What happens when a corporate client's merger creates adversity to another current client?
Apply this to your situation
This page answers the general question as of 2012. Ask about yours and see what the current rules of professional conduct in your state say for your facts, with citations.
Plain-English summary
The hypothetical lawyer represents a small company in patent matters and a separate client litigating against the small company's new parent. The committee says a conflict depends on whether the acquired company and parent have a unity of interests, including how their functions and law departments are integrated.
If a conflict exists and the affected clients do not give informed written consent, the opinion examines loyalty and confidentiality before permitting withdrawal from either client. The lawyer must comply with withdrawal duties, including duties relevant to pending litigation and deadlines.
The opinion says the lawyer may withdraw from one client and continue for the other if the lawyer did not receive confidential information from the now-former client substantially related to the ongoing matter. The conclusion is conditional on those facts; it does not say every merger permits that course.
In practice
The committee's analysis turns on the relationship between the merged entities, the lawyer's access to confidential information, client consent, and the ability to withdraw consistently with the rules governing each active matter.
Common questions
Q: Does every parent-subsidiary relationship create this conflict?
A: No. The opinion evaluates whether the two companies have a unity of interests, particularly whether their law departments and operations are integrated.
Q: What if the clients refuse to waive a resulting conflict?
A: The committee considers withdrawal from either representation, subject to loyalty, confidentiality, and the rules governing withdrawal.
Q: May the lawyer continue for one client after withdrawing from the other?
A: Under the opinion's hypothetical, that may be ethical if the lawyer received no substantially related confidential information from the now-former client and complies with withdrawal duties.
Background and rules framework
The opinion discusses former California Rules 3-100, 3-310, 3-500, and 3-700 and California Business and Professions Code section 6068(e)(1). It distinguishes the acquisition-triggered conflict from a lawyer knowingly undertaking adverse concurrent work.
Citations and references
Rules of Professional Conduct:
- Former California Rules 3-100, 3-310, 3-500, and 3-700
Statutes:
- California Business and Professions Code section 6068(e)(1)
Cases:
- Flatt v. Superior Court, 9 Cal. 4th 275 (1994), loyalty and successive representation
- Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, 69 Cal. App. 4th 223 (1999), confidential information and corporate affiliates
See also
- Los Angeles County Bar Op. 536: Prior-work conflicts
- Los Angeles County Bar Op. 501: Changing-law-firm conflicts
Source
- Landing page: Orange County Bar ethics opinions
- Original PDF: Formal Opinion 2012-01
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