Freivogel on Conflicts
 
 
 

 
Partnerships (Including Limited Partnerships)

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        Corporations.  Click here.

        Trade Associations and other Kinds of Associations.  Click here.

General Partnerships

        Does the lawyer for a general partnership also represent the individual partners for conflict of interest purposes?  In a well-reasoned and comprehensive opinion the ABA Ethics Committee said no, ABA Op. 91-361 (1991).   The opinion cautions that the lawyer may wind up having duties to individual partners.  For example, the lawyer may have to protect confidences gained from individual partners where there is an expectation of confidentiality.  The lawyer may also have duties to individual partners under circumstances leading the partners to believe that they are clients. 

        The following cases follow the ABA approach both in the disqualification context, and in the context of whether the individual partner was a client for purposes of bringing a malpractice action against the partnership's lawyer: Law v. Harvey, 2007 U.S. Dist. LEXIS 35956 (N.D. Cal. May 1, 2007) (disqualification; court recognized rule, but held that lawyer did represent one of the partners); Richter v. Van Amberg, 97 F. Supp. 2d 1255 (D.N.M. 2000) (no malpractice action); Hopper v. Frank, 16 F.3d 92 (5th Cir. 1994) (no malpractice action); Responsible Citizens v. Superior Court, 20 Cal. Rptr. 2d 756 (Cal. App. 1993) (no disqualification); Griva v. Davison, 637 A.2d 830 (D.C. App. 1994); Rudolf v. Gray, Harrison & Robinson, P.A., 901 So. 2d 148 (Fla. App. 2005) (liability: without more, lawyer for a professional association is not lawyer for the owners); Rice v. Strunk, 670 N.E.2d 1280 (Ind. 1996) (no malpractice action); Bison Plumbing City, Inc. v. Benderson, 722 N.Y.S.2d 660 (N.Y. App. 2001) (no disqualification); and Security Bank v. Klicker, 418 N.W.2d 27 (Wis. App. 1987) (no malpractice action).  The following state and local ethics opinions are to the same effect: Cal. Op. 1994-137 (1994); N.Y. City Bar Op. 1994-10 (1994); and Va. Op. 1458 (1992).  But, see Dembitzer v. Chera, 728 N.Y.S.2d 78 (N.Y. App. Div. 2001), Jamie v. Jamie, 765 N.Y.S.2d 774 (N.Y. App. Div. 2003) (courts held that a law firm that represented a partnership could not be adverse to a 50% partner in a case seemingly unrelated to the partnership), and Steven's Distributors, Inc. v. Gold Rosenblatt & Goldstein, 2010 N.Y. Misc. LEXIS 3336 (N.Y. Sup. Ct. July 19, 2010).  Conn. Op. 1993-13 (undated) held that the lawyer for the partnership must explain up front that the only client is the partnership.

        Minor v. Combo Stores Co., 2012 N.Y. App. Div. LEXIS 359 (N.Y. App. Div. Jan. 17, 2012).  In this disqualification proceeding the court  held that a lawyer's earlier representation of an individual partner of a general partnership was not tantamount to representation of the partnership.

        In Collins v. Collins, 1999 Conn. Super. LEXIS 1803 (Conn. Super. 1999), the court ruled that the lawyer who represented both partners when they created the partnership could not represent one against the other.  Although the latter was a former client, the court said the new matter was substantially related to the creation of the partnership.  That was the thrust of Conn. Op. 93-13 (1993).

        Cacciola v. Nellhaus, 733 N.E.2d 133 (Mass. App. 2000).  A lawyer represented a four person partnership.  Unbeknownst to one of the partners (the "deceased partner"), the lawyer represented another partner to buy out yet another.  The executrix of the estate of first partner sued the lawyer.  The court agreed that the lawyer did not have a lawyer-client relationship with the deceased partner.  However, the court held that he plaintiff stated several causes of action.  One was breach of fiduciary duty to the deceased partner for failing to keep him advised of the buy-out.  Another was for aiding and abetting the breach of fiduciary of duty of the acquiring partner to the deceased partner.  The last was for intentionally interfering with the contractual relations of the deceased partner - based upon the fact that the lawyer knew the deceased partner was also interested in buying out his partners.

        In re Bon-Air P'Ship v. Trumble, 2013 U.S. App. LEXIS 7316 (4th Cir. April 11, 2013).  In this opinion the court held that Chapter 7 trustee could hire a law firm as special counsel even though that law firm was asserting a claim against a general partner of Debtor on behalf of another client.

