I co-own a corporation with a non-client. A new client wants me to act against that co-owner's separate business. May I?

Plain-English summary

The inquiring attorney is a co-owner of a close corporation with a non-client; at all times both the attorney and the co-owner have been represented by independent legal counsel. Client A has approached the attorney to represent the client in a matter adverse to the co-owner's unrelated business venture, and the attorney asks whether the attorney may represent Client A against the co-owner.

The panel concluded that the cautionary language of Rule 1.7 and its comments addresses the inquiry. Rule 1.7(b) provides that a lawyer shall not represent a client if the representation may be materially limited by the lawyer's responsibilities to another client or a third person, or by the lawyer's own interests, unless the lawyer reasonably believes the representation will not be adversely affected and the client consents after consultation.

The panel stated that it was unable to conclude that the client's informed consent is sufficient to avoid a conflict of interest. It noted that conflicts of interest outside litigation can be difficult to assess, and that relevant factors include the duration and intimacy of the lawyer's relationship with the third party, the functions the lawyer performs, the likelihood that actual conflict will arise, and the likely prejudice to the client if it does; the question is often one of proximity and degree. Finding the situation fertile with potential conflicts, the panel added that the outcome would be quite different if the attorney surrendered or abandoned the attorney's shares in the corporation.

Currency note

This opinion was issued in 1992, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.7 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, which restructured Rule 1.7. 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 Treat this page as historical context, not current guidance.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 mentioned here.

Common questions

Q: Can my client's informed consent cure the conflict from my co-ownership of a business with the opposing party?

A: Per the opinion, the panel was unable to conclude that the client's informed consent is sufficient to avoid the conflict of interest.

Q: What factors did the panel say bear on the conflict?

A: Per the opinion, the duration and intimacy of the lawyer's relationship with the third party, the functions the lawyer performs, the likelihood that actual conflict will arise, and the likely prejudice to the client if it does.

Q: Would giving up my shares change the analysis?

A: Per the opinion, yes; the panel said the outcome would be quite different if the attorney surrendered or abandoned the attorney's shares in the corporation.

Background and rules framework

The opinion applies Rhode Island Rule 1.7 (conflict of interest: general rule), corresponding to Model Rule 1.7. The panel focused on Rule 1.7(b)'s personal-interest limitation and its comment, treating the lawyer's ongoing business co-ownership with the adverse party as a source of material limitation whose gravity turned on proximity-and-degree factors rather than being resolved by consent alone.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest: general rule)
• RI RPC 1.7(b)

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 92-38: Referring Clients to the Attorney's Own Constable Firm
• RI EAP Op. 92-30: Suing a Former Employer-Lawyer for a Client's Malpractice Claim
• RI EAP Op. 88-26: Mortgage-Brokerage Ownership, Title Work, and Office Sharing

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2092-37.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

ETHICS ADVISORY PANEL
Opinion #92-37, Request #257
Issued July 23, 1992

An attorney seeks Panel advice with regard to the following circumstances. The attorney is a co-owner of a close corporation with a non-client. At all times, both the attorney and the co-owner were represented by independent legal counsel. The attorney has been approached by Client A to represent the client in a matter which is adverse to the co-owner's unrelated business venture. The attorney asks whether the attorney may represent Client A against the co-owner.

The Panel believes that the cautionary language of Rule 1.7 and the comments thereto addresses this inquiry. Rule 1.7(b) specifically mandates that:

A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation.

The language in the comment to Rule 1.7 strongly cautions an attorney as to potential problems when choosing to undertake such representation. The Panel is unable to conclude that the client's informed consent is sufficient to avoid a conflict of interest. Conflicts of interest in contexts other than litigation sometimes may be difficult to assess. Relevant factors in determining whether there is potential for adverse effect include the duration and intimacy of the lawyer's relationship with the third party, the functions being performed by the lawyer, the likelihood that actual conflict will arise and the likely prejudice to the client from the conflict if it does arise. The question is often one of proximity and degree.

The Panel believes that this situation is fertile with potential conflicts for the attorney. The Panel agrees that the outcome would be quite different if the attorney surrendered or abandoned the attorney's shares in the corporation.