When is an Attorney in Conflict of Interest

Many times client ask an attorney or his firm to represent them in a legal dispute bewteen fellow shareholders or partners where the attorney or firm had rendered legal representation in the past.

While the general ethical rule states that an attorney may not represent a party if there the possibility of a conflict of interest, the issue is a bit more complicated. The complication arises in defining the term “conflict of interest.”

Ohio has adopted the three-part test for disqualification of counsel due to a conflict of interest set forth in Dana Corp. v. Blue Cross & Blue Shield Mut. Of N. Ohio., (C.A.6, 1990), 900 F.2d 882. Also see Morgan v. N. Coast Cable Co. (1992), 63 Ohio St.3d 156, 586 N.E.2d 88; Hollis v. Hollis (1997), 124 Ohio App.3d 481, 485, 706 N.E.2d 798; Kitts v. U.S. Health Corp. of S. Ohio (1994), 97 Ohio App.3d 271, 275, 646 N.E.2d 555. The test is as follows:

(1) a past attorney-client relationship must have existed between the party seeking disqualification and the attorney he or she wishes to disqualify;

(2) the subject matter of the past relationship must have been substantially related to the present case; and

(3) the attorney must have acquired confidential information from the party seeking disqualification.

In determining whether corporate counsel should be disqualified from representing any of the corporation's officers in a later suit, the trial court is required to find all three factors enumerated in the Dana test before ordering disqualification, Legal Aid Soc. of Cleveland v. W & D Partners I, L.L.C., 162 Ohio App.3d 682, 2005 Ohio 4130, 834 N.E.2d 850.

Even though an attorney has served as counsel for a corporation, Ohio does not require the immediate disqualification of the attorney from serving as personal counsel for a shareholder or officer in a suit involving the corporation, Phillips v. Haidet (1997), 119 Ohio App.3d 322, 325, 695 N.E.2d 292; A.G. Financial, Inc. v. LaSalla, Cuyahoga App. No. 84880, 2005 Ohio 1504; Maloof v. Benesch, Friedlander, Coplan & Aronoff, Cuyahoga App. No. 84006, 2004 Ohio 6285.

In Ohio, pursuant to Rule 1.13(a) of the Ohio Rules of Professional Conduct, corporate counsel represents the interests of the corporation and not those of individual officers:

"(a) A lawyer employed or retained by an organization represents the organization acting through its constituents. A lawyer employed or retained by an organization owes allegiance to the organization and not to any constituent or other person connected with the organization. The constituents of an organization include its owners and its duly authorized officers, directors, trustees, and employees."

Therefore, in order for there to be a conflict of interest the following must be proven:

1. There was a past attorney-client relationship between the lawyer and the individual. Just because an attorney represented the corporation, that does not assume he presented the individual shareholders or partners too. Even if the attorney met with the members of a closely held corporation to discuss corporate business does not, in and of itself, arise to an attorney-client relationship with the individual shareholder or partner, and

2. Even if there was an attorney-client relationship, the subject matter of that relationship must be related to the present case for which the attorney is being retained, and

3. The attorney must have acquired confidential information from the party.

Note, all three of these requirements must be met before the conflict will arise. They are not mutually exclusive but a three-part requisite.