Standard 1.2-4 on Governing Body Members’ Conflicts of Interest
Standard
Governing body members must not knowingly attempt to influence any decisions in which they have a conflict of interest.
Commentary
General Considerations
The governing body has a responsibility to adopt appropriate policies that protect against conflicts of interest and provide appropriate guidance to its members regarding their responsibilities in the event that a conflict arises.
No member of the governing body should participate in a decision in which the member has a personal, professional, organizational, or institutional interest in that is in conflict with those of the legal aid organization or its clients.
A conflict of interest may arise in a variety of ways. Some examples of conflicts are:
- When a governing body member has a personal or pecuniary interest in a matter that is under consideration by the organization.
- When a member is employed by or associated with an organization that has a competing or adverse interest with that of the organization.
- When a member has a personal or institutional interest that is in conflict with interests of the communities served by the organization.
- When a member, particularly a lawyer member, represents a client whose interests are adverse to the interests of a client of the organization, although the clients are not direct adversaries in a particular case.
- When a lawyer member represents a client who is a direct adversary of a client of the organization in a specific case.
The organization should adopt policies that ensure that any conflicts are effectively managed. The policies should define what constitutes a conflict of interest, and for those governing body members who are attorneys, the policies should be consistent with the ethical requirements and the law governing conflicts of interest in the jurisdiction in which the organization operates.
The policy should also provide that the governing body instruct its members regarding what to do in the event that a conflict does arise. Generally, a conflict must be disclosed, and the member cannot participate in any discussion or vote on any matter that gives rise to the conflict.
The policy should make it clear that a governing body member with a conflicting interest also has an obligation to avoid influencing the operation of the organization by any indirect means, such as participating in decisions regarding priorities, allocation of resources, or the organization's structure. The policy should also prohibit any governing body member with a potential or actual conflict from informally seeking to influence the conduct of legal work consistent with Standard 1.1-2,or the operation of the organization.
Conflicts may arise unexpectedly and are often impossible for the governing body or its individual members to anticipate. Moreover, concern about the risks associated with foreseeable conflicts should not exclude from the governing body every person who might have a conflict in the future. Rather, the policy should provide guidance for management to anticipate potential conflicts and suggest the appropriate steps that the governing body member should take to avoid improper action.
A strict rule that forecloses anyone with potential conflicts from serving as a member of the governing body could exclude individuals with beneficial skills and experience and inhibit establishment of a positive relationship with the legal profession overall.This is particularly true in rural areas and small communities where the pool of potential governing body members may be relatively small and the likelihood of occasional conflicts relatively high.
Concerns Associated with Different Types of Conflicts
Governing body member's personal or pecuniary interests. Governing body members may occasionally have conflicts that arise when the member or the member's family has a financial or personal interest in a matter under consideration by the organization. Such conflicts can arise unexpectedly in the normal course of the organization's operation, such as when the lease or purchase of real property may affect a governing body member's personal interests. In some instances, disclosure of the conflict and withdrawal from any discussion or voting on the matter may be adequate to address the conflict, but jurisdiction-specific rules pertaining to conflicts of interest - and, depending on context and circumstances, perhaps other professional conduct rules as well - may apply and must be followed to appropriately resolve the conflict.
Organizational conflicts between the organization and competing entities. Situations may arise where a governing body member is employed by, on the governing body of, or represents an organization that has a competing, adverse interest with that of the organization. These conflicts may arise, for instance, when the organization and another organization with which the governing body member is associated are competing for the same funding. Often these conflicts may be managed by disclosure and recusal from discussions and decisions that affect both entities. If the conflict is ongoing and involves access to information that may be confidential, such as a long-term fundraising strategy or a confidential business plan, proper protection of the interests of the organization may call for the member to resign from the governing body.
Institutional conflicts with communities served by the organization. Circumstances may arise where a governing body member has a professional interest that is in conflict with the interests of the communities that the organization serves. A finance company, for example, has economic interests that are served by laws and policies favoring creditors rather than borrowers and a governing body member who represents finance companies may have an institutional conflict with an organization that seeks to challenge those laws or policies on behalf of client communities. Similarly, a real estate developer seeking to develop an industrial park in the heart of a low-income neighborhood may be fundamentally at odds with the interests of the client community in that neighborhood that wishes to preserve the area for affordable housing.
Institutional conflicts with the community can be more complicated to manage. Such conflicts can arise unexpectedly with an existing governing body member and should be addressed in accordance with the organization's conflict of interest policy and applicable law and professional conduct rules to which governing body members are subject.
In some circumstances, an individual being considered for appointment to the governing body may have such a conflict. In making appointments to its governing body, the organization should consider institutional conflicts on a case-by-case basis. Among the factors to consider are the extent of the apparent conflict and the degree to which the organization's conflict-of-interest policy will be adequate to prevent inappropriate participation by the member in decisions related to the apparent conflict.
The governing body may also look to factors that suggest the individual will, in fact, exercise independent judgment in serving as a member of the governing body, in spite of the apparent institutional conflict. Such factors could include the degree to which the potential governing body member has a policymaking role with the institution with the adverse interest and indicia of the individual's support of the overall mission of the legal aid organization.
Concerns Specific to Attorney Members of the Governing Body
Professional conflicts with the organization's clients. A conflict may arise when a governing body member represents an institution that has interests that are adverse with the interests of a particular client of the organization, although the organization's client and the governing body member's client are not adversaries in the same case.For example, such a conflict could exist when a governing body member represents a large financial institution that makes sub-prime home mortgage loans, and the organization is suing a different financial institution in a predatory lending case.
The responsibilities of the governing body member may be governed in such circumstances by the ethical requirements in the jurisdiction in which the member is part of a profession subject to such requirements. Should that not be the case, the organization's conflicts policies should address this issue. As with general institutional conflicts, the question arises as to whether a person with such a conflict should be invited onto the governing body, if the conflict is known at the time the appointment is being considered. The matter should be determined on a case-by-case basis, applying the considerations discussed above.
Representation of a client by a lawyer member of the governing body against a client of the organization. Occasionally, an attorney member of the governing body represents a client in a case where the adversary is a client of the organization. Generally, because the attorney member of the governing body does not have an attorney-client relationship with clients of the organization, there is not an impermissible conflict under pertinent ethical rules.
While such representation may not create a multiple-representation conflict, there could be a material limitation conflict, and the organization's conflict-of-interest policy should include provisions to manage such situations.
The policy should clearly prohibit the attorney acting as a governing body member from taking any action to influence or interfere with the conduct of legal work pursued by a practitioner of the organization on behalf of its client. There must be no interference, directly or indirectly, on the practitioner's representation of the organization's client and the governing body member must not have access to any confidential information about the case.
The practitioner representing the organization's client has an obligation to ensure that a governing body member's representation of an adversary does not interfere with the practitioner's independent professional judgment on behalf of the client. The organization and practitioner should be aware of and abide by the ethical requirements in the jurisdiction in which they practice, including the obligation, if any, to obtain the client's informed consent to the representation.