Case Title: Bowen v. Smith

Citation: 

Docket Number: 91-152

State: wyoming

Court: Wyoming Supreme Court

Date: 1992-08-28T00:00:00Z

Document:
Bowen v. Smith1992 WY 109838 P.2d 186Case Number: 91-152Decided: 08/28/1992Supreme Court of Wyoming
Pat BOWEN, Bernard 
Raymond McGuire, Sr., Irrevocable Trust, Bernard Raymond McGuire, Jr., and 
Thomas Michael McGuire, Trustees, and Burnett Ranches, A Wyoming Partnership, 
Appellants (Plaintiffs),

v.

Thomas S. SMITH, John E. 
Stanfield and Smith, Stanfield and Scott, A Partnership composed of Thomas S. 
Smith, John E. Stanfield and John B. Scott, 

Appellees 
(Defendants).

Appeal from District 
Court of Albany County, James N. Wolfe, J.

Frank J. Jones, 
Wheatland, for appellants.

J. Patrick Hand, 
Douglas, and John B. Speight of Hathaway, Speight, Kunz, Trautwein & 
Barrett, Cheyenne, for appellees.

Before 
THOMAS, CARDINE, URBIGKIT* and GOLDEN, JJ., and BROWN, J. 
(Retired).

* Chief Justice at time of 
oral argument.

URBIGKIT, Justice.

[¶1]      This appeal, in 
current course of events, presents the third lawsuit in what is now generally 
designed to be a legal malpractice action. Appellants, as minority shareholders, 
sued Smith, Stanfield and Scott - the attorneys who represented the majority 
shareholder and parent corporation after rights against a third party were 
resolved by a favorable cash settlement, and the shareholders could not then 
agree on a division of the settlement proceeds. That disagreement was litigated 
through appeal, Squaw Mountain Cattle Co. v. Bowen, 804 P.2d 1292 (Wyo. 1991), 
with the minority shareholders achieving complete success. During this period of 
time, the minority shareholders' growing dissatisfaction was manifested by the 
filing of this lawsuit against the law firm which had secured the settlement in 
the first of the three proceedings, with the law firm losing the division 
litigation in the second lawsuit. This third litigative campaign ends in summary 
judgment favoring the targeted law firm. That conclusion is hereby 
affirmed.

[¶2]      A melange if not 
avalanche of charges and counter charges, including sufficiency of the appeal 
itself, are developed from this record accurately described by a litigant to 
total not less than fifty pounds of paper.

[¶3]      The 
superintending issue presented is propriety of the trial court's entry of 
summary judgment in favor of the law firm or, conversely, existence of material 
issues of fact precluding that resolution. Cordova v. Gosar, 719 P.2d 625 (Wyo. 
1986).

I. ISSUES

[¶4]      The game players 
require identification before the substance of the contended issues is 
meaningful. In actuality, the present three lawsuits are only a continuation of 
a course of prior litigation which has been actively pursued since well before 
1944. Those cases include, in more specific detail than needs to be related 
here, the identification of a longstanding course of action and reaction. 
Anderson v. Wyoming Development Co., 60 Wyo. 417, 154 P.2d 318 (1944); Wheatland 
Irr. Dist. v. Two Bar-Muleshoe Water Co., 431 P.2d 257 (Wyo. 1967); Wheatland 
Irrigation Dist. v. Two Bar-Muleshoe Water Co., 521 P.2d 1334 (Wyo. 1974); State 
ex rel. Squaw Mountain Cattle Co. v. Wheatland Irr. Dist., 728 P.2d 172 (Wyo. 
1986); and, finally, Squaw Mountain Cattle Co., 804 P.2d 1292.

[¶5]      Wheatland 
Irrigation District (Wheatland Irrigation) is a user owned cooperative 
irrigation system with large farming acreage under cultivation in Platte County, 
Wyoming and storage facilities located in Albany County, Wyoming. The initiation 
of all proceedings came with Wheatland Irrigation's effort to acquire water 
rights and storage capacity. The predecessor in land ownership to Two 
Bar-Muleshoe Water Company (Swan Land and Cattle Company, Ltd.) was a target of 
the acquisition activities. In more recent times, Two Bar-Muleshoe Water was 
owned by a majority shareholder and an associative group of individuals as 
minority shareholders. The "majority shareholder" was Squaw Mountain Cattle 
Company (Squaw Mountain), essentially owned and managed by Springer Jones and 
his family. The Bowen-McGuire group are the "minority shareholders."

[¶6]      Springer Jones, 
an Albany County rancher, on behalf of Squaw Mountain employed the Laramie, 
Wyoming law firm of Smith, Stanfield and Scott (law firm) to further 
litigatively challenge Wheatland Irrigation for contended breach of contractual 
rights resulting from earlier courses of litigation. It was determined that the 
essential cause of action was held by Two Bar-Muleshoe Water as the corporation. 
By agreement of all shareholders, the law firm employed by Springer Jones 
undertook in the name of the parent entity, at the sole expense of the majority 
shareholder, to seek redress against Wheatland Irrigation. After an arduous 
effort totaling six years in litigative pursuit, a satisfactory and even very 
successful recovery was obtained by settlement after an intermediate first 
appeal, State ex rel. Squaw Mountain Cattle Co., 728 P.2d 172, in 1988. The 
majority and minority shareholders came to a serious dispute through another 
lawsuit about division of proceeds. That suit ultimately resulted in final 
decision by this court on a pro-rated shareholder basis for division. Squaw 
Mountain Cattle Co., 804 P.2d 1292. The minority shareholders, while the 
division litigation was still ongoing, then sued the law firm in a third 
lawsuit. It is that lawsuit which now comes to this court following entry of 
summary judgment by the trial court. Appellants (minority shareholders) state 
their issues:

A. Are there genuine 
issues of material fact which preclude the granting of Summary 
Judgment?

     B. Are Plaintiffs' 
claims barred by the doctrine of res judicata?

     C. Are Plaintiffs' 
claims barred by the doctrines of estoppel and waiver?

     D. Are attorney's fees 
incurred in an action which was necessitated by the wrongful acts and conduct of 
Defendants recoverable as damages?

