Risk Update

Firms Fighting (Part 4) — No Conflict in Partner’s Dual Representation of Firm and Partner

Posted Dan Bressler

“Court Found No Conflict of Interest with Dual Representation of Law Firm and Partner Against Claims from Departing Partner Shareholder” —

  • “Earlier this year [2016], California’s Fourth District Court of Appeal found that a partner’s status as 50% shareholder of a law firm did not give rise to a conflict of interest which would preclude the firm’s counsel from defending the firm and another partner against the departing partner’s lawsuit. (See Coldren v. Hart, King & Coldren (2015) 239 Cal.App.4th 237.)”
  • “The Court also found that under the facts specific to that case, the departing partner did not have standing to bring a motion to disqualify the firm’s counsel based on an alleged conflict of interest. The Court’s analysis in this matter is helpful in guiding not only attorneys who are considering whether there is a conflict with such dual representations, but for law firm’s handling the transition of departing partners and who want to avoid potential conflicts in representing the firm’s interests in such disputes.”
  • “Coldren brought a motion to disqualify the law firm of Grant, Genovese & Barratta LLP (“Grant Genovese”) from representing both Hart and HKC, claiming it was a conflict of interest for Grant Genovese to represent HKC in claims against Coldren since he was also a 50% shareholder of HKC. The trial court granted the motion to disqualify, but a writ was taken by Hart and HKC and the Court of Appeal ultimately reversed that order.”
  • “Although the Court of Appeal reversed the order on two grounds – both due to lack of standing and finding there was no conflict of interest with the dual representation – the conflict of interest analysis is particularly instructive as it relates to partner departures and recurring issues that can arise during shareholder disputes.”
  • “In this case, the Court found that no actual conflict existed because Hart’s interests were aligned with HKC’s interests, and that even though Coldren was still a 50% shareholder in the firm, Grant Genovese’s duty was to HKP, not its shareholders and HKC was free to defend Coldren’s lawsuit and assert any relevant counterclaims.”