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Advancing the Client’s Interests In Contract: Delicacy & Nudity Riders
Raisa Choudhury, CDC Fellow Fall 2022
In the mid-2000s, True Crime had the idea to put together an episodic television series titled “Femme Fatales.” They offered the lead role in an episode titled “Jailbreak,” to Anne Greene after she auditioned for the role. Green accepted and signed an employment agreement, along with a personal release and a nudity rider. A year after she completed her obligations to the show, Greene filed a lawsuit against True Crime claiming that they sexually harassed her, caused her intentional inflictions of emotional distress, and were negligent in fully disclosing the facts surrounding her role. In a surprising turn of events, True Crime filed a cross-complaint alleging Greene breached the express terms of the nudity rider by refusing “to appear and perform in nude scenes and/or simulated lovemaking scenes,” thereby causing them to incur additional expenses and delay in shooting.
So, what is a nudity rider and what is it comprised of? A nudity rider is a separate document from the employment contract that sets out the levels of nudity the receiving party is expected to undergo and the actions that they will be expected to perform. The intention behind a nudity rider is to protect both parties by setting clear boundaries on what will be done and providing future evidence that any videography or photography was obtained consensually. Nudity riders have specific descriptions of the amount of skin shown during the agreed-upon session and they require the receiving party to consent to the stipulations. Depending on the situation, a nudity rider may also stipulate how the photos and videos that are taken from the session can be used.
Essentially, the aim of writing a nudity rider is to prevent any misunderstandings or future legal disputes. For example, in Greene’s case, her lawsuit was deemed frivolous by the courts because she signed the nudity rider, and the rider disclosed in detail the amount of skin that would be shown on video. This clearly shows the importance of nudity riders and their role in protecting drafters from vulnerability to claims of sexual harassment.
So, the question then becomes, why is a separate document necessary to draft a nudity clause? Is it not easier to simply have a nudity clause in the main employment contract? To answer these questions, it is important to note what the purpose of contracts is. A contract is an agreement between parties, creating mutual obligations that are enforceable by law. Once signed, this contractual agreement forms a promise that certain rights and obligations will be fulfilled by each party. In essence, a promise and a meeting of the minds are at the heart of every contract. A well-drafted contract provides certainty, clarity, and protection if problems arise in the future. While the details described in nudity clauses can be added to main employment contracts, the sensitivity and delicacy surrounding a person being filmed or photographed in a vulnerable position make it improper to do so.
Contracts form promises between two willing parties, and it would be a disservice to both parties if the gravity of a person being filmed in nude or semi-nude positions is not expressed. By having a detailed description of what the receiving party is expected to do in a nudity rider, a correct amount of importance and consideration is placed on it before the receiving party signs off on the contract.
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Can an LLC be classified as a non-profit and receive tax-free benefits?
By Mike Masci
Mike Masci, CDC Fellow Fall 2022
Yes, but proceed with caution! Because Limited Liability Companies (LLCs) are a relatively new entity type, with all 50 states having adopted LLC statutes by 1996i, the Internal Revenue Service (IRS) has recently issued guidance regarding how an LLC can receive non-profit status under Section 501(c)(3) of the Internal Revenue Code.ii In this notice, the IRS outlined the requirements that the LLC must satisfy to qualify as tax-exempt for IRS purposes.
