Can a corporation's lawyer later sue a stockholder who had paid part of the lawsuit's cost deposit?

Plain-English summary

A lawyer had filed suit on behalf of a corporation with three stockholders, one of whom was his brother, against the managing stockholder for alleged conversion of corporate assets. To fund a $100 cost deposit, the brother obtained half from the third (interested) stockholder, and the lawyer issued that stockholder a receipt for his $50. After filing, the lawyer advised his brother and the interested stockholder about the matter. It later emerged that the interested stockholder and the managing stockholder had been acting together to convert corporate assets, so the interested stockholder needed to be joined as a defendant. The lawyer asked whether he could ethically continue the corporation's suit by joining that stockholder despite the earlier cost contribution.

While noting it was not entirely clear on what legal basis the corporation's suit could proceed when an apparent majority of stockholders were adverse, the committee assumed a lawful basis for the continued representation. Emphasizing that the inquirer had received no information about the suit from the stockholder now to be joined, and assuming his $50 was treated as an advance on behalf of the corporation, the committee, with three members dissenting, concluded it would not be unethical for the inquirer to continue prosecuting the suit in the circumstances described.

Currency note

This opinion was issued in 1968, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. It applied the former Canon 6 on conflicting interests. Concurrent conflicts of interest are now addressed by Rule 4-1.7, and the rules on representing an organization as client by Rule 4-1.13. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Can a corporation's lawyer sue a stockholder who helped pay the case costs?

A: Under this opinion, yes on these facts, where the stockholder's contribution was treated as an advance for the corporation and the lawyer received no information about the suit from that stockholder. Three members dissented.

Q: What was the key condition the committee emphasized?

A: That the lawyer had received no information pertaining to the suit from the stockholder who was now to be joined as a defendant.

Background and rules framework

The opinion applied the former Canon 6 on representing conflicting interests, in the setting of a lawyer for a corporation whose stockholders had become adverse. Concurrent conflicts are now addressed by Rule 4-1.7 of the Rules Regulating The Florida Bar, and representation of an organization as client by Rule 4-1.13; the Model Rule analogues are Rules 1.7 and 1.13.

Citations and references

Rules of Professional Conduct:

• Canon 6 [Code of Professional Responsibility; conflict duties now in Rule 4-1.7]

See also

• FL Bar Ethics Op. 69-2: Representing Developer and HOA

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-68-34/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-68-34-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 68-34
July 12, 1968
Advisory ethics opinions are not binding.
The fact that an attorney representing a corporation in litigation received a portion of the cost deposit from a certain stockholder does not preclude his thereafter joining such stockholder as a defendant in the suit, provided the attorney received no information pertaining to the suit from the stockholder in question.
Canon: 6
Chairman MacDonald stated the opinion of the committee:
A member of The Florida Bar advises as follows:
I filed a suit on behalf of a corporation which had three stockholders. One of the stockholders was my brother. He requested that I file suit on behalf of the corporation against one of the three stockholders who was managing the corporate affairs for alleged conversion of corporate assets. I told him that I would need $100 for a cost deposit. He contacted the third stockholder about the cost money and got half of the cost deposit from him. I then forwarded to this stockholder a receipt for the $50 that he had delivered to my brother as a portion of the suit costs. Shortly thereafter I filed suit on behalf of the corporation against the managing stockholder and his wife. After the institution of the suit I had occasion to advise my brother and the other interested stockholder concerning the matters involved in the suit. It later developed that the interested stockholder and the managing stockholder were acting in concert in converting the corporate assets. As this point it is, of course, indicated that the interested stockholder should be joined as a party defendant. My question is whether or not I can ethically carry this suit forward on behalf of the corporation by joining the interested stockholder notwithstanding the fact that he posted one half of the original cost deposit.
Although it is not completely clear to us the legal basis on which the suit on behalf of the corporation may be prosecuted when the apparent majority of the stockholders are adverse parties, we assume for purposes of this inquiry that there is a lawful and appropriate basis for the inquirer to continue to represent the corporation. Emphasizing as we must that the inquirer received no information pertaining to the suit from the stockholder who is now to be joined as a defendant, and assuming that the $50 contributed by him to the original cost deposit was treated by the parties as an advance on behalf of the corporation, the Committee, three members dissenting, concludes that it would not be unethical for the inquirer to continue the prosecution of the suit in the circumstances related.