[¶7]      Appellees (law 
firm), injected with considerable emotion, restate the issues:

     A. Is the Appellants' 
(hereafter "Non-Clients") appeal subject to dismissal and denial for failure to 
comply with the Wyoming Rules of Appellate Procedure?

B. Did an Attorney-Client 
relationship exist between the Non-Clients and the Attorneys?

     C. If an 
Attorney-Client relationship existed between Non-Clients and the Attorneys, was 
a duty created; was that duty breached; was the alleged breach "the cause" of 
the Non-Clients[']  damages; were 
the Non-Clients damaged at all; or, are the damages they now seek to recover the 
direct and proximate cause of the actions of their President, Springer Jones; 
the majority stockholder of Two Bar, (Squaw), all of which were previously 
resolved in Squaw Mountain v. Bowen, (804 P.2d 1292, Wyo. 1991) (hereafter "the 
Grant case"); or, simply the attorney's fees and costs which every litigant must 
bear in resolving disputes through litigation?

     D. Under the 
pronounced Rules of the Wyoming Supreme Court, was Summary Judgment in this case 
not only proper, but required.

II. SUMMARY OF 
DECISION

[¶8]      This court 
affirms the trial court in lacking a desire to send the laundry out to wash one 
more time than is necessary. We agree with the trial court's decision by our 
determination that a claim was not stated. We find the law firm was not 
representing the minority shareholders and violated no fiduciary relationship to 
them in continuing to represent the initial client after the disagreement about 
division of settlement proceeds developed.1 Settlement with Wheatland 
Irrigation ended both representation of the parent corporation and assertable 
responsibility for either it or the minority shareholders during the continued 
course of this present litigative odyssey.

[¶9]      Despite the high 
level of acrimony and histrionics documented for this appeal, we concur with the 
trial court's decision on the dispositive issue presented that there was no 
material conflict in evidence precluding summary judgment for a legal issue 
resolution of the minority shareholders' claims. The parent corporation was 
faithfully and fully represented by the law firm through the Wheatland 
Irrigation litigation, and to a very successful settlement. The dispute 
thereafter was either a new ball game or a different inning where, lacking 
agreement, the parties litigated and the courts resolved.

III. FACTS SIGNIFICANT 
FOR THIS DECISION

[¶10]   As casually recognized earlier, 
disputes between Two Bar-Muleshoe Water and Wheatland Irrigation had a long and 
almost intractable Wyoming litigative history. The history goes back to about 
May 15, 1883 when the predecessor to Wheatland Irrigation commenced its 
development of the Platte County project and continued through a 1912 water 
rights adjudication. See Anderson, 154 P.2d 318. This court's determinations in 
earlier litigation involving the Albany County storage project had not ended 
water supply disputes. In 1983 or thereabouts, Springer Jones as the principal 
in Squaw Mountain, the majority shareholder in Two Bar-Muleshoe Water as the 
parent corporation, decided to try again by litigation against Wheatland 
Irrigation to re-establish rights of water and compensation.

[¶11]   In that process, the present law 
firm was employed by Squaw Mountain. That law firm, one of the more experienced 
trial firms in Wyoming, was asked to take on a further chapter in this major Two 
Bar-Muleshoe Water effort in behalf of the majority shareholder. The record is 
clear that the minority shareholders in Squaw Mountain were advised and 
concurred in the continued effort provided that the majority shareholder remain 
totally obligated to (and did) compensate the law firm for fees and expenses 
incurred.

[¶12]   After an active course of 
litigation, which is the history of Wheatland Irrigation, a settlement was 
achieved calling for payment of $1,250,000 by Wheatland Irrigation to the parent 
corporation. The record may be in some dispute as to exactly what advice was 
furnished to the minority shareholders, but there is no dispute that some of the 
minority shareholders were also members of the Wheatland Irrigation District. In 
any event, the settlement was completely acceptable. Unfortunately, the majority 
shareholder desired in large part the fruits of its litigative victory and the 
minority shareholders (appellants) strongly disagreed with any such 
division.

[¶13]   Consequently, the fifth lawsuit, 
second in this sequence, developed. Squaw Mountain Cattle Co., 804 P.2d 1292. A 
decision followed within the trial court which substantially favored the 
minority shareholders. The trial court gave them a pro-rated interest in the 
settlement for their forty-one percent shareholder interest with the majority 
shareholder, Squaw Mountain, to receive fifty-nine percent of the cash 
settlement. No consideration was given Squaw Mountain for its six year 
litigative expenditures. The recovery by the minority shareholders totalled 
$407,600, for which in achievement they had expended little effort and no 
litigative costs. The trade off, if that term is appropriate in 
conceptualization, is that the minority shareholders, although demanded in the 
division litigation prayer, were awarded neither attorney's fees nor punitive 
damages against either the majority shareholder or its principal, Springer 
Jones.2 With the division judicially 
completed through trial court and pending appeal, the minority shareholders then 
filed this lawsuit against the law firm which had represented the corporation in 
receiving the recovery.

