney-client privilege would be better protected. Also, questions concerning law firm liability for actions taken by a member as part of a board of directors would be eliminated. Legal malpractice insurance would cover any statement or action by the attorney in this situation because there would be no question whether the advice given is legal or business in nature. This would also prevent an inadvertent waiver of attorney-client privilege through the draft of meeting minutes. It would be clear that anything said by this attorney should not be included.

Additionally, the benefits to the client from having a lawyer sitting as a director would also be preserved. The attorney attending these meetings will bring with him all of his prior knowledge of the client's business based on past representation, and by attending the board meetings he will continue to be well informed about corporate governance and policy issues, without having to render a business opinion on the advisability of such courses of action.

Allowing the ultimate decision to be made by the attorney (in concert with his law firm) helps to preserve his independence. It recognizes that attorneys are professionals who can give careful consideration to decisions that will impact our profession as a whole. It preserves the self-governing aspect of being a lawyer while giving more guidance than the ABA Formal Opinion. It also recognizes that saying "no" to a client may not be in the best interests of the client or a law firm and leaves informed decision making to the lawyer and his firm.

CONCLUSION

Corporate representation raises questions and issues not raised in individual client representation. When the client is an entity, the lawyer must determine who exactly the "client" is, and he must follow additional ethical rules. With this in mind, when the client invites outside counsel to serve as a member of its board of directors, the issues become further complicated.

There are significant advantages to both the client and the lawyer that can result from this dual service. There are, however, important disadvantages to both as well. Whether these disadvantages are theoretical or practical in nature, scholars have been debating this issue for over two decades and many solutions or guidelines have been proposed. Some argue that full disclosure is necessary, while others argue that the practice should be prohibited in its entirety.

A middle ground, such as the one advocated in this Note, will alleviate many of the disadvantages while preserving the independent judgment of lawyers. Model Rule 1.7 governs conflicts of interest, and comment 14 specifically speaks to the issue of dual service. It should be amended to provide clearer guidance to the attorney considering such a role, while leaving the decision whether to accept or reject such an invitation to the professional judgment of the attorney and his law firm. In the alternative, a new rule governing dual service may be adopted, without a strict per se prohibition on the practice. 127

1. It should be noted that this Note will focus on the role of outside corporate counsel, although the disadvantages faced by in-house counsel are largely the same. See Marc I. Steinberg, The Role of Inside Counsel in the 1990's: A View from Outside, 49 SMU L. REV. 483.494 (1996) (identifying the risks to inside counsel as loss of attorney-client privilege, loss of insurance coverage, increased exposure for personal liability, and internal conflicts). Additionally, the Note focuses solely on large corporations, rather than closely held corporations. However, the advantages and disadvantages to dual service in either situation are closely aligned. See Harry J. Haynsworth, Special Problems of Closely Held Corporations, Q 171 ALI-ABA 5 (Mar. 31, 1988) (main considerations for general counsel for a closely held corporation include potential loss of professional judgment, disqualification of the lawyer-director and his firm for later matters, loss of attorney-client privilege, exposure to individual liability, and the involvement in awkward situations in the event of disputes among investors).

2. CANONS OF PROFESSIONAL ETHics (1908). See also Susanna M. Kim, Dual Identities and Dueling Obligations: Preserving Independence in Corporate Representation, 68 TENN. L. REv. 179, 189 (2001).

3. MODEL CODE OF PROFESSIONAL RESPONSIBILITY EC 5-18 (1969) [hereinafter MODEL CODE].

4. Id. See also Kim, supra note 2, at 189.

5. CHARLES W. WOLFRAM, MODERN LEGAL ETHICS 732 (1986).

6. ld at 735.

7. ld.

8. MODEL RULES OF PROFESSIONAL CONDUCT Rule 1.13 cmt. 1 (1983) [hereinafter MODEL Ross].

9. KIM supra note 2, at 191:

10. Id, at 194.

11. Id.

12. Id. at 194, 208.

13. See, e.g., N.J. Sup. Ct. Advisory Comm. on Prof'l Ethics, Eth. Op. 462 (1980). See also John K. Villa, Liabilities of Bank and Thrift Counsel, 666 PLI/CoMM. 483, nD.67-68 (July 26-27, 1993) (citing bar association opinions from eight jurisdictions refusing to prohibit dual service); John FX Peloso et al., The Lawyer-- Director: Implications for Independence, 1998 REPORT OF THE TASK FORCE ON THE INDEPENDENT LAWYER app. C [hereinafter TASK FORCE REPORT]. However, the Securities and Exchange Commission has expressed the view that the dual role should be prohibited due to the appearance of the lack of independence while serving on the board. See Craig C. Albert, The Lawyer-Director: An Oxymoron?, 9 GEO. J. LEGAL ETHICS 413, 440 (1996). See also NATIONAL ASSOCIATION OF CORPORATE DIRECTORS' BLUE RIBBON COMM'N ON DIRECTOR PROFESSIONALISM at 9-10 (1996), cited in ATTORNEYS' LIABILITY ASSURANCE SOCIETY, INC., ALAS Loss PREVENTION MANUAL, app. A (2000).

