Can a lawyer who has represented an individual officer or shareholder also represent the closely held corporation, and vice versa?

Plain-English summary

A lawyer had represented an individual (the Officer), a minority shareholder and officer of a closely held corporation, X Corp, including negotiations with X Corp over employment and ownership. X Corp's CEO then asked the lawyer to represent X Corp going forward. The Officer understood the lawyer could no longer represent him on matters related to X Corp but wanted to keep using the lawyer for unrelated matters, such as buying a summer home. The lawyer asked two questions: whether he could begin representing X Corp (Question A), and whether he could concurrently represent both the Officer and X Corp on unrelated matters (Question B) (paragraphs 1 through 4).

On Question A, treating the Officer as a former client, the committee applied Rule 1.9(a): the lawyer may not represent X Corp in the same or a substantially related matter that is materially adverse to the Officer without the Officer's informed written consent. The committee explained the "substantially related" test from Comment [3] (matters involving the same transaction, or where confidential information from the prior representation would materially advance the new client). If a new X Corp matter is not substantially related, the lawyer may take it even if adverse to the Officer; if it is substantially related and adverse, the Officer's consent is required. The committee added that consent under Rule 1.9(a) to oppose the former client does not by itself authorize using the former client's confidential information against him (a separate Rule 1.9(c)/1.6(a) consent), and the lawyer must also clear Rule 1.7(a); if he cannot disclose enough to obtain X Corp's informed consent or cannot provide competent and diligent representation given his duty to the Officer, the conflict is non-consentable (paragraphs 5 through 10).

On Question B, the committee noted Rule 1.13(d) permits a lawyer for an organization to also represent its constituents, subject to Rule 1.7. Whether a conflict exists turns on whether the representations involve "differing interests" (broadly defined in Rule 1.0(f)). The committee illustrated with three hypotheticals: a personal injury claim against X Corp with no Officer interest (no conflict, no consent needed); X Corp directly adverse to the Officer (differing interests, permissible only if the lawyer reasonably believes he can competently represent each and both consent in writing, never both sides of the same litigation under Rule 1.7(b)(3)); and advice on bylaws or compensation that could affect the Officer (a conflict in some situations, requiring informed written consent from both) (paragraphs 11 through 16).

Finally, the committee noted that whether the Officer is a current or former client, the lawyer acting for X Corp must avoid any misunderstanding about his role, explaining under Rule 1.13(a) that he represents the entity and not the constituent when their interests may differ; and under Rule 1.13(d) an official other than the Officer must give consent on the corporation's behalf (paragraph 17, footnote 6).

In practice

The opinion holds that, under New York Rules 1.7, 1.9, and 1.13, a lawyer may move between representing an individual constituent and the corporation, and may sometimes represent both, but each new engagement must be tested for conflicts. The committee made the former-client analysis turn on whether matters are "substantially related" and materially adverse (Rule 1.9(a)), and the concurrent analysis on whether there are "differing interests" (Rule 1.7), with consentable conflicts curable by informed written consent from each affected client. It flagged two hard limits: the lawyer may never represent both the entity and the constituent on opposite sides of the same litigation (Rule 1.7(b)(3)), and consent to oppose a former client does not authorize using that client's confidences against him without separate consent. Per Rule 1.13(a) and (d), the lawyer must clarify that he represents the entity, and corporate consent must come from someone other than the constituent at issue.

Common questions

Q: I represented a company's officer; can I now represent the company itself?

A: Yes, unless the new matter is substantially related to your prior work for the officer and materially adverse to him. In that case Rule 1.9(a) requires the officer's informed written consent, and you must separately clear Rule 1.7(a) and any use of his confidences (paragraphs 7 through 10).

Q: Can I represent both the corporation and one of its officers at the same time?

A: You may, subject to Rule 1.7. Rule 1.13(d) allows representing an organization and its constituents, but if the matters involve "differing interests" you need informed written consent from each affected client; if there is no differing interest, no consent is needed (paragraphs 11 through 16).

Q: Can I represent the company in a lawsuit directly against its officer who is also my client?

A: Only if you reasonably believe you can competently and diligently represent each affected client and both consent in writing, and never on both sides of the same litigation before a tribunal, which is a non-consentable per se conflict under Rule 1.7(b)(3) (paragraph 15, footnote 4).

Q: Who gives consent on the corporation's behalf?

A: An appropriate official other than the individual constituent at issue, or the shareholders. The committee noted under Rule 1.13(d) the officer may consent for himself but not for the corporation (footnote 6).

Background and rules framework

The opinion interprets New York Rule 1.7 (current-client conflicts; "differing interests" defined in Rule 1.0(f)), Rule 1.9(a) and (c) (former-client conflicts and use of confidences), and Rule 1.13(a), (d), and (e) (organization as client; representing constituents; entity consent), corresponding to ABA Model Rules 1.7, 1.9, and 1.13. The "substantially related" standard of Rule 1.9 Comment [3] and the informed-consent definitions in Rule 1.0(e) and (j) drive the analysis.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NY Rule 1.7(a), (b): current-client conflicts; "differing interests" (Rule 1.0(f))
• MR 1.9 / NY Rule 1.9(a), (c) and Comment [3]: former-client conflicts; "substantially related"; use of confidences
• MR 1.13 / NY Rule 1.13(a), (d), (e): organization as client; representing constituents; who gives entity consent
• NY Rule 1.0(e), (j): confirming informed consent in writing; definition of informed consent

Other opinions cited:

• N.Y. City 2005-2: conflicts arising solely from possession of another client's confidences

See also

• NY State Bar Ethics Op. 903: Revocation of Consent to a Conflict
• NY State Bar Ethics Op. 1008: Suing an Entity the Firm Once Represented
• NY State Bar Ethics Op. 905: Paralegal Who Becomes a Lawyer

Source

• Landing page: https://nysba.org/ethics-opinion-901/