Family Corporate Counsel's Representation of One Spouse in a Dissolution Proceeding
| Publication year | 1992 |
| Pages | 703 |
1992, April, Pg. 703. Family Corporate Counsel's Representation of One Spouse In a Dissolution Proceeding
Closely held corporations frequently are family enterprises in which ownership and management are shared by or divided among family members, often husband and wife. One attorney or firm may represent such a "family corporation" and its principals in a number of different matters. These may include matters of corporate formation and governance, as well as personal and corporate transactions and litigation.
It is not uncommon for one of the principals of the corporation to request his or her longtime and trusted legal advisor to provide representation in connection with a dissolution of marriage proceeding. Such a request presents the practitioner with a variety of ethical issues that have not been addressed squarely in a published or formal opinion of the Colorado appellate courts or the Colorado Bar Association Ethics Committee. This article reviews judicial and ethics committee opinions from other jurisdictions. It also poses one problem heretofore unaddressed by the existing published opinions.
It often is difficult to identify the "client" in the attorney-client relationship when a closely held corporation is involved. In the ordinary corporate setting, corporate counsel represents the entity and not the individual shareholders, officers or directors. Thus, ABA Code of Professional Responsibility ("Code") EC 5-18 provides in material part that a lawyer employed by a corporation
owes his allegiance to the entity and not to a stockholder, director, officer, employee, representative, or other person connected with the entity.
The "aspirational character" of the Code's Ethical Considerations readily is apparent in EC 5-18. The entity theory of corporate representation is easier to observe in practice when the client corporation is large and publicly held. However,
In some such cases, courts have overlooked the corporate entity. These courts have concluded that principals of closely held corporations were entitled to the benefits of the attorney-client relationship (such as expectations of confidentiality and loyalty) where, under the facts presented it was reasonable for the corporate principals to believe they in fact had entered into such a relationship with an attorney who also represented the corporation.(fn2)as corporate stock is concentrated in fewer and fewer hands, the distinction between corporate entities and shareholders begins to blur. In the case of a sole-owner corporation, they may merge.(fn1)
The same factors exist in cases where counsel for closely held family corporations undertake to represent one spouse in a divorce case. The few published cases and ethics opinions addressing the topic provide some guidance to practitioners for the avoidance of conflicts of interest, at least to the extent the conflicts exist between the spouses. However, there is virtually no published material on conflicts that may exist between the spouse being represented by corporate counsel and the corporation itself. This latter issue is explored below, following the discussion of the lawyer-as-witness problem.
A handful of courts have addressed squarely the ethical propriety of the representation of one spouse in a dissolution proceeding by an attorney who also represents the family corporation. All of the judicial opinions involve factual scenarios where both spouses were shareholders.
In In re Brandsness,(fn3) the Oregon Supreme Court reprimanded an attorney who provided legal counsel to the spouses when they acquired the family business, then represented the husband in a divorce. The attorney had sought an order restraining the wife from participating in the business and dissipating its
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