Can my lawyer represent me and my LLC? Simply put, no a lawyer cannot represent both the LLC and individual members in a shareholder dispute where there is a history of the lawyer representing the LLC and looking out for the interests of the members in the past, and litigation ensues between the members and the company. I won the first-ever published decision in New Jersey addressing this issue squarely.
Comando v. Nugiel
In the decision, Comando v. Nugiel, the Appellate Division reversed a trial order refusing to disqualify Norris McLaughlin & Marcus (“NMM”) in an inter-member dispute. The plaintiff (my client) was a member of an operating LLC. The LLC purchased certain real estate in connection with several property management companies. My client was a high-level employee of Defendant RCP. She was promised an equitable ownership interest in RCP. The LLC property was purchased in furtherance of that plan. NMM had helped form the LLC; helped in refinancing its debt; and created the operating agreement for the LLC. Later, a dispute arose between Plaintiff and Defendants over the companies’ businesses. NMM tried to represent RCP and its sole shareholder. The sole shareholder also happened to be the other 50% member of the LLC.
The Court in its decision ruled decisively that in the context of closely-held corporations or LLC’s, lawyers with a history of representing the company must be very careful about conflicts of interest. Therefore, they must not take a legal position against a member of an LLC where it has historically represented that LLC and answered to that client. Moreover, there are ethical minefields for a law firm that represents a company at the same time as another member. In short, NMM learned this in the end.
Avoid Conflicts of Interests
The lesson is to be careful when hiring an attorney. If you have a potential matter where the company is considering action against minority members, avoid hiring an attorney with a history of representing the company itself and/or its members. Similarly, be aware where you are the minority member looking to find counsel. So if you asked yourself the question – can my lawyer represent me and my LLC? – now you know.
Please contact me if you have any questions about this blog or other shareholder dispute issues.