May a California attorney who serves on a corporation's board accept representation of a client who proposes a transaction with the corporation when the corporation has separate counsel?

Currency note

This opinion was issued in 1993, before the State Bar of California's adoption of the November 1, 2018 revisions to the Rules of Professional Conduct. The opinion interprets former California Rules 2-100 (communication with represented parties) and 3-310 (conflicts), including subsections (B), (C)(1), (C)(2), (C)(3), and (E), together with Business and Professions Code section 6068(e) and California Corporations Code section 309(a). The substance is now in current California Rules 4.2 (communication with represented persons), 1.7 (concurrent conflicts), and 1.13 (organization as client). Section 6068(e) and Corporations Code section 309 continue in effect. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the State Bar of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.

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Plain-English summary

The committee took up the following scenario: an attorney serves on the board of a corporation that is regularly represented by other counsel; a client approaches her about a transaction with the corporation and asks her to represent it in structuring, negotiating, and drafting the agreement. The committee analyzed both the duties she owes the corporation and those she owes the client.

Rule 2-100 (communication with represented parties). The committee opined that Rule 2-100(B)(1) treats an officer, director, or managing agent as a "party" for purposes of the no-communication rule. Lacking consent of corporate counsel, the attorney must exclude herself from all board and committee deliberations and votes on matters pertaining to the transaction, even where the communication is initiated by others. Rule 2-100 does not bar communication about unrelated matters, but the committee opined that many board deliberations could touch the transaction (e.g., where the transaction involves stock acquisition, decisions affecting stock value implicate the negotiation).

Fiduciary duties to non-client. A director owes the corporation a broad duty of care and loyalty under Corporations Code section 309(a)(6). The committee opined that an attorney is subject to discipline for breach of fiduciary duties even where the relationship is not attorney-client (citing Hartford v. State Bar, 50 Cal.3d 1139 (1990); Worth v. State Bar, 17 Cal.3d 337 (1976); Simmons v. State Bar, 70 Cal.2d 361 (1969); Clark v. State Bar, 39 Cal.2d 161 (1952)). Corporate law (not the rules of professional conduct) governs the scope of those duties and whether the corporation may consent to continued board service notwithstanding the conflict.

Is the corporation the attorney's "client" under Rule 3-310? The committee opined that "client" under the rules is not as broad as the Libarian/Jacobs line of authority on non-legal services performed by an attorney; the presence of independent counsel for the corporation distinguishes those cases. The committee opined that Kapelus v. State Bar, 44 Cal.3d 179 (1987), supports a narrower reading of "client" for purposes of the rules, and a broader reading would produce far-reaching unintended consequences (e.g., Rule 3-400 implications for indemnification provisions; Rule 3-600(C) duties to resign; section 6068(e) duties to preserve secrets in the corporate context). The committee concluded that a corporation is not per se the attorney/director's client.

But the corporation may easily become her client in fact. The committee opined that an attorney-client relationship does not depend on an express agreement (citing Responsible Citizens v. Superior Court, Cal.App.4th (1993)); a client includes a person or entity that consults a lawyer for retention or advice (Cal. State Bar Formal Op. 1984-84; Estate of Dupont, 60 Cal.App.2d 276 (1943)). Board matters often involve legal issues; if the board looks to the attorney on those, an attorney-client relationship can arise. The committee opined that caution dictates assuming the corporation is the client when analyzing ethical duties.

If corporation is the client, Rule 3-310 application. Rule 3-310(C)(1) and (C)(2) require informed written consent for concurrent representations with potential or actual conflicts. The committee adopted a broad reading of "representation" (citing William H. Raley Co. v. Superior Court) that includes participation in board deliberations or voting. The committee opined that if the attorney participates in any way in deliberations relating to the transaction, she is "representing" the corporation in that matter, and a potential conflict is virtually certain, requiring written consent from both corporation and client. Rule 3-310(E) applies if the attorney has obtained confidential information material to the transaction, even if she recuses from board deliberations. Rule 3-310(B) (written disclosure only) applies if Rule 3-310(C) does not.

Whether informed written consent is obtainable. The committee opined that the breadth of the attorney's access to confidential information and the strength of her competing fiduciary obligations may make adequate disclosure impossible without breaching duties to the other party, and may make competent representation impossible due to split loyalties and constraints on use of the other party's confidences. Competent representation cannot be waived (citing Rule 3-110 and L.A. County Bar Formal Op. 471 (1992)).

