Was a firm barred from suing a doctor because another firm lawyer had formed a corporation naming the doctor as a shareholder?

View original ethics opinion (PDF)

Plain-English summary

One firm lawyer formed a corporation at another person's request, and the doctor later sued by a different firm lawyer was named as a shareholder. The incorporating lawyer had not met or communicated with the doctor or received information from the doctor.

The committee found no lawyer-client relationship with the doctor on the stated facts. It also found the incorporation and malpractice action were neither the same nor substantially related matters. The later request to substitute a corporate officer did not establish a renewed representation because the lawyer declined it. The committee concluded the malpractice representation did not violate the rules.

Currency note

This opinion was issued in 1999, before North Dakota's 2006 revisions to its Rules of Professional Conduct. The later North Dakota Opinion 06-05 states: “On August 1, 2006, material changes to N.D.R. Prof. Conduct 1.10(a) will take effect.” 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 Treat this page as historical context, not current guidance.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, deadline, or requirement.

Common questions

Q: Did shareholder status automatically make the doctor a client?

A: No. The committee found that the facts did not support a lawyer-client relationship with the doctor merely because the doctor was named as a shareholder.

Q: Were the incorporation and malpractice case substantially related?

A: No. The committee found they were not the same or substantially related matters.

Q: Did the later officer-substitution request change the answer?

A: No. The committee said the facts did not support a renewed representation; the incorporating lawyer declined to assist.

Background and rules framework

The opinion discusses North Dakota Rules 1.9 and 1.10 on former and imputed conflicts, and Rule 1.13 on organizational representation. It contrasts Opinion 97-02’s case-by-case analysis of a closely held corporation.

Citations and references

Rules of Professional Conduct:

• North Dakota Rule 1.9.
• North Dakota Rule 1.10.
• North Dakota Rule 1.13.
• North Dakota Rule 1.7.

Other opinions cited:

• North Dakota Opinion 97-02, corporate representation and shareholder relationships.
• North Dakota Opinion 94-03, possible derivative or agency-based client relationship.

See also

• ND Ethics Op. 1999-01: former firm client conflict

Source

• Landing page: https://www.sband.org/page/ethics_opinions
• Original PDF: https://web.archive.org/web/20250000000000id_/https://www.sband.org/resource/resmgr/docs/for_lawyers/99-04.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.
STATE BAR ASSOCIATION OF NORTH DAKOTA
ETHICS COMMITTEE
OPINION NUMBER 99-04
December 14, 1999

The Ethics Committee has received a request for an opinion

from an attorney on the question of whether that attorney is

disqualified from representing a plaintiff in a medical

malpractice action against a doctor who was named as a

shareholder in a corporation previously formed by another member

of the requesting attorney’s law firm.

FACTS

The attorney requesting the opinion commenced a medical

malpractice case against a doctor.
Some time before commencing

that litigation another attorney in the same firm was engaged by

another individual to form a corporation, the primary purpose

for which was the lease of a particular piece of medical

equipment. The defendant in the medical malpractice action was

named as a shareholder in the documents forming the corporation;

but no one in or at the law firm ever met with, spoke to, or

otherwise received any information from the doctor either

directly or indirectly. The corporate documents were filed with

the Secretary of State’s office and a certificate of

incorporation was issued several months before the medical

malpractice litigation was commenced.

1

The attorney forming the corporation has expressed his view

that his professional engagement ended upon the filing of the

aforementioned documents. He also indicated that he was advised

shortly thereafter that the purpose for the incorporation had

not come to fruition and that the corporation would not likely

be conducting any future business.
He indicated still further

that his charges for the work done in its formation were not

submitted to the corporation and that he never considered the

doctor to be his client.

A little more than a month before the medical malpractice

action was commenced the attorney forming the corporation was

contacted by the individual who had initially requested his

assistance in forming the corporation asking that the attorney

assist in accomplishing the substitution of another person in

his place as an officer of that corporation because of a

conflict of interest issue.
Upon learning of the commencement

of the medical malpractice action on the date thereof, the

attorney forming the corporation recommended to that person that

it would be best for them to find another attorney because of

the fact of that medical malpractice action. The materials do

not indicate that any steps were undertaken by that attorney in

the interim period.

Roughly nine months after the medical malpractice action was

2

commenced, the defendant doctor asserted the existence of a

conflict and indicated that he will likely ask that the law firm

of the attorney requesting the opinion be disqualified from

representing the plaintiff in that action.

DISCUSSION

The primary question appears to be that of whether an

attorney client relationship was created between the law firm of

the attorney requesting the opinion and the doctor by virtue of

the fact that he was named as a shareholder in the corporation

formed with the assistance of another attorney in the law firm.

