Attorneys are often eager to serve on boards of directors of outside organizations and with good reason. After all, membership on a board can increase the attorney's visibility, create connections that lead to new business and, in the case of non-profit organizations, help the attorney give back to the community. For younger attorneys, service on a board can also provide invaluable "real-life" business experience that cannot be replicated in a law firm.
Although attorneys serving on boards generally act only in their capacity as board members, attorneys often cannot resist acting like an attorney. For example, the attorney may feel inclined to advise the organization regarding the legal implications of a particular course of action under consideration. Indeed, in the event that the organization is faced with any legal issue, the other members of the board will undoubtedly solicit, and may rely upon, the attorney's opinion as to the legality of the organization's actions.
As a result, it can often be ambiguous regarding whether the attorney is providing legal services to the organization in the context of an attorney-client relationship or whether the attorney is simply acting in her or his capacity as a board member. This confusion can lead to a wide range of problems. For example, other board members may erroneously believe that communications with the attorney are protected by the attorney-client privilege, even though the organization and the board members are not the attorney's clients.
Another concern is the effect on the insurance coverage available to the attorney. Board members can face a wide variety of potential claims, and the risk for a claim can be heightened if the attorney board member is perceived as rendering legal advice to the organization regarding a course of action. In such circumstances, the organization's directors and officers liability insurance carrier may argue that coverage is unavailable for any subsequent claim because the attorney was acting in her or his capacity as an attorney, while the attorney's professional liability insurer may conversely argue that coverage is precluded due to the attorney's role in the organization. As a result, the attorney may be caught in the middle of a coverage dispute and, in the worst case scenario, may even be left without any insurance coverage for a claim.
Regardless of whether there is an attorney-client relationship between the attorney and the organization, an attorney's service on a board can also give rise to conflicts of interest for the attorney and the attorney's law firm. While conflict of interest issues typically involve conflicts between multiple clients, Rule 1.7 of the Georgia Rules of Professional Conduct provides that "[a] lawyer shall not represent or continue to represent a client if there is a significant risk that the lawyer's own interests or the lawyer's duties to … a third person will materially and adversely affect the representation of the client." Thus, even if the organization is not a client of the attorney, the attorney's service on the board of the organization may create conflicts.
Finally, when an attorney serves on the board of an organization, the attorney's law firm may be viewed as supporting or having an association with the organization. As a result, any negative publicity or controversy involving the organization may implicate the law firm in the eyes of the public.
Tips for limiting risk
Despite these various risks, there are a number of steps that law firms can take to ensure that the attorney and the law firm are protected while enjoying the benefits of the attorney's service on outside boards.
For example, law firms should consider enacting a written policy governing service on outside boards. This policy can vary depending on whether the entity is for-profit or non-profit, or where the organization is a client of the firm. Generally, however, a law firm should consider including certain provisions in its policy regarding service on outside boards.
The law firm should consider requiring that the attorney obtain firm approval before agreeing to any board service, and the firm should also consider retaining the right to revoke approval at any time. This allows the firm to evaluate the pros and cons of the attorney's service on the board and to reevaluate the relationship in the event that circumstances change. The firm should also consider noting the attorney's relationship with the organization in the firm's conflicts clearance database to avoid any potential conflicts with current or future clients.
Next, the law firm may consider requiring that the attorney confirm the following with the organization, as applicable:
- The attorney will act solely in a business capacity;
- No attorney-client relationship exists between the law firm and the organization; and
- No communications with the attorney will be protected by the attorney-client client privilege.
Confirming the scope of the relationship with the organization up front will help avoid any ambiguity that could lead to negative consequences later. Likewise, in the event that legal issues arise, the attorney should remind other board members that the attorney is acting solely in a business capacity and recommend that the organization retain outside counsel, where practicable.
It may also be helpful to remind the attorney that the law firm's professional liability insurance generally will not cover claims arising out of the attorney's service on the board. Instead, the attorney should confirm that the organization has adequate directors and officers insurance and appropriate indemnification provisions for board members.
Finally, the law firm should consider prohibiting or requiring advance approval of the use of the firm's name or logo in the organization's marketing, public relations, or external literature. While it may be acceptable to identify the board member's association with the law firm in, for example, a biography on the organization's website, anything beyond that may create the false impression that the law firm endorses the viewpoints of the organization.
By following these suggested steps, a law firm can minimize the risk associated with an attorney's service on outside boards.