Former-Client Conflict and Entity Representation
Attorney Mireille is a partner at a New Orleans firm. The firm represents Bayou Fabricators, LLC in a contract dispute with a supplier. Bayou's operating agreement names two managers: Adele, who holds 60%, and Ben, who holds 40%. Adele asks Mireille to file suit on behalf of Bayou against Ben personally, alleging that Ben diverted $200,000 of LLC funds to his own side company. Two years ago, Mireille personally drafted Ben's will and revocable trust; the firm also advised Ben and his wife on a family LLC. Ben did not disclose the diversion dispute during that work. Bayou's operating agreement permits the LLC to indemnify managers and to advance their legal fees. Mireille wants to continue representing Bayou against Ben and to tell Ben that Bayou will not pay his fees. Ben objects and moves to disqualify the firm from both the estate matter and the new suit.
1. Does the firm have a conflict of interest in suing Ben?
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The firm's client is Bayou, not Adele or Ben. Under Rule 1.13, a lawyer representing an organization represents the entity and must act in its best interest, not the interest of any manager. That does not end the conflict analysis. Mireille and her firm previously represented Ben personally in estate planning and a family LLC. Under Rule 1.9(a), a lawyer who has formerly represented a client may not represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the former client unless the former client gives informed consent. The new suit is materially adverse to Ben. The critical question is substantial relationship. Estate planning and family LLC advice can involve Ben's assets, side company, and financial structure. If the firm obtained confidential information about the side company or Ben's finances that is material to the diversion claim, the matters are substantially related and the firm is disqualified. If the estate work had no connection to the side company or LLC funds, the firm may argue no substantial relationship, but the firm should not lightly assume that. Ben has not consented, so if the matters are substantially related, the firm must withdraw from the new suit.
2. Can the firm screen Mireille and continue the representation?
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The conflict is imputed to the entire firm under Rule 1.10(a). Screening is available in some lateral-lawyer situations under Louisiana's Rules, but it does not cure a firm's own former-client conflict. Because Mireille personally represented Ben, her disqualification is imputed to the firm, and Ben's objection blocks any consent cure. The firm should withdraw from the lawsuit against Ben unless Ben gives informed consent confirmed in writing. The estate matter is different: if it is closed, the firm may continue to hold Ben's files and may not use confidential information against him. If the estate matter is ongoing, the firm cannot represent Ben while suing him in a related matter without consent; Ben objects, so the firm must withdraw from the estate matter as well.
3. What are Mireille's obligations regarding Bayou's payment of Ben's legal fees?
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Bayou's operating agreement may require Bayou to indemnify or advance Ben's fees, but that does not make Ben a client of Mireille. Mireille cannot represent Ben in the suit; Ben needs independent counsel. Mireille may advise Bayou about its indemnification obligation, but she must be careful not to use the fee decision to obtain an advantage over Ben or to interfere with his defense. If Ben is a manager and the operating agreement gives him a vote on litigation, Adele alone may not be able to direct the suit. Mireille should confirm who has authority to act for Bayou and should explain the entity's interests to the authorized managers. She also may not communicate about the suit with Ben if he is represented by counsel.