        Joint Ventures.  In Division Eight Park Place Associates, Ltd. v. Bell Gardens Bicycle Club, 2002 Cal. App. Unpub. LEXIS 9239 (Cal. App. October 2, 2002) the court held that representing a joint venture does not create a lawyer-client relationship with the members of the joint venture.  To the same effect, see Nadherny v. Roseland Property Co., 2002 U.S. Dist. LEXIS 20760 (D. Mass. October 29, 2002), and Integrity Nat'l Corp. v. DSS Servs., Inc., 2017 WL 2812807 (D. Md. June 29, 2017).  But, in Al-Yusr Townsend & Bottum Co, v. United Mid East Co., 1995 U.S. Dist. LEXIS 14622 (E.D. Pa. 1995) the court held that given the special nature of joint ventures, a lawyer for a joint venture is also the lawyer for the members of the joint venture.  A similar holding is Hakimian Mgm’t. Corp. v. Richard C. Fiore, Inc., 2007 N.Y. Misc. LEXIS 4844 (N.Y. S. Ct. July 9, 2007).   State ex rel. Oklahoma Bar Ass'n v. Malloy, 37 P.3d 874 (Okla. 2001), was a disciplinary proceeding.  Malloy represented Nave in setting up a “smoke shop” venture with Corday and Pendergrass.  One of the complaints against Malloy, for which he was reprimanded, was his handling of the joint venture.  As to that the court said that given the multiple parties involved, Malloy should have explained what would happen if a conflict arose.

        Business Trusts.  Greate Bay Hotel & Casino, Inc. v. City of Atlantic City, 624 A.2d 102 (N.J. Super. 1993) involved a business trust.  The court held that a lawyer for a business trust could take a position directly adverse to one of the trust's owners.

       Limited Liability Companies.  These cases are collected at the "Corporations" page.

        Unincorporated Associations.  Sheehy Road Water Systems Subscribers v. Pirghaibi, 2003 Cal. App. Unpub. LEXIS 6869 (Cal. App. July 17, 2003).  The court held that a lawyer could represent an unincorporated association of fourteen individuals (a water system) in a dispute with a member of the association.  The association and the member were fighting when the association hired the lawyer.  The court affirmed a trial court finding that the lawyer never had represented the member and had never received confidential information from the member.  Also, see R.I. Op. 2003-04 (September 11, 2003).  The inquiring lawyer represented an unincorporated condominium association.  Because the association board was not following his advice, he decided to resign the representation.  He inquired of the Rhode Island Supreme Court Ethics Advisory Panel whether he could inform individual unit owners about the board’s conduct.  The Panel said no, citing only Rhode Island’s versions of Model Rules 1.13 and 1.6.  The Panel held that, under Rule 1.13, the association was an entity, and the inquirer was lawyer for the entity.  It went on to hold that he has a duty of confidentiality to the association.

        Unincorporated Association.  Guerilla Girls, Inc. v. Kaz, 2004 U.S. Dist. LEXIS 19969 (S.D.N.Y. Oct. 4, 2004).  In granting a motion to disqualify the court held that a lawyer who represented an unincorporated association had a lawyer-client relationship with all members of the association.

        Condominium Association.  In Ocean Club of Palm Beach Shores Condominium Association v. Estate of Daly, 504 So. 2d 1377 (Fla. App. 1987), the court held that the law firm for the association could sue a member of the association.

        Ethics OpinionIll. Op. 13-02 (Jan. 2013).  This opinion adopts the majority rule that a lawyer for a partnership represents the entity and not, necessarily, the individual partners.  The opinion goes on to discuss the extent to which the lawyer may take sides in a partnership dispute where the lawyer has also represented individual partners.

        Restatement.  Section 96 adopts the majority rule.

         Treatise.  Rotunda & Dzienkowski § 1.13-4.


Limited Partnerships

        ABA Op. 91-361 (1991), which was so clear on general partnerships, basically did not take a position on limited partnerships. 

       No Lawyer-Client Relationship.  In the following cases the courts took the position that a lawyer for a limited partnership was not, without more, a lawyer for the limited partners.  Usually the issue was whether one or more limited partners could sue the lawyer for the limited partnership for malpractice or under the securities laws.  Rhode Island Depositors Economic Protection Corp. v. Hayes, 64 F.3d 22 (1st Cir. 1995);  Richter v. Van Amberg, 97 F. Supp. 2d 1255 (D.N.M. 2000);  Fortson v. Winstead, McGuire, Sechrest & Minick, 961 F.2d 469 (4th Cir. 1992); Quintel Corp., N.V. v. Citibank, N.A., 589 F. Supp. 1235 (S.D.N.Y. 1984); Morin v. Trupin, 711 F. Supp. 97 (S.D.N.Y. 1989); Marshall v. Quinn-L Equities, 704 F. Supp. 1384 (N.D. Tex. 1988): Mursau Corp. v. Florida Penn Oil & Gas, Inc., 638 F. Supp. 259 (W.D. Pa.), aff'd. 813 F.2d 396 (3d Cir. 1987); Hackett v. Village Court Associates, 602 F. Supp. 856 (E.D. Wis. 1985); Buehler v. Sbardellati, 41 Cal. Rptr. 2d 104 (Cal. App. 1995);  Kapelus v. State Bar of California, 745 P.2d 917 (Cal. 1987) (for disciplinary purposes, lawyer for limited partnership not lawyer for limited partners); Gould v. Mellick & Sexton, 819 A.2d 216 (Conn. 2003); Amsler v. American Home Assur. Co., 348 So. 2d 68 (Fla. App. 1977); Bell v. Clark, 670 N.E.2d 1290 (Ind. 1996); Rose v. Summers, Compton, Wells & Hamburg, P.C., 887 S.W.2d 683 (Mo. App. 1994); Eurycleia Partners, LP  v. Seward & Kissel, LLP, 2009 N.Y. LEXIS 1728 (N.Y. June 4, 2009); Kilpatrick v. Wiley, Rein & Fielding, 2001 UT 107 (Utah 2001); Margulies v. Upchurch, 696 P.2d 1195 (Utah 1985); Security Bank v. Klicker, 418 N.W.2d 27 (Wis. App. 1987).  See, also, Md. Op. 95-54 (1995); and N.Y. City Bar Op. 1994-10 (1994).

