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Case 1:01-cv-01451-REB-KLM

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EXHIBIT I

Case 1:01-cv-01451-REB-KLM

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ABA Formal op. 91-361 ABA Comm. on Ethics and Professional Responsibility, Formal Op. 91-361

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American Bar Association REPRESENTATION OF A PARTNERSHIP July 12, 1991 Copyright (c) 1991 by the American Bar Association A partnership is an organization within the meaning of Rule 1.13. Generally, a lawyer who represents a partnership represents the entity rather than the individual partners. Confidential information received by the lawyer while representing the partnership is "information relating to the representation" of the partnership that normally may not be withheld from the individual partners. The question has been raised whether partnerships are "organizations" within the meaning of Rule 1.13, ABA Model Rules of Professional Conduct (1983, amended 1989), so that a lawyer who represents a partnership represents the entity rather than the individual partners. Two related questions frequently arise: (I) When does a partnership's lawyer have an attorney-client relationship with an individual partner? (2) Under what circumstances does information received by the partnership's lawyer from an individual partner constitute "information relating to representation" of the partnership within the meaning of Rule 1.6(a) so as to give the partnership a right of access to that information; and convcrsely, to what extent is each partner entitled to know whatever information has been conveyed on the partnership's behalf to the partnership's lawyer? The pertinent provision of the Model Rules with respect to representation of an entity is Rule 1.13(a): (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. While there is no analogue to this Rule in the Disciplinary Rules of the predecessor ABA Model Code of Professional Responsibility, Ethical Consideration 5-18 of the Model Code states that a "lawyer employed or retained by a corporation or similar entity owes his allegiance to the entity and not to a stockholder, director, officer, employee, representative, or other person connected with the entity." The entity concept upon which Rule 1.13 is based, broadly stated, rests on two notions. The first is that an organization of persons, often in corporate form, is a separate jural entity having distinct rights and duties and capable, among other things, of entering into contracts and either bringing suit or being sued in its own name. Second, under the law of agency, a lawyer is an agent of the employing organization and it is the organization, as principal, to which the lawyer is professionally responsible, not its directors, officers, owners or other agents. Ultimately, the rationale behind the Rule is that an organization will have goals and objectives that may, or may not, be consistent with the goals and objectives of all or some of its members or other constituents. A lawyer ordinarily cannot be expected to represent differing interests, but must exercise fidelity to the person, or entity, that engaged his or her services. However, because a partnership is a unique legal entity, where the individual members comprise the whole, there may be confusion as to which interests the lawyer represents. There is no logical reason to distinguish partnerships from corporations or other legal entities in determining the client a lawyer represents. A partnership is, by definition, an unincorporated association. See, e.g., Uniform Partnership Act § 6(2); Bromberg & Ribstein, Partnership § 1.01(1988); and the Comment to Rule 1.13 which explicitly states that "[t]he duties defined in this Comment apply equally to unincorporated associations." Both case authority and commentary support the treatment of partnerships as entities separate from their owners. See, for example, Quintel Corporation, NV. v. Citibank, N.A., 589 F.Sunp. 1235, 1240 (S.D.N.Y.1984) (court recognized that limited partnership is "similar entity" to a corporation for purposes of EC 5-18); Margulies v. Upchurch, 696 P.2d 1195 (Utah 1985); [FNI] see also G.C. Hazard, Jr. & W.W. Hodes, The Law of Lawyering § © 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:01-cv-01451-REB-KLM
ABA Formal Op. 91-361

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ABA Comm. on Ethics and Professional Responsibility, Formal Op. 91-361 1.13:103 (2d Ed.1990); C.W. Wolfram, Modern Legal Ethics

§§

8.3.5 and 13.7.2 (1986).

