Can a lawyer's firm sue or take matters adverse to a public body or nonprofit board when one of the firm's lawyers serves on that board?

Plain-English summary

A lawyer in a firm represents the defendant in a condemnation action filed by a county. After that appearance, another lawyer in the same firm was elected to the county's Board of Commissioners, the body that directed the suit and could compromise or dismiss it. The board member disclosed the firm's role, promised to abstain from any consideration or vote, and the board and the represented client consented. The opinion addresses whether the firm may continue, and how far the principle extends to other matters, nonprofit boards, and transactions.

The opinion concludes the firm may continue, subject to conditions, and frames the goal as encouraging lawyers to serve on public bodies while preserving professional ethics. To avoid the appearance of impropriety or undue influence, a lawyer elected or appointed to a public body must be screened within the firm from any action another firm lawyer brings against that body, with procedures isolating the board-member lawyer from firm discussion of the matter and from related confidential information (Rule 6.5; RPC 53). Sharing the resulting fee is not specifically prohibited but is discouraged; the opinion suggests that, if practical, the firm withhold the board-member lawyer's share of the profit to reinforce the lawyer's isolation. The board-member lawyer must also make full disclosure to the public body and follow four steps: disclose the relationship in writing or open meeting; refrain from any expression of opinion or consideration of the matter, including communication with members or staff; absent himself from any discussion; and withdraw from voting on all related issues (CPR 290; RPC 53; Rule 6.5(b)).

The opinion sets a hard limit: if the board-member lawyer is named as a party in an official or individual capacity, the lawyer cannot maintain neutrality, so it is a disqualifying conflict for the firm to represent any party where the board member is a necessary party (RPC 53). Applying this across the inquiries, the firm may take nonlitigation and litigation matters adverse to the county subject to these conditions, may take matters where the board itself or its members in their official capacity are adverse subject to the same screening, and a firm lawyer may continue serving on a nonprofit board even when another firm lawyer sues the organization, subject to the same conditions. The same screening allows the firm to continue a transactional representation involving a public body or nonprofit the firm lawyer serves. The opinion overrules RPC 160 (which had barred a lawyer from suing a public hospital whose board included the lawyer's associate) because RPC 160 did not distinguish a suit against the entity from a suit against board members in their official or individual capacities.

In practice

Under the North Carolina rules as they stood at the time of the opinion, the analysis turns on screening the board-member lawyer within the firm and on full disclosure and abstention by that lawyer on the public body. The opinion holds that with adequate screening and the four disclosure-and-abstention steps, a firm may take matters adverse to a public body or nonprofit board one of its lawyers serves on, including litigation, nonlitigation, and transactional matters.

Per the opinion, the dividing line is whether the board-member lawyer would be a necessary party in the action: if so, in either an individual or official capacity, the conflict disqualifies the firm. The opinion treats fee-sharing by the board-member lawyer as discouraged though not prohibited, and overrules the contrary holding of RPC 160.

Common questions

Q: Can a firm sue a county when one of its lawyers sits on the county board?

A: Yes, subject to conditions. The opinion concludes the board-member lawyer must be screened within the firm and must disclose and abstain on the public body, and the firm may then proceed unless the board member is a necessary party.

Q: What steps must the board-member lawyer take on the public body?

A: The opinion requires the lawyer to disclose the relationship in writing or open meeting, refrain from any consideration of or comment on the matter (including with members or staff), absent himself from discussion, and withdraw from voting on all related issues.

Q: When is the firm disqualified outright?

A: When the board-member lawyer would be a necessary party in the action, in an individual or official capacity. The opinion concludes that situation makes neutrality impossible and disqualifies the firm (RPC 53).

Q: Does this apply to nonprofit boards and transactions too?

A: Yes. The opinion concludes the same screening and disclosure conditions let a firm lawyer continue serving on a nonprofit board while another firm lawyer sues the organization, and allow the firm to continue a transactional matter involving the body the lawyer serves.

Q: What happened to RPC 160?

A: The opinion overrules RPC 160, which had barred a lawyer from suing a public hospital whose board included the lawyer's associate, because it failed to distinguish a suit against the entity from a suit against board members.

Background and rules framework

The opinion interprets North Carolina Rule 6.5 and Rule 6.5(b) (the State Bar's rule on a lawyer's professional independence and conduct when serving on a public body or board) together with the conflict-of-interest principles of Rule 1.7 (corresponding to Model Rule 1.7). It relies on the prior North Carolina opinions RPC 53 and CPR 290, and overrules RPC 160.

Citations and references

Rules of Professional Conduct:

• NC Rule 6.5, Rule 6.5(b) (screening and conduct of a lawyer serving on a public body or board)
• MR 1.7 / NC Rule 1.7 (conflicts of interest)

Statutes:

• N.C. Gen. Stat. Chapter 40A (condemnation), referenced as the basis for the underlying action.

Other opinions cited:

• NC RPC 53: screening and disqualification when a firm lawyer serves on a public body.
• NC CPR 290: disclosure-and-abstention steps for a lawyer on a governing body.
• NC RPC 160: overruled by this opinion.

See also

• NC State Bar 2007 FEO 16: Elected Official Cross-Examining a Law Enforcement Officer
• NC State Bar 2007 FEO 10: Lawyer Employed by a School Board as a Hearing Officer
• NC State Bar 2008 FEO 2: Roles of School Board Lawyers in Administrative Proceedings

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2002-formal-ethics-opinion-2/

Original opinion text

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

Inquiry #1:

Attorney A is a lawyer with Law Firm C. He was retained by the defendant in a condemnation lawsuit filed by D County pursuant to Chapter to 40A of the North Carolina General Statutes. Subsequent to Attorney A's entering an appearance in the condemnation proceeding, Attorney B, who is also a lawyer with Law Firm C, was elected to the Board of County Commissioners of D County ("the Board").

The Board is the governing body of D County. Neither the Board nor its members are parties to the condemnation proceeding. However, the proceeding was filed at the direction of the Board and the Board has the authority to compromise or dismiss the action. Attorney B disclosed to the Board that Attorney A represents the defendant in the condemnation suit. He also advised the Board that he would refrain from consideration or comment, as a member of the Board, on the condemnation action. He promised to absent himself from meetings in which the matter is discussed and will not vote on any issue relating to the condemnation proceeding. After full disclosure from Attorney B, and upon the advice of its attorney, the Board unanimously resolved that it does not object to Attorney A's representation of the defendant in the condemnation proceeding, provided Attorney B continues to comply with the conditions previously noted. Attorney A's client, after the full disclosure, also has no objections.

May Attorney A continue as counsel for the defendant in the condemnation action while Attorney B serves as a member of the Board of Commissioners of D County?

Opinion #1:

Yes, subject to certain conditions. Lawyers should be encouraged to serve on public bodies, whether by election or appointment, because, by education and experience, lawyers are uniquely qualified for such service. Any barriers to public service by lawyers should be removed if procedures can be established that preserve the ethical values of the profession.

To avoid the appearance of impropriety or undue influence, a lawyer who is elected or appointed to a public body must be screened in his law firm from participation in an action brought by another lawyer in the firm against the public body or any subsidiary of that public body. See Rule 6.5 and RPC 53. This means that the law firm must adopt reasonably adequate procedures, under the circumstances, to isolate the lawyer from participation in the discussion of the matter with the other members of the firm and from exposure to any confidential information relative to the matter. Sharing of the legal fee generated by the representation, while not specifically prohibited, is discouraged. Although receipt of the fee by the board member/lawyer may not materially affect his judgment or neutrality, screening from participation in the profit earned from the representation increases the isolation of the lawyer and thereby enhances the public's perception that the lawyer is not exercising undue influence on the other members of the board. Therefore, if practical, a law firm should adopt reasonable procedures for withholding the lawyer's share in the profit (after overhead) from the legal fee earned from the representation.

The lawyer serving on the public body must also make full disclosure to the body on which he serves and be screened from participation in the public body's deliberations on the matter. The lawyer must do the following:

(1) Disclose in writing or in open meeting to the governing body his relationship to the matter involved;

(2) Refrain from any expression of opinion, public or private, or any formal or informal consideration of the matter, including any communication with other members or the staff of the governing body;

(3) Absent himself from any discussion of the matter by the governing body; and

(4) Withdraw from voting on all issues relating to the matter.

CPR 290 and RPC 53. These safeguards will help avoid any inappropriate influence on the other members of the governing body and will protect the lawyer's neutrality. See Rule 6.5(b). Nevertheless, if the lawyer is named, in an official or individual capacity, as a party in the action, it is unlikely that the lawyer will be able to maintain his neutrality on the public body or within the law firm. Therefore, it is a disqualifying conflict of interest for the board member's law partner or associate to undertake the representation of any party in litigation or other adversary action if the board member is a necessary party to the action in either his individual or official capacity. See RPC 53.

In RPC 160, the Ethics Committee ruled that a lawyer whose associate is an appointed member of a public hospital's board of trustees may not sue the hospital on behalf of a client. The opinion holds that permitting the lawyer to go forward with the suit against the hospital creates a conflict of interest. However, the opinion fails to distinguish between a suit against the hospital itself and a suit against the members of the board of trustees in their official or individual capacities. In dicta, it is implied that the holding in RPC 160 also pertains to a lawyer whose partner or associate is an elected member of a public governing body but the exact application of RPC 160 to this situation is unclear. For the reasons noted above, RPC 160 is overruled.

Inquiry #2:

May lawyers at Law Firm C accept new representation adverse to County D provided it does not involve litigation?

Opinion #2:

Yes, subject to the limitations set forth above, and further subject to the limitation that no lawyer in the firm may undertake the representation of a client if it is known or reasonably should be known that Attorney B will be named, in either his individual or official capacity, as an opposing party in the lawsuit. See RPC 53.

Inquiry #3:

May lawyers at Law Firm C accept new representations in litigation matters adverse to D County?

Opinion #3:

Yes, subject to the limitations set forth in Opinion #1 above.

Inquiry #4:

May lawyers at Law Firm C accept new representations in which the Board itself, or members of the Board in their official capacity, are adverse parties?

Opinion #4:

See Opinion #1 above.

Inquiry #5:

Attorney X, another member of Law Firm C, serves on the board of a non-profit organization. Attorney Y, also of the firm, is representing a client with a claim against the organization. May Attorney X continue to serve as a member of the board if Attorney Y files an action against the organization on behalf of the client?

Opinion #5:

Lawyers should be encouraged to serve on the boards of non-profit organizations for the same reasons that they should be encouraged to serve on government bodies. Therefore, subject to the screening and disclosure conditions set forth in Opinion #1 above, a lawyer may continue to serve on the board of a non-profit organization although another member of the firm brings an action against the organization. RPC 160, as noted above, is overruled.

Inquiry #6:

Assume that the preceding inquiries concern representation of a client in a transaction rather than representation in an adversarial proceeding or litigation. If another lawyer in the firm serves on a board of the public body or non-profit organization that is a party to the transaction, may the representation continue if the lawyer serving on the board of the public body or non-profit organization follows the procedures set forth in Opinion #1?

Opinion #6:

Yes.