14. MODEL RULES Rule 1.7, cmt. 14.

15. Stephen M. Zaloom, Legal Status of the Lawyer-Director: Avoiding Ethical Misconduct, 8 U. MiAmi Bus. L. REv. 229,232 (2000).

16. Id at 233.

17. Id. at 234.

18. '...In the Spirit of Public Service: 'A Blueprint for the Rekindling of Lawyer Professionalism, 112 F.R.D. 243, 281 (1986) (citing American Society of Certified Public Accountants, AICPA Professional Standards, Rule 101-8, 1.09 (1986)). Additionally, the English Barrister and the French avocat are prohibited from engaging in business activities.

19. Id.

20. Kim, supra note 2, at 184.

21. Id.

22. Id at 183.

23. Id.

24. Id (citing Potter Stewart, Professional Ethics for the Business Lawyer: The Morals of the Market Place, 31 Bus. LAw 463,464 (1975)).

25. TASK FoRcE REPoRT, supra note 13, at 27.

26. Id.

27. Id.

28. The Model Rules treatment of the issue remains substantially unchanged by Ethics 2000.

29. Despite these advantages, the practice seems to be declining over the past twenty years. For instance, in 1980, thirty-five percent of corporations had outside attorneys serving on the board of directors. In 1995, this was true for only nineteen percent of corporations. Of the Fortune 500 companies, only eleven percent had outside counsel on the board. See JOHN F. OLSON BC JOSIAH 0. HATCH, Ill, DIRECTOR AND OFFICER LIABILITY: INDEMNIFICATION AND INSURANCE 10.02 (2001). Only about 1,000 of the 52,000 attorneys insured by ALAS in 2001 were serving as officers or directors of clients. E-mail from Joseph Lundy, Vice President-Loss Prevention Counsel, Attorneys' Liability Assurance Society ("ALAS"), to Bethany Smith, Feb. 25, 2002 (on file with the author).

30. Kim, supra note 2, at 183.

31. Micalyn S. Harris & Karen L. Valihura, Outside Counsel as Director: The Pros and Potential Pitfalls of Dual Service, 53 Bus. LAw. 479, 483 (1998).

32. Kim, supra note 2, at 223.

33. Id. It is arguable whether this legal advice is truly "free." Lawyer-directors receive perquisites for their service, and depending on the attorney's agreement with the client, the attorney may also be billing for his time while in the board meeting.

34. See Harris & Valihura, supra note 31, at 483.

35. Patrick W. Straub, ABA Task Force Misses the Mark: Attorneys Should Not Be Discouraged From Serving on Their Corporate Clients'Board of Directors, 25 DEL. J. CoRP. L. 261, 263 (2000).

36. See infra Part II for more in depth discussion of this proposition. 37. Straub, supra note 35, at 263-64.

38. Kim, supra note 2, at 222.

39. Id.

40. Straub, supra note 35, at 263.

41. E-mail from Anonymous Partner, Anonymous Law Firm, to Bethany Smith (Feb. 1, 2002) (on file with the author).

42. MODEL RuLEs Rule 1.1.

43. Many of the disadvantages identified here may be eliminated if the lawyer refuses a seat on the board but attends the board meetings in his capacity as outside counsel.

44. 66 F.R.D. 206 (S.D.N.Y. 1974).

45. Id. at 210.

46. Id. at 210, 212.

47. Id. at 212-13.

48. 125 N.Y.S. 193 (App. Div. 1910). 49. Id. at 199.

50. Harris & Valihura, supra note 31, at 484-85.

51. Id. at 485.

52. The Lawyer as Director of a Client, 57 Bus. LAw. 387, Nov. 2001.

53. Id.

54. ABA Standing Comm. on Ethics and Prof"I Responsibility, Formal Op. 410 (1998).

55. Kim, supra note 2, at 230-31.

56. See Zaloom, supra note 15, at 235. 57. Id.

58. Id. Zaloom's article also discusses the allegation that Hillary Rodham Clinton used her position on the board of TCBY Enterprises, Inc. to financially benefit her law firm. Here, Clinton's personal financial interest trumped her serving the best interests of the client.

59. Harris & Valihura, supra note 31, at 491-92.

60. Kim, supra note 2, at 230-31, 235.

61. Harris & Valihura, supra note 31, at 492. See also MoDEL RuLEs Rule 3.7. 62. The Lawyer as Director ofa Client, 57 Bus. LAw. 387, Nov. 2001.

63. 428 F.Supp. 149 (M.D. Pa. 1977).

