Can the lawyer who represented the sponsor in a cooperative conversion also represent the new cooperative corporation afterward, agreeing to withdraw if a conflict arises?

Plain-English summary

Building on Formal Opinion 1988-5, the committee addressed a situation that opinion had not reached: a lawyer who represents the sponsor in converting a rental building to a cooperative and then proposes to continue representing both the sponsor and the new cooperative corporation after the conversion. The lawyer asked whether the dual representation is permissible if the lawyer agrees to withdraw when a specific conflict arises, and whether the tenants' control of the cooperative's board (and their power to discharge its counsel) would justify it.

The committee described the many capacities in which a sponsor acts (owner, landlord, creator and controlling shareholder of the cooperative, seller of shares, managing agent, commercial lessee, and often mortgage holder) and noted the inquirer had already concluded the tenant shareholders' interests are adverse to the sponsor in virtually all of them. Applying DR 5-105(A) and (B), which require declining or discontinuing multiple representation likely to involve differing interests, the committee said it was difficult to conceive of a situation in which representing both the sponsor and the cooperative would not be "likely to involve" differing interests, and it pointed to EC 5-18: a lawyer for a corporation owes allegiance to the corporation, not to a connected person such as the sponsor.

The committee recognized that DR 5-105(C) permits multiple representation if it is "obvious" the lawyer can adequately represent each interest and each consents after full disclosure, but stressed that the more issues likely to arise between sponsor and cooperative, the less likely the "obviousness" test is met, and that doubts must be resolved against the representation (EC 5-15). It observed that even a permissible dual representation can force later withdrawal from both engagements if a non-waivable conflict develops, sometimes without the lawyer being able to explain why, and that in common practice the sponsor's lawyer typically resigns from the cooperative when tenant and sponsor interests diverge. The committee concluded the preferable course is to decline representation of the cooperative corporation at the outset, sparing the clients the expense and disruption of later withdrawal.

Currency note

This opinion was issued in 1990, before New York replaced the Code of Professional Responsibility (the Disciplinary Rules cited here) with the New York Rules of Professional Conduct, effective April 1, 2009. Conflicts of interest are now governed by Rule 1.7, and the duties of a lawyer for an organization by Rule 1.13. 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 mentioned here.

Common questions

Q: Can the sponsor's conversion lawyer also represent the cooperative corporation after conversion?

A: The committee concluded the preferable course is to decline, because the interests of the sponsor and the cooperative are almost always differing interests under DR 5-105, even though dual representation is theoretically possible with full disclosure and consent.

Q: Does agreeing to withdraw if a conflict arises make the dual representation acceptable?

A: The committee concluded that an agreement to withdraw later does not cure the problem; later withdrawal from both engagements may be forced and disruptive, so declining at the outset is preferable.

Q: Does it matter that the tenants control the board and could fire the cooperative's lawyer?

A: The committee did not treat the tenants' control of the board as sufficient to justify otherwise impermissible dual representation; the conflict turns on the differing interests of the sponsor and the corporation.

Background and rules framework

The opinion applied New York Code DR 5-105(A), (B), and (C) (declining, discontinuing, and consenting to representation of differing interests), informed by EC 5-15 (resolving doubts against the representation) and EC 5-18 (a corporation's lawyer owes allegiance to the entity). These correspond to ABA Model Rule 1.7 (conflicts of interest) and Model Rule 1.13 (organization as client).

Citations and references

Rules of Professional Conduct:

• New York Code DR 5-105(A)-(C); EC 5-15, EC 5-18 (applied in the opinion)
• MR 1.7 (conflicts of interest); MR 1.13 (organization as client)

Other opinions cited:

• N.Y. City Formal Op. 1988-5: lawyer-tenants and the cooperative
• N.Y. City Formal Ops. 80-7 and 81-4: the adverse-effect touchstone of DR 5-105(C)
• N.Y. State 162 (1970); N.Y. State 38 (1966): the "obviousness" test and practicing dual representation sparingly

See also

• NYC Bar Formal Op. 1988-5: Lawyer-Tenants in Cooperative and Condominium Buildings
• NYC Bar Formal Op. 1990-4: Volunteer Judge and Mediator Conflicts

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-1990-1/