A corporation’s litigation attorney must refuse to hand over to the company’s CEO copies of documents which are subject to a discovery order in a pending lawsuit and which the CEO has indicated he intends to destroy. Even though threatened with dismissal by the CEO if the attorney disregards his instructions, the attorney should preserve the documents in her possession while pursuing steps to achieve a reversal of the CEO’s threatened action, according to an opinion issued by the Michigan bar’s ethics committee.
In the fact pattern presented to the ethics committee, a closely held corporation was engaged in litigation. The CEO was a shareholder and reported to a board of directors. The CEO had informed the corporation’s litigation attorney that the CEO intended to destroy documents which were relevant to the lawsuit and subject to an outstanding discovery order. The CEO not only had directed the attorney not to produce the documents in question, but had threatened to terminate her if she did so and had instructed her to return to him copies of the documents in her possession. The lawyer asked the bar committee to advise her regarding her ethical obligations.
The resulting opinion stressed that corporate counsel’s obligations are to the organization, as distinct from its officers, directors, shareholders, “or other constituents.” Corporate counsel is required to act in the best interest of the organization if she knows that someone associated with the company intends to engage in conduct relating to her representation of the company that constitutes “a violation of law which reasonably could be imputed to the organization and that is likely to result in substantial injury to the organization. . . .” The ethics committee assumed that the CEO’s threat to destroy documents covered by a discovery order would, if carried out, be such a violation. Therefore, litigation counsel was required to take steps to avoid the foreseeable harm to her client, the corporation.
The Michigan ethics committee recommended that the lawyer first attempt to dissuade the CEO from his threatened destruction of the documents. The lawyer’s efforts could include suggesting that a second opinion be obtained and signaling her intent to refer the matter to higher authority within the corporation if the CEO did not alter course. If unsuccessful, the lawyer should consult with higher authority -- presumably the board of directors, in this case. If necessary, this could include advising the board that the lawyer’s ethical obligations would likely require withdrawal from her representation of the corporation and her disclosure to the court of the corporation’s violation, if the CEO were to carry out his threat and if his misconduct were not otherwise rectified. Furthermore, if the CEO sits on the board, the attorney should make sure that any independent directors are fully briefed on the issue.
By retaining the copies of the documents in her possession all the while, the attorney complies with her ethical obligations, which include not facilitating a client’s destruction or concealment of a document with potential evidentiary value and not assisting a client in illegal or fraudulent conduct. At the same time, the attorney is not obligated to withdraw from representing the company based on the CEO’s threat to destroy the documents, since the course of action recommended by the ethics committee actually “fulfills the lawyer’s ethical duties and may forestall a violation of law by the client.” To view the full text of the Michigan State Bar Committee on Professional and Judicial Ethics, Informal Opinion RI-345, dated October 24, 2008, click here.