Ethics: Representing a Partnership or Limited Liability Company
SCR 20:1.13 does not clearly delineate whether a partnership,
LLC, or other type of business entity is considered an organization
under the rules. Attorneys should clarify exactly who the client is when
representing an organization such as a partnership or LLC.
By Dean R. Dietrich
I know who my client is when I am retained by the board of directors
to represent a corporation, but I am not sure who I represent if I am
retained to represent a partnership or a limited liability company.
Answer
There is a lot of debate as to whether an
attorney is representing the partners or the partnership as an
organization when an attorney is retained to render legal advice for a
partnership. The same types of issues arise under new business entities
such as a limited liability company (LLC) or a limited liability
partnership (LLP). Some suggest that the attorney is representing the
organization and is governed by Supreme
Court Rule 20:1.13. This rule, however, does not provide clear
guidance to the lawyer when addressing the question of representation of
an organization that is not created or recognized by statute to be a
separate and distinct entity. The nature of partnerships and LLCs
suggests that the attorney actually is representing the individual
partners or individual stakeholders in the LLC. However, many cases have
held that the lawyer is representing the organization if the law
recognizes it as a separate entity, although each situation is based on
the facts involved.
This article is not a formal opinion of the
Professional Ethics Committee and is not to be relied upon as having
been approved by the Professional Ethics Committee. Attorneys with
questions or professional ethics issues may contact the Ethics Hotline
at (800) 444-9404, ext. 6168; or (608) 250-6168 (all day Wednesday); and
(608) 629-5721 on Monday, Tuesday, Thursday, and Friday mornings.
Send written requests for Professional Ethics Committee opinions to
the committee c/o Keith Kaap, State Bar of Wisconsin, P.O. Box 7158,
Madison, WI 53707-7158.
Professional Ethics Committee opinions may be found online.
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SCR
20:1.13 in its simplest form only addresses the representation of a
duly organized and created entity. For example, the rule requires the
attorney to "go up the ladder" to the final decision makers of the
organization in instances where an individual employee or officer is
conducting business affairs that cause harm to the entity. The same
process of "going up the ladder" does not appear applicable in the case
of a partnership or LLC. These business entities envision the owners
actually operating the business and making the decisions for the
organization rather than utilizing the corporate structure of an officer
and board of directors.
Much of the decision rests upon the relationship that is identified
when the attorney is retained to represent the organization. If three
partners come to the attorney seeking legal services to create a
partnership, it is far more clear that the attorney is representing the
partners individually rather than the partnership that is created. The
scenario may be very different if the managing partner or managing owner
of an LLC comes to the attorney seeking legal advice on the operations
of the partnership or LLC, or asks the attorney to represent the
organization in litigation.
The attorney can eliminate confusion on this topic by preparing a
specific retainer letter that identifies exactly who the attorney is
representing, either the individuals or the organization as a separate
entity. Attorneys are well advised to draft a specific retainer letter
in these instances to avoid confusion in the event a disagreement exists
among the partners or owners. It also is advisable to discuss the
contents of the retainer letter with each of the individual partners or
owners so that a knowing decision is made by the individual as to the
nature and scope of representation by the attorney.
Dean R. Dietrich, Marquette 1977,
of the Wausau firm of Ruder, Ware & Michler L.L.S.C., is a member of
the State Bar Professional Ethics Committee. |
If the attorney does not have a clearly worded retainer letter, it is
likely that the attorney will be presumed to be representing the
individual partners or company owners simply because the presumption
will rest with a broader scope of representation rather than a narrow
scope of representation. The facts and circumstances surrounding the
hiring of the attorney may affect this presumption; however, a reviewing
body is more likely to look at the question of representation through
the eyes of the partner or company owner rather than the attorney.
SCR
20:1.13 does not clearly delineate whether a partnership, LLC, or
other type of business entity is considered an organization under the
rules. Attorneys are cautioned to clarify exactly who the client is when
being called upon to represent an organization such as a partnership or
LLC.
Wisconsin Lawyer