Can a lawyer who handled a company's asset sale and was its officer later sue the seller on the buyer's behalf over that same sale?

Plain-English summary

The committee considered an attorney who had represented a corporation, served as one of its officers, and handled to a large extent the transaction in which that corporation transferred its assets to a successor corporation. The question was whether the attorney could later represent the successor corporation in litigation against the prior owner over issues relating to that asset transfer. The committee answered no.

The committee pointed to the office file and portions of the court file, which showed a long history of representation of the selling corporation, active participation in the transfer (including the attorney's signature as secretary of the selling corporation), and the confidences the attorney could have acquired about the transaction. On that record, the committee's informal opinion was that a conflict-of-interest situation could appear that would not be to the best interest of the attorney or the organized Bar.

Currency note

This opinion was issued in 1971 under the former Code of Professional Responsibility, before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. The conflict principles it applied are now addressed by Model Rule 1.9 (duties to former clients) and Model Rule 1.7 (concurrent conflicts), with Kentucky's counterparts at SCR 3.130. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer who handled a company's asset sale later sue the seller for the buyer over that same sale?

A: No. The committee concluded the lawyer could not represent the successor corporation against the prior owner on issues relating to the transfer, because a conflict of interest could appear.

Q: What facts drove the committee's conclusion?

A: The long history of representing the selling corporation, the attorney's active role in the transfer (including signing as its secretary), and the confidences he could have acquired about the transaction.

Background and rules framework

The opinion applied the conflict-of-interest principles of the Code of Professional Responsibility to a lawyer who had represented and served as an officer of one party to a transaction and later sought to litigate against that party for the other side. The modern analogs are Model Rule 1.9 (duties to former clients, including matters substantially related to a former representation) and Model Rule 1.7 (concurrent conflicts), with Kentucky's counterparts at SCR 3.130.

Citations and references

Rules of Professional Conduct:

• Code of Professional Responsibility (conflict-of-interest principles); modern analogs Model Rules 1.9 and 1.7

See also

• KBA Ethics Op. E-148: Adverse to a Frequent Bank Client in an Unrelated Matter
• KBA Ethics Op. E-37: County Attorney Partner Before the Zoning Commission

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-042.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-42
Issued: January 1971

This opinion was decided under the Code of Professional Responsibility,
which was in effect from 1971 to 1990. Lawyers should consult the current
version of the Rules of Professional Conduct and Comments, SCR 3.130
(available at http://www.kybar.org), before relying on this opinion.

Question:

May an attorney who represented a corporation and was an officer of the
corporation, which transferred its assets to a successor corporation, the
transaction handled to a large extent by such attorney, represent the
successor corporation in litigation between the successor corporation and
the prior owner of the business concern concerning issues relating to the
transfer of the assets?

Answer:

No.
OPINION

In view of the fact that the office file, as presented with portions of the Court file,
shows a long history of representation of the selling corporation, active participation in
the transfer, including attorney’s signature as secretary of the selling corporation, and the
confidences that could have been acquired in regard to the transaction, it is our informal
opinion that a conflict of interest situation could appear which would not be to the best
interest of the attorney or the organized Bar.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the
Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530
(or its predecessor rule). The Rule provides that formal opinions are advisory only.