Opinion ID: 835208
Heading Depth: 2
Heading Rank: 2

Heading: Violation of DR 5-105(C) in the Bankruptcy Matter

Text: The accused seeks review of the trial panel's decision that he violated DR 5-105(C) in the bankruptcy matter. Pursuant to DR 5-105(C), after representing a former client, an attorney cannot represent another client in the same or a significantly related matter when the current client's interests conflict with the former client's interests, unless all the clients consent after full disclosure under DR 5-105(D). DR 5-105(C) specifically provides, in part: Except as permitted by DR 5-105(D), a lawyer who has represented a client in a matter shall not subsequently represent another client in the same or a significantly related matter when the interests of the current and former clients are in actual or likely conflict. In this case, the Bar charged that DR 5-105(C) precluded the accused from representing the Ziegenhagens and First Call on appeal of the Bankruptcy Court's approval of the Dorsey settlement. The Bar contends that the interests of those clients in opposing the settlement conflicted with the interests of the accused's former client, Trunnell, whose interest was in affirming the settlement. The accused responds that Trunnell was not his client, that the appeal was not the same matter as, or significantly related to, the adversary proceeding, and that the interests of his new and former clients did not conflict. We turn to those arguments.
The accused argues that, in the adversary proceeding, he was special counsel for the bankruptcy estate, not Trunnell. He further argues that, even though Trunnell had decided, as trustee of the estate, to settle with Dorsey, the interests of the estate were independent of those of the trustee. The Bar argues that the accused's distinction is too fine, and we agree. When a lawyer represents a corporation, the lawyer represents, for the purpose of conflict of interest analysis, the entity, not the person who manages the entity. See In re Banks, 283 Or. 459, 469, 584 P.2d 284 (1978) ([t]he corporation usually is considered an entity[,] and the attorney's duty of loyalty is to the corporation and not to its officers, directors or any particular group of stockholders). However, the entity may act only through its authorized representatives, and, in representing the entity, the lawyer generally must follow their directives. See RPC 1.13(a) (lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents). A personal representative of a decedent's estate similarly has authority to direct a lawyer who the personal representative hires for advice and counsel in the administration of a decedent's estate. See ORS 114.305(18) (a personal representative, acting reasonably for the benefit of interested persons, is authorized to [e]mploy qualified persons, including attorneys, accountants and investment advisers, to advise and assist the personal representative and to perform acts of administration, whether or not discretionary, on behalf of the personal representative). This court has concluded that, for purposes of conflict of interest analysis, when the personal representative hires a lawyer, the lawyer must treat the personal representative as the lawyer's client. See ORS 113.135 ([i]f the personal representative has employed an attorney to represent the personal representative in the administration of the estate, the personal representative shall file in the estate proceeding the name and post-office address of the attorney unless that information appears in the petition or the order appointing the personal representative (emphasis added)); In re Phelps, 306 Or. 508, 517, 760 P.2d 1331 (1988) ([t]he accused was the lawyer for the personal representative); In re Howard, 304 Or. 193, 204, 743 P.2d 719 (1987) (the accused's client was the personal representative). In this case, the accused understood that it was Trunnell who defined the interests of the estate. In his Application to Employ Attorney, the accused stated, in relevant part, that [t]he trustee seeks to employ Special Counsel, G. Jefferson Campbell, Jr. of the law firm of G. Jefferson Campbell, Jr., P.C., to assist the trustee in the following discrete matters having the following potential benefits to the estate. (Emphasis added.) The accused also verified in that document that he [would] be the trustee's attorney of record. (Emphasis added.) In addition, when the accused objected to the settlement that Trunnell had arranged, the accused referred to himself as former special counsel to the Chapter 7 Trustee.  (Emphasis added.) We conclude that, whether the accused represented Trunnell or the estate, Trunnell's decisions represented the interests of the estate and the accused therefore could not represent new clients who opposed the estate's interests, as she determined them to be, without her consent. It is undisputed that the accused did not obtain that consent.
The accused next argues that the appeal in which he represented the Ziegenhagens and First Call was a different matter from the adversary proceeding against Dorsey. The accused argues that the appeal was a contested matter. A contested matter is a matter that addresses factual and legal issues arising out of particular statutes, procedures, and practices in bankruptcy. By definition, a contested matter does not include an adversary proceeding. See Advisory Committee Note to FRBP 9014 (Whenever there is an actual dispute, other than an adversary proceeding, before the bankruptcy court, the litigation to resolve that dispute is a contested matter.). According to the accused, the appeal and the adversary proceeding were, therefore, different matters. The accused's argument is not well-taken. The appeal was from the outcome of the adversary proceeding. Whether or not the appeal falls within the definition of a contested matter, the dispute in that appeal centered on the settlement reached in the adversary proceeding, and the adversary proceeding and the appeal were both parts of a single bankruptcy proceeding. Thus, both the adversary proceeding and the appeal were the same matter for purposes of DR 5-105(C).
The accused argues finally that the interests of the bankruptcy estate and those of his new clients, the Ziegenhagens and First Call, did not conflict and were not likely to conflict. A disagreement between two representatives of a bankruptcy estate, the accused contends, does not constitute a violation of DR 5-105(C). We disagree. Trunnell's interest, and therefore the interest of the bankruptcy estate, in enforcing the settlement directly conflicted with the Ziegenhagens' and First Call's interests in setting that settlement aside. Therefore, the accused could not represent the latter without obtaining the consent of the former, after full disclosure. DR 5-105(D). The accused did not obtain that consent. We conclude that he violated DR 5-105(C).