By Anita Anand, Professor of Law & Academic Director, Centre for the Legal Profession and Program on Ethics in Law and Business / Illustration by Ulla Puggaard

From the Spring/Summer 2013 issue of Nexus.

Corporate lawyers and the Rules of Professional ConductThe Law Society of Upper Canada’s Rules of Professional Conduct generally focus on the lawyer-client relationship but do so in the litigation setting. The Rules compel lawyers to encourage clients to settle a dispute whenever possible and to discourage clients from either commencing useless legal proceedings[1] or threatening criminal prosecution in order to secure a civil advantage.[2] Corporate clients are not typically adversaries involved in such disputes but are parties seeking to engage in value-enhancing transactions. While these parties have separate counsel, their mutual objective to complete the transaction at hand remains central, at least in a “friendly” deal. 

But the Rules of Professional Conduct pay relatively little attention to the practice of corporate law and ethical dilemmas that corporate lawyers face, whether they are in-house or external to the corporation.  This inadvertent neglect may have arisen because professional codes developed with the work of barristers rather than solicitors. It is true that piecemeal additions to codes of professional conduct over time have attempted to address ethical dilemmas faced by practicing solicitors, including corporate lawyers, [3] suggesting that other types of legal practice also need to be covered by the Rules. Despite this evolution, the Rules are arguably limited in their applicability outside the litigation bar. 

If this is true, there is cause for concern. Demographic shifts suggest the increasing predominance of corporate counsel within the legal profession. As early as 1985, Deborah Rhode explained that two-thirds of the American Bar, including 95 percent of recent entrants, worked within organizations such as firms or companies rather than as sole practitioners. Additionally, lawyers performed the majority of their legal services for entities (e.g. corporations, partnerships, limited partnerships, non-profit organizations), rather than individuals.[4] These trends have continued. Among 2011 U.S. law school graduates, only half went into private practice, with the rest working for other organizations such as businesses, government and public interest groups. Only three percent of class went directly into sole practice.[5] Likewise, according to 2007 data compiled by the Federation of Law Societies of Canada, approximately 85 percent of lawyers across the country worked within an entity in some capacity, many of those often working on behalf of entities as well.[6]  Organizations, including corporations, are thus central to our understanding and ultimate application of the rules[7] and given that the RPC govern all lawyers, we should question the relevance of the RPC to corporate counsel, both internal and external.

To probe the extent to which the Rules address the conduct of corporate solicitors, I examined 183 decisions resulting from Law Society of Upper Canada (LSUC) disciplinary proceedings that were publicly available in the CanLii database over a three-year period between 2008 and 2011.  Of the 183 cases recorded, only 65 (35.5 percent) related to solicitors.  Out of these 65 cases, 46 (70.8 percent) involved solicitors practicing real estate.  Only one solicitor in these cases was identified as a corporate lawyer.  Of these same 183 cases, 42 (23 percent) involved barristers whose practices included criminal law, small claims, and family or immigration law. The remaining 76 cases dealt primarily with a failure to communicate with the LSUC under Rule 6.02:  51 of the 76 cases (67 percent) were found to have breached this Rule.

The data collected demonstrate that a plurality of cases where solicitors breached the Rules involved real estate lawyers. This is partly because 2.04(3), (6), and (8) seem to apply in the case of a lawyer acting in a conflict of interest, which often arises in real estate transaction cases. None of the solicitor sanctions arose from commercial transactions or other types of business law. The larger proportion of cases involving lawyers who practice real estate may have a simple explanation. One’s real property tends to be the largest asset that one owns; those who are wronged thus have a strong financial interest to complain.

Of course, the data are suggestive only. Although more solicitors than barristers were found to have violated the Rules, it seems that it was a specific type of solicitor practice (real estate) covered by the Rules rather than business law practices more generally. This fact suggests one of two things from a disciplinary standpoint: corporate lawyers do not engage in egregious conduct or the Rules have not caught corporate lawyers’ misconduct in a way that is enforced by the LSUC. Going forward, deeper statistical analysis relating to disciplinary proceedings is warranted so that we can better understand the relevance of the Rules for corporate lawyers. Before this can occur, broad-based data including area of practice, gender, and geographical location of practice area, among other things, should be more easily attainable.

Ultimately, an examination of the Rules of Professional Conduct is in order to take into account ethical issues that arise in the course of corporate lawyers’ practices. But the review should be broadly conceived as it is not only corporate lawyers but also in-house and public sector lawyers who may well question the applicability of the Rules to their respective practices. The review should involve qualitative and quantitative research, including discussions with counsel and a full-fledged review of disciplinary proceedings before the law society. Empirical analyses of this sort would serve as a foundation for more meaningful discussion about potential reform of the Rules and associated commentary.

[1] Law Society of Upper Canada, Rules of Professional Conduct, Toronto: LSUC, 2011, r 2.02(2) [RPC].

[2] Ibid, r 2.02(4).

[3] See for example, RPC, supra note 1, r 5 (which provides specific guidance on the treatment of employees) or        r 2.02(1.01) (which addresses the representation of corporate entities).

[4] Deborah Rhode, “Ethical Perspectives on Legal Practice” (1985) 37 Stan L Rev 589 at 590.

[6] Federation of Law Societies of Canada, “2007 Law Society Statistics”. The percentage value was produced by adding up the total number of sole practitioners across the country (12,312), and dividing by the aggregate number of practicing lawyers (82,138).  This assumes that most, if not all, practicing lawyers who are not sole practitioners work for corporations, partnerships or limited partnerships, or non-profit organizations.  It also assumes that the majority of those who work for entities also do work largely for or on the behalf of those entities or client entities.

[7] Rhode, supra note 4 at 590.