If a lawyer represents one company, can the lawyer take a matter adverse to that company's corporate affiliate, like a parent or subsidiary, without the client's consent?

Plain-English summary

The committee addressed whether a lawyer who represents a corporate client may, without the client's consent, take on a matter adverse to a corporate affiliate of the client in an unrelated matter. It concluded that the Model Rules do not prohibit such a representation merely because of the corporate affiliation: "[t]he fact of corporate affiliation, without more, does not make all of a corporate client's affiliates into clients as well." Drawing on Rule 1.13's principle that the organization, not its constituents, is the client, the committee rejected reading the Comment to Rule 1.7 as making every member of a corporate family a client.

The committee framed the analysis as three questions. First, is the affiliate also a client, or entitled to be treated as one for Rule 1.7 purposes? That depends on the circumstances, such as an express or implied agreement, the affiliate's reasonable reliance, the sharing of confidential information, or a degree of integration approaching alter ego; the committee drew on Formal Opinions 91-361 (partnerships) and 92-365 (trade associations). Second, if the affiliate is not a client, is the representation nonetheless "directly adverse" to the corporate client under Rule 1.7(a)? The committee took the view that a suit against an affiliate is ordinarily only indirectly adverse to the client, because its immediate impact falls on the affiliate, so Rule 1.7(a)'s per se consent requirement is not triggered. Third, even if Rule 1.7(a) does not apply, would the representation be "materially limited" under Rule 1.7(b) by the lawyer's responsibilities to the corporate client, for example where concern for the client's good graces would impair the lawyer's diligence or judgment for the new client? If so, consent is required.

The committee concluded that, absent a clear understanding, "the better course is for a lawyer to obtain the corporate client's consent" before undertaking a representation adverse to an affiliate, and that doubts should be resolved by a presumption favoring the client who would be adversely affected. The opinion drew sharp separate writings: one member would have made consultation an ethical duty under Rule 1.4 whenever the Rule 1.7 judgments are difficult, and two members dissented, arguing that an unrelated suit against a wholly owned affiliate should be treated as directly adverse to the client under Rule 1.7(a).

Currency note

This opinion was issued in 1995, before the American Bar Association's adoption of the 2002 (Ethics 2000) revisions to the Model Rules of Professional Conduct, which rewrote Rule 1.7 into its current concurrent-conflict framework and added Comment language addressing representation adverse to a client's affiliates. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Does representing a company make all of its corporate affiliates the lawyer's clients?

A: No. The committee concluded that corporate affiliation alone does not make the affiliates clients; whether an affiliate is a client depends on the particular circumstances.

Q: Is suing a client's subsidiary "directly adverse" to the client under Rule 1.7(a)?

A: The committee took the view that it is ordinarily only indirectly adverse, because the immediate impact is on the affiliate, so Rule 1.7(a)'s per se consent requirement does not apply, though Rule 1.7(b) may.

Q: When is consent required to take a matter adverse to an affiliate?

A: The committee said consent is required if the affiliate is itself a client, if there is an understanding to avoid representations adverse to affiliates, or if the lawyer's duties to either client would be materially limited under Rule 1.7(b).

Q: Should a lawyer discuss it with the client even when consent is not required?

A: Yes. The committee said the better practice, absent a clear understanding, is to obtain the corporate client's consent before undertaking the adverse representation, with doubts resolved in favor of the client who would be adversely affected.

Background and rules framework

The opinion interpreted Model Rule 1.7 (conflict of interest), distinguishing Rule 1.7(a)'s "directly adverse" per se rule from Rule 1.7(b)'s material-limitation standard, and Rule 1.13 (organization as client; constituents are not automatically clients). It noted that whether a client-lawyer relationship exists with an affiliate is governed by substantive law outside the Model Rules. A separate writing invoked Rule 1.4 (communication). Because the ABA interprets the Model Rules directly, there is no state-rule analogue.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest: general rule; direct adversity vs. material limitation)
• MR 1.13 (organization as client)
• MR 1.4 (communication; raised in a separate writing)

Cases:

• Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 264 (D. Del. 1980), declining to disqualify a firm from a representation adverse to a sibling of its corporate client
• Stratagem Dev. Corp. v. Heron Int'l N.V., 756 F. Supp. 789 (S.D.N.Y. 1991), a subsidiary's liabilities affect the parent's bottom line

Other opinions cited:

• ABA Formal Op. 91-361 (1991): representation of a partnership and when individual partners become clients
• ABA Formal Op. 92-365 (1992): trade associations as clients and when members become clients
• ABA Formal Op. 93-377 (1993): positional conflicts and the direct/indirect adverseness line

See also

• ABA Formal Op. 91-361: Representation of a partnership as an entity client
• ABA Formal Op. 92-365: Trade associations as clients
• ABA Formal Op. 97-405: Conflicts in representing government entities
• RI EAP Op. 2005-10: Sale of Corporate Assets to a New Owner Creates No Rule 1.9 Conflict Absent Adverse Interests to the Former Client

Source

• Landing page: ABA Formal Ethics Opinions index
• Original PDF: 95-390.pdf