Duty to preserve client confidences. Section 6068(e) requires preservation of client secrets, defined broadly as information conveyed with an expectation of nondisclosure and against use. If the corporation is the attorney's client, the duty covers information learned in any of her activities for the corporation.

Duties to the client. Rule 3-310(C) applies if attorney-client relationships with both corporation and client exist. Rule 3-310(B) requires written disclosure to the client regardless of whether the corporation is the client. Rule 3-310(E)'s "acceptance" language does not reach the continued service on a pre-existing board.

The committee concluded that, although facts may arise in which dual roles are workable, the ethical and legal obstacles make their acceptance "highly imprudent."

Common questions

Q: May a California attorney-director accept representation of a client transacting with her corporation under this opinion?

A: Per the opinion, possibly, but only after navigating Rule 2-100 (no board-level communication on the matter), the fiduciary duties owed to the corporation, and Rule 3-310's written-disclosure and informed-written-consent requirements. The opinion characterized acceptance as highly imprudent.

Q: Is the corporation automatically the attorney's "client" because she's on the board?

A: Per the opinion, no. A corporation served by independent counsel is not per se the director-attorney's client under Rule 3-310. But the committee opined that the corporation can easily become the attorney's client in fact, and caution dictates assuming it is.

Q: If the corporation is the client and the attorney recuses from board deliberations, does Rule 3-310(C) still apply?

A: Per the opinion, if the attorney participates in any way in deliberations or voting relating to the transaction, "representation" is broad enough to bring Rule 3-310(C) into play. Full recusal could remove (C) but Rule 3-310(E) still applies if she has obtained confidential information material to the transaction.

Q: Does the attorney owe the corporation fiduciary duties even if it is not her client?

A: Per the opinion, yes. Corporations Code section 309(a) imposes director fiduciary duties of care and loyalty regardless of attorney-client status, and an attorney can be disciplined for breaching fiduciary duties owed even outside an attorney-client relationship (citing Hartford, Worth, Simmons, and Clark).

Q: Can the parties' informed written consent always cure the conflict?

A: Per the opinion, often no. The breadth of access to both parties' confidences and the depth of competing fiduciary duties may make complete disclosure impossible and competent representation impossible; competence cannot be waived.

Q: Does Rule 3-310(E) prevent the attorney from accepting the client representation while remaining on the board?

A: Per the opinion, no. Rule 3-310(E)'s ban on "acceptance" does not cover continued service in a pre-existing board role; the attorney is not "accepting" the corporate position because of the client representation.

Background and rules framework

The opinion interprets former California Rules 2-100 (communication with represented parties) and 3-310 (conflicts), with sustained attention to subsections (B), (C)(1)-(C)(3), and (E). It interprets Business and Professions Code section 6068(e) and California Corporations Code section 309(a). The substance is now in current California Rules 4.2, 1.7, and 1.13.

Citations and references

Rules of Professional Conduct (former, in effect at time of opinion):

• Former California Rule 2-100, including (A) and (B)(1)
• Former California Rule 3-310, including (A)(1)-(A)(3), (B), (C)(1)-(C)(3), and (E)
• Former Rule 3-110 (competence); Rule 3-400 (limiting liability); Rule 3-600(C) (organizational clients) (referenced)
• Former Rule 5-102(B) (referenced as precursor to current Rule 3-310(C))

Statutes:

• Cal. Bus. & Prof. Code section 6068(e), confidentiality
• Cal. Corp. Code sections 309 (director duties) and 310 (transactions between corporations with common directors)
• Restatement 2d of Agency section 394; Restatement 2d of Trusts sections 172, 179, 180

Cases:

• Hartford v. State Bar, 50 Cal.3d 1139 (1990), discipline for non-client fiduciary breach
• Worth v. State Bar, 17 Cal.3d 337 (1976)
• Simmons v. State Bar, 70 Cal.2d 361 (1969)
• Clark v. State Bar, 39 Cal.2d 161 (1952)
• William H. Raley Co. v. Superior Court, 149 Cal.App.3d 1042 (1983), conflict and disqualification
• Libarian v. State Bar, 21 Cal.2d 862 (1943), and Jacobs v. State Bar, 219 Cal. 59 (1933), licensed attorneys held to professional standards
• Kapelus v. State Bar, 44 Cal.3d 179 (1987), narrower "client" reading
• Bancroft-Whitney Co. v. Glen, 64 Cal.2d 327 (1966), corporate fiduciary duties
• Bainbridge v. Stoner, 16 Cal.2d 423 (1940)
• Guth v. Loft, 23 Del.Ch. 255 (1939)
• Responsible Citizens v. Superior Court, Cal.App.4th (1993)
• Estate of Dupont, 60 Cal.App.2d 276 (1943)
• People v. Dorvance, 65 Cal.App.2d 125 (1944)
• Miller v. Metzinger, 91 Cal.App.3d 31 (1979)
• Ferrara v. La Sala, 186 Cal.App.2d 263 (1960)
• Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7th Cir. 1978), implied attorney-client relationship
• People v. Thoi, 213 Cal.App.3d 689 (1989)
• Hunniecutt v. State Bar, 44 Cal.3d 362 (1988)
• David Welch Co. v. Erskine & Tulley, 203 Cal.App.3d 884 (1988)
• Yorn v. Superior Court, 90 Cal.App.3d 669 (1979)
• Guzetta v. State Bar, 43 Cal.3d 962 (1987)
• Crawford v. State Bar, 54 Cal.2d 659 (1960); Mitton v. State Bar, 49 Cal.2d 686 (1958); Alkow v. State Bar, 38 Cal.2d 257 (1952); Baron v. City of Los Angeles, 2 Cal.3d 535 (1970)

Other opinions cited:

• Cal. State Bar Formal Op. 1981-63 (city council member)
• Cal. State Bar Formal Op. 1982-69 (real estate broker / attorney)
• Cal. State Bar Formal Op. 1984-84 (client = consults for advice)
• L.A. County Bar Formal Op. 366; L.A. County Bar Formal Op. 471 (1992)

See also

• CA Ethics Op. 1999-153: Joint Representation of Corporation and Shareholder
• CA Ethics Op. 2001-156: City Attorney Conflicts Among Constituents
• CA Ethics Op. 1989-113: Representation Adverse to a Corporate Subsidiary

Source

• Landing page: https://www.calbar.ca.gov/legal-professionals/ethics-compliance-practice-resources/ethics/ethics-opinions
• Source HTML: https://www.calbar.org/ethics/Opinions/1993-132.htm

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Ethics Opinions - FORMAL OPINION NO. 1993-132

Editor's Note:

State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.

THE
STATE BAR OF CALIFORNIA

STANDING COMMITTEE ON

PROFESSIONAL RESPONSIBILITY AND CONDUCT
FORMAL OPINION NO. 1993-132

ISSUE:

While Attorney serves as a director of a corporation ("Corporation"), Client approaches Attorney with a proposal for a transaction with Corporation. Client wants to present the proposal to Corporation and asks the attorney to represent it in connection with structuring the proposal and negotiating and drafting an agreement between Client and Corporation. Corporation is regularly represented by other counsel in connection with such transactions. What ethical considerations must Attorney address as she decides whether she can or should accept representation of Client?

DIGEST:

As long as she remains on the Corporation's board, the attorney is ethically bound to perform her fiduciary duties to Corporation in her capacity as director regardless of whether Corporation is her "client." The breadth of those fiduciary duties makes a conflict of interest virtually unavoidable, but unless Corporation is also the attorney's client, the scope of those duties and the issue of what constitutes adequate consent by Corporation are governed by corporate law rather than by the California Rules of Professional Conduct.

Whether or not an attorney-client relationship arises, the attorney/director has an ethical duty to restrict her communications with Corporation as necessary to comply with rule 2-100.

If Corporation is deemed the attorney's client for any purpose, and if the attorney participates in board deliberations or voting relating to the transaction, the attorney has independent duties to obtain the informed written consent of both Corporation and Client to the conflicting representation under rule 3-310(C)(1) (if a conflict is only potential) or rule 3-310(C)(2) (if the conflict is actual). If Corporation is deemed attorney's client, rule 3-310(E) may apply even if attorney recuses herself from such board deliberations and voting.

The attorney must also give written disclosure to Client of her relationship to Corporation whether or not Corporation is also her client. (Rule 3-310(B).)