IV. 
RESOLUTION

[¶14]   With the charges and counter 
charges proliferating within this appellate record, this court will now resolve 
this appeal on one simple issue. The representation of the parent corporation, 
Two Bar-Muleshoe Water, by attorneys employed in the interest of the majority 
shareholder, did not create an attorney/client relationship with the minority 
shareholders in the same corporation. Obviously, no breach of attorney/client 
relationship was manifested or is contended about their representation of the 
corporation, but only that the majority shareholder, as their additional or 
original client, desired a greater portion of the division of proceeds than was 
acceptable to the minority shareholders. The issue of attorney's fees awardable 
in the division litigation was resolved in that proceeding through denial by the 
trial court and affirmation of the result on appeal. Squaw Mountain Cattle Co., 
804 P.2d  at 1297-98.

[¶15]   Consequently, if the essence of 
this lawsuit is recovery of attorney's fees incurred by the minority 
shareholders in the division litigation, recovery is now precluded from either 
the majority shareholder or Springer Jones, who served as president of both 
Squaw Mountain and Two Bar-Muleshoe Water. With a perceived understanding of 
that preclusion, appellants create the anomaly now presented by undertaking to 
sue the law firm after recovery from the law firm's primary client was denied. 
We are called to recognize with regret, sadly here but fortunately not pervasive 
in Wyoming, that a counterpoint to effective advocacy, usually always 
ineffective, is in itself to sue or attack the attorney for the opposing 
litigant. This court has spoken on this subject in one context, Spence v. Flynt, 
816 P.2d 771 (Wyo. 1991), cert. denied ___ U.S. ___, 112 S. Ct. 1668, 118 L. Ed. 2d 388 (1992); cf. Brooks v. Zebre, 792 P.2d 196, 202 (Wyo. 1990) (majority and 
dissent).

A. Prior 
Litigation

[¶16]   We decide this case on the simple 
concepts of corporate law.  The law 
firm never purported to represent the minority shareholders who clearly had 
independent representation at any and all material times during the Wheatland 
Irrigation claim litigation. Consequently, a legal malpractice claim is not 
properly stated. Whatever duty the law firm owed to the corporation as well as 
the employing agency, the majority shareholder, was discharged by the favorable 
resolution of the legal responsibility for which they were employed by the 
settlement with Wheatland Irrigation.

[¶17]   One vice of the appellants' overall 
philosophic effort in present litigation is rejection of any legitimacy in the 
Squaw Mountain proceeds division controversy. Unsuccessful certainly, but the 
contention was surely subject to reasonable moral and legal legitimacy, Springer 
Jones had a realistic although unacceptable concept of why he should be granted 
the majority benefit after he had funded the entire cost of collection and had 
probably sustained much of the loss for which the settlement was 
achieved.

[¶18]   The sequence of events distilled 
for this opinion are significant. During the summer of 1988, negotiations were 
underway between Wheatland Irrigation and the law firm to settle the then 
five-year-old lawsuit originally started in 1983. Considerable argument is 
presented about conversations and communications between the lawyers for the 
majority shareholder and the lawyers for the minority shareholders, or the 
minority shareholders themselves, regarding the status of negotiations; but, 
unquestionably, the second offer including cash of $1,250,000 was presented, 
considered, and then held in abeyance for another reconvened shareholders' 
meeting. That meeting was held and the settlement was approved by the board of 
directors of the corporation and the majority shareholder. The minority 
shareholders then objected to the proposed division of this prize resulting from 
the long continued litigation.

[¶19]   On September 27, 1988, the minority 
shareholders filed suit which ultimately ended in this court's decision in Squaw 
Mountain Cattle Co., 804 P.2d 1292 on February 6, 1991. The division lawsuit 
involved an original and two amended complaints. In original complaint, John 
Does One through Four were included as defendants and the complaint itself did 
not include any substantive text regarding who they may be or what their claimed 
participation as a basis for a liability was claimed. The first amended 
complaint recognized a required change in the status of the plaintiffs and added 
Donna Jones, Springer Jones' wife, as a defendant alleging her material 
involvement. The second amendment recognized final settlement with Wheatland 
Irrigation and the stipulation for deposit that had been made.

[¶20]   In paragraph eleven of the first 
amended complaint and paragraph ten of the second amended complaint, defendants 
John Does One through Three were recognized:

Defendants, John Does One 
through Three, are all individuals or entities, whose identifies or involvement 
in this matter are not presently known to the Plaintiff; however, upon 
determination of their names and their involvement with the subject matter of 
this litigation, this Complaint will be properly amended. Defendants, John Doe 
One through Three, may have actively and materially participated with the 
Defendants, Squaw Mountain and Springer Jones, in carrying out the acts alleged 
herein[.]

[¶21]   The second amended complaint, filed 
about six months after the initiation of that litigation, did not provide any 
change regarding the designation or identification of John Does One through 
Three. The second amended complaint did claim exemplary and punitive damages 
from Springer Jones, Donna Jones, Squaw Mountain, and John Does One through 
Three. Obviously, no judgment was entered against the John Does since their 
identification was neither alleged nor proved during the continued course of 
that litigation up until the date that a final judgment was entered by the trial 
court. The second amended complaint predated the filing of the present lawsuit 
by a further period of about fifteen months (April 6, 1989 to July 31, 1990) in 
which the law firm finally became the actual specified defendants.

