Former-Client Conflict in a Business Sale
Attorney Patel represented Dan three years ago when Dan formed Northside HVAC LLC. Patel drafted the operating agreement, reviewed Dan's equipment loans, and learned Dan's customer list and pricing strategy. Dan paid Patel personally; the LLC was not a client. Patel's engagement ended when the LLC was formed. Now Dan is selling the LLC to Wendy, Dan's former spouse. Wendy asks Patel to represent her in the purchase. Dan is represented by another lawyer. Patel still has Dan's old file, including the pricing strategy. Wendy wants Patel to negotiate aggressively and to advise her whether Dan's customer list is worth paying for. Dan has not consented to Patel's representation of Wendy; in fact, Dan says he will not consent. Patel believes he can represent Wendy because he never represented Dan in the sale and because the old formation work is stale. The sale is for $650,000.
1. Does Patel have a conflict of interest under Rule 1.9? Analyze former client, material adversity, and substantial relationship.
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Patel has a former-client conflict under Rule 1.9(a). Dan was Patel's client in the LLC formation. The current matter is materially adverse to Dan: Wendy wants Patel to negotiate aggressively against Dan and to evaluate whether Dan's customer list is worth paying for. That is direct adversity in a $650,000 sale.
The key issue is whether the current matter is the same as or substantially related to Patel's former representation. It is substantially related. Patel drafted the operating agreement, reviewed equipment loans, and learned Dan's customer list and pricing strategy. Those are precisely the kinds of confidential information that could be used against Dan in the sale. Wendy even wants advice about the customer list. The fact that the old formation work is three years old does not cure the conflict; Rule 1.9 has no staleness exception when the matters are substantially related. Patel may not represent Wendy unless Dan gives informed consent, confirmed in writing. Dan has refused. Patel must decline the representation.
2. Could Patel cure the conflict by screening himself from Dan's old file or by having Wendy promise not to use the pricing information?
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No. Screening is not a cure for a lawyer's own former-client conflict under Rule 1.9(a). Screening rules generally address imputation to other lawyers in a firm under Rule 1.10; they do not allow the personally conflicted lawyer to undertake the adverse representation. Because Patel himself represented Dan and personally learned the confidential information, Patel is disqualified unless Dan gives informed consent confirmed in writing.
A promise from Wendy not to use the pricing information also does not cure the conflict. Patel has a duty not to use or reveal information relating to the former representation under Rule 1.9(c). The risk is not only deliberate use; it is the difficulty of compartmentalizing confidential information during negotiation and advice. Patel's possession of the old file and his knowledge of Dan's pricing strategy make the conflict personal and nonconsensual. Dan's refusal is dispositive. Patel should decline Wendy's representation and should not disclose Dan's confidential information to Wendy.
3. Would the analysis change if Patel's only former engagement had been representing the LLC itself, not Dan personally?
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The analysis would change but would not necessarily eliminate the conflict. If the LLC was Patel's client, then the former client is the entity, not Dan personally. A current matter adverse to the LLC-such as Wendy buying the LLC or its assets-could still be substantially related to Patel's formation work for the LLC. Patel would need the informed consent of the appropriate person in the LLC, and Rule 1.13 may complicate who can consent, especially if Dan controls the entity and has interests adverse to Wendy.
If the old engagement were unrelated to the sale-for example, Patel had only represented the LLC in a routine tax filing-then the substantial-relationship test might not be met. But on these facts, Patel drafted the operating agreement, reviewed loans, and learned pricing and customer information. That work is closely related to the value of the business being sold. Even with the LLC as the former client, Patel would likely need consent or should decline.