90-1.
Case Date | January 19, 1990 |
Court | Alaska |
Alaska Ethics Opinion
1990.
90-1.
Ethics Opinion No. 90-1 Attorney Representing Dissenting
Shareholders/Directors Communicating with Board of Directors Without Consent of
Corporation's Attorney.The Committee has been requested to give an opinion as to whether
it is improper for an attorney who represents two corporate directors, in their
individual capacity, in a shareholder derivative action to discuss matters
relating to the pending litigation with other board members when the
corporation is represented by both corporate counsel and retained litigation
counsel who have not consented to the communication. It is the opinion of the
Committee that the communication is in violation of Disciplinary Rule
7-104(A)(1) of the Code of Professional Responsibility.
Disciplinary Rule 7-104 (A)(1) provides as follows:
During the course of his representation of a client, a lawyer
shall not:
(1) communicate or cause another to communicate on the subject of
the representation with a party he knows to be represented by a lawyer in that
matter unless he has prior consent of the lawyer representing such party or is
authorized by law to do so.
Attorney originally represented three dissenting shareholders who
sued a corporation, three board members, and a corporate employee, on their own
behalf and in the form of a shareholder's derivative suit, to set aside a
corporate transaction. Two of the plaintiffs and the daughter of a third
plaintiff were subsequently elected to the board of directors, along with other
directors who shared their view. At the time in question, the board was deeply
and approximately evenly divided on the propriety of the corporate transaction.
The lawsuit was active. The corporation had a corporate attorney, and had also
retained a separate litigation attorney to represent the corporation in the
lawsuit. The board had also created a special litigation committee to determine
what the corporation's position should be on the transaction in question. The
committee's membership consisted of all available disinterested
directors.
At a point when the litigation was very active, and important
decisions needed to be made quickly, the attorney met with seven of the
thirteen corporate directors. The attorney received a request to so meet from
his client, who was one of the corporate directors and a plaintiff in the
derivative lawsuit. This plaintiff/director was present at the meeting. The
other six directors present at the meeting consisted of the director/corporate
president who was the daughter of a plaintiff, an additional
client/plaintiff/director, and four disinterested directors who were eligible
for and subsequently appointed to the litigation committee. The attorney did
not seek the consent of the corporate counsel or the litigation counsel prior
to the meeting, nor did the attorney notify either one that the meeting would
take place. (endnote 1) The specific issue presented by this opinion request is
the extent to which corporate directors are parties in litigation involving the
corporation. A related question is how the ethical conduct of the attorney is
affected by the principle that factions of a corporate board, such as
dissenting directors or minority shareholders, have the right to obtain legal
counsel of their own choosing to advise them or to represent their own
interests.(endnote 2)
The corporation was an opposing party in the litigation.
Therefore, so were its officers and directors, except those who chose to be
plaintiffs.
ABA Informal Opinion 1410 (2/14/78) states:
If the officers and employees that you propose...
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