Can a county attorney who is ex officio president of a bond-holding corporation for a nursing home sue that nursing home for a private client?

Plain-English summary

The committee considered a county attorney who, by virtue of his office, was automatically designated president of a holding corporation that had issued bonds for the construction of a nursing home in the county. A separate corporation operated the nursing home; the holding corporation's sole responsibility was to collect money from the nursing home to liquidate the bonds. In his private practice the attorney had been asked to litigate a client's claim against the nursing home, and he asked whether he could accept it. The committee answered no.

The committee framed the question through the conflict-of-interest concerns of the then-applicable canons (Canons 6, 11, 19, 36, and 37), quoting Professor Wise's treatise that doubt about a conflict can best be resolved by the principle that no person can serve two masters, and that the lawyer owes undivided loyalty and fidelity as a trustee for the client. It held the county attorney should not accept the employment, however remote the holding company's control of the nursing home, because members of the lay public would be unlikely to understand such fine distinctions.

The committee identified the concrete conflict: because the holding corporation's duty was to collect money from the nursing home to liquidate the bonds, a sizable claim successfully litigated against the nursing home might leave it without sufficient money to liquidate the bonds, giving rise to a genuine conflict of interest.

Currency note

This opinion was issued in 1971 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), 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 opinion itself reasons from the older Canons of Professional Ethics. 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a county attorney sue a nursing home whose bond-holding corporation he heads ex officio?

A: No. The committee held he should decline, because a successful claim could leave the nursing home unable to liquidate the bonds the holding corporation is charged with collecting.

Q: Did it matter that the holding corporation had no role in operating the nursing home?

A: No. The committee held the result held "however remote" the holding company's control of the nursing home, because the public would not understand such fine distinctions.

Q: What was the specific conflict the committee identified?

A: A sizable judgment against the nursing home might leave it without enough money to liquidate the bonds the holding corporation is responsible for collecting, creating a genuine conflict of interest.

Background and rules framework

The opinion reasoned from the older Canons of Professional Ethics (Canons 6, 11, 19, 36, and 37) on conflicts of interest and the lawyer's duty of undivided loyalty, as discussed in Wise's treatise on legal ethics. It did not cite a specific Disciplinary Rule of the then-new Code. The modern analogs are Model Rule 1.7 (concurrent conflicts of interest) and Model Rule 1.11 (conflicts for current government lawyers).

Citations and references

Rules of Professional Conduct:

• Canons 6, 11, 19, 36, 37 (Canons of Professional Ethics; conflicts of interest and undivided loyalty); modern analogs Model Rules 1.7 and 1.11

Other authorities cited:

• Wise, Legal Ethics, 2d ed., p. 256 (frequency and difficulty of conflict-of-interest questions under these canons)

See also

• KBA Ethics Op. E-80: City Attorney vs Renewal Agency
• KBA Ethics Op. E-88: County Attorney for a City
• KBA Ethics Op. E-94: Judge Sharing Office With Prosecutor

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-056.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-56
Issued: November 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 a County Attorney who is by virtue of his office designated president of a holding corporation which issued bonds for construction of a nursing home, but does not participate in its operation, represent a client with a claim against the nursing home?

Answer:

No.

References:

Canon 6, 11, 19, 36, 37

OPINION

The Ethics Committee has received a very interesting inquiry from a Kentucky attorney concerning a possible ethical conflict.

The attorney making the inquiry holds the office of County Attorney, and by virtue of that office, he is automatically designated as president of a holding corporation which issued bonds for construction of a nursing home situated within the county. A separate corporation actually operates and is responsible for the function of the nursing home, and the holding corporation has nothing to do with the actual operation of the nursing home, its sole responsibility being to collect money from the nursing home for the purpose of liquidating the bonds.

In his private practice, the attorney indicates that he has been asked to engage in litigation on behalf of a client against the nursing home, and wonders if he should accept such employment.

As stated by Professor Wise, in his text on Legal Ethics, 2nd Edition, at page 256:

There have been more requests for interpretation of these Canons (Canons 6, 11, 19, 36, and 37) than any of the other Canons. Some of the questions and problems are complex and intricate. Thus, if there is the slightest doubt as to whether a proposed representation involves a conflict of interest between two clients or may encompass the use of special knowledge or information obtained through service of another client or while in public office the doubt can best be resolved by Matthew VI 24: "No man can serve two masters." The profession of law makes the attorney a trustee for the client, an unsolicited beneficiary who has placed his property and sometimes his life in the care of his attorney. The responsibility is great and is both a legal and moral one. It cannot be delegated and demands undivided loyalty and fidelity.

Although the specific question posed is a difficult and intricate one, the Committee is persuaded to hold that the County Attorney should not accept the indicated employment, however remote the actual control the nursing home may be from the holding company. It is doubtful that members of the lay public would be able to understand such fine distinctions, and it is noted that the duties of the holding corporation are to "collect monies from the nursing home for the purpose of liquidating its bonds." It would occur to the Committee that in the event a sizable claim were successfully litigated against the nursing home, this might well mean that the nursing home would not have sufficient monies to liquidate the bonds and this could give rise to a very genuine conflict of interest.

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.