Wednesday, November 28, 2007

Playing From The Rough

An Illinois Hearing Board has recommended a six-month suspension of an attorney who was found to have improperly represented multiple interests in the development of a project involving a golf-themed restaurant. The board rejected the attorney's contention that he did not have an attorney-client relationship with the originator of the idea, who eventually was disadvantaged by the conflict (and obtained an $8.2 million judgment against the attorney and his firm):

"The evidence in this case shows that prior to July 3, 1996, Ruttenberg and Rudman had agreed to become partners in the golf-themed restaurant project. His purpose in partnering with Rudman, according to Ruttenberg, was to move the project forward. In furtherance of that, Rudman suggested that the two men use [respondent's] law firm, which he described as "a one-stop shop" for such projects. The firm could provide the necessary legal expertise as well as help in raising capital and finding an operator.

At the beginning of their July 3rd conference call, which lasted one and one-half to two and one-half hours, Rudman explained to Respondent that the restaurant concept was Ruttenberg’s idea but that he had invited Rudman to participate. Respondent then asked Ruttenberg to tell him everything he could, and Ruttenberg did so. He described his idea and all the work he had done on the project up to that point. He answered Respondent’s questions. Ruttenberg held no information back, as he believed he was speaking to his attorney. Ruttenberg clearly intended to have [respondent] and his firm represent him concerning the restaurant project, and reasonably believed by the end of the call that they were going to do so."

An attorney-client relationship depends on the reasonable perception of the person or entity claiming client status. Here, the lawyer was found to have received closely-held information and provided advice to both partners. Such interaction will create an attorney-client relationship absent specific and unequivocal disclaimers at the outset. Then, in dealing with multiple partners in a business development, the lawyer for the represented partner would be required to comply with Rule 4.3 in dealings with the unrepresented partner. An unhelpful fact here is that the accused attorney and Rudman had been friends since they were seven years old. (Mike Frisch)

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