May a lawyer whose client made a secured loan to a corporation, guaranteed by the corporation’s sole stockholder, subsequently represent the stockholder upon his sale of his stock to a third person? The lawyer acted in behalf of the lender in the original loan transaction and expects to continue to represent him. The loan is unpaid, but has not matured.
If the answer is in the negative, would such representation be proper in the event that both the client – lender and the stockholder consented thereto?
EC 5-15 provides:
“If a lawyer is requested to undertake or to continue representation of multiple clients having potentially differing interests he must weigh carefully the possibility that his judgment may be impaired or his loyalty divided if he accepts or continues the employment, He should resolve all doubts against the propriety of the representation.,. If a lawyer accepted such employment and the interest did become actually differing, he would have to withdraw from employment with likelihood of resulting hardship on the clients, and for this reason it is preferable that he refused the employment initially. On the other hand, there are many instances in which a lawyer may properly serve multiple clients having potentially differing interests in matters not involving litigation. If the interests vary only slightly, it is generally likely that the lawyer will not be subjected to an adverse influence and that he can retain his independent judgment on behalf of each client, and if the interests become different, withdrawal is less likely to have a disruptive effect upon the causes of his clients.”
Applying this rule to the question stated, it would appear that since the note has not yet matured, and assuming that it is not to mature prior to the close of the contemplated transaction, there is no immediate conflict of interest in representing the stockholder seller in the contemplated transaction. However, in view of the possibility of a potential conflict the lawyer should explain fully to both clients the implications of the common representation and obtain the consent of both clients thereto. See EC 5-16, DR 5-105(C).
February 8, 1972