        Duty Running to the Limited Partners.  In the following cases the courts found some basis for a duty running from the lawyer for the limited partnership or general partners to the limited partners.  Ferguson v. Lurie, 139 F.R.D. 362 (N.D. Ill. 1991) (limited partners allowed to see documents otherwise protected by attorney-client privilege); Pucci v. Santi, 711 F. Supp. 916 (N.D. Ill. 1989) (court said lawyer for limited partnership is lawyer for the limited partners); Metropolitan Life Ins. Co. v. The Guardian Life Ins. Co. of America, 2009 U.S. Dist. LEXIS 42475 (N.D. Ill. May 18, 2009) (followed Pucci); Roberts v. Heim, 123 F.R.D. 614 (N.D. Cal. 1988) (limited partners are clients insofar as the attorney-client privilege is concerned); Laucella v. Ireland San Filippo, LLP, 2006 Cal. App. Unpub. LEXIS 359 (Cal. App. Jan. 13, 2006); Hart v. Gilbert, 2002 Cal. App. Unpub. LEXIS 78 (Cal. App. April 15, 2002) (two-person limited partnership and derivative action); Johnson v. Superior Court, 45 Cal. Rptr. 2d 312 (Cal. App. 1995) ("duty of loyalty" to all the partners); Wortham & Van Liew v. Superior Court, 233 Cal. Rptr. 725 (Cal. App. 1987) (attorney-client privilege not applicable to limited partners); McCain v. Phoenix Resources, Inc., 230 Cal. Rptr. 25 (Cal. App. 1986) (limited partner has right to lawyer's records); Berk v. Sherman, 682 A.2d 209 (D.C. 1996); Adell, v. Sommers, Schwartz, Silver and Schwartz, P.C., 428 N.W.2d 26 (Mich. App. 1988) (because limited partners may sue the partnership's accountants, they may also sue the partnership's lawyers); Zendell v. Neport Oil Corp., 544 A.2d 878 (N.J. Super. 1988) (no attorney-client relationship, but limited partner can sue lawyer for negligence for allowing offering of unregistered securities); Arpadi v. First MSP Corp., 628 N.E.2d 1335 (Ohio 1994) (lawyer for limited partnership or general partner is ipso facto lawyer for limited partners); and Euclid Retirement Village, Ltd. v. Giffin, 2002 Ohio 2710 (Ohio App. June 6, 2002) (limited partners entitled to general partner's law firm's billing records, relying in part on Arpadi).

        Ethics Opinions.  N.Y. City Op. 1986-2 (1986):  Lawyer for entity may tell limited partners of general partner misconduct.  N.Y. City Op. 1994-10 (1994):  Lawyer for entity must tell limited partners of general partner misconduct.

        Duty Running to General Partner. In Prisco v. Westgate Entertainment, Inc., 799 F. Supp. 266 (D. Conn. 1992), the court held that a lawyer for a limited partnership could not be adverse to the general partner.

        Derivative Action and Limited Partnership. Simms v. Super. Ct., 316 P.3d 1235 (Ariz. App. 2014). The court held that a law firm could bring a derivative action on behalf of a limited partnership while, at the same time, defending the limited partner in action brought by the limited partnership.

       Law Reviews.  Fischer, Representing Partnerships: Who Is /Are the Client?, 26 Pac. L.J. 961 (1995); and Post, Representing  a Tax Matters Partner: Who is the Client?, 6 Geo. J. Legal Ethics 527 (1993).

        The Non-Existent Client.  Ariz. Op. 02-06 (Sept. 2002) holds that a lawyer may represent only the entity in a start-up situation, even though the entity does not exist.   For a limited partnership case where the court seems to have made such a holding, go to Buehler v. Sbardellati, 34 Cal. App. 4th 1527 (1995).  For close corporation cases where the court found likewise, Manion v. Nagin, 394 F.3d 1062 (8th Cir. 2005) (although court found relationship with incorporator because of all the personal advice he had given); and Jesse v. Danforth, 485 N.W.2d 63 (Wis. 1992).

       But, I Thought He Was a General Partner!  In  Shimko v. Guenther, 505 F.3d 987 (9th Cir. 2007), a lawyer was attempting to collect a fee from a limited partner, claiming that he reasonably believed the limited partner was a general partner.  The court said that belief was not reasonable because the lawyer could have (should have) read the partnership documents.

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