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What are the consequences for a corporate lawyer (S-Corp) representing one of the shareholders & in turn hurting the others?

Saint Francis, MN |
Filed under: Business torts Business

The other shareholders have been financially & have extreme emotional distress from the corporations lawyer representing a shareholder.

Attorney Answers 4


  1. If this is a case where the attorney was first counsel for the company then advised one of the shareholders(at the detriment of the company) there may be some ethical issues implicated here. As a general rule, an attorney must receive a waiver when representing two clients who may have adverse interests. If the clients consent to any necessary limitation on the scope of the representation and the potential future need for separate representation, and that the lawyer will be able to zealously represent each client then the lawyer may proceed.

    If in this case, the lawyer failed to represent the company's best interest(and was engaged to do so) you may have a case for breach of ethical duty.


  2. I agree with my colleague.

    The content of this answer has been prepared by Scott Legal Services, P.C. for general informational purposes only. It is not legal advice and should not be considered or relied upon as legal advice. Transmission or receipt of the content of this information does not create, nor is it intended to create, and receipt does not constitute, an attorney-client relationship. Because each matter involves differing facts, online readers should not act upon the content of this website without seeking legal advice.


  3. The type of corporation (c or s) really doesn't matter. The real question is whether the attorney represented the corporation, or the shareholder. The fact that an attorney may represent a shareholder in suing the corporation and there are economic consequences has no impact on the attorney, or the shareholder, unless the legal action was dreadfully wrongful in some way. The fact that other shareholders are "hurt" is the nature of a lawsuit. If the attorney attempts to represent BOTH the corporation and shareholder, however, that would be a conflict of interest most likely and there are ethical and licensing issues involved but there is insufficient information to discuss that. If there is no conflict but the lawsuit was "specious" or "vexatious" (basically without basis) then a court may award attorney fees to the other shareholders. As to "extreme emotional distress" and while there is a cause of action that is in tort for such issues, you give no information that would even begin to suggest that a lawsuit for such an "independent" tort may exist.


  4. The lawyer has a fiduciary obligation to the corporation. The obligation requires a duty of loyalty, accountability and competence. The duty does not run to the other shareholders. If the conduct violates the duty of loyalty, which is the closest possibility, there can be a complete fee forfeiture under Tarnowski v. Resop, a 1956ish Minnesota Supreme court case, or actual damages. You could seek to have the lawyer disqualified in any proceeding too.

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