Ezel / Ethics Opinions / OCBAR

What duties arise when a lawyer who invested in a company becomes its counsel and director?

Short answer The opinion calls for a fact-specific review of competence, conflicts, confidentiality, and privilege, often requiring written disclosure or informed written consent.
Bar
OCBAR
Issued
2011
Source
View official page

Apply this to your situation

This page answers the general question as of 2011. Ask about yours and see what the current rules of professional conduct in your state say for your facts, with citations.

Currency note: this opinion is from 2011
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as an official web page) is the authoritative source for any reliance.
View original ethics opinion (official page)

Plain-English summary

The hypothetical lawyer already owns an interest in a company and considers taking its legal work and a board seat. The opinion identifies potential conflicts between the lawyer's investment, legal advice, and director duties. The committee also examines whether those roles interfere with competent legal service or protection of confidential and privileged information.

Under the former California rules discussed, a business transaction or adverse pecuniary interest can trigger Rule 3-300's written disclosure and consent requirements. Rule 3-310 may require disclosure or consent for representation despite a conflict. The opinion calls for an individual assessment because the effect depends on the investment, proposed work, and governance role.

The company is the client under Rule 3-600, rather than its officers, directors, or investors merely because they interact with counsel. The opinion says counsel must make that distinction clear when a constituent's interests may diverge from the organization's.

In practice

Under the opinion, accepting both roles often requires written disclosures to the company or its informed written consent before representation. The lawyer's director role may also require disclosure of personal interests in matters before the board.

Common questions

Q: Does holding an investment automatically prohibit company representation?

A: No categorical prohibition appears in the opinion. The committee requires an individual assessment under the applicable rules and facts.

Q: Who is the client when the lawyer also sits on the board?

A: The opinion applies Rule 3-600 to the company and says its constituents must not be misled into believing that the lawyer separately represents them.

Q: Does the director position affect confidential information?

A: Yes. The opinion identifies confidentiality and attorney-client privilege as issues created by the dual role.

Background and rules framework

The opinion discusses former California Rules 3-300, 3-110, 3-310, and 3-600. It treats the lawyer's legal and director roles as distinct sources of duties to the organization and its constituents.

Citations and references

Rules of Professional Conduct:

  • Former California Rules 3-300, 3-110, 3-310, and 3-600

See also

Source

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