IRS Requirements
First, the entity must be organized and operated exclusively for exempt purposes and its assets are dedicated to an exempt purpose and do not support private interests.iii In addition, the LLC must have both of its articles of organization and operating agreement include the following provisions:
· Require each member of the LLC to be an organization described in Section 501(c)(3)
· Express charitable purposes and charitable dissolution provisions
· Express Chapter 42 compliance with provisions of Section 508(8)(e)(1) if the LLC is a private foundation
· Contingency plans in the vent that one or more members cease to be a Section 501(c)(3) organizationiv
The IRS has noted that some state LLC laws may restrict the types of provisions that can be included in the articles of incorporation. In this case, the requirements set forth above will meet if the (1) operating agreement contains the required provisions and (2) articles of incorporation do not contain contradictory provisions.v In addition, the LLC must represent that all provisions in its articles of organization and operating agreement are consistent with applicable state LLC law and are legally enforceable. vi
Finally, the organization files Form 1023 with the IRS along with the required provisions of the articles of organization and operating agreement, and then IRS will supply the entity with a determination letter stating they have received non-profit status.vii
General Considerations
Section 501(c)(3) of the Internal Revenue Code has been used since 1969 for entities to organize as non-profit companiesviii but this was before the IRS recognized LLCs as an entity type in 1997ix. Since the Internal Revenue Code was written before the IRS recognized LLCs as their own entity structure, there are potential issues and considerations one must consider before choosing to become a non-profit LLC. In addition, the guidance regarding LLC tax-exempt status has not been fully fleshed out due to LLCs being a creation of state law and tax-exempt status being a federal law. The IRS has mentioned some potential issues that may arise, but there is currently no clear resolution:
· Most states’ LLC statutes specify that an LLC may be formed for any lawful purpose. In a few states, however, the LLC statute appears to require that an LLC be a profit-seeking enterprise.
· Are there any other provisions of the LLC law in one or more states that may affect the ability of an LLC to qualify under section 501(c)(3)?
· Most state LLC laws include default provisions granting the members of LLC certain economic rights that would be inconsistent with IRC Section 501(c)(3) if the members are “private shareholders or individuals” within the meaning of IRC Section 1.501(a) – 1(c).x
MA Considerations
Massachusetts will classify an LLC for tax purposes the same way they are for federal income tax purposes.xi This means that after the entity has received its IRS determination letter, a copy must be filed with the Corporate Division of Massachusetts Department of Revenue and once the letter has been filed, there will be no subsequent Massachusetts income tax.xii
Although the non-profit LLC will receive no Federal or Massachusetts income tax, it is still important to consider other tax implications. In 2009 the Massachusetts Supreme Judicial courts heard the case of CFM Buckley/North, LLC v. Board of Assessors of Greenfield, where it held that LLCs do not qualify for the charitable exemption from local real and personal property taxes.xiii This is because to qualify as a “charitable organization” for the purposes of receiving an exemption from real and personal property taxes, the organization must be “incorporated”.xiv Pursuant to M.G.L. c. 156c, section 2(2), LLCs are defined specifically as “unincorporated organizations formed under c. 156c and having 1 or more members.”xv This in turn means that any non-profit LLCs in Massachusetts will be responsible for all of their real and personal property taxes, which can amount to a significant tax liability.
Takeaways
Although the IRS and Massachusetts Department of Revenue allow for LLCs to be exempt from income taxes, one must proceed with caution because the real and property tax liability can become substantial. In addition, there is a lack of case law involving non-profit LLCs, so it can be difficult to determine how a court will rule.
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i Larry E. Ribstein, LLCs: Is the Future Here? A History and Prognosis, 13 A.B.A 10, 10-13 (2003).
ii In 2021, the IRS issued Notice 2021-56 to explain the requirements an LLC must meet to qualify for an exemption from income taxes.
iii I.R.C. § 501(c)(3). iv I.R.S. Notice 2021-56.
v Id.
vi Id.
vii Form 1023: Limited Liability Companies Eligible for Exemption, I.R.S. (Oct. 05, 2022), https://www.irs.gov/charities-non-profits/form-1023-limited-liability-companies-eligible-for-exemption.
viii A Brief History of Nonprofit Organizations (And What We Can Learn), NONPROFIT HUB, https://nonprofithub.org/a-brief-history-of-nonprofit-organizations/ (last visited Nov. 29, 2022).
ix Sandra Feldman, Understanding LLC Law: Its Past and its present, WOLTERS KLUWER (Sep. 30, 2021), https://www.wolterskluwer.com/en/expert-insights/understanding-llc-law-its-past-and-its-present
x I.R.S. Notice 2021-56.
xi Limited Liability Companies and Limited Liability Partnerships, MASS. DEP. OF REV. (Oct. 21, 2022, 5:00 PM), https://www.mass.gov/service-details/limited-liability-companies-and-limited-liability-partnerships.
xii Stephen Fishman, How to Form a Massachusetts Nonprofit Corporation, NOLO, https://www.nolo.com/legal-encyclopedia/forming-nonprofit-corporation-massachusetts-36069.html#:~:text=Once%20your%20corporation%20has%20its,your%20nonprofit’s%20IRS%20exemption%20letter (last visited Nov. 29, 2022).
xiii CFM Buckley/N., LLC v. Bd. of Assessors of Greenfield, 902 N.E.2d 381, 387 (2009).
xiv Id. at 383-384.
xv Id. at 384.