Accordingly, the Committee is of the opinion that a partnership is an organization within the meaning of Rule 1.13. [FN2] Turning to the first of the related questions posed--when does a partnership's lawyer have an attomey-client relationship with an individual partner--the Committee is of the view that a lawyer who represents a partnership represents the entity rather than the individual partners unless the specific circumstances show otherwise. Furthermore, whether a lawyer representing a partnership has an attorney-client relationship with any individual partner depends on the facts of the particular situation, discussed more fully infra. A lawyer who represents a partnership must take care to avoid the creation of an attorney-client relationship with individual partners unless the lawyer is satisfied that it is ethical to do so and intends to create such a relationship. Representation of the partnership does not necessarily preclude the representation of individual partners in matters not clearly adverse to the interests of the partnership, nor preempt such an individual representation previously undertaken. However, simultaneous representations of partnerships and of individual partners, even on basically unrelated matters, may result in the lawyer possessing confidences of one client that may not be revealed to another, a circumstance which could effectively prevent continued representation of the other client. See Rule 1.7(a). In such a case the lawyer may have to withdraw from one or both ofthe representations. Because Rule 1.13(e) [FN3J authorizes a lawyer to represent both an organization and one or more of its representatives or owners, the difficulties inherent in multiple representation are close to the surface for a lawyer who undertakes to advise both a partnership and one or more of its partners. Thus, before accepting the representation of one or more partners individually in addition to the partnership, a lawyer should consider whether it would be possible to discharge his or her responsibilities to the partnership under Rule 1.13(b) (requiring disclosure to the entity of acts of individual officer, employee or other agent that may harm the entity), if an individual partner client were to take or contemplate taking action adverse to the partnership. The lawyer should also consider whether the dual representation may compromise the lawyer's duties of fidelity, candor and independent professional judgment either to the partnership or to the individual partner clients. Finally, the lawyer should assess whether the dual representation may impair the lawyer's ability to maintain the confidentiality of communications from an individual partner or made on behalf of the partnership. Because these important issues are sometimes overlooked, lawyers who represent partnerships face serious problems when litigation arises affecting both the partnership and the individual partners. An attorney-client relationship does not automatically come into existence between a partnership lawyer and one or more of its partners. See, Quintel, supra; accord Margulies, supra, and Security Bank v. Klicker, 142 Wis.2d 289. 418 NW.2d 27 (Wis.App. 1987), review denied, (1988). Whether such a relationship has been created almost always will depend on an analysis of the specific facts involved. The analysis may include such factors as whether the lawyer affirmatively assumed a duty of representation to the individual partner, whether the partner was separately represented by other counsel when the partnership was created or in connection with its affairs, whether the lawyer had represented an individual partner before undertaking to represent the partnership, and whether there was evidence of reliance by the individual partner on the lawyer as his or her separate counsel, or of the partner's expectation of personal representation. [FN4J Once the legal nature of the lawyer's relationship, or lack thereof, to the partnership and the individual partners has been determined, Rule 1.13 and its companion rules are readily applied. Where the attorney for a partnership also represents one or more individual partners, explicitly or as a result of the close relationship between the partnership and its members, the obligations and limitations of Rule 1.7 apply, as Rule 1 .13(e) expressly recognizes. Thus it is clear, under Rule 1.7(a) (see Note 3, supra), that the partnership's attorney could not, without the informed consent of the partnership, represent the interests of one partner against the partnership. It is also clear that, under Rule 1.7(a), the partnership's attorney could not, without the informed consent of both the partnership and all adverse partners, represent the interests of one partner against other partners with respect to a matter involving the partnership's affairs. However, a lawyer undertaking to represent a partnership with respect to a particular matter © 2005 Thomson/West No Claim to Orig. U.S. Govt. Works.

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ABA Formal Op. 91-361 ABA Comm. on Ethics and Professional Responsibility, Formal Op. 91-361

does not thereby enter into a lawyer-client relationship with each member of the partnership, so as to be barred, for example, by Rule 1.7(a) from representing another client on a matter adverse to one of the partners but unrelated to the partnership affairs. [FN5] As to the second related question posed above--in what circumstances may or must information regarding the partnership or individual partners relating to the representation of each be kept confidential from the other--the Committee believes that information received by a lawyer in the course of representing the partnership is "information relating to the representation" of the partnership, and normally may not be withheld from individual partners. [FN6] Questions with respect to client confidences under Rule 1.6(a) [FN7] will often arise when the lawyer for a partnership also represents an individual partner, or a client adverse to the interests of an individual partner. See, for example, Wortham and Van Liew v. Superior Court (Clubb), 188 Cal.Apy3d 927, 233 Cal.Rptr. 725 (1987), in which the attorney for a partnership, in an action by one partner to dissolve the partnership, refused on deposition to disclose information about the partnership, asserting the attorney-client privilege. The court compelled the testimony, holding that under the California Joint Client Rule of Evidence "the attorney must divulge all partnership information to all partners" See also Fassihi v. Sommers, et al., 107 Mich.App. 509, 309 N.W.2d 645 (1981), where it was held that no attorney-client privilege could be asserted by a closely-held corporation's attorney as to communications made to him by one officer in connection with the ouster of the second officer (the plaintiff) as one oftwo owners of the corporation. The mandate of Rule 1.6(a), not to reveal confidences of the client, would not prevent the disclosure to other partners of information gained about the client (the partnership) from any individual partner(s). Thus, information thought to have been given in confidence by an individual partner to the attorney for a partnership may have to be disclosed to other partners, particularly if the interests of the individual partner and the partnership, or vis-a-vis the other partners, become antagonistic. As suggested above, Rule 1.13(e), permitting counsel for an organization to represent its officers, employees and members, presents special problems where the organization is a partnership. This is so primarily because of two factors: first, because partners almost always are co-owners of the partnership and, second, because partnerships are usually relatively small organizations in which the interests ofthe partners are both personal and often co-extensive. Lest the difficulties of representing both a partnership and one or more of its partners appear impossible to overcome, however, Rule I .7(b)(2) and, to a lesser extent, Rule 1.13(d) suggest a procedure that may be helpful in many situations. If an attorney retained by a partnership explains at the outset of the representation, preferably in writing, his or her role as counsel to the organization and not to the individual partners, and if, when asked to represent an individual partner, the lawyer puts the question before the partnership or its governing body, explains the implications of the dual representation, and obtains the informed consent of both the partnership and the individual partners, the likelihood of perceived ethical impropriety on the part of the lawyer should be significantly reduced. FNI It should be noted that because the structural organization of limited partnerships, in which only the general partners have managerial responsibility and limited partners are usually passive investors, differs from that of general partnerships, the application of the Model Rules to the two forms of partnership may not be the same in all circumstances. Judicial decisions dealing with the responsibility of an attorney who represents a limited partnership, or its general partner, to the limited partners have not been wholly consistent. One court, interpreting § 10(l)(b) of the Uniform Limited Partnership Act, a provision which gives certain informational rights to limited partners, held that an attorney for a general partner had no duty, in connection with the preparation of an offering memorandum, to disclose to investing limited partners information received from the general partner. Buford White Lumber Co. v. Octagon Properties, Ltd., 740 F.Supn. 1553 (W,D.Okla.l989). See also Mursau Corp. v. Florida Penn Oil & Gas, Inc., 638 F.Sunp. 259 (W.D.Pa.1986) (holding that indirect benefit received by limited partner from services performed by attorney for limited partnership and its general partner insufficient to create attorney-client relationship with limited partner), affd sub nom. Murseau Cop. v. Florida Penn Oil & Gas, Inc., 813 F.2d 398 (3rd Cir.1987); Quintel Corp., NV. v. Citibank, N.A., 589 F.Supn. 1235 (S.D.N.Y.1984) (attorney representing general partner or even the limited partnership is not, in absence of affirmative assumption of duty, © 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

