When a lawyer sits on the board of trustees of a nonprofit hospital, may another lawyer in the same firm sue that hospital if the board member is screened from the case?

Plain-English summary

An associate at a firm had been appointed to the board of trustees of a public, nonprofit, charitable hospital. After his appointment, a shareholder in the same firm filed a malpractice claim against a doctor and the hospital, handling it entirely without the board-member associate, who refrained from any expression of opinion, recused himself from all board discussion or votes on the matter, and relied on procedures from CPR 290. That case settled. The inquiry asked whether, in new cases, the firm shareholder could represent clients against the hospital so long as the CPR 290 insulation procedures were followed, whether the board service and the firm's adverse representation could ever coexist, and whether it mattered if the board member were a shareholder rather than an associate.

The opinion concluded the firm may not. Under Rule 5.1(b), an irreconcilable conflict exists when a lawyer who is a member of a nonprofit hospital's board of trustees, or his firm, represents a client suing the board or the hospital the board manages and controls, and under Rule 5.11(a) and CPR 66 that disqualification is imputed to the whole firm. The opinion overruled RPC 53. It distinguished CPR 290, CPR 327, and RPC 130, which allow a firm lawyer to appear before, or accept employment on behalf of, a government board on which a firm member sits if the board-member lawyer is insulated, because none of those involved a client whose interests were directly adverse to the board in a lawsuit against it; CPR 290 and CPR 327 remained in effect and unchanged. Because lawyers had relied on RPC 53, the opinion applied prospectively: representations in adversarial proceedings already filed as of the effective date could continue, with the CPR 290 removal procedures observed, while the new rule governed proceedings filed on or after that date. The answer did not change if the board member were a shareholder rather than an associate.

Currency note

The North Carolina State Bar has overruled this opinion; it was overruled by 2002 Formal Ethics Opinion 2. It is retained here for historical research only and is not current guidance. This opinion was also issued in 1994, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. 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: Can a firm sue a hospital whose board includes one of the firm's lawyers?

A: No, under this opinion. It concluded an irreconcilable conflict exists under Rule 5.1(b) when a firm lawyer sits on the board, and Rule 5.11(a) imputes that disqualification to the whole firm. (This opinion has since been overruled by 2002 FEO 2.)

Q: Does screening or recusing the board-member lawyer cure the conflict?

A: No. The opinion held the conflict irreconcilable and not cured by insulation, distinguishing the CPR 290 procedures as applying only where the client is not directly adverse to the board in a lawsuit.

Q: Did the opinion force pending cases to be dropped?

A: No. Because lawyers had relied on the overruled RPC 53, the opinion applied prospectively, letting representations already filed continue with the CPR 290 removal procedures, while governing matters filed on or after its effective date.

Background and rules framework

The opinion applied North Carolina's then-current Rule 5.1(b), the conflict provision corresponding to Model Rule 1.7, and Rule 5.11(a), the firm-imputation provision corresponding to Model Rule 1.10, read with CPR 66. It overruled RPC 53 and distinguished CPR 290, CPR 327, and RPC 130, which permitted insulated appearances before or employment by a government board, as not reaching direct adversity in litigation against the board.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest; current clients)
• MR 1.10 (imputation of conflicts within a firm)
• North Carolina Rule 5.1(b); Rule 5.11(a)

Other opinions cited:

• North Carolina RPC 53 (overruled by this opinion)
• North Carolina CPR 66 (imputation among firm lawyers)
• North Carolina CPR 290; CPR 327 (insulated appearance before a board a firm member sits on; remain in effect)
• North Carolina RPC 130 (firm employment by a board a partner sits on)
• North Carolina 2002 Formal Ethics Opinion 2 (overruling this opinion)

See also

• NC Ethics Op. RPC 177: insurer, insured, and UIM-carrier conflicts
• NC Ethics Op. RPC 188: personal-interest conflicts in a real estate closing

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-160/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Editor's Note: This opinion is overruled by 2002 Formal Ethics Opinion 2.

Inquiry #1:

Attorney A is an associate (nonshareholder) in a law firm in North Carolina. He was appointed to the board of trustees of a local hospital on October 7, 1991, and has served as a trustee since that time. The hospital is a public, nonprofit, charitable hospital governed by a board of trustees.

After the appointment of Attorney A as a trustee, Attorney B, a shareholder in the same law firm, filed a malpractice claim against a doctor and the hospital. Attorney B handled all aspects of the claim from the initial investigation forward without discussing it with Attorney A and without any assistance from Attorney A.

After oral discussions between Attorney A and the hospital attorney concerning his firm's involvement in the case, Attorney A wrote the hospital attorney a letter in which he stated that he did not feel there was a conflict of interest because he had complied with the procedures prescribed in CPR 290 . At all times Attorney A refrained from any expression of opinion about the case, as well as from formal or informal consideration of the matter, including any communications with anyone at the hospital concerning the matter, and absented himself from all hospital meetings during any discussion or vote concerning the case. Attorney B reached a settlement of the case through negotiations with attorneys for the doctor and the hospital.

The hospital now has a program which began on October 1, 1990, under which it pays a substantial portion of all malpractice claims out of hospital funds. Prior to October 1, 1990, the hospital was insured, but had a large deductible, and the settlement of this claim was paid entirely out of the deductible.

With respect to any new cases that may arise, would it be ethical for Attorney B to represent a client with a claim against the hospital, so long as there is adherence to the procedures prescribed in CPR 290 ?

Opinion #1:

No. Under Rule 5.1(b), an irreconcilable conflict would exist if a lawyer who is a member of the board of trustees of a nonprofit hospital were to represent a client who is suing the board or the hospital which is managed and controlled by that board. Rule 5.1(b). While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by the Rules of Professional Conduct. Rule 5.11(a) and CPR 66. RPC 53 is hereby overruled.

Other prior ethics opinions which appear to be in conflict with this opinion are distinguishable. CPR 290 allows a lawyer to appear before a government board upon which a lawyer from his or her firm is a member provided four specified steps are taken to insulate the attorney board member from the board's consideration of the particular matter. See also CPR 327. RPC 130 allows a law firm to accept employment on behalf of a governing board upon which its partner sits provided the representation is otherwise lawful and certain steps are taken to insulate the attorney board member from the decision. None of these prior opinions involve the representation of a client whose interests are directly adverse to those of the board and who is filing a lawsuit against the board upon which the attorney board member sits. CPR 290 and CPR 327 are unchanged by this opinion and remain in effect.

In reliance on RPC 53, lawyers have undertaken to represent clients in litigation or other adversarial proceedings filed against a board upon which a member of their law firm serves. To require lawyers who have relied upon RPC 53 to withdraw from the representation of a client in the midst of an adversarial proceeding or litigation would work a hardship upon the client. Therefore, this opinion shall be applied prospectively. Lawyers may continue to represent clients in litigation or other adversarial proceedings which were filed as of the effective date of this opinion despite service by another lawyer from the same firm on the board. However, the procedures for removing the attorney board member from involvement in the case set forth in CPR 290 must be observed. This opinion shall apply to the representation of clients in litigation or other adversarial proceedings against a board upon which a member of the firm serves which are filed on or after the effective date of the opinion.

Inquiry #2:

If the answer to Inquiry #1 is "no," is it permissible under any circumstances for Attorney A to sit on the hospital board and for Attorney B at the same time to handle the malpractice case against the hospital?

Opinion #2:

See the answer to Inquiry #1 above.

Inquiry #3:

Finally, would it make any difference in the answers to Inquiries #1 and #2 if Attorney A were a shareholder in the firm rather than an associate?

Opinion #3:

No.