Could a lawyer continue representing a majority stockholder after merging with the firm representing the corporation?
Apply this to your situation
This page answers the general question as of 1982. Ask about yours and see what the current Vermont Rules of Professional Conduct say for your facts, with citations.
Plain-English summary
A firm represented a corporation, while a separate lawyer represented its majority stockholder in litigation brought by minority stockholders. The firm had referred the stockholder to that lawyer because it apparently believed it could not represent both. The two practices later merged. The corporation had been dismissed from the lawsuit, but the merged firm would continue to represent it.
The committee treated the corporation's and stockholder's interests as differing because of the original referral. Under former DR 5-105(D), when a lawyer must decline or withdraw from employment, the lawyer's partners and associates also cannot accept or continue it. The committee concluded that the stockholder's lawyer, now part of the merged firm, could not continue the litigation representation.
The corporation's dismissal from the suit did not change the differing interests, and forming the new firm after the representation began did not remove the conflict. The committee identified risks of misuse of confidential information and divided loyalty. It declined to decide the broader question whether a lawyer may represent both a corporation and individual defendants in a stockholder derivative action because that question was not directly presented.
Currency note
This opinion was issued in 1982, before Vermont's 1999 adoption of the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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 dismissal of the corporation from the lawsuit let the lawyer continue for the stockholder?
A: No. The committee said dismissal did not change the nature of the two clients' differing interests.
Q: Did the fact that the practices merged after the representation began change the result?
A: No. The committee applied former DR 5-105(D) to the newly formed firm and identified risks to confidentiality and loyalty.
Q: Did the opinion decide whether one lawyer could defend both a corporation and individuals in every stockholder derivative suit?
A: No. The committee said the precedents were divided and declined to decide that broader issue because the inquiry did not directly raise it.
Background and rules framework
The committee relied on former DR 5-105(D), which extended a lawyer's disqualification to partners and associates, and cited DR 5-105(A) concerning the differing interests. Its conclusion assumed that the corporation and stockholder had differing interests on these facts.
Citations and references
Former Vermont disciplinary rules:
- DR 5-105(D) and DR 5-105(A).
See also
Source
- Landing page: VBA conflict of interest opinions
- Original PDF: Vermont Advisory Opinion 82-02
- Rules history: Vermont Rules of Professional Conduct, “These rules apply to lawyer conduct after September 1, 1999.”
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