B. Challenge to the 
Law Firm of a Conflict of Interest

[¶22]   Between September 27, 1988 and July 
31, 1990 when this lawsuit was instituted, one thing did happen and one did not. 
The minority shareholders specifically agreed with Wheatland Irrigation and with 
the majority shareholder for the establishment of an escrow to retain their 
claimed share of proceeds. Counsel for the litigants stipulated that the 
settlement should be completed and proceeds paid. That stipulation 
provided:

STATE OF WYOMING 

SS 

COUNTY OF 
ALBANY

 IN THE DISTRICT COURT 

EIGHTH JUDICIAL DISTRICT 

Civil Action No. 
18-446

PAT BOWEN, BERNARD 
RAYMOND

 MCGUIRE SR., 
IRREVOCABLE

 TRUST, BERNARD 
RAYMOND

 MACGUIRE, JR., and THOMAS 
MI-

CHAEL MCGUIRE TRUSTEES 
and 

BURNETT RANCHES, a 
Wyoming Part-

nership, acting by and 
through TWO

 BAR-MULESHOE WATER COMPANY, 

a Wyoming Corporation, 
Plaintiffs,

-vs- 

SQUAW MOUNTAIN CATTLE 
COMPA-

NY a Wyoming Corporation, 
SPRINGER 

JONES, DONNA JONES, 
WHEATLAND IRRI-

GATION DISTRICT 

and JOHN DOES ONE through 
THREE, 

Defendants

STIPULATION

[¶23]   It is hereby stipulated and agreed 
to by and between the undersigned counsel of record, with respect to the 
proceeds payable to Squaw Mountain Cattle Company and others by virtue of the 
settlement agreement between Wheatland Irrigation District and Two Bar-Muleshoe 
Water Company, and others, executed in full on January 3, 1989, as 
follows:

[¶24]   1. It is acknowledged that the 
settlement agreement provides for the payment of the sum of $1,250,000 which 
under the terms of the agreement was to be paid out as follows:

            
(a) $82,500 to Squaw Mountain Cattle Company as reimbursement for crop 
loss.

(b) $116,000 to Two 
Bar-Muleshoe Water Company as consideration for 3,321.86 acres of land 
underlying the Wheatland Reservoir No. 2.

(c) $1,051,500 to 
Springer Jones, Donna Jones, Estate of Vera Springer Jones deceased, Audra 
Weitzel and Betty Jeane Snell, the stockholders of Squaw Mountain Cattle 
Company, to compensate them for physical and emotional stress, embarrassment and 
loss of reputation resulting from the litigation with the Wheatland Irrigation 
District.

2. Without regard to the 
above distribution formula, the undersigned agree that their respective clients 
will take such action, execute such documents and do all things necessary to 
modify the above distribution formula in the following manner:

     (a) Wheatland Irrigation District 
will, on or before the 1st day of April, 1989, pay over to Squaw Mountain Cattle 
Company the first $382,000, due under the settlement agreement, with no interest 
payable thereon.

     (b) If Wheatland 
Irrigation District shall elect under the settlement agreement to pay the entire 
sum of $1,250,000 in cash, then in that event the next $407,600 (40.78% of 
$1,000,000) shall be paid into this court to be deposited by the court at the 
best possible interest rate, at the Key Bank of Laramie or such other banking 
institution in the State of Wyoming as is approved by Springer Jones, President 
of Squaw Mountain Cattle Company and Plaintiffs, to be held pending a decision 
and final order of the district judge of the Eighth Judicial District in this 
cause. It is stipulated also that Bowen, the McGuire trust and Bennett Ranches 
shall be entitled to have the said $407,600 paid directly to them to the extent 
of any judgment entered in their favor by the district court, together with the 
right to receive pre-judgment interest on the amount of any such judgment 
awarded to them at a rate commensurate with that received by the Clerk of Court 
on the deposit of $407,600, from the date the $407,600 is deposited by the 
court. The remaining funds out of the $1,250,000, less the amount due Wheatland 
of $78,495.51 for unpaid assessments, or the amount of $381,904.49; together 
with any excess monies out of the $407,600 after entry of judgment, shall be 
payable jointly to Springer Jones, Donna Jones, the estate of Vera Springer 
Jones deceased, Audra Weitzel and Betty Jeane Snell.

     3. If Wheatland 
Irrigation District does not elect to pay the balance due under the settlement 
agreement at the time of or after the $382,000 payment, in cash, then any 
judgment entered in favor of the individual and trust Plaintiffs, if not sooner 
paid, shall be paid out of the next annual installments due under the settlement 
agreement. Any such judgment shall be entitled to interest at the statutory rate 
from the date of the entry of judgment by the district court.

     4. Plaintiffs shall 
take immediate steps to release the lis pendens which they recently filed in the 
office of county clerk, Albany County, Wyoming relative to this action and the 
transfer of title to the lands underlying the Wheatland Reservoir No. 
2.

     5. Upon payment of the 
$382,000 to Squaw Mountain Cattle Company, or upon the full payment of the 
$1,250,000 in cash, Plaintiffs and Defendants Squaw Mountain Cattle Company and 
all individual Defendants agree to dismiss with prejudice all claims and 
counterclaims against Wheatland Irrigation District.

Dated this 8th day of 
March 1989.

SMITH, STANFIELD & 
SCOTT

Attorneys for Squaw 
Mountain

Donna Jones, Springer 
Jones, 

Estate of Vera Springer 
Jone[s], 

Audra Weitzel, and Betty 
Jeane Snell

By: /s/ Thomas S. 
Smith 

REX JOHNSON

Attorneys for 
Plaintiffs

/s/ Rex 
Johnson

 JONES, JONES, VINES & 
HUNKINS

Attorneys for Wheatland 
Irrigation Dis-

trict

By: 
____________________[3]

[¶25]   Something else did not happen. At 
no time during the conduct of the proceeds division litigation, Squaw Mountain 
Cattle Co., 804 P.2d 1292, did the minority shareholders, by contention of 
conflict of interest or otherwise, challenge continued representation of Squaw 
Mountain by the law firm. Actually, the conflict contention did not really 
mature until July 31, 1990 when this present lawsuit was filed. Even then, the 
minority shareholders did not seek to require the law firm to withdraw as their 
opponent's counsel from the proceeds division litigation still in 
progress.