The nature of any conflict or adversity between Client and Corporation may be such that the attorney must withdraw from any joint representation notwithstanding the parties' willingness to give written consent.

AUTHORITIES INTERPRETED:

Rules 2-100 and 3-310 of the California Rules of Professional Conduct.

Business and Professions Code section 6068, subdivision (e).

Corporations Code section 309, subdivision (a).

DISCUSSION

I. THE ATTORNEY'S ETHICAL DUTIES WITH RESPECT TO CORPORATION.

A. California Rule of Professional Conduct 2-100.

Rule 2-100 states in pertinent part:

(A) While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer.

(B) For purposes of this rule, a "party" includes:

(1) An officer, director, or managing agent of a corporation or association, and a partner or managing agent of a partnership . . . .

In considering whether to accept representation of Client, the attorney in the above-described fact situation should anticipate that she will be precluded from communicating directly or indirectly with any officer, director or managing agent of Corporation about the subject of her representation of Client, because Corporation is represented by other counsel in that matter. This means that, lacking consent of Corporation's counsel, the attorney must exclude herself from all board and board committee deliberations and from votes on matters pertaining to the transaction with respect to which she represents Client. Rule 2- 100's prohibition applies even though the communication might not be initiated by the attorney.

Rule 2-100 does not preclude the attorney from communicating with officers, directors and managing agents of the Corporation about subjects not relating to the attorney's representation of Client. However, the nature of the transaction in which the attorney represents Client might easily affect a broad range of board deliberations over a period of time. For example, if part of the proposed transaction involves Client's acquisition of stock in Corporation, consideration by Corporation's board of any matter likely to affect stock value might well include discussion of how particular action by the Board would affect the negotiations with Client.

B. Attorney's Breach of Fiduciary Duty to Non-Client.

A director of a corporation owes that corporation a broad duty of care and loyalty. For example, California Corporations Code section 309(a)(6) states:

A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

It is beyond the scope of this opinion to analyze in detail the scope of a director's fiduciary duties to a corporation; however, it is difficult to envision how an attorney under the facts stated above could serve on Corporation's board and not be under a fiduciary duty to Corporation to recuse herself from board deliberations relating to the subject matter of that representation.

It is a well established principle of California law that an attorney may be subject to professional discipline for her breach of fiduciary duties owed to another, even though the relationship from which those fiduciary duties arise is not one of attorney and client. (See, e.g., Hartford v. State Bar (1990) 50 Cal.3d 1139, 1153 [270 Cal.Rptr. 12]; Worth v. State Bar (1976) 17 Cal.3d 337, 341 [130 Cal.Rptr. 712]; Simmons v. State Bar (1969) 70 Cal.2d 361, 365 [74 Cal.Rptr. 915]; Clark v. State Bar (1952) 39 Cal.2d 161, 166-170 [246 P.2d 1].) This principle applies even to an attorney who may have breached her fiduciary duties without fraudulent intent.

Applicable corporate law, rather than the rules of professional conduct, however, would govern both the scope of the attorney's fiduciary duties and whether (and, if so, how) Corporation might properly consent to the attorney's continued service on the Board notwithstanding the conflict of interest.

C. California Rule of Professional Conduct 3-310.

1. For rule 3-310 to apply, does Corporation have to be the attorney's "client?

Under former rule 5-102(B) of the 1975 version of the California Rules of Professional Conduct - the precursor of current rule 3- 310(C) - the attorney under the facts cited above would be required to obtain Corporation's informed consent to the joint representation regardless of whether Corporation were deemed the attorney's client. In William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042 [197 Cal.Rptr. 232], the Court of Appeal applied former rule 5-102(B) in reversing the trial court's denial of defendant's motion to disqualify plaintiff's counsel. A partner in the firm representing plaintiff was also a director and trust investment committee member of a bank holding as trustee 100% stock ownership in defendant. No attorney of the firm representing plaintiff had ever represented defendant or the bank as legal counsel.

Former rule 5-102(B) states: "A member of the State Bar shall not represent conflicting interests, except with the written consent of all parties concerned."

Because "client" does not appear in the language of former rule 5- 102(B), the Raley court was not confronted with the problem of how to construe that term.