64. Id. at 152.

65. Id

66. Harris & Valihura, supra note 31, at 501. See also The Lawyer as Director of a Client, 57 Bus. LAw. 387, Nov. 2001.

67. 283 F. Supp. 643 (S.D.N.Y. 1968).

68. David B. Parker et al., Law Firm Liability Under the Federal Securities Laws, 3 INSIGHTS 19 (1992).

69. Id.

70. Id.

71. Id.

72. Id. See also Securities Exchange Act of 1934, 48 Stat 881, (codified as amended in 15 U.S.C. sec 78a-mm).

73. Id.

74. Parker, supra note 68, at 19.

75. Id. See also 15 U.S.C. sec 78t.

76. Id.

77. Id.

78. Id

79. 406 F.2d 260 (2d Cir. 1969). 80. Id at 262.

81. Id. at 264.

82. The lawyer as Director ofa Client, 57 Bus. LAw. 387, Nov. 2001. See also Kim, supra note Z at 242-45.

83. &mail from Joseph Lundy, supra now 29.

84. See Kim, sqn nm 2, at 227. 85. Id. at 228.

86. ld. at 229.

87. to

88. Id. at 232.

89. Kim, supra note 2, at 231

90. Id. at 233.

91. Id.

92. Id.

93. Id. at 235 (suggesting steps that may be taken to minimize such risks).

94. E-mail from Joseph Lundy, supra note 29.

95. Harris & Valihura, supra note 31, at 504.

96. Id

97. Id.

98. Kim, supra note 2, at 240.

99. AwoP LY AssuRANcE SOCIETY, INC., ALAS Loss PREvEr MAN MANUAL (2000).

100. ABA Standing Comm. on Ethics and Prof'l Responsibility, Formal Op. 410 (1998). 101. Id.

102. Zaloom, supra note 15, at 238.

103. Id.

104. Interview with Donald Langevoort, Professor, Georgetown University Law Center, in Washington, D.C. (Jan. 25, 2002).

105. Id.

106. Parker, supra note 68, at 22-24.

107. Model Rule 1.7 governs conflicts of interest generally, with comments specifically designed for lawyers serving a dual role.

108. EC 5-1 governs the exercise of professional judgment.

109. Restatement (Third) of the Law Governing Lawyers Section 96 mirrors the language of Model Rule 1.13 and Section 131 proscribes representing both an organization and its constituents when the representation would be materially limited by the dual obligations.

110. Parker, supra note 68, at 22-23.

111. WOLFRAM, supra note 5, at 739.

112. Id.

113. Kim, supra note 2, at 260.

114. Id. at 259.

115. Harris, supra note 31, at 480,482.

116. Id. at 482.

117. Albert, supra note 13, at 470.

118. E-mail from Anonymous Partner, Anonymous Law Firm, to Bethany Smith (Feb. 1, 2002) (on file with the author). Implicit in the idea of case-by-case evaluation is the notion that everyone, including the client and the law firm will be fully informed of all relevant considerations.

119. Not all situations which may compromise a lawyer's professional judgment can be covered by a per se prohibition. For instance, the 2001 board of directors of Enron Corp. did not include an attorney from the law firm of Vinson & Elkins, longstanding outside counsel to Enron, yet Vinson & Elkins' assistance on Enron's disclosure statements regarding related-party transactions has been criticized precisely because they did not exercise independent professional judgment. "It would be inappropriate to fault Vinson & Elkins for accounting matters, which are not within its expertise. However, Vinson & Elkins should have brought a stronger, more objective and more critical voice to the disclosure process." William C. Powers, Jr. et al., Report and Investigation by the Special Investigative Committee of the Board of Directors of Enron Corp., 2002 WL 198018, at * 15 (Feb. 1, 2002).

120. MODEL RULES Preamble 18.

121. Id. at para 14.

122. See generally MODEL RULES. Only Model Rules 2.3, 5.2 5.7, 6.1, 8.4, and & are not framed in mandatory terms.

123. MODEL RULES Rule 1.6(a).

124. See Part I, supra

125. Zaloom supra note 15, at 238-39.

126. See MODEL RULES Rule 1.8.

127. It should be noted, however, that the full fallout from the Enron debacle has yet to be determined. At this point, all five major accounting firms have declared that they will no longer provide both counseling and auditing services to the same client because of the potential for conflicts of interest and impaired professional judgment. The last firm, Deloitte Touche Tohmatsu, has done so because of public pressure not because problems have come to the firm's attention. Perhaps the Enron situation will lead to increased support for a per se ban on dual service for attorneys. However, it should be noted that the situation with Enron developed despite the fact that accountants already have a per se rule against serving on clients' board of directors.

Maybe this is evidence that a per se ban is not the answer, but instead evidence that as professionals, we need to be activists in monitoring threats to our independent professional judgment.

BETHANY SMITH*

* J.D., Georgetown University, May 2002.

Copyright Georgetown University Law Center Spring 2002
Provided by ProQuest Information and Learning Company. All rights Reserved