May a Vermont lawyer for a corporation's former owner represent its purchaser and also hold pledged stock in escrow?
Apply this to your situation
This page answers the general question as of 2014. Ask about yours and see what the current Vermont Rules of Professional Conduct say for your facts, with citations.
Plain-English summary
The requesting lawyer had represented a corporation and its sole shareholder before the shareholder sold all the stock. The seller financed part of the sale with a loan secured by pledged stock, and the lawyer held that stock as escrow agent. The buyer then asked the lawyer to continue representing the corporation and to represent the buyer in the business.
The opinion applied Vermont Rules 1.6, 1.7, and 1.9 to confidentiality and conflicts involving the former shareholder and the purchaser. It concluded that the later representation was permissible if the former and new shareholders gave informed consent confirmed in writing. The committee also treated the escrow as a fiduciary role and noted a duty to disclose information necessary to prevent loss to an escrow party.
For the escrow arrangement, the lawyer needed to give both parties enough information to make an informed decision about the material advantages and disadvantages of the dual roles and their alternatives if disclosure later became necessary. The opinion said the lawyer may serve as escrow agent if both parties give informed consent to carrying out those obligations.
In practice
On the facts presented, the opinion's permission for representation depends on written confirmation of informed consent from the affected shareholders. The escrow role separately depends on both parties understanding and consenting to the lawyer's disclosure duties as escrow agent.
Common questions
Q: Does the former shareholder's adverse interest automatically prevent representation of the buyer?
A: No. The opinion permits the later representation when the former shareholder and new shareholder give informed consent confirmed in writing.
Q: May the lawyer hold the pledged stock while representing the new owner?
A: The opinion permits the escrow role if both parties give informed consent to the lawyer's obligations in that role.
Q: What must the escrow disclosure address?
A: The opinion calls for information adequate to explain material advantages and disadvantages and the parties' options if the lawyer has to disclose information to prevent loss to an escrow party.
Background and rules framework
The opinion cites Vermont Rules 1.0(b) and (e) for written confirmation and informed consent, Rule 1.6 for confidentiality, Rules 1.7 and 1.9 for current and former client conflicts, and Rule 1.15 for property held in connection with a representation.
Citations and references
Vermont Rules of Professional Conduct:
- Rules 1.0(b), 1.0(e), 1.6, 1.7, 1.9, and 1.15
Cases:
- Powell v. H.E.F. Partnership, 793 F.Supp. 91, 93 (D.Vt. 1992), escrow agent disclosure duty
Other opinions cited:
- Vermont Opinion No. 2011-2, confidentiality and informed consent
See also
- Vermont Ethics Op. 90-08: Borrower and lender representation
- Vermont Ethics Op. 17-02: Deceased partner's former client
Source
- Landing page: VBA confidences of the client opinions
- Original PDF: Vermont Advisory Opinion 14-02
What do the rules say today, for your facts?
This opinion is from 2014. Ezel checks the current Vermont Rules of Professional Conduct against your situation and cites the rules it relies on.
Opens in Ezel Pro.
- Checks the law as it stands today, not only this page
- Cites every source it relies on, so you can verify it
- Chat, drafting and research in one workspace