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How does a client-centered approach look in real-time?
Andrew Ashkar, CDC Fellow Fall 2022
When a client engages you to start a business, they may have a clear vision of the result they want to achieve, but they may need your expertise on the mechanics of making it happen. Other times, the client may be focused solely on the mechanics and require guidance on the mission. Regardless of where the client is at, taking a client-centered approach is crucial to the success of the transaction because starting a business is an art, not a science, and the client’s vision is their masterpiece. You want the client to feel empowered, in control, and that their needs have been met. But what happens when the client seems satisfied until the end of the process when they suddenly get cold feet or raise a new issue?
In such cases, thinking quickly and adapting to the situation with the facts at hand is a quality that’s embedded in the legal profession. However, giving the client space to breathe and time to reflect on important decisions is equally important. This approach enables the client to feel more confident when they ultimately make that decision. Even if you’ve laid out all the possibilities with the facts presented by the client, taken a specific course of action, and are right at the finish line, if the client raises concerns that were not previously discussed, the attorney needs to take a step back and refrain from inundating the client with more options or scenarios.
A client-centered approach not only fosters trust, which is essential when working with someone to create something meaningful, but it also lets the client know that they are in charge, and their vision will manifest on their schedule when they’re ready. This is particularly important when the attorney is organizing an entity that the client may operate for their lifetime. The entity is the client’s brainchild, and they should feel secure and confident in what they’re bringing into the world. A client-centered approach requires the attorney to create a working relationship with the client and move with them down the path they choose.
For the attorney, this may be just one transaction, but for the client, it’s a campaign. A client-centered approach puts the client at the center of the thinking, considers the entire client journey, gives the client what they’re looking for, requires clear communication, and does not operate under assumptions.
Attorneys may feel they have the best solution or strategy for the client, but putting the client at the center of the thinking allows them to express their vision fully, and the attorney’s job in a client-centered approach is to align the client’s brain and heart. However, an overambitious client may need to be cautioned when their heart overrides their thought-process. Nonetheless, the client must feel that they are at the center of the thinking and not coerced into making certain decisions.
A client-centered approach must begin with the end in mind. It’s not a matter of executing the transaction and being done with it. The attorney is required to consider the entire client journey and lay out all foreseeable scenarios that may impact the transaction. Additionally, if a client is engaging an attorney, they likely have an idea of what they’re looking for. It may be their vision or mission, but either way, the client will be vocal about what they want from the beginning. It’s the attorney’s job to listen closely and not read between the lines, adding their own values to the client’s mission.
Clear communication requires the attorney to be attentive to the client’s confusion or lack of understanding of a legal concept. This requires emotional intelligence and the ability to read body language. The client may be confused even if they don’t explicitly state it, but it may be evident from their facial expressions. Taking a step back and ensuring the client is on the same page is necessary for a client-centered approach to be effective.
Finally, a client-centered approach cannot operate at its full capacity if the attorney is making assumptions. Assumptions can take many forms and ultimately stem from a gap in understanding that is filled with non-explicit assertions. If the client does not communicate a detail or methodology to the attorney, the attorney must not assume it. Assumptions have rarely produced satisfactory results in human life and are even less likely to create satisfaction in a legal transaction.
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Advances in Contract Law: Protecting Hollywood’s Naughty Little Sisters
Stefanie Grimando, CDC Fellow Fall 2022
If you’re involved in directing or shooting media, you’ll likely encounter nudity in some fashion. Most photographers or filmmakers will eventually have to implement a nudity rider to accompany consent agreements.