In contrast, under California's current basic conflict of interest authority, rule 3-310, the ethical duties imposed on the member are plainly formulated to protect only "clients": rule 3-310(B) speaks only to representation of a "client" absent written disclosure to the "client"; rule 3-310(C)(1) and rule 3-310(C)(2) address only representation of more than one "client"; rule 3-310(C)(3) is concerned with accepting representation of a "client" in one matter while representing another "client" in another matter; the prohibition of rule 3-310(E) on acceptance of employment adverse to a client or former client can be avoided by informed written consent of that "client or former client."

In assessing, then, whether any of the subsections of current rule 3-310 impose on the attorney an independent ethical duty toward Corporation, the threshold question is whether Corporation is the attorney's "client."

2. Is the Corporation per se the Client of the Attorney/Director?

The argument can be made that the term "client," as used in the rules of professional conduct, has a much broader meaning than that associated with other definitions of the attorney-client relationship. There is a strong line of authority in California case law supporting the rule that:

. . . when [an attorney] is licensed to practice as an attorney at law, the professional services that he thus performs are performed by him as an attorney, whether or not some of the services could also be rendered by one licensed in a different profession. One who is licensed to practice as an attorney in this state must conform to the professional standards in whatever capacity he may be acting in a particular matter.(Emphasis added.) (Libarian v. State Bar (1943) 21 Cal.2d 862, 865 [136 P.2d 321] (citing Jacobs v. State Bar (1933) 219 Cal. 59 [25 P.2d 401].)

With the exception of Raley, and those cases that cite Libarian only in dictum, the Libarian/Jacobs line of cases involve attorneys who had furnished non-legal services to otherwise unrepresented parties where those non-legal services were closely related to the attorney's law practice. That line of cases, however, is distinguished from the fact situation at hand by the presence here of independent counsel for Corporation.

Moreover, the reasoning of the California Supreme Court in Kapelus v. State Bar (1987) 44 Cal.3d 179 [242 Cal.Rptr. 196] is more consistent with a limited application of the Libarian rule. In Kapelus v. State Bar, the Supreme Court concluded that the petitioning attorney had violated neither former rule 4 (predecessor of 1975 rule 5-101 and current rule 3-300 prohibiting an attorney from acquiring an interest adverse to a client) nor 1975 rule 4-101 (the predecessor of current rule 3-310(E)) when he represented a limited partnership of which he was a general partner against certain limited partners. The Court acknowledged that, in his capacity as general partner, the attorney had a fiduciary relationship with the limited partners; nonetheless, according to the Court, the relationship did not arise to that of attorney and client, and, therefore, former rules 4 and 4-101 did not apply.

If we were to adopt a broad construction of the term "client" for purposes of rule 3-310, it would be difficult indeed to justify a narrower construction of the same term elsewhere in the California Rules of Professional Conduct. To broaden the term "client" for all purposes under the rules, however, would produce far-reaching and, we believe, unintended results. For example, if a corporation on which an attorney served as director were by definition the attorney's "client" for purposes of the rules, the attorney/director might risk violating rule 3-400 (Limiting Liability to Client) simply by voting for or even benefitting from a provision in the corporation's articles limiting director liability. Defense and indemnification of the attorney/director by the Corporation in connection with litigation of claims arising out of the attorney's conduct as a director might well be restricted by rule 3-400 if the Corporation were the attorney's "client." The attorney/director would also probably have an ethical obligation to resign as director if the corporation insisted upon action in violation of law likely to result in substantial injury to the organization. (Rule 3-600(C).) The attorney/director would likely in all cases have an ethical duty beyond that generally imposed upon directors "at every peril" to preserve "secrets" - such as, for example, disclosures of past illegal conduct or existing illegal conditions - revealed to her by her "client" even though the confidences might clearly not be attorney/client privileged communications. (Bus. & Prof. Code, § 6068 (e)).

A general rule holding the beneficiary of a fiduciary relationship with an attorney to be that attorney's "client" as a matter of law for purposes of the rules of professional conduct even though that beneficiary is at all times separately represented by legal counsel, appears neither necessary to accomplish any policy sought to be furthered by the ethical rules nor compelled by the language of those rules.

3. Even If Corporation Is Not per se the Attorney/Director's "Client," Corporation Might Easily Become Her Client in Fact.

Irrespective of whether the corporation for which an attorney serves as director should in all cases be deemed the "client" of the attorney when applying the rules of professional conduct to her activities as director, service by an attorney in such a capacity brings with it a significant risk that an attorney-client relation ship will actually arise.

Whether an attorney-client relationship exists does not depend upon the existence of an express agreement between attorney and client that such a relationship exists. (See Responsible Citizens v. Superior Court (July 1, 1993, F018604) Cal.App.4th [93 C.D.O.S. 5122].) "[A] client includes a person or entity which consults a lawyer for the purpose of retention or advice even if neither results." (Cal. State Bar Formal Opn. No. 1984-84 [see, e.g., Estate of Dupont (1943) 60 Cal.App.2d 276, 288 [140 P.2d 866, 872]; People v. Dorvance (1944) 65 Cal.App.2d 125, 129 [150 P.2d 10, 12] and L.A. Cty. Bar. Assn. Formal Opn. No. 366.) Courts are especially prone to find that an attorney-client relationship has arisen when a putative client reveals information in confidence to one he knows to be an attorney. (See, e.g., Miller v. Metzinger (1979) 91 Cal.App.3d 31 [154 Cal.Rptr. 22]; Ferrara v. La Sala (1960) 186 Cal.App.2d 263 [9 Cal.Rptr. 179]; Westinghouse Electric Corporation v. Kerr-McGee Corporation, et al (7th Cir. 1978) 580 F.2d 1311. But see People v. Thoi (1989) 213 Cal.App.3d 689 [261 Cal.Rptr. 789].)

Matters addressed by a board of directors often involve legal issues. Business negotiations, employment and pricing policies, and even budgeting decisions are often permeated with legal issues. An attorney-client relationship may arise if, in the course of such deliberations, the corporation looks to the attorney on any such issues for legal advice.

The attorney in the fact situation described above could easily find her relationship with Corporation to be one of attorney and client. Whether Corporation is the attorney's "client" depends more upon how the attorney's co-directors on the board and the corporate officers view the attorney's role than upon whether Corporation and the attorney have entered into a fee agreement. Relevant inquiries include: Why was the attorney elected to the board and for what do the board and the officers look to the attorney? Does the board, for example, look to the attorney to second guess the advice of corporate counsel? Was Corporation ever the attorney's client in the past?

In light of the high risk that the attorney's relationship with Corporation might be deemed one of attorney and client, caution would normally dictate that, when assessing her ethical duties under the fact situation described above, the attorney assume that the Corporation is her client. Of course, once Corporation is the attorney's "client" for any purpose (whether or not in connection with the subject transaction), then the various subsections of rule 3-310 must be examined still further to ascertain whether they apply in the particular circumstances.

4. If Corporation is the attorney's "client," then does rule 3-310 impose on the attorney independent ethical duties toward Corporation?

This Section 4 addresses how rule 3-310 would affect the attorney's ethical duties to Corporation under the above-stated facts, assuming that Corporation is the attorney's client.

(a) Rule 3-310(C).

Rule 3-310(C)(1) forbids an attorney from accepting "representation of more than one client in a matter in which the interests of the clients potentially conflict." Rule 3-310(C)(2) forbids an attorney from either accepting or continuing "representation of more than one client in a matter in which the interests of the clients actually conflict."

To determine whether either of these clauses of rule 3-310(C) applies to the facts described above, one must first ascertain whether (i) the attorney is "representing" Client and Corporation "in the same matter," and (ii) whether the clients' interests "potentially" or "actually" conflict.

If Corporation were to seek legal advice from the attorney in connection with the transaction between Corporation and Client, her "representation" of Client is clearly "in the same matter." It is less clear whether the attorney's "representation" of Corporation is "in the same matter" when, as is the case under the facts described above, attorney's participation is limited to board deliberations and voting on the transaction.

Although we believe that neither case law nor ethics opinions dictate a broad construction of "client" as that term is used in the Rules, the Raley case does furnish authority for a broad construction of the term "representation." Whereas former rule 5- 102(B) did not mention the term "client," its proscription was worded in terms of "represent[ing] conflicting interests." The holding in Raley interpreting former rule 5-102(B) indicates that "representation" should be interpreted broadly enough to encompass even instances in which the client - i.e., Corporation - seeks the attorney's views on issues not strictly legal in nature. (William H. Raley v. Superior Court, supra, 149 Cal.App.3d at pp. 1046- 1048.)

We agree that a broad construction of "representation" is appropriate here. Once an attorney-client relationship of any kind is established, it is too likely that the client will expect the attorney's advice to include -- implicitly, if not expressly -- some degree of legal counsel. In analyzing the application of 3- 310(C) to these facts, the attorney should, therefore, be considered to be "representing" Corporation in connection with the transaction if she is in any way involved in board deliberations or voting relating to that transaction.

As to the second issue -- whether the interests of Corporation and Client "potentially" or "actually" conflict -- the facts would indicate that at least a potential for conflict would exist. As the Discussion accompanying rule 3-310 states, "Subparagraphs (C)(1) and (C)(2) are intended to apply to all types of legal employment, including the concurrent representation of multiple parties in litigation or in a single transaction or in some other common enterprise or legal relationship." If a transaction is sufficiently significant to merit the attention of a corporate board of directors, such potential for conflict is a virtual certainty. Therefore as long as the attorney participates in any way in deliberations relating to the transaction, therefore, she will have to obtain the informed written consent of Corporation (as well as that of Client).

Of course, if rule 3-310(C) otherwise applies and a potential conflict turns into an actual one, the attorney will once again have to obtain the informed written consent of her clients, and might even have to withdraw from further representation of Corporation, Client or both.

(b) Rule 3-310(E).

If, in the course of serving either as legal counsel for Corporation or as a board member, the attorney obtains confidential information material to the transaction, then rule 3-310(E) imposes an independent duty on the attorney to obtain Corporation's informed written consent before she may accept employment with Client. Rule 3-310(E) applies even if the attorney recuses herself from participation in board deliberations and voting relating to the transaction with Client.

(c) Rule 3-310(B).

The burden under rule 3-310(B) is only to furnish "written disclosure," not to obtain "informed written consent" as is the case under rule 3-310(C). Rule 3-310(B), therefore, need only be considered under these facts if rule 3-310(C) does not apply -i.e., if the attorney does not participate in any board deliberations or voting relating to the transaction.

The first three categories encompass relationships between a member and another person or entity who is in some manner linked to the "matter" in which the member "represents" the client (i.e., Corporation). Only if the attorney were to participate in board deliberations or voting relating to the transaction, however (precisely the same case in which rule 3-310(C) would impose an even greater burden) would she be representing Corporation in that "matter." These first three categories, therefore, do not independently impose any additional burden on the attorney here.

Similarly, the fourth category, encompassing situations in which the member has one of the listed kinds of interests in the "subject matter of the representation" (here, the representation of Corporation) has no application as long as the transaction is excluded from the "subject matter" of the attorney's representation of Corporation.

(d) If "informed written consent" is required under rule 3-310(C) or rule 3-310(E), can it always be obtained?

"Informed written consent" under rule 3-310 means "the client's or former client's written agreement to the representation following written disclosure." (Rule 3-310(A)(2).) "Disclosure" means "informing the client of the relevant circumstances and of the actual and reasonably foreseeable adverse consequences to the client . . . ." (Rule 3-310(A)(1).)

Although rule 3-310(B), (C) and (E) appear to permit all otherwise proscribed representations if the member gives "written disclosure" (in the case of 3-310(B)) or obtains the clients' or former clients' "informed written consent (in the case of rule 3-310(C) or (E)), the Discussion to rule 3-310 states that "[o]ther rules and laws may preclude making adequate disclosure under the rule."

Here, the attorney-director's access to confidential information of both Corporation and Client will almost inevitably be so great, her involvement in corporate decision-making (even subject to the strictures of rule 2-100) so broad, and her fiduciary obligations to each party so strong, that disclosing to either party all relevant circumstances may be difficult or even impossible without violation of duties owed to the other party. Moreover, even if the attorney is able to make adequate disclosure, she is likely to be unable to give either of her clients competent representation due to her split loyalties and inability to take advantage of confidential information obtained from the other. An attorney's duty to give competent representation may not be waived. (See rule 3-110; L.A. Cty. Bar Formal Opn. No. 471 (1992).) Effective informed written consent, therefore, may be either impossible or insufficient.

D. The Duty to Preserve Client Confidences (Bus. & Prof. Code, § 6068 (e).).

The attorney has a duty "at every peril to himself or herself to preserve the secrets of his or her client." (Bus. & Prof. Code, § 6068 (e).) Protected confidences include all "information conveyed to the attorney as to which the client has an expectation that it will not be disclosed to others nor used against him." (Cal. Formal Opn. No. 1984-84 at p. 2; see also Yorn v. Superior Court (1979) 90 Cal.App.3d 669, 676 [153 Cal.Rptr. 295].) If Corporation is the attorney's client for any purpose, her duties under Business and Professions Code section 6068 (e) would preclude the attorney's disclosure or misuse of such information received in the course of any of her activities on behalf of Corporation.

The attorney should be especially wary of the possibility that, if she should accept representation of Client, her access to Client secrets and the existence of her Business and Professions Code section 6068 (e) duty as to Client may prevent her from fulfilling her fiduciary obligations to Corporation.

II. THE ATTORNEY'S DUTIES WITH RESPECT TO CLIENT.

A. Rule 3-310(C).

If circumstances give rise to an attorney-client relationship between the attorney and Corporation, then rule 3-310(C) applies under the analysis described in Section I(C)(4)(a), above, and informed written consent of both Client and Corporation will be required.

As we discuss above, however, a corporation on whose board of directors an attorney serves might not per se be the attorney's client or, even if Corporation is the attorney's client, she might recuse herself from board deliberations and voting relating to the subject transaction. In either case, neither rule 3-310(C)(1) nor rule 3-310(C)(2) will apply, as they both presuppose concurrent representation of two or more "clients" in a single matter.

B. Rule 3-310(B).

Under rule 3-310(B)(1), a member has a duty to provide the client "written disclosure" where "[t]he member has a legal, business, financial, professional, or personal relationship with a party or witness in the same matter . . . ."

The relationship of a director to the corporation on whose board she serves is precisely the kind of relationship that rule 3-310(B) is intended to cover. Under the above-described facts, the attorney's representation of Client is likely to be materially limited by her responsibilities to non-client Corporation. A corporation's board of directors bears ultimate responsibility for making most major corporate decisions. As an attorney of that board, a director owes Corporation a broad duty of care and loyalty. As attorney for Client, on the other hand, the attorney is under an ethical and legal duty zealously and faithfully to use all lawful means and all information at her disposal to further Client's interests. Under the facts at hand, the chances are great that at some point the attorney will have to take action harmful to Corporation in order to fulfill her duties as Client's attorney. Taking such action, however, would violate the attorney's duties to Corporation, thereby possibly subjecting the attorney to civil liability as well as professional discipline.

The attorney, thus, has a clear duty to furnish Client "written disclosure" regardless of whether Corporation is her "client."

C. California Rule of Professional Conduct 3-310(E).

In the course of representing Client in negotiating a transaction, the attorney will almost certainly obtain confidential information from Client material to the subject transaction. The issue then arises whether the attorney "accepts employment" with Corporation in violation of his ethical duties to Client under rule 3-310(E) by serving as one of Corporation's directors.

Rule 3-310(E) only prohibits "acceptance" of employment, not the "continuation" of employment. In the fact situation described above, Client offers employment to the attorney at a time when the attorney is already on Corporation's board. The facts do not envision that the nature of the attorney's relationship with Corporation will change because of the transaction. Rule 3-310(E), therefore, does not apply here.

D. The Duty to Preserve Client Confidences (Bus. & Prof. Code, § 6068 (e).).

The duty to protect client secrets will, of course, apply to any secrets of Client that attorney learns in the course of her representation of Client.

CONCLUSION

By choosing to simultaneously represent Client and to serve as a director of Corporation, the attorney runs significant risks of violating ethical rules, even if Corporation is independently represented by counsel. With respect to her duties to Corporation, the attorney must refrain from communications with Corporation's officers and directors regarding the subject matter of her representation of Client.

Whether or not Corporation is the attorney's client, the attorney may be subject to discipline for breaching her fiduciary duties to Corporation. Corporation, moreover, may easily be the attorney's client in fact even though it is being represented by other counsel in connection with the transaction. If so, the attorney will be subject to an even greater risk of breaching ethical duties owed both to Corporation and Client. Consequently, although facts may arise in which the attorney might successfully represent Client while serving on Corporation's board, the ethical and legal obstacles make acceptance of such dual roles highly imprudent.

This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding upon the courts, the State Bar of California, its Board of Governors, any person or tribunal charged with regulatory responsibility or any member of the State Bar.