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The Mystery Of Independent Legal Counsel

Section 317(e) of the California Corporations Code provides that indemnification may be authorized in four different ways.  Today's blog concerns the second.  Under Section 317(e)(2), an "independent legal counsel" may authorize indemnification in a written legal opinion if a quorum consisting of directors who are not parties to the proceeding cannot be obtained.  

The mystery here is what did the legislature intend by the phrase "independent legal counsel".  The terminology at a minimum should be read to exclude counsel for the proposed indemnitee. 

But what about in-house counsel or outside counsel regularly employed by the corporation?  Under current Rule 1.13(a) of the Rules of Professional Conduct, a lawyer employed or retained by an organization must conform his or her representation to the concept that the client is the organization itself.  It would seem to make little sense to require in-house counsel or outside counsel to be independent of the corporation, which is, after all, the person to whom counsel owes his or her professional responsibilities.

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