by Andrew Nathanson

In the film Michael Clayton, George Clooney plays an associate at a large New York firm defending a class action against a pharmaceutical manufacturer. The partner leading the defence team learns of a damaging internal memorandum. Rather than produce the document, the client’s general counsel, played by Tilda Swinton, has the partner murdered and moves swiftly to complete a fraudulent settlement before the plaintiffs learn of the document’s existence. When Clooney finds the memorandum, he too becomes a target and narrowly escapes a car bomb. Clooney’s solution to this minefield? He cooperates with the police, taping Swinton offering to buy his silence.

It is hard to imagine a more dysfunctional lawyer-client relationship. Swinton is on a crime spree. The lawyers are working against the client. Swinton responds by attempting to terminate the relationship – with extreme prejudice.

What should we do when a client engages in dishonest conduct? An obvious answer is to withdraw from the representation. After all, the Professional Conduct Handbook (the "Handbook"). says a lawyer must not engage in any activity that the lawyer knows or ought to know assists or encourages any dishonesty, crime or fraud (Chp. 4, s. 6). Nor can a lawyer acquiesce in the client doing anything dishonest or dishonourable (Chp. 8, s. 1(b)).

But immediate withdrawal is not always the right answer. It may be an overly simplistic response that does not satisfy our duties to the client or our own ethical obligations.

In Michael Clayton, Clooney and his firm’s duties are owed to the pharmaceutical company. Swinton’s character, and not the company, is behaving corruptly. If the firm were to withdraw immediately, no one else might learn of the damaging memorandum and Swinton’s fraud on the plaintiffs could continue unchecked. In certain circumstances, the Handbook recognizes the limitations of immediate withdrawal. For example, a lawyer must first do everything reasonably possible to prevent the client from adopting a course prohibited by Chapter 8 before withdrawing (Chp. 8, ss. 7 and 8). On the other hand, if the firm withdraws too late, it risks breaching its professional obligations, civil liability to those harmed by the client’s dishonest acts and, in an extreme case, criminal liability.

One option to consider before withdrawing is up-the-ladder reporting. If Clooney had no success in changing Swinton’s course of action, he could have reported the matter to the company’s CEO, and ultimately, to the board of directors. Up-the-ladder reporting: recognizes the distinction between the dishonest manager and the true client, the corporation; avoids disclosure of client confidences; and, by acting on the source of the problem – the dishonest individual – it is more likely to be effective. The concept of up-the-ladder reporting is now found in the ABA’s model rules. It is implicit in our rules in the circumstances covered by Chapter 8 of the Handbook.

What if Clooney had reported up? Swinton’s removal by the company’s board may not have made as entertaining an ending to the film, but it may have been just as effective, without violating client confidences. Up-the-ladder reporting can be a nuanced way of meeting our obligations to organizational clients, and navigating the difficult question of when it is time to withdraw.

Andrew Nathanson of Fasken Martineau DuMoulin LLP

This article was published in the April 2009 issue of BarTalk. © 2009 The Canadian Bar Association. All rights reserved.