Pinnacle Health: Joint Representation and a CFO's Confidential Admission
Attorney Elena Marsh represents both Pinnacle Health LLC and its chief financial officer, Roger Vale, in a civil fraud action brought by a vendor. Pinnacle's operating agreement provides that the company will indemnify managers for acts in good faith. During a joint defense meeting, Roger tells Elena privately that he altered invoices to hide a $400,000 shortfall and that Pinnacle's CEO did not know. He asks Elena not to tell Pinnacle. Two weeks later, Pinnacle's board sends Elena an email asking whether Roger committed fraud and whether the company should terminate him. Elena knows that Pinnacle's insurer will rescind coverage if fraud is established. Roger has not consented to disclosure. Elena also learns that Pinnacle's CEO has been asked to testify about the invoices. Elena has not yet filed an appearance for either client in the vendor suit.
1. May Elena continue to represent both Pinnacle and Roger? Apply Delaware Rules 1.7 and 1.13.
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Elena has a current-client conflict under Rule 1.7(a)(2): her representation of Pinnacle is materially limited by her duty to Roger. Rule 1.13 makes Pinnacle the client; Roger is a constituent whose interests may differ. The confidential information from Roger is adverse to Pinnacle, and Elena cannot use it against Pinnacle or disclose it to Pinnacle. Informed consent from both may not cure the conflict because the lawyer cannot serve both sides of a dispute over whether Roger committed fraud. She must withdraw from at least one representation, and likely from both, under Rule 1.16(a)(1). She may tell the board only that she cannot answer the question and must withdraw; she may not continue dual representation while the board's inquiry requires her to reveal Roger's confidence.
2. What may Elena disclose to Pinnacle's board, and what must she do if she withdraws?
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Rule 1.6 bars disclosure of Roger's confidence. The fraud is past, not a future crime or fraud involving Elena's services, so the Rule 1.6(b)(3) exception likely does not apply. She may not reveal the admission to Pinnacle without Roger's informed consent. If she withdraws, she must protect the clients' interests, return files, account for fees, and seek leave of court if required. She cannot later represent Roger against Pinnacle in the same matter because she has received Pinnacle's confidences and Rule 1.9(a) bars a substantially related adverse representation. She could represent neither in the vendor suit unless both give informed consent and no confidences are used, which is unlikely here.
3. What if the board asks Elena to keep Roger's disclosure secret while she continues representing Pinnacle?
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She cannot agree to that arrangement. As entity counsel, Elena must keep the board informed under Rules 1.4 and 1.13, but she cannot disclose Roger's confidence. Those duties collide, and the conflict is not consentable on these facts. Continuing to represent Pinnacle while withholding information that the board needs to decide whether to terminate Roger and whether coverage exists would mislead the client. She must decline the arrangement and withdraw. She may not use the information to Pinnacle's advantage, and she may not reveal it merely because the board asks.