Models and actors have to consent to what they’ll do during their performance, and great detail goes into how much—if any—nudity they will allow to be filmed or photographed. A consent agreement is a legal contract governing a relationship where one party gives informed consent to participate in an activity. In terms of Hollywood sex scenes, how do directors and actors come to an agreement? Nudity rider incoming! This contract addition could be as simple as not allowing nudity whatsoever or may allow shots of particular body parts or a body double. The nudity rider spells out just how much skin an actor will show, before filming or even auditioning occurs. Success is telling—major celebrities have more freedom to decline work that they don’t agree to do, whereas relatively unknown actors may not have the same liberties if they want to secure as much work as they can. Where Hollywood starlets are protected by SAG-AFTRA, which states “the appearance of a performer in a nude or sex scene or the doubling of a performer in such a scene shall be conditioned upon his or her prior written consent,” adult film stars are often left unprotected by some higher power. If Anne Hathaway can decline to film a racy birth scene, can Sasha Grey decline anal sex if it’s not specifically outlined in her contract? Why should Ms. Grey feel obligated to hire an attorney or agent when a union could specialize in her line of work?
The Screen Actors Guild represents upwards of 160,000 actors, journalists, dancers, singers, and other media professionals. With SAG formed in the 1930s and pornography having been officially invented in the early 1800s, why is it that when I search “porn” on SAG-AFTRA’s FAQ page, it yields no results? Are adult film actors not worthy of union protection such as those of the likes of Bill Cosby or George Takei? Maybe Hollywood doesn’t want to admit that actors performing on the other side of Mulholland Drive deserve the same protections as its A-List celebrities. So the adult film industry needs to take matters into its own hands. Historically, Hollywood has neglected to associate its movie stars with its adult film actors. Advocates for adult film actors’ rights argue that SAG should create a branch specifically catered to adult film actors. The mainstream entertainment industry ought to recognize adult media stars as performers worthy of legitimate protections, of empowerment. Where Sharon Stone’s Hollywood success could be attributed to her Basic Instinct nudity, perhaps adult film actors should be given more credit. Where all entertainers strive to earn a living, perhaps it is time SAG caters to adult film actors, offering them union protection. Destigmatize sexual expression. Protect the rights and freedoms of adult industry performers. Next stop: the decriminalization of sex work, stereotypes be damned.
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Protecting Brand Identity After a Merger
Stephanie Sabino, CDC Fellow Fall 2022
A successful organization depends heavily on its brand identity. It pertains to a brand’s outward appearance while also reflecting the purpose behind branding and the methods used by a business to take actions that will help create a particular impression in the minds of customers. Nike’s “swoosh” or Apple’s “bitten-off apple” logos serve as examples of this. Strengthening a company’s brand identity helps to increase its reputation and market presence. The identities of the organizations involved are substantially affected when two or more businesses merge, leading to fears of identity loss on one or both sides and uncertainties about the identity of the new business, which may make it harder for people to trust and identify with the merged corporation. As a result, one of the most crucial duties on the plates of top officials is maintaining brand identity following a merger. It’s important to distinguish between identity and organizational culture. While “culture” relates to how a business is run and the cultural distinctions inside the organization, “identity” is more concerned with the nature of the business itself. When competitive firms merge, maintaining brand identity can be more challenging. This outcome is predicted given that individuals who previously competed with one another are now required to work cooperatively in a matter of seconds. If the merging firms served various market segments or clients, they would also need different organizational and managerial techniques. Not every managing board has the resources necessary to complete this role. How crucial is it to maintain the brand’s identity after a merger? It is of highest significance.
Organizations that put off focusing on identity integration too long run the danger of experiencing internal crises and staff attrition. This might occur because, in spite of the companies’ similarities, each team inside each one may have been adopting a different set of tactics, leading to a disconnect between the teams and the organization as a whole. Not to mention that a lack of integration could harm their customer base and drive business to other competitors. Brand identity integration can be achieved through different approaches. In their paper “Making 1+1=1: The Central Role of Identity in Merger Math,” authors John Kimberly and Hamid Bouchikhi offer four potential approaches to achieve this goal: assimilation, confederation, federation, and metamorphosis. Assimilation is when one organization entirely adopts the functions and identity of the other. Both organizations can maintain their individual identities, titles, management systems, and autonomy in decision-making through confederation. Federation enables the joined organizations to maintain their individual identities while forging a shared identity that will enable them to prosper. Finally, a metamorphosis entails both businesses shedding their previous identities and forming a brand-new organization that didn’t exist before the merger.