[¶26]   Two conclusions follow from this 
partial history. The minority shareholders accepted the settlement and, 
consequently, cannot raise another cause of action after their successes in 
division litigation. The stipulation to settle has resolved any contended 
factual issues which similarly provided froth and furry in the division 
litigation. Any potential challenge to the participation of the law firm in the 
division litigation is waived by failure to make the appropriate objection 
following entry of appearance in the proceeds division lawsuit where the 
minority shareholders succeeded in achieving a larger division of the Wheatland 
Irrigation litigation success. Squaw Mountain Cattle Co., 804 P.2d 1292.

[¶27]   What is left for resolution here is 
the single issue that the law firm did represent the minority shareholders. 
Consequently, as present defendants, the law firm should have forced the 
majority shareholder, who undertook and funded the litigation, to be more 
generous and kindly rather than seeking to obtain most of the fund which was not 
so willingly paid by Wheatland Irrigation on settlement.4

[¶28]   The status of representation and 
conduct of the law firm in pursuing the primary interest of the majority 
shareholder was really not in factual issue during the six year effort and 
successful conclusion. It was initiated by a corporate resolution of approval to 
proceed in the name of the corporation and continue thereafter by the assumed 
financial responsibility of the majority shareholder and not the corporate 
entity or the minority shareholders. Everyone was happy with the results, except 
when it came time to settle up and split the pie.

V. RELEVANT CASE LAW AND 
LEGAL ISSUES

[¶29]   In legal analysis, the independent 
entity of the corporation to be distinguished from individual shareholders was 
first recognized by this court in a suit by a shareholder against the 
corporation in Wilson v. First Nat. Bank of Cheyenne, 1 Wyo. 108 (Wyo. 1873). 
That precept was followed in the considerably more complex case involving an 
action by a minority shareholder in Smith v. Stone, 21 Wyo. 62, 128 P. 612 
(1912). Nothing in Wyoming case law has since developed a different 
understanding. Furthermore, the principle is recognized in the Wyoming 
Disciplinary Standards, which has a national source derivation. The Wyoming 
Rules of Professional Conduct for Attorneys at Law, Rule 1.13, "Organization as 
client," states in preliminary text:

     (a) A lawyer employed 
or retained by an organization represents the organization acting through its 
duly authorized constituents.

* * * * * *

     (e) A lawyer 
representing an organization may also represent any of its directors, officers, 
employees, members, shareholders or other constituents, subject to the 
provisions of Rule 1.7. If the organization's consent to the dual representation 
is required by Rule 1.7, the consent shall be given by an appropriate official 
of the organization other than the individual who is to be represented, or by 
the shareholders.

[¶30]   Rules of Professional Conduct for 
Attorneys at Law, Rule 1.7 provides in part:

     (a) A lawyer shall not 
represent a client if the representation of that client will be directly adverse 
to another client, unless:

     (1) the lawyer 
reasonably believes the representation will not adversely affect the 
relationship with the other client; and

     (2) each client 
consents after consultation.

[¶31]   The resolution by which the lawsuit 
was initiated, duly signed by the directors (one of whom constitutes a member of 
the minority shareholders in this present litigation) stated in 
text:

RESOLUTION

     The undersigned, being 
all of the stockholders and directors of Two Bar-Muleshoe Water Company, do 
hereby take the following action by consent:

     
RESOLVED that Springer Jones, 
President, be and he is hereby authorized and directed to take such legal 
action, on behalf of the Company, as is in his sole and absolute discretion 
deemed necessary, against Wheatland Irrigation District, by reason of 
Wheatland's breach of the terms and provisions that certain Lease Agreement 
between Swan Land and Cattle Company, Ltd. and Wyoming Development Company 
executed on or about March 1, 1900 and further to petition the Court for an 
Order to show cause why the officers and directors of Wheatland should not be 
held in contempt for their failure and refusal to follow the Judgment and Order 
of the District Court, Platte County, relating to said lease, as modified by the 
Wyoming Supreme Court in the case of Wheatland Irrigation District -vs- Two 
Bar-Muleshoe Water Company, 521 P.2d 1334.

DATED this 30th day of 
May, 1983.

/s/ Springer 
Jones

 /s/ Bernard McGuire

 /s/ H. Richard Windling

[¶32]   There was never any secret during 
the course of all this litigation about the law firm being employed at the cost 
and direction of the majority shareholder. During the years of the litigation, 
this arrangement went satisfactorily with some apparent ups and downs. It did 
include an intermediate effort apparently directed by some or more of the 
minority shareholders to dissolve the corporation, but nevertheless continued 
until success was realized.

[¶33]   We can divide this course of events 
into three sequences: (a) collection litigation against Wheatland Irrigation; 
(b) division litigation between majority and minority shareholders; and (c) suit 
by minority shareholders against law firm representing majority shareholder. It 
is not completely clear from which sequence damages against the law firm are now 
claimed in this lawsuit. Sufficiency of the settlement in the collection 
litigation is foreclosed by stipulation and acceptance. Obligation of the 
majority shareholder to pay attorney's fees to the minority shareholders in the 
division litigation is foreclosed by the decision in the division litigation 
where the trial court denied recovery. We lack understanding why the denied 
claim for attorney's fees in the division litigation becomes a valid claim 
against the law firm. It must be either the law firm had a duty to advise and 
control their client regarding his interest in division or they should have 
withdrawn or not appeared in the division litigation after dispute erupted about 
the method of division of the settlement proceeds.

