The Oklahoma Bar Journal December 2024

or as director. 19 This clarity should also be recorded in the board meeting minutes to reflect when an attorney is acting within their capacity as a director and not as legal counsel. 20 A lack of clarity may result in another director’s deference that it is legal advice and unwarranted reliance on such advice. But where the attorney’s statements are, in fact, legal advice, fellow directors may not treat it as advice if they are unaware of “which hat [the attorney] is wearing.” 21 To remedy role confusion, the attorney should provide sufficient informa tion for the nonprofit organization and fellow directors to understand the risks inherent in this dual capacity and to clarify in which role they are serving at all times. 22 Service as legal counsel requires loyalty and indepen dent judgment to the client. 23 This judgment may be materially limited where the attorney has dual responsibilities – as legal counsel and as director. 24 A mate rial limitation may arise where the Board of Directors chooses a course of action contrary to the attorney’s legal advice or desired course of action. In this situation, the ethical dilemma focuses on whether the attorney is materially limited by their responsibilities as a director or legal counsel to the organization and how this limitation may affect indepen dent judgment in either role. 25 In essence, is the attorney capable of carrying out the desired course of action if it is, in fact, contrary to their stated legal advice or their independent judgment as a direc tor of the organization? Thus, an attorney faced with this situation should openly communicate with the nonprofit organization – the client – about perceived conflicts

Dual service as director and attorney may result in a presumption by other members of the Board of Directors that any statements made by this individual are, in fact, legal advice. An attorney should, therefore, clarify to the recipient in which capacity they are speaking – as legal counsel or as director. 19

policies to cover certain acts or omissions of a director acting in their official capacity. An attorney serving as a director, however, may not be covered by the organization’s D&O policy for legal advice offered in this dual role. 17 The attorney’s professional liability or malpractice insurance may additionally exclude coverage where the attorney is acting in this dual capacity. 18 Hence, both the nonprofit organization’s liability policy and the attorney’s own malpractice liability policy should be reviewed to determine if this legal service will be excluded from insurance coverage. attorney may result in a pre sumption by other members of the Board of Directors that any state ments made by this individual are, in fact, legal advice. An attorney should, therefore, clarify to the recipient in which capacity they are speaking – as legal counsel ROLE CONFUSION Dual service as director and

as a private foundation. This error, therefore, runs afoul of competent representation, and the organization – the client – is faced with raising a malpractice issue against its own director acting as its legal counsel. A highly precar ious decision for both parties. The Oklahoma Rules of Professional Conduct stipulate that an attorney may handle legal problems with which they are unfamiliar, but it requires neces sary study of this field of law. 16 An attorney unfamiliar with the Oklahoma nonprofit corporation law and Internal Revenue Code requirements for operating a non profit organization thus should spend considerable time studying the law and regulations prior to effectively providing legal counsel. Failure to stay abreast of the law in this area may result in malpractice issues for the attorney. Furthermore, many nonprofit organizations have director’s and officer’s (D&O) liability insurance

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

18 | DECEMBER 2024

THE OKLAHOMA BAR JOURNAL