The Ethical Obligation of Transactional Lawyer to Act as GatekeepersRutgers Law Review
AbstractRecent examples of managerial misconduct at major corporations have called into question the adequacy of the gatekeeper role provided by transactional lawyers representing corporations. That role is governed by Model Rule 1.13(b), which obligates the lawyer for a corporation to take remedial action if the lawyer knows that corporate managers are engaged in actions that amount to a "violation of a legal obligation" to the corporation or that are unlawful and likely to result in substantial injury to the corporation. In addition, Model Rule 1.2(d) forbids a lawyer from lending assistance to any action by corporate managers "that the lawyer knows is criminal or fraudulent." In this article, the authors focus on the substantive standards within these rules that both trigger the lawyer's duty to take action within the corporation to protect the corporate client from harm and restrict the lawyer's participation in the corporate manager's misconduct. The authors conclude that, even after the American Bar Association's 2003 amendments to the Model Rules, the ethical rules making up the gatekeeper role of transactional lawyers provide insufficient guidance, mask various conflicts of interest, and offer too much latitude for lawyers to assist managerial misconduct. The authors propose amendments to those rules heightening the standards demanded of lawyers representing corporations. Further, as a way to address the conflict in which corporate lawyers find themselves—a conflict generated by the fact that lawyers are chosen by managers but should represent the interests of shareholders—the authors propose that the corporation's lawyers should be chosen by the company's independent audit committee.
Citation InformationRutheford B Campbell, Jr. & Eugene R. Gaetke, The Ethical Obligation of Transactional Lawyer to Act as Gatekeepers, 56 Rutgers L. Rev. 9 (2003).