[¶34]   As we have said, the minority 
shareholders could have objected to the continued representation of Springer 
Jones and his company, Squaw Mountain, in the division litigation if they had so 
chosen. Clearly, that effort was not made and any complaint either in ethical 
challenge or damage complaint is waived by intentional choice, disinterest or 
inactivity.

[¶35]   We apply the rule of "reasonable 
promptness" to conflict of representation challenges by opposing litigants. 
Jackson v. J.C. Penney Co., Inc., 521 F. Supp. 1032 (N.D.Ga. 1981) (fifteen 
months into the litigation). The significance of a prompt request to withdraw 
and a comprehensive analysis of the entire subject of developed conflict of 
interest is provided in the often cited cases of E.F. Hutton & Co. v. Brown, 
305 F. Supp. 371 (S.D.Tex. 1969); Roth v. Roth, 84 Ill. App.3d 240, 39 Ill.Dec. 
872, 405 N.E.2d 851 (1980) (two years delay until shortly before trial); Empire 
Life and Hospital Ins. Co. v. Harris, 595 S.W.2d 904 (Tex.Civ.App. 1980) (two 
days into trial); River West, Inc. v. Nickel, 188 Cal. App. 3d 1297, 234 Cal. Rptr. 33 (1987) (at least thirty-nine months); and Hudson v. State, 250 Ga. 479, 299 S.E.2d 531 (1983) (issue must be raised prior to trial). Each applied a test of 
prompt action or, in River West, Inc., also complainant's burden of proving 
justified delay. See also, where waiver concepts are applied, Central Milk 
Producers Co-op. v. Sentry Food Stores, Inc., 573 F.2d 988 (8th Cir. 1978) and 
Redd v. Shell Oil Co., 518 F.2d 311 (10th Cir. 1975). As one resource regarding 
waiver of right to disqualify by delay, see Restatement (Third) of the Law 
Governing Lawyers § 201, at 22 (Tentative Draft No. 4 1991).

[¶36]   This case in its facts takes us 
much further down the time line since no motion to disqualify was ever made. 
Instead, while division litigation was ongoing, this malpractice suit was filed 
against the law firm representing the opposing litigant. Consequently, if a 
claim could have been stated it can only relate to settlement of the first 
lawsuit in which the law firm was overtly representing the majority shareholder 
and, of necessity, the corporate entity.5

[¶37]   We concur in the implicit decision 
of the trial court that the law firm never did represent the minority 
shareholders. Although the subject in text there addressed was attorney/client 
privilege for the corporate attorney in resisting action of minority 
shareholders, the principle was simplistically addressed by 2 F. Hodge O'Neal 
& Robert B. Thompson, O'Neal's Oppression of Minority Shareholders § 7:40, 
at 271 (1991): "An attorney employed by a corporation is, of course, not 
strictly a `joint attorney' of the corporation and the suing shareholders * * 
*." Likely the most practical and definitive resource regarding ethical 
requirements of business lawyers is provided by Brooke Wunnicke, Ethics 
Compliance for Business Lawyers (1987).

[¶38]   In text, Wunnicke recognized the 
corporate entity and the compatible rule which had earlier set forth in cited 
cases that the duty of the corporate attorney is to his client - the corporate 
entity. Wunnicke, supra, at § 8.2. The citation of Evans v. Artek Systems Corp., 
715 F.2d 788 (2d Cir. 1983) provides authority regarding the entity status and 
observation that the object of the disqualification rule is to preserve the 
integrity of the adversary system. That court further said:

However, while we have 
not hesitated to disqualify counsel when the circumstances warranted it, we have 
also noted that "there is a particularly trenchant reason for requiring a high 
standard of proof on the part of one who seeks to disqualify his former counsel, 
for in disqualification matters we must be solicitous of a client's right freely 
to choose his counsel - a right which of course must be balanced against the 
need to maintain the highest standards of the profession."

Evans, 715 F.2d  
at 791 (quoting Government of India v. Cook Industries, Inc., 569 F.2d 737, 739 
(2d Cir. 1978)). We adopt and apply for Wyoming law the entity rule for the law 
firm representation of its client, the corporation, and not the shareholders. 
Jesse by Reinecke v. Danforth, 169 Wis.2d 229, 485 N.W.2d 63 (1992).

[¶39]   Nothing in this record reveals 
justification to attribute any intended or agreed representation by the law firm 
for the minority shareholders individually and as a group. Skarbrevik v. Cohen, 
England & Whitfield, 231 Cal. App. 3d 692, 282 Cal. Rptr. 627 (1991); and In re 
Conduct of Weidner, 310 Or. 757, 801 P.2d 828 (1990). Conversely, the minority 
shareholders never independently demonstrated any willingness to be responsible 
for contribution to the litigative costs and expenses. On the first and most 
obvious justification for summary judgment in this case, the facts demonstrate 
without question that contrary to pleadings and argument, the law firm never, 
through the initial litigation or separately thereafter, assumed a duty of 
attorney for the minority shareholders. The duty of the majority shareholder to 
either the corporation or to the minority shareholders has been settled and 
resolved by our prior litigation.

