I represent a corporation and gave one 50% shareholder some general advice. He left and kept his stock. Can I keep representing the company and the other shareholder in buying him out?

Plain-English summary

The inquiring attorney represented a corporation owned by two fifty-percent stockholders who were all of its officers and directors. While representing the corporation, Stockholder A sought the attorney's advice on a personal matter in another state; the attorney could not represent Stockholder A out of state but rendered general advice. Stockholder A then resigned as an officer and director, formed a new corporation, and kept the fifty-percent stock ownership in the original corporation. The attorney asked whether he or she could continue to represent the corporation and Stockholder B in negotiations for a stock purchase or buyout with Stockholder A.

The panel applied Rule 1.13(e), which provides that a lawyer representing an organization may also represent any of its constituents, including shareholders, subject to Rule 1.7, and that where the organization's consent to the dual representation is required by Rule 1.7, it must be given by an appropriate official other than the individual to be represented, or by the shareholders.

The panel opined that the inquiring attorney may continue to represent the corporation and Stockholder B subject to Rule 1.7, and that under that rule the attorney must receive Stockholder A's consent to the representation.

Currency note

This opinion was issued in 1995, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rules 1.13 and 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 the conflict-of-interest rule around informed consent. 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 Treat this page as historical context, not current guidance.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: Could the corporation's lawyer stay in the buyout matter?

A: Yes. The opinion concluded the lawyer may continue to represent the corporation and Stockholder B under Rule 1.13(e), subject to Rule 1.7.

Q: Whose consent did the lawyer need?

A: The opinion required the lawyer to obtain Stockholder A's consent to the representation under Rule 1.7.

Q: Did the earlier general advice to Stockholder A create the problem?

A: The opinion recounted that advice as background and grounded the consent requirement in Rule 1.7 as applied through Rule 1.13(e), given Stockholder A's position across from the corporation and Stockholder B in the buyout.

Background and rules framework

The opinion applied Rhode Island Rules of Professional Conduct 1.13 (Model Rule 1.13) and 1.7 (Model Rule 1.7). Rule 1.13(e) permitted a lawyer for an organization to also represent its constituents subject to Rule 1.7, and specified who may give the organization's consent when Rule 1.7 requires it. Rule 1.7 supplied the conflict standard and the consent the panel found necessary from Stockholder A.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.13 / RI RPC 1.13(e) (organization as client; also representing a constituent subject to Rule 1.7)
• Model Rule 1.7 / RI RPC 1.7 (conflict of interest; consent)

See also

• RI EAP Op. 2025-06: A lawyer board member may represent a nonprofit if not materially limited
• RI EAP Op. 2017-02: Nonwaivable conflict representing both buyer and seller in a business sale

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%2095-17.pdf

Original opinion text

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

FINAL

ETHICS ADVISORY PANEL
OPINION # 95-17, Request # 577
Issued March 23, 1995

The inquiring attorney represents a corporation owned by two fifty percent (50%) stockholders who constitute all of the officers and directors of the corporation. The inquiring attorney was requested by the corporation to pursue various legal matters. During the course of representing the corporation, Stockholder A sought the attorney's advice regarding a personal matter in another state. The inquiring attorney could not represent Stockholder A out of state but did render general advice in the matter.

Soon thereafter, Stockholder A resigned as an officer and director of the corporation and formed a new corporation. Stockholder A retains his/her fifty percent (50%) ownership in stock of the original corporation. The attorney asks if he/she can continue to represent the corporation and Stockholder B in the negotiations for a stock purchase or buyout with Stockholder A.

Rule 1.13 entitled "Organization as Client" addresses this inquiry. The Rule states in pertinent part:

(e) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.

The Panel opines that the inquiring attorney may continue to represent the Corporation and Stockholder B subject to Rule 1.7 entitled "Conflict of Interest: General Rule." Pursuant to that Rule, the inquiring attorney must receive Stockholder A's consent to the representation.