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automatically the attorney for limited partners). Other cases, however, have held that the attorney for a limited partnership may not withhold information from the limited partners on the basis of attorney-client privilege. McCain v. Phoenix Resources, Inc., 185 Cal.App.3d 575. 230 Cal.Rytr. 25,26(1986) ("We conclude that absent any restriction by statute or by the partnership agreement, a limited partner has the right to inspect all documents and papers affecting the partnership, including those held by the partnership's attorney.") To the same effect, see Roberts v. Heim, 123 F.R.D. 614 (N.D.CaI.l988), and Abrams v. Rogers, No. 11793/89 (Sup.Ct.N.Y., June 5, 1991). See In re W.F. Development Corp., 905 F.2d 883. 884 (5th Cir.l990), for a limited partnership case in which conflict of interest issues were presented ("When one attorney represents both limited and general partners in bankruptcy there will always be a potential for conflict and disqualification [of the attorney] is proper."). FN2 While for some purposes, often involving the substantive rights and liabilities of partners, a partnership is treated as an "aggregate" or group of individuals, rather than as an entity, Bromberg and Ribstein, Partnership, § 1.03 (1988), that concept was rejected in favor of the entity theory of organization representation by the drafters ofthe Model Rules. G.C. Hazard, Jr. & W.W. Hodes, The Law of Lawyering 392 (2d Ed.1990). Accord Security Bank v. Klieker, 142 Wis.2d 289, 418 N.W.2d 27 (Wis.App.1987), review denied (1988). FN3 Rule 1.13(e) provides: (e) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7.... Rule 1.7 provides: (a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless: (I) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and (2) each client consents after consultation. (b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless: (I) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved. FN4 While the creation of an attorney-client relationship depends primarily upon the intent of the parties, G.C. Hazard, Jr. & W.W. Hodes, The Law of Lawyering 75 (2d Ed.l990), it is clear the intent to form such a relationship may be implied from the conduct of the parties. Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7th Cir.), cert. denied, 439 U.S. 955 (1978); Connelly v. Wolf, Block, Shorr & Solis-Cohen, 463 F,Sunp. 914 (E.D.Pa.l978). FN5 Partnerships vary in size, of course, from two partners to 1,000 or more. In small partnerships, as with closely held corporations, it is more difficult to distinguish between representation of the entity and of its individual owners, Bobbitt v. Victorian House, Inc., ~45LSllpa.j 124 (N.D,lll.1982), and the likelihood that the attorney representing the entity will be held to stand in a confidential, or fiduciary, relationship with the individual shareholders, or partners, is much greater. Fassihi v. Sommers, et al., 107 Mich.Ap~. ~9. 309 N.W.2d 645 (1981). But see Glueck v. Jonathan Logan, 653 F.2d 746 (2d Cir.l98l) in which the court, applying a substantial relationship test, held that a law firm which represented an incorporated trade association having more than 100 members could not represent an individual client against a corporation, one division ofwhich was a member ofthe trade association. FN6 An exception to this general proposition would be presented if the lawyer were representing the partnership in a dispute between the partnership and one or more individual partners. FN7 Rule 1.6 provides, in part: (a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the © 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

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ABA Formal Op. 91-361 ABA Comm. on Ethics and Professional Responsibility, Formal Op. 9 1-361 representation.... ABA Formal Op. 91-361 END OF DOCUMENT

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