[¶40]   Summary judgment is justified not 
by the absence of contested issues of fact of which there were many, but since 
the decision was justified as a matter of law by preclusive legal principles. 
Cordova, 719 P.2d 625. Following Cordova, this court recognized in Davenport v. 
Epperly, 744 P.2d 1110, 1112 (Wyo. 1987) (quoting Cordova, 719 P.2d at 634) the 
appropriateness of summary judgment when based upon "`substantive legal issue 
disposition.'" This case appropriately fits into that legal principle 
delineation with the well-established summary judgment law. In this record, 
existence of an attorney/client relationship or special assumed duty of the law 
firm to the majority shareholders invokes legal principles and is not presented 
in any contested relevant issues of fact. National Sav. Bank of District of 
Columbia v. Ward, 10 Otto 195, 100 U.S. 195, 25 L. Ed. 621 (1879); Hayes v. 
American Nat. Bank of Powell, 784 P.2d 599 (Wyo. 1989); Ricci v. New Hampshire 
Ins. Co., 721 P.2d 1081 (Wyo. 1986).6

[¶41]   At this juncture, other appellate 
contentions will be left with minimal attention for our decision since we find 
that the attorney/client relationship is the essential element under the 
circumstances for maintenance of a legal malpractice lawsuit. Brooks, 792 P.2d 196; cf. Carlson v. Langdon, 751 P.2d 344 (Wyo. 1988). See also Lawrence H. 
Averill, Jr., Attorney's Liability To Third Persons For Negligent Malpractice, 
II Land and Water L.Rev. 379 (1967). Additionally, we could easily find no 
damage beyond the denied attorney's fees already rejected for recovery by 
appellants in Squaw Mountain Cattle Co., 804 P.2d 1292. However we limit or 
extend collateral estoppel and res judicata, it is difficult to perceive why, 
after the client, Squaw Mountain, was denied obligation for attorney's fees 
accrued by the minority shareholders in the division litigation, the attorneys 
representing Squaw Mountain should now be asked to shoulder that previous 
rejected burden against their client. Dispositively at this stage, we choose not 
to pursue the collateral estoppel-res judicata defensive concepts, although 
those were well briefed and thoroughly presented. See, e.g., Marias v. Marano, 
120 Idaho 11, 813 P.2d 350 (1991); Kelly v. Foster, 62 Wn. App. 150, 813 P.2d 598 (1991); and Jackson Trak Group By and Through Jackson Jordan, Inc. v. Mid 
States Port Authority, 242 Kan. 683, 751 P.2d 122 (1988).

VI. 
CONCLUSION

[¶42]   Stripped of emotional complexities 
and unfortunate challenges of adverse conduct characterizations in the 
litigation, this voluminous record presents a very simple case. A majority 
shareholder as one entity, with approval of the minority shareholders, undertook 
very expensive litigation to collect money in the interest of the parent 
corporation from a third party. The majority shareholder employed attorneys to 
pursue this litigation with the knowledge and overt concurrence of the minority 
shareholders, provided all expenses were borne by the majority shareholder as 
proponent. At the majority shareholder's expense, expensive and overtly 
difficult litigation was resolved by a favorable settlement. The shareholders 
then came to disagree about proceeds division with resolution finally achieved 
by further litigation in a fashion entirely favorable to the minority 
shareholders. As the appeal of that decision from the trial court was pending, 
the minority shareholders instituted a lawsuit against the attorneys who won the 
war.

[¶43]   We agree with the summary judgment 
granted by the trial court and affirm its decision.

CARDINE, Justice, specially 
concurring.

[¶44]   I concur in the result but not the 
legal rationale. This opinion of the court seems to hold that a party may not 
sue the lawyer of an adverse party. If this is a general rule, there are 
exceptions. Lawyers are as responsible as any other citizen in a proper case for 
harm caused others. The case against this "more experienced trial firm," 
however, is not such a case.

BROWN, Justice (Retired), 
concurring with whom CARDINE, Justice, joins.

[¶45]   I agree with the majority that this 
case be affirmed; however, I do not agree with the packaging of the majority 
opinion for publication. It seems that the issue before the court is simple; 
however, the majority obscures its holding with phantom sub-issues and a 
profusion of unnecessary commentary.

[¶46]   The adjudicative facts of this case 
are uncomplicated. Squaw Mountain Cattle Company (Squaw) is the majority 
shareholder in Two Bar-Muleshoe Water Company (Two Bar) and appellants are the 
minority shareholders. Both Squaw and Two Bar employed appellees to represent 
them in an action against Wheatland Irrigation District (WID).

[¶47]   In the litigation against WID, all 
the costs and attorney fees were paid by Squaw. None of appellants paid any of 
the costs or attorney fees, nor were they asked to. A favorable settlement offer 
was proposed by WID. At a Two Bar shareholders meeting on September 9, 1988, 
Squaw approved the settlement and appellants, minority shareholders, rejected 
the settlement offer. Appellants and their attorney were present at the 
September 9 shareholders meeting.1 Appellants did not disagree with 
the amount of the settlement, but rather the proposed division of $1,250,000 
between majority stockholder Squaw and minority stockholders (appellants). The 
dispute between the majority stockholder and the minority stockholders with 
respect to allocation of WID settlement resulted in a lawsuit filed by 
appellants. In the division lawsuit, the minority stockholders were successful 
and recovered substantially the amount of their principal claim. However, they 
were not awarded attorney fees or punitive damages.

[¶48]   After the division suit, appellants 
here (minority stockholders in Two Bar) ran out of entities to sue, so they sued 
the attorneys who represented Squaw and Two Bar. In this latest lawsuit against 
Squaw's attorneys, appellants here contend that they were clients of appellees 
and apparently contend that appellees should have required a division more 
favorable to them. In their lawsuit, appellants specified five causes of action: 
breach of fiduciary duty, conspiracy, breach of contract, fraud, and legal 
malpractice. They also demanded judgment for costs, attorney fees, and other 
damages they sustained in the division lawsuit. The trial court determined that 
appellee attorneys never represented the minority stockholders (appellants) and 
summary judgment was entered accordingly.

