TRANSMOGRIFICATION: LEGAL ETHICS AND THE TRANSACTIONAL LAWYER. Lindsey Lee Bond, Taylor & Lee, L.L.P Main, Suite 1220 Houston, Texas

Transcription

1 TRANSMOGRIFICATION: LEGAL ETHICS AND THE TRANSACTIONAL LAWYER Lindsey Lee Bond, Taylor & Lee, L.L.P Main, Suite 1220 Houston, Texas INTO THE DEEP END: NAVIGATING THE PERILOUS WATERS OF LEGAL ETHICS AND LEGAL MALPRACTICE November 13, 1998 Austin, Texas J

2 LINDSEY LEE Bond, Taylor & Lee, L.L.P Main, Suite 1220 Houston, Texas / (d) 713/ (o) 713/ (f) (e) BIOGRAPHICAL INFORMATION EDUCATION B.A. with Honors, University of Texas, 1980 M.B.A., University of Texas, 1983 J.D., South Texas College of Law, 1990 PROFESSIONAL ACTIVITIES Partner, Bond, Taylor & Lee, L.L.P., Houston, Texas Certified Public Accountant Chartered Financial Analyst Member, American Bar Association Member, Houston, Bar Association Member, Securities Committee, State Bar of Texas Member, Houston Society of Financial Analysts Member, Association for Investment Management and Research

3 TABLE OF CONTENTS I. INTRODUCTION...J-1 A. Overview...J-1 B. References...J-1 C. Sources of Ethical Issues...J-1 D. The Client...J-1 II. III. IV. FORMING THE BUSINESS...J-2 A. Introduction...J-2 B. Discussion...J-2 AFTER FORMING THE BUSINESS...J-4 A. Introduction...J-4 B. Discussion...J-4 C. Conclusion...J-4 INVESTING IN THE CLIENT...J-5 A. Introduction...J-5 B. Discussion...J-5 C. Conclusion...J-6 V. SERVING ON A CLIENT'S BOARD OF DIRECTORS...J-7 A. Introduction...J-7 B. Discussion...J-7 C. Conclusion...J-8

4 I. INTRODUCTION The nature of a small business is the second factor which contributes to the complexity of the A. Overview ethical issues that may arise when representing it. Small businesses often have limited financial and While representing entrepreneurs or intellectual resources. In addition, the identity of owner/operators and the businesses they lead, an most small businesses is closely aligned with their attorney may face questions that do not immediately founders and operators. Legal counsel to a small appear to be complex ethical issues. This article business, will serve in many roles including advisor, presents several situations from which ethical issues 7 advocate, negotiator, intermediary, and evaluator. might arise for a lawyer representing a small business. D. The Client B. References Virtually all difficult ethical problems arise from apparent conflict between a lawyer s The primary reference for this guidance will responsibility to clients...and to the lawyer s own be the Texas Disciplinary Rules of Professional 8 interests. The Rules provide a guideline by which Conduct (the Rules ) and its Comments (the to resolve such conflicts by defining the minimum 1 Comments ). The Rules and their Comments 9 standards of conduct by which a lawyer must act. constitute a body of principles upon which the In the same context, the Rules rely on the lawyer s lawyer can rely for guidance in resolving issues conscience to set a higher standard of conduct than through the exercise of sensitive professional and 10 the Rules define. 2 moral judgment and define the proper conduct 3 for purposes of professional discipline. The Rules A lawyer s first duty is to the client. The 4 are imperatives which must be followed. The Rules set forth the lawyer s role, in order, as a Comments, in turn, provide guidance interpreting representative of clients, an officer of the legal 5 the Rules by illustrating or explaining how the system and a public citizen having responsibility for 6 Rules are applied. Other sources include relevant 11 the quality of justice. When a conflict arises Texas case law, relevant case law of other states between the lawyer s duty as the client s whose rules of professional conduct are similar to representative and the remaining two duties, the the Rules, and the lawyer should defer to the client, unless the Rules allow otherwise. C. Sources of Ethical Issues For example, the Rules define few instances Although many elements contribute to the when a lawyer is permitted to disclose confidential ethical complexities of representing a small 12 information received from a client to someone business, two factors appear to the key sources of other than the attorney s or the client s agents the difficulty. The first factor is the nature of the 13 without the client s consent or authorization. The Rules themselves. The Rules were drafted mainly exceptions are (i) to prevent the client from by litigators for litigators. Much like boxing s 14 committing a crime or fraudulent act, (ii) to Marquis of Queensbury rules, the Rules are mitigate an attorney s culpability in a client s designed primarily to be rules of engagement 15 criminal or fraudulent act, (iii) to establish a between two adversaries. The legal profession s defense to civil claims, criminal charges, or ethical rules have few direct answers to the conflicts disciplinary proceedings arising from the lawyer s of interests that transactional and business lawyers 16 relationship with the client, (iv) enforce a claim may face. Most direct references to transactional 17 against a client, or (v) if required by court order, attorneys ethical responsibilities are in the 18 the Rules or law. Comments. II. FORMING THE BUSINESS N-1

