Can a lawyer represent a corporation when the lawyer is the brother of its president and main shareholder?

Plain-English summary

Lawyer A's firm represented Corporation B. C, the brother of Lawyer A, was a 50% shareholder, president, and director; the board was almost always deadlocked. The questions were whether the family relationship created a conflict, and if not, whether one would arise if Lawyer A actually favored C's interests.

The opinion applied Rule 1.13(a), under which a lawyer for a corporation represents the entity acting through its constituents, so Lawyer A's loyalty runs to Corporation B, not to any officer, director, or shareholder. It then applied Rule 1.7(b), noting that a lawyer's personal relationships can create a conflict even without representing another party, and drawing on prior opinions (including lawyer-as-director and lawyer-relative situations) that found no violation where the relationship is disclosed, consent is obtained, and the lawyer's professional judgment is not adversely affected.

The opinion concluded that Lawyer A must reasonably believe, on an objective standard, that the relationship will not affect his advice to the corporation. Being related to C does not mean he will favor C, and the fact that the board deadlocks or that A agrees with C's positions does not itself create a conflict (the question is why they agree). The opinion concluded that Lawyer A should disclose the relationship to the other directors and obtain consent, recommend independent counsel where his judgment is reasonably likely to be affected, and that if he felt compelled to place C's personal interests above the corporation's, continued representation would be impermissible and withdrawal required under Rule 1.16(a)(2).

Currency note

This opinion was issued in 1995, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in May 2010 as generally consistent with the 2010 Rules (referring to Rules 1.7, 1.13(a), and 1.16(a)(1)), while noting the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Is a lawyer automatically conflicted out of representing a relative's company?

A: The opinion concluded no. The family relationship does not by itself create a conflict, because the corporate lawyer's duty runs to the corporation, not to the related constituent.

Q: What must the lawyer do about the relationship?

A: The opinion concluded the lawyer should disclose the relationship to the other directors and obtain consent under Rule 1.7(b), and judge by an objective standard whether his judgment will be affected.

Q: Does agreeing with the related owner show a conflict?

A: The opinion concluded not necessarily. The owner's position may also be best for the corporation; the proper question is why the lawyer agrees, judged by an objective determination of the corporation's best interest.

Q: When must the lawyer withdraw?

A: The opinion concluded that if the lawyer felt compelled to place the relative's personal interests above the corporation's, he could not reasonably believe his advice would be unaffected, making the conflict irreconcilable and withdrawal mandatory under Rule 1.16(a)(2).

Background and rules framework

The opinion interpreted Rule 1.13(a) (the corporation as the client, acting through constituents; Model Rule 1.13), Rule 1.7(b) (personal-interest and third-party conflicts, curable by reasonable belief plus consent; Model Rule 1.7), and Rule 1.16(a)(2) (mandatory withdrawal where continued representation would violate the Rules; Model Rule 1.16).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.13 (organization as client) / Illinois Rule 1.13(a)
• Model Rule 1.7 (conflict of interest: current clients) / Illinois Rule 1.7(b)
• Model Rule 1.16 (declining or terminating representation) / Illinois Rule 1.16(a)(2)

Cases:

• ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 90 Ill. App. 3d 817, 413 N.E.2d 1299 (1st Dist. 1980), corporate lawyer's duty to the entity

Other opinions cited:

• ISBA Opinions 92-11, 92-4, 783, and 483

See also

• ISBA Ethics Op. 96-03: Disclosing a Client's Death
• ISBA Ethics Op. 96-05: Conflicts of Interest in Estate Matters

Source

• Landing page: https://www.isba.org/ethics/opinions/9501