[¶49]   Resolving a single issue is 
dispositive of this appeal. Did an attorney/client relationship exist between 
minority stockholders in Two Bar and the attorneys who represented the 
corporations, Two Bar and Squaw?

[¶50]   An attorney who represents a 
corporation does not, because of that corporate representation, also represent 
the individual stockholders. Skarbrevik v. Cohen, England & Whitfield, 231 Cal. App. 3d 692, 282 Cal. Rptr. 627, 634 (1991). Some additional circumstance 
other than representing the corporation must come to pass before the corporate 
attorney also becomes the attorney for a stockholder. Whether an attorney/client 
relationship exists is a question of law. Meehan v. Hopps, 144 Cal. App. 2d 284, 
301 P.2d 10, 11 (1956). The facts necessary to make that determination are not 
in dispute. There is no indication in the record that any of appellants 
(minority stockholders) ever contacted appellees (attorneys) in regard to the 
Wheatland Irrigation District litigation or for any other purpose. Furthermore, 
appellants did not pay any attorney fees or costs; nor were they billed or 
expected to pay any of the expenses.

[¶51]   In their affidavits opposing 
summary judgment, appellants merely state that in their "opinion," "belief," 
"understanding," "feeling," and "intention," appellees represented the 
shareholders. Opinion or belief by appellants is insufficient to rebut a prima 
facie showing that an attorney/client relationship did not exist.

[¶52]   It has not been shown that an 
attorney/client relationship existed between appellants and appellees. In fact, 
the record shows that there was no such relationship. An attorney/client 
relationship is the essential element for the maintenance of a malpractice 
lawsuit. Brooks v. Zebre, 792 P.2d 196, 201 (Wyo. 1990). Whether a legal duty 
exists is a question of law, and absent a duty, there is no liability. Allmaras 
v. Mudge, 820 P.2d 533, 536 (Wyo. 1991). Summary judgment was, therefore, 
justified as a matter of law, the trial court having determined that appellants 
were never represented by appellees during the WID litigation. See Davenport v. 
Epperly, 744 P.2d 1110 (Wyo. 1987); Cordova v. Gosar, 719 P.2d 625 (Wyo. 
1986).

[¶53]   Each of appellants' five causes of 
action was premised on an attorney/client relationship between the minority 
stockholders and the attorneys. Failure to show that relationship was fatal to 
all causes of action.

 

FOOTNOTES 

1 The eight page, 
fifty-one paragraph complaint filed by the minority shareholders against the law 
firm premised liability on an attorney/client relationship. It stated separate 
claims for breach of fiduciary duty; conspiracy; breach of contract; fraud; 
malpractice; and punitive damages. The complaint does not clearly delineate 
items of claimed damage except obviously attorney's fees incurred in the 
division litigation and attorney's fees now incurred in this third lawsuit. An 
answer was filed to the complaint on August 20, 1990 and, on the same day, an 
amended complaint was filed. No easily apparent difference except a designation 
of the particular attorney rather than the law firm for certain claimed 
misconduct is demonstrable within the terms of the extended complaint and 
amended complaint.

     This present lawsuit 
was filed July 31, 1990. The final decision of this court determining 
shareholder division of proceeds in affirming the trial court would not come 
until February 6, 1991, more than six months later. Obviously, this lawsuit was 
not instituted in reliance on what the Wyoming Supreme Court might do in Squaw 
Mountain Cattle Co., 804 P.2d 1292.

2 In the earlier case, 
State ex rel. Squaw Mountain Cattle Co., 728 P.2d  at 179, this writer in special 
concurrence recognized the apparent unstoppable nature of the exhaustive 
litigation and observed that "[h]ope springs eternal." Unfortunately, now two 
lawsuits later, we may not have yet reached that ephemeral 
conclusion.

3 The status of the John 
Does One through Three achieves an interesting perspective in briefing and 
argument. The minority shareholders never amended to state specific persons, but 
the law firm is no doubt correct that the original intendment was to include 
them in that litigation. For some reason, the amendment was never made and the 
separate lawsuit was later instituted.

4 Obviously, the original 
Wheatland Irrigation settlement was not computed in attributable damage amount 
on a pro-rated shareholder basis. There was much logic to the position of 
Springer Jones, although not accepted by the trial court or approved on appeal, 
that most of the damage proved, as well as all of the efforts undertaken, was to 
compensate for his loss and to credit his litigative persistency.

5 For a substantive 
discussion and appropriate forms directed to disqualification of counsel for 
reasons of conflict or prior representation, see 2 Roger J. Magnuson, 
Shareholder Litigation § 19.20 (1991) and 3 Roger J. Magnuson, Shareholder 
Litigation § 26.25 (1991).

6 Springer Jones, 
president of Squaw Mountain, may have been ungenerous in his intendment to 
divide the hard won process of six years of unrelenting effort while the 
minority shareholders stood on the sidelines and went along only for a 
completely free ride.

7 There is a counterclaim 
yet pending since our consideration of this case occurred which required a 
supplementary order to provide a W.R.C.P. 54(b), no just cause for delay 
certification. The decibel level, now two cases removed from the "[h]ope springs 
eternal" comment, State ex rel. Squaw Mountain Cattle Co., 728 P.2d  at 179, does 
not necessarily provide confidence that the infinite willingness of these 
participants to yet discontinue this course of litigation has presently been 
achieved. 

 

FOOTNOTES for Concurring 
Opinion

1 One appellant had been 
represented by his own counsel since 1984. Another appellant was represented by 
counsel since August 1988.