In 1983, the American Bar Association (ABA) comprehensively defined corporate counsel’s ethical duties in situations where a corporate officer engages in conduct which could substantially harm the organization. In such cases, the nature of the corporate attorney’s duties depends on whether the officer’s conduct is illegal or whether the officer made a policy decision which falls short of illegality. Rule 1.13 of the Model Rules of Professional Conduct imposes the duty on corporate counsel to take steps to stop corporate officers from engaging in illegal conduct which is likely to result in substantial injury to the organization. Conversely, counsel is obligated to defer to the corporation’s representatives in matters falling short of illegality. The rise of malpractice litigation spawned a series of cases which held attorneys may be liable for not taking remedial action to prevent their client’s representatives from engaging in illegal acts. This new form of attorney liability has been called liability for “aiding and abetting a breach of fiduciary duty.” This implies an attorney may be held liable for aiding any bad policy decision later found to be a breach of a corporate representative’s fiduciary duties to the organization. A corporate attorney’s duties of loyalty and confidentiality flow to the organization and its many representatives, who also owe a duty to the organization. The new aiding and abetting breach of fiduciary duty claim attempts to define and place ethical restraints on such complicated relationships. Such restraints appear to hold attorneys responsible for any advice which can result in clients’ unwise policy decisions. Although arguments exist for extending attorney’s liability to participation in legal but harmful policy decisions, the cause of action should be limited to attorneys who knowingly and substantially assist their clients’ clear violations of positive law.
St. Mary's University School of Law
Stanley Pietrusiak Jr.,
Changing the Nature of Corporate Representation: Attorney Liability for Aiding and Abetting the Breach of Fiduciary Duty Comment.,
St. Mary's L.J.
Available at: https://commons.stmarytx.edu/thestmaryslawjournal/vol28/iss1/6
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