Which brand identity integration strategy is the most effective for a company? Depending on the particular traits of the organizations that are merging, this question would warrant a variety of answers. Although a more restrictive strategy, like assimilation, is certainly more economical, it can also bring difficulties because it calls for greater focus on identity-related concerns. Organizational executives may ultimately decide against merging brand identities altogether since they would find it more cost-effective to maintain both or one of the firms’ distinct identities rather than integrate them.
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The Community Development Clinic & Our Dynamic Clients Featured on UMass Law Website
The work of the CDC was the subject of a feature article by Debra Hazian, featuring our fellows and clients.
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Black Businesses Are Booming, But Are They Surviving?
By Alejandra Spruill
Alejandra Spruill, CDC Fellow Fall 2022
Over the course of the semester [at the Community Development Clinic], Stephanie Sabino and I have recognized the variety of opportunities and challenges facing Black owned businesses, not only present in the South Coast area surrounding our university, but throughout the United States. As we gathered information and began crafting a presentation our colleague, Jim Brady, suggested hooking the audience in with statistics–his led me to wonder what the numbers are for Black businesses as the post-pandemic world dawns. Facing numerical realities showed our cohort the pressing need
of the circumstances. The time before the pandemic feels like a colored with a rose-colored haze, although certainly not perfect in the moment it exists immune from the loss and sociopolitical conversion of the 2020s. To better speak to my audience, I had to find numbers that reflect our changing and expanding society.The COVID-19 pandemic threw life and business as we knew it into new realms, the previous standard has shifted due in no small part to the Black Lives Matter movement. Mostly the numbers are tilting toward Black owned business success in the short term although I believe the key to generational wealth in our community and others is rooted in longevity and sustainability. Unfortunately, it seems like our governmental systems are ill-equipped to support this sector of the population. Only 29% of Black owned businesses which applied for the Trump and subsequently then Biden administration “Paycheck Protection Program” were able to surmount the red tape in place and receive protections from the federal government when compared to 60% of their white counterparts [Footnote 1].
Intervening in the way policy plays out is one place where we as attorneys and future attorneys come in, disparities must be addressed from the root, no monolith is challenged but for the first filing, the first dispute at law, which forces those who might be otherwise powerless (or powerful enough to look away) on notice of the people’s demands. The businesses which have survived the pandemic were Black already, but now that they are labeling themselves as such are they seeing the community support imagined by such labeling? A study from the Annals of the American Association of Geographers in association with University of Washington found that restaurants in 20 major cities which labeled themselves as minority or Black owned are seeing long-term effects of a decrease in business as compared to both pre-pandemic numbers and the surge in interest in labeling which occurred in the wake of George Floyd’s murder in 2020 [Footnote 2]. This study uniquely used cell-phone data to track visitation and patronage [Footnote 3].
On the other hand, the number of Black owned businesses is higher than it has ever been before [Footnote 4]. Women are leading the entrepreneurial way, and we at the clinic have seen this across the clients we’ve encountered this semester [Footnote 5]. This explosion in entrepreneurship is coupled with 4.2 million women exiting the traditional workforce since February 2020 [Footnote 6] Pre-pandemic, in 2019, Wells Fargo released data finding that Black women are presently opening 35% of all Black owned business, a figure that is 10% greater than the share female owned businesses have in the American economy as a whole [Footnote 7]. This boom is not occurring in a racial vacuum, among Hispanic and Asian entrepreneurs there is an increase in number of open businesses as compared to before the pandemic [Footnote 8]. Nevertheless, volume alone does not equate to success, and resilience does not pay the bills. Typically recession proof businesses are facing labor shortages, even jobs with the most lucrative and competitive compensation plans these businesses can offer are drawing no applicants [Footnote 9]. And how can you compete when multinational corporations are promising potential managers six figure salaries within a year of hiring [Footnote 10].
Ultimately the further prosperity of Black owned businesses remains to be seen as we embark into the rest of the 2020s, no longer the roaring dream society collectively imagined as this era dawned. It is my sincere hope that through financial literacy, innovation, and community support Black businesses surrounding UMASS will continue to expand and make their mark.
