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INTRODUCTION
Imagine that you are an associate, or even a partner, in a major nationwide law firm. You work in the corporate department and have good relationships with all of your clients. One of them invites you to become part of an elite team which formulates the management policies and direction of the company. This elite team is the board of directors. While this role is very prestigious and could be very lucrative for you and your firm, there are certain drawbacks to be considered. Should you accept the position?
The question of whether outside corporate counsel should serve on a client's board of directors has been debated for over two decades by the American Bar Association ("ABA") and scholars in the field. Many articles have been written on the subject in order to inform corporate counsel of the advantages and disadvantages that go along with accepting such a role in a client's organization. Some of the main advantages for the client that have been identified include having ready access to legal advice when questions come up in board meetings, and having a member of the board who is able to spot legal issues before they become legal problems. The main advantage for the lawyer serving as director is a better (i.e., more lucrative) relationship between his firm and the client.
Despite these obvious advantages, there are some disadvantages to both the client and the law firm that may not be easily perceived. For instance, when a lawyer-director gives advice to the board, is he giving legal advice or business advice? How do you tell? These questions do not always have clear-cut answers, yet the distinction is important. If the advice is perceived to be business advice, then the communication will not be protected by the attorney-client privilege and will therefore be discoverable in a lawsuit. In addition to the potential loss of privilege, the lawyer-director may be conflicted out of representing the corporation in a given matter. For instance, if the board of directors is sued, the lawyer-director may be called as a necessary witness in the matter and according to the American Bar Association's Model Rules of Professional Conduct ("Model Rules"), would be disqualified from representing the corporation in the litigation. Instances...