Who’s Your Client? Issues in Advising Small Businesses and Their Members/Directors

Presented by: Michael D. Haeberle & Peter J. Evans
Firm: The Patterson Law Firm, LLC
Event: Business Law Section PRMCLE Meeting

Topics Covered:

1. Avoiding confusion when forming the attorney-client relationship
2. Obligations to the company and the individuals
3. Avoiding confusion regarding who your client is during representation
4. What to do when a dispute arises between the company and an individual

Key Ethics Principles

Who’s Your Client?

• Check your engagement letter
• Specify who IS and who IS NOT your client
• Be careful of creating an implied attorney-client relationship
  • Herbes v. Graham, 180 Ill. App. 3d 692 (2d Dist. 1989)
  • Restatement (3d) of the Law Governing Lawyers, § 14
• Consider the advice. Is it something the individual would rely on?

Avoiding and Addressing Conflicts

• A lawyer owes a duty of loyalty to their client
• Communicate who the client is
• Refrain from advising constituents personally about their interests in the company
• Protects the company AND protects you

Conflicts, Continued

• Illinois Rule of Professional Conduct 1.13
  • Know who you are supposed to be dealing with
  • Reiterate the representation of the entity when adversity arises
  • Check for conflicts before advising constituents
  • Get conflict waivers IN WRITING
• Comment 10 to Rule 1.13
  • When the organization’s interests conflict with constituents, the lawyer must inform affected individuals
  • The lawyer cannot represent the constituent and should advise them to seek independent representation
  • Communications may not be privileged
• Illinois Rule of Professional Conduct 1.7
  • A lawyer shall not represent a client if the representation involves a concurrent conflict of interest
  • A concurrent conflict exists if:
  • Representation is directly adverse to another client
  • Significant risk that representation will be materially limited by responsibilities to another client or personal interest
• A lawyer may represent despite a conflict if:

• Believes competent representation is possible
• Representation is not prohibited by law
• Does not involve claims between clients in the same proceeding
• Each client gives informed consent

Obligations to Individuals

• No duty owed to constituents solely based on their role
• Duty may arise if advice is meant to benefit/influence the individual

• Pelham v. Griesheimer, 92 Ill. 2d 13, 21 (1982)
• Restatement (3d), § 51(2)

Negligent Misrepresentation

• General rule: duty to use care in supplying information for reliance
• Second District follows Pelham for lawyers’ negligent misrepresentation

Privilege

• The entity holds the privilege
• Some courts deny the privilege against shareholders/officers
• Common interest doctrine:
• An attorney for two parties with a common interest loses the privilege in disputes between those parties

Get The Full Presentation on https://cdn.ymaws.com/www.dcba.org/resource/resmgr/business/2.15.18_Agenda_and_Handouts.pdf