1 Jason Lalljee, BLACK-OWNED BUSINESSES TOOK A PANDEMIC HIT, BUT THEY’RE DOING BETTER THAN EVER NOW- LARGELY BECAUSE OF BLACK WOMEN BUSINESS INSIDER (2022),
2 Kim Eckhart, BLACK-OWNED RESTAURANTS DISPROPORTIONATELY IMPACTED DURING PANDEMIC UW NEWS
3 Id.4 Sabrina Lynch, BLACK BUSINESSES ARE BEGINNING THEIR POST-PANDEMIC BOOM UP 38% NASDAQ
5 Id.
6 Jasmine Tucker, WOMEN GAINED 57% OF JOBS ADDED TO THE ECONOMY IN OCTOBER BUT STILL NEED …7 Lalljee, supra note 1.
8 Lynch, supra note 3.
9 Tracy Jan, AFTER RECESSION, A BLACK BUSINESS BOOM THE WASHINGTON POST
10 Id. -
The Community Development Clinic Welcomes Spring Fellows
Pictured: (From Top Left) Austin Gutierrez, Alexandra Rampy, Madison Boudreau, Philip Light, (From Bottom Left) Justin Taylor, Laurie Miller, Hadassah Gomez, Lauren Thomas
The selection for this semester’s group of fellows was very competitive, with several students competing for each spot in the clinic. We’re honored to welcome such an impressive group of fellows.
This spring, the fellows have hit the ground running, jumping into supporting existing clinic clients and onboarding new clients. The Community Development Clinic supports entrepreneurs, small businesses and non-profits in Massachusetts. We’re working with a number of transactional client matters this semester, including non-profit dissolution, entity merger, board fiduciary duty consulting, land use, zoning, municipal law, and entity formation.
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A Federal Long Arm for Torts? The Alien Tort Statute Clarification Act
By James Brady
In May of 2022, Senators Richard Durbin (D-IL) and Sherrod Brown (D-OH) introduced legislation “which will expressly state that the Alien Tort Statute (ATS) applies extraterritorially“. What does this mean? How did we get here? What problem is this solving?
According to the senators, “This clarification will ensure that foreign national victims can hold perpetrators within the jurisdiction of the United States accountable for human rights violations that occur abroad”.
Recent world events have demonstrated that the world’s evolution toward civility is still wrought with war crimes, crimes against humanity, and even in some cases, genocide. As the Nazis fled Europe to South America after WWII, these senators wish to ensure that the U.S. does not become a “Safe haven” for those who commit these crimes. The senators are looking to hold these individuals accountable both criminally and civilly. On the criminal front, a proposed bill looks to expand the war crimes statute to allow the Department of Justice to prosecute foreign war criminals in the U.S. On the civil front, the bill looks to expand the 1789 Alien Tort Statute to apply extraterritorially, allowing non-U.S. Citizens to file civil suits in U.S. Federal Courts for violations of international law.
James Brady, CDC Fellow Fall 2022
It was hoped that the “current” Alien Tort Statute of 1789 would allow this type of litigation. The Alien Tort Statute (“ATS”) gives federal courts jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350.4
However, recent cases have gutted this possibility. For example, in Nestle USA, Inc. v. Doe, 141 S. Ct. 1931 (2021), t
omestic nexus” for their claims and that domestic corporations participating in the global supply chain, will have a strong argument for not being held liable for activities of foreign third parties who violate international law.
he Supreme Court held 8-1 that plaintiffs suing domestic corporations for aiding and abetting international law violations overseas had failed to allege a sufficient “domestic nexus” for the conduct to support liability under the Alien Tort Statute. Here, the Nestle Court limited the “extraterritorial” reach of the Alien Tort Statute, holding that plaintiffs bringing suit under the ATS must establish a “d
The proposed legislation will further clarify that the Alien Tort Statute applies to extraterritorial applications of law, seemingly as originally intended.
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New Business Entities, Authorized Agents, and the Duty of Confidentiality
Community Development Clinic Advanced Fellow Matt Walker Fall 2022
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.
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Note 1. https://www.mass.gov/supreme-judicial-court-rules/rules-of-professional-conduct-rule-113-organization-as-client#-a-