If so, additional questions would include: whether that

relationship continues or has been renewed; whether that matter

is the same matter or substantially related to the present

matter such that representation of the plaintiff in the medical

malpractice against the doctor may be prohibited; and whether

safeguards must be taken to avoid the disclosure or use of

confidential information. Rules which govern, if applicable,

include Rule 1.9, Rule 1.10 and Rule 1.13, N.D.R. Prof. Conduct.

Rule 1.9 provides:

“A lawyer who has formerly represented a client in a matter shall not thereafter:
(a) Represent another person in the same matter in which that person's interests are materially adverse to the interests of the former client; or
(b) Represent another person in a substantially related

3
matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation; or (c) Use information relating to the representation to the disadvantage of the former client in the same or a substantially related matter except as Rule 1.6 would require or permit with respect to a client.”

Rule 1.10 concerning imputed disqualification provides, in relevant part, that :

“(a) Lawyers associated in a firm may not knowingly represent a client when any one of them practicing alone would be prohibited from doing so by these rules, except as provided by Rule 1.11 or Rule 1.12.”

Rule 1.13 provides as follows:

“(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.

(b) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer reasonably believes that the organization's interests are or are likely to become adverse to those of the constituents with whom the lawyer is dealing.

(c) 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 constituent of the organization other than the individual who is to be represented.”

In SBAND Ethics Committee Opinion No 97-02(April 29, 1997)

the Committee addressed the issue of whether an attorney

representing a closely held corporation had an attorney client

relationship with its husband and wife shareholders which would

4

preclude representation by another member of the firm of one of

them in a divorce action. The conclusion of the Committee in

that Opinion was that when it came to closely held corporations

an attorney representing the corporation may also be considered

to have an attorney client relationship with the shareholders as

well; but that such would have to be determined on a case by

case basis. One factor that was recited by that Opinion as

important in that type of “case by case” evaluation was whether

there could be a reasonable belief that the attorney was

representing the shareholder. The facts here don’t support such

a belief.

The facts are further distinguishable in that one of the

attorneys in that instance was representing an existing

corporation. In this instance it does not appear that any

attorney client relationship was ever created between a member

of the law firm and the corporation formed, but that the other

member of the law firm represented the individual which perhaps

should be denominated as one of the incorporators.

Even if the attorney involved in the incorporation did

represent the corporation, it does not necessarily follow from

Rule 1.13 N.D.R. Prof. Conduct that an attorney representing a

corporation also represents its shareholders or officers. That

Rule contemplates that, while such may be permissible, it is

5

permissible only when the conditions set forth in Rule 1.7,

N.D.R. Prof. Conduct can be satisfied. Since individual

incorporators or prospective shareholders could very likely have

differing interests, the rule provides no presumption of such a

relationship in the absence of facts thereof. No such facts

appear here.

Furthermore, it is clear that the medical malpractice action

is not “the same matter” as the incorporation or “substantially

related” thereto. Therefore, even if an attorney client

relationship had been established at the time of the

incorporation, such would not preclude representation of the

plaintiff in the medical malpractice action by the attorney

requesting the opinion unless the Committee concludes that such

representation had been renewed by the recent request for

assistance in the substitution of corporate officers. The facts

available do not support that conclusion.

Another      of     this     Committee’s           opinions          that        bears

consideration is SBAND Ethics Committee Opinion No. 94-03(March

24, 1994), which addresses the possibility that an attorney

client relationship may be created under principles of agency or

fiduciary relationship or be “derivative” of some other

representation.

While the facts available here do not absolutely foreclose

6

the possibility that the incorporating client who saw the other

attorney was acting as an agent for the doctor or that some sort

of derivative representation was created, the known facts do not

support such a conclusion.

Based upon the facts available, it is the conclusion of the

Committee that no attorney client relationship was created

between the law firm of the attorney requesting the opinion and

the doctor by virtue of the fact that he was to be a shareholder

in the corporation formed with the assistance of another

attorney in the law firm or the fact that the attorney forming

the corporation was asked, but declined, to assist in

substituting one corporate officer for another. Therefore,

there is no need to decide whether any safeguards must be taken

to avoid the disclosure or use of confidential information.

CONCLUSION

It is the opinion of the Committee that the attorney

requesting the opinion is not disqualified from representing the

plaintiff in the medical malpractice action and that it is not a

violation of the North Dakota Rules of Professional Conduct for

him to do so.

This opinion is provided pursuant to Rule 1.2(B) of the

North Dakota Rules for Lawyer Discipline. This Rule states:

A lawyer who acts with good faith and reasonable reliance

7
on a written opinion or advisory letter of the ethics committee of the association is not subject to sanction for violation of the North Dakota Rules of Professional Conduct as to the conduct that is the subject of the opinion or advisory letter.

This opinion was drafted by Dann Greenwood and was approved

by a unanimous vote of the Committee on December 14,1999.

______
Mark Hansen, Chair

8