By Matt Walker
December 3, 2022
Confidentiality is central to an attorney’s professional relationship with their clients. When representing an individual, there is little doubt as to whom the confidentiality is owed. However, this is not always the case when representing a business entity. Especially when a business entity is newly formed or in the process of being formed, there can be ambiguity in terms of the authorized agents with whom an attorney may confer.
As per the Massachusetts Rules of Professional Conduct, Rule 1.13 (a) “a lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” (Note 1) While this may seem simple when representing well-established businesses, issues can more easily arise with new business entities. Typically, this type of relationship begins with an individual as the attorney’s client, but transitions to the business entity as the client after the entity has been formed.
At UMass Law’s Community Development Clinic, we are frequently presented with clients looking to start new business entities and are therefore confronted with the issue of authorized agents quite often. Normally this isn’t an issue with new entities as they are typically sole proprietorships already in existence or entrepreneurs looking to incorporate as non-profits or C-corporations. Occasionally, we are approached by multiple individuals working on one project. Though it happens rarely, disputes over control of a new organization do happen in these situations.
Prior to formally incorporating a business entity, we are representatives of the individuals who come to our clinic. Once we have incorporated their entity, we transition to representatives of the organization rather than the individuals themselves. It is most difficult to determine who we may speak with in a situation where an entity has been formally incorporated before reaching out to the clinic, but where infighting has persisted. In such a situation, to maintain confidentiality, we are forced to look to the board of directors and officers of the organization, regardless of who has approached us on the organization’s behalf.
In one particular instance, we were faced with an organization that had two members claiming to be the organization’s sole representative, neither of whom had any paperwork to prove that the organization was even incorporated. Luckily, we were able to find the organization’s legal name and find its board of directors and officers on the Secretary of the Commonwealth of Massachusetts’ website. We found that both individuals were members of the board of directors which put to rest our fears of having to work with one person over the other, which we knew would cause even more in-fighting.
The project gave us some experience in mediation, and by the end of our semester both individuals cooperated to install one as the new president of the organization while the other chose to leave the organization and pursue a new career. This type of issue is a prime example of how this rule of professional conduct operates in a legal practice and how attorneys can find themselves constrained by confidentiality from the onset of a client’s legal representation.
Note 1. https://www.mass.gov/supreme-judicial-court-rules/rules-of-professional-conduct-rule-113-organization-as-client#-a-