Legal Ethics Opinion #1517

Confidences and Secrets - Former Client - Attorney As Witness:
Representation of One of Two Corporate Shareholders After Having
Represented the Corporation

You have presented a hypothetical situation in which Lawyer has
represented Corporations 1 and 2 (collectively, the
"Corporations") since their formation, both of which were owned
at all times equally by individuals shareholders M and S.  Prior
to and subsequent to the creation of the Corporations, Lawyer's
law firm (the "Firm") had represented S personally in other
unrelated matters.  Neither Lawyer nor any other attorney in the
Firm had ever represented M personally nor had any communications
with M that the Firm would consider privileged as to M.

You advise that negotiations between M and S recently occurred
for the complete redemption of M's shares by the Corporations,
resulting in a request by S to Lawyer to represent the
Corporations in the preparation of purchase documents of M's
shares.  M consented to this representation. 

During the process, S learned of M's alleged breach of fiduciary
duty to the Corporations by operating a competing business and
utilizing corporate assets and employees.  Lawyer then resigned
as counsel to the Corporations after proper notice to M, S, and
the Corporations.  You advise that another attorney in the Firm
has now undertaken to represent S in filing a shareholder's
derivative action against M on behalf of S as a shareholder in
the Corporations for the alleged violations.

Finally, you indicate that M's attorney has raised an objection
to the Firm's representation of S in this litigation, alleging a
conflict of interest due to Lawyer's prior representation of the
Corporations and suggesting that Lawyer might become a witness in
the litigation.

You have asked the committee to opine whether, under the facts of
the inquiry, (1) it is improper for a lawyer to represent a
shareholder in a derivative action against another shareholder
when the lawyer has previously represented the corporation and
the plaintiff shareholder personally in unrelatedever represented
the defendant shareholder; and (2) whether the mere threat by
opposing counsel in the derivative action to call a partner in
the plaintiff shareholder's law firm as a witness is sufficient
to require the law firm's withdrawal from the case.

The appropriate and controlling Disciplinary Rules related to
your inquiry are DR 5-105(D) which provides that a lawyer who has
represented a client in a matter shall not thereafter represent
another person in the same or substantially related matter if the
interest of that person is adverse in any material respect to the
interest of the former client unless the former client consents
after disclosure; DR 5-102(B) which states that if, after
undertaking employment in contemplated or pending litigation, a
lawyer learns or it is obvious that he or a lawyer in his firm
may be called as a witness other than on behalf of his client, he
may continue the representation until it is apparent that his
testimony is or may be prejudicial to his client; DR 4-l0l(A)
which defines a "confidence" as information protected by the
attorney-client privilege under applicable law, and "secret" as
other information gained in the professional relationship that
the client has requested be held inviolate or the disclosure of
which would be embarrassing or likely to be detrimental to the
client; and DR 4-l0l(B) which precludes a lawyer from knowingly
revealing a client's confidence or secret and from using a
client's confidence or secret to the disadvantage of the client
or to the advantage of the lawyer or a third person. 

As to whether the attorney may represent the plaintiff
shareholder against the defendant shareholder and the
corporation, the committee is of the opinion that such
representation would not be improper under DR 5-105, since the
attorney neither represented the defendant shareholder
individually and provided that the attorney never obtained
confidences or secrets from that defendant shareholder during the
course of the attorney's representation of the corporation.  SeeLEO #l458.  

Regarding your second inquiry, the committee believes that the
threat by an opposing counsel to call an attorney as a witness is
not per se sufficient to require the attorney's withdrawal from
the case. Instead, the committee opines that the plain language
of DR 5-102(B) allows the attorney to continue representation of
his client, even if called to testify by opposing counsel, until
it is apparent that the attorney's testimony is or may be
prejudicial to his client.  See LEOs #866, l240, l455.

Committee Opinion
April 12, 1993