Can a lawyer represent a company as a client while personally owning and running a competing company?

Plain-English summary

A lawyer was a principal stockholder and officer of a corporation whose business directly competed with another corporation for which the lawyer performed legal services. Part of the fee the lawyer charged the client corporation consisted of future profits based on the client's performance. The committee was asked whether it is a conflict of interest for a lawyer with a business interest in one corporation to represent a competitor of that corporation.

The committee found several Code provisions applicable: Rule 4-101(b) (a lawyer may not reveal or use a client's confidence or secret to the client's disadvantage or for the lawyer's or a third person's advantage, absent consent after full disclosure); Rule 5-101(a) (a lawyer may not accept employment where his professional judgment may be affected by his own financial, business, property, or personal interests, absent consent after full disclosure); and Rule 5-104(a) (a lawyer may not enter a business transaction with a client where they have conflicting interests and the client expects the lawyer's protective judgment, absent consent after full disclosure). The committee concluded that, unless there is full disclosure to and waiver by the client corporation, the lawyer cannot represent a corporation while serving as the principal shareholder and an officer of a competing corporation.

The committee observed that, in serving as an officer of one corporation and lawyer for a competitor, the lawyer is certain to receive confidential information about business activities, efforts to win customers, potential litigation, and more, whether received as shareholder, officer, or attorney. The potential for a rule violation was too great and obvious absent full disclosure and consent. Drawing on Opinion 644 (multiple representation in the same transaction), the committee said that while a fact pattern in which such representation is proper can be envisioned, whether it is proper in practice depends on the facts, and all doubts must be resolved against the employment.

Currency note

This opinion was issued in 1984, under the former Illinois Code of Professional Responsibility and before Illinois adopted the 1990 (and later 2010) Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in July 2010 as generally consistent with the 2010 Rule (Rule 1.7), while cautioning that the specific standards referenced may differ from the 2010 Rules, and noting Opinion 91-11. 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 or requirement mentioned here.

Common questions

Q: Can a lawyer represent a company while owning a competing business?

A: The opinion concluded only with the client's consent after full disclosure; absent that, the lawyer's role as principal shareholder and officer of a competitor bars representing the client corporation.

Q: Why is full disclosure and waiver required?

A: Per the opinion, the lawyer is certain to receive confidential business information, and the risk to client confidences (Rule 4-101) and to his independent judgment (Rules 5-101(a), 5-104(a)) is too great without the client's informed consent.

Q: Is consent enough to make the representation proper?

A: The committee said a proper fact pattern can be envisioned, but whether such employment is proper in practice depends on the facts, and all doubts must be resolved against the representation.

Background and rules framework

The opinion applied former Illinois Code Rule 4-101(b) (confidences and secrets), Rule 5-101(a) (the lawyer's own financial or business interest affecting his judgment), and Rule 5-104(a) (business transactions with a client where interests conflict). The Board's 2010 affirmation maps the analysis to current Illinois Rule of Professional Conduct 1.7 (concurrent conflicts, including the lawyer's personal interest), corresponding to ABA Model Rule 1.7, with the related duties in Model Rules 1.6 (confidentiality) and 1.8 (business transactions with clients).

Citations and references

Rules of Professional Conduct:

• Illinois Code Rule 4-101(b), Rule 5-101(a), Rule 5-104(a) (applied in the opinion)
• Illinois RPC 1.7 (2010 equivalent per the Board's affirmation)
• MR 1.6 (confidentiality); MR 1.7 (concurrent conflicts); MR 1.8 (business transactions with clients)

Other opinions cited:

• ISBA Opinion 644: multiple representation is proper only if each client can be adequately represented and consents after full disclosure, with doubts resolved against the employment

See also

• ISBA Ethics Op. 84-14: Lawyer Acting as Real Estate Broker
• ISBA Ethics Op. 88-05: Lawyer on a Bank Board
• ISBA Ethics Op. 89-14: Lawyer as Insurance Agent

Source

• Landing page: https://www.isba.org/ethics/opinions/870