5 A. Introduction (iv) he can impartially represent all of the clients; When asked to form a new entity, the process of identifying the client appears to be fairly (b) the lawyer fully discloses to each client straightforward -- the client should be the founders the implications of common of the entity. One of the reasons the founders are 24 representation, and the client is that the entity does not have any legal standing until it is formed. Legal entities (e.g., (c) each client consents in writing to the corporations, limited liability companies, limited 25 representation after such disclosure. partnerships) do not exist until formed by a filing with the Secretary of State s office. Until such time, The lawyer should exercise sensitive the entity does not have the power to enter into professional and moral 26 judgment when contracts, such as a fee arrangement with an determining whether to represent multiple clients. attorney. The lawyer must consider many factors before agreeing to act as an intermediary. Factors to B. Discussion consider include: In assisting two or more people forming a 27 the risk of failure; new business, the attorney acts as an intermediary 19 between the founding parties. As an intermediary, the compatibility of each client s 20 the lawyer is an advisor to each founder. His role 28 interests; is to assuage potentially conflicting interests by 21 developing the parties mutual interests. The whether the lawyer will represent both lawyer should immediately recognize that conflicts 29 parties on a continuing basis; of interest between the founding members will exist. Examples of possible areas of conflict include whether the situation involves creating ownership percentage, salaries, positions as officers a relationship between the parties or and directors, restrictions on transferring ownership 30 terminating one; interests, and duties, functions, and responsibilities. the effect of the joint representation on A lawyer may represent multiple parties when client-lawyer confidentiality and 22 forming a new business. In determining whether 31 attorney-client privilege; and to represent two or more people forming a new business, the lawyer s criteria must be: the lawyer s ability to act impartially 32 for each client. (a) the lawyer reasonably believes Each client may easily be confused regarding (i) each client can make adequately the lawyer s role because of the potential conflict informed decisions about the between the client s expectations and the lawyer s matter, 33 ethical restrictions. Full disclosure is the key to a 34 lawyer resolving any such confusion. The lawyer (ii) there is little risk of each client s 35 must make clear his relationship with each client interest being materially by discussing the implications of representing the prejudiced by the joint founders collectively, the effect such representation representation, will have on the attorney-client privilege, and the risks and the advantages of retaining a single (iii) the matter can be resolved to 36 attorney on such matter. each client s best interest 23 without litigation, and N-2

6 The advantages a lawyer may discuss include 44 clients. If the lawyer cannot maintain such the cost savings of retaining one attorney to balance, it is improper for the lawyer to undertake represent the founders in forming the company and 45 the joint representation. the likelihood of reduced complications in forming 37 the business with only one lawyer involved. The III. AFTER FORMING THE BUSINESS lawyer, however, may not permit his personal interest to influence his advice if one of the founders A. Introduction wants to be represented by other counsel. 38 In many cases, the lawyer forming the new The risks of representing multiple clients in business becomes the lawyer for the business. Upon forming a new business are less straightforward. becoming the lawyer for the business, the lawyer When a lawyer represents two or more people represents the organization itself, not the founders forming a new business, each of those individuals is 46 of the business, and the lawyer s duty is to serve the lawyer s client, and each client will expect his 47 the best interests of the organization. The lawyer 39 lawyer to fulfill many roles when representing him; should carefully explain this fact to his clients however, limits exist on the roles an attorney before they agree to transfer the representation to forming a new business can perform for his clients. 48 the new entity. Examples of these limits, which must be disclosed to the clients, include: B. Discussion the lawyer is precluded from acting as The difficulty in representing an entity is that a partisan advocate between the it only speaks and decides through its agents, 40 founders; 49 officers, and employees. As a result, a lawyer's relationship with an organization is through its information related to forming the new 50 intermediaries. In the ordinary course of business that one founder discloses to representing a business entity, the lawyer reports to, the attorney is not confidential and the and accepts direction from, the business's duly lawyer must share it with the other 51 authorized constituents. The term constituents, as 41 founders; defined in Rule 1.12, includes the entity's directors, officers, employees, shareholders, members and the attorney-client privilege does not 52 others serving in similar capacities. attach between commonly represented 42 clients; and Communications between an attorney and an organization s constituent serving in his each founder must assume greater 53 organizational capacity are protected by Rule responsibility for any decisions made Since the attorney represents the organization rather regarding the new business than he than the constituent, Rule 1.05 may not protect any would if he had been independently communications between the attorney and a 43 represented. constituent whose interests are adverse to the 54 organization. If the attorney concludes that the When representing two or more founders in constituent s interests are adverse to the forming a new business, a lawyer must resolve two organization, he must explain to the individual that ethical requirements which come into conflict as a 55 the organization, not the constituent, is his client. result of the multiple representation. Rule 1.03 He should immediately end the conversation, warn requires that a lawyer keep a client adequately the individual that the conversation with the attorney informed. Rule 1.05 requires a lawyer to maintain may not be privileged, and advise him to seek other confidentiality as to information disclