Presentation given by Cory Sinclair (Parsons Behle & Latimer) on June 17, 2019

1. parsonsbehle.com
Unique Ethical Issues Facing
In-House Counsel
Ten things you need to know as In-House Counsel to
remain compliant with the Rules of Professional Conduct
Cory Sinclair

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Issue 1: In-House Compensation
 Rule 1.8 prohibits a “business transaction” with a
client except:
o When transaction is fair and reasonable for both parties,
o Client is advised in writing of desirability of seeking
independent counsel,
o Client gives informed consent,
o Client given reasonable time to evaluate and secure
opinion of outside counsel
 Kaye v. Rosefielde, 75 A.3d 1168 (N.J. Super. Ct. App.
Div. 2013) (in-house counsel committed ethical violation
by forming new company on behalf of client and granting
himself ownership without compliance of rule 1.8).

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Issue 2: Exercising Independent Judgment
 Rule 5.4 seeks to protect an attorney’s professional
and independent judgment by limiting the influence
that non-lawyers have on the attorney-client
relationship.
 Scenario: client is considering two courses of
action. One will increase value of stock in short run
but with greater long term risk. The other will
provide long term stability but short run losses or
stagnation.

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Issue 3: Licensing
 Rule 14-719 governs admission of in-house counsel
to practice law in the State of Utah.
o Application based
o Proof of graduation from approved law school
o Licensed in at least one state
o Resident of Utah or company maintains office in Utah
o Employed and practices law for company (in non-law firm)
o Affidavit signed by both applicant and employer of
disclosed limitations of in-house admission
o MPRE
o Application must be filed within 6 months of accepting
employment

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Issue 4: Competence of “General” Counsel
 Rule 1.1 requires “competence” in the particular
field in which the lawyer is giving legal advice.
o Know when you are outside your expertise
o CLE history can be factor that is evaluated
o Learn e-discovery and litigation holds (at least the basics)
o Learn privacy-related issues
o Develop broad research tools

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Issue 5: Where to get licensed
 Rule 5.4 prohibits the “unauthorized practice of law”
in jurisdictions in which you are not licensed.
o Most states require a lawyer who “regularly offices” in that
state to be licensed in that jurisdiction.
• Varies by state
• Some states allow “single client” license
 Crews v. Buckman Labs, 78 S.W.3d 852 (Tenn.
2002) (in-house lawyer learned that GC was not
licensed in that state and felt ethically compelled to
notify state bar. She was fired and then brought
retaliation lawsuit).

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Issue 6: Conflicts when only representing
one client
 Rule 1.7 prohibits concurrent conflicts of interest
o Directly adverse to current client
o Significant risk that representation will be materially limited
by responsibilities to client, former client, third party, or
personal interest of attorney
 Joint ventures, subsidiaries, sister corporations, related
entities, trade association boards all present potential
conflict issues.
 In re Teleglobe Comm’ns Corp., 493 F.3d 345 (3d. Cir.
2007) (in-house lawyer performed work for multiple,
related entities. During dispute, attorney notes were
made available to all parties because each believed
attorney represented that specific entity).

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Issue 7: Who is the client?
 Upjohn opinion where U.S. Supreme Court rejected
“control group” test for defining client.
o No clear replacement standard provided
o Subject matter test has emerged = if subject matter is to
give legal advice to a corporation and the communication
is authorized by upper management, then communication
is privileged.
o Comment 7 to rule 4.2 = attorney client relationship
extends between counsel and one who “supervises,
directs, or regularly consults with the organization’s lawyer
concerning the matter.

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Issue 8: Lawyer hat v. Business hat
 No bright-line test for delineation between attorney
hat and business hat.
 Would following advice of non-lawyer subject that
person to unauthorized practice of law complaint?
 Finova Capital Corp. v. Lawrence, 2001 U.S. Dist.
LEXIS 2087 (N.D. Tex. 2001) (documents regarding
how to structure business transaction privileged, but
documents regarding corporate minutes, insurance
matters, and executive compensation were not
privileged).

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Issue 9: Copying in-house counsel on all
communications
 Non-lawyers have a difficult time with this rule.
 Privilege only extends to communications between
an attorney and client for the purpose of seeking
legal advice.
 “facts” cannot be shielded by copying attorney.
 Develop a practice of identifying when legal advice
is sought and/or provided and train employees and
executives on difference.

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Issue 10: Up-the-ladder reporting
 First question when things go south is typically,
“what happened to the lawyers?”
 If publicly traded, legal obligation to report material
violations of the law up the ladder (and ethical
violation even if not publicly traded).
 Develop whistleblower policies, including policy for
investigating allegations of wrongdoing, responding
to party who raised issue, and non-retaliation policy.

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Bonus Issue: Resources
 Always start with the Model Rules of Professional Conduct,
including the comments and annotations. It is a great resource
and it covers many of the “basic” issues.
 ABA Center for Professional Responsibility
(https://www.americanbar.org/groups/professional_responsibility/r
esources/
 This ABA website has compiled many useful resources, including
articles, formal ethics opinions, links to all bar associations and
other professionalism reports
 www.legalethicsforum.com. This is a great blog that is populated
by dozens of law school professors and recognized practitioners
on legal ethics.

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 Cory Sinclair
801.536.6727
csinclair@parsonsbehle.com
Thank You