Legal Ethics Opinion No. 1364
Corporate Counsel: Indemnification of In-House Counsel by 
Corporate Employer

You have requested that the committee opine as to whether a
lawyer who practices law on behalf of a corporate employer is in
violation of Disciplinary Rule 6-l02(A) if, during the tenure of
that employment, the lawyer may be indemnified pursuant to the
corporate employer's Articles of Incorporation or Bylaws as
permitted by Virginia law.

Following your discussion with the committee on April l9, l990,
during its regularly scheduled meeting of May l7, l990, the
committee reviewed the circumstances of your inquiry and
considered at great length the arguments involved in the question
you raised. 

Although the committee recognizes the statutory availability of
indemnification to corporate officers and employees, the
committee continues to be of the opinion that the plain language
of DR 6-l02(A) does not ethically permit a corporate
attorney-employee to avail himself of such indemnification. 
Additionally, the committee appreciates the conflict demonstrated
between the conclusions reached in South Carolina Ethics Opinion
85-30 and District of Columbia Ethics Opinion l93.  The committee
is not persuaded by the reasoning of the latter that such
indemnification is permitted since the corporate employer, a
"sophisticated business entity", has made a "careful 'business
judgment' that it prefers to waive its rights of legal redress
against its employees." 

Rather, in affirming prior LEOs #l2ll and #877, and in adopting
South Carolina Opinion 85-30, the committee's concern is that
such a broad reading of DR 6-l02(A) as you have requested would
ultimately permit analogous application of the result to
individual clients of a practitioner in private practice when
those clients possess high levels of sophistication and business
judgment. The committee believes that such a dilution of the
language of the Rule does inestimable damage to the protection
afforded a client by the Code of Professional Responsibility. 

In a recent opinion, the committee, recognizing the reasoning of
the Supreme Court of Virginia, found that certain acts are
ethically improper when undertaken by a member of the bar,
irrespective of the legality of such behavior.  See LEO #l324;
Gunter v. VSB, 238 Va. 6l7, 621 (l989).

Since the committee believes it is required to predicate its
conclusions upon the plain language of DR 6-l02(A), the committee
respectfully suggests that, if customary malpractice insurance is
unavailable to corporate counsel, the appropriate avenue for
reaching a different conclusion [which would permit corporate
counsel to accept indemnification by their corporate employers]
would be a proposal to the Council for a change to the current
Rule.  Such a change could more clearly delineate the ethical
propriety of a corporate attorney accepting indemnification as
permitted by the corporation's Articles of Incorporation, Bylaws
and statute.   

The committee offers the sample language below as a suggestion
for Corporate Counsel Section to consider proposing for Council's
adoption and submission to the Supreme Court of Virginia.  

DR 6-l02
(B)  A lawyer employed as in-house counsel to a corporation shall
     not negotiate or condition his or her employment upon the
     granting of prospective indemnification rights by the
     corporate employer/client.  

(C)  A lawyer employed as in-house counsel to a corporation may
     accept prospective indemnification pursuant to the corporate
     employer's Articles of Incorporation or Bylaws, as permitted
     by law, provided that the employer/client is independently
     represented in making the agreement.

Although the committee is of the belief that such language would
render proper the corporate counsel's acceptance of
indemnification, the committee also believes that, under certain
circumstances, it may be improper for corporate counsel to bring
an action for breach of the indemnification agreement or any
other agreement for the corporation's voluntary reimbursement of
the corporate counsel's liability.  In any case, the
enforceability of such indemnification raises legal questions
beyond the scope of this committee's purview.

Committee Opinion
June 28, 1990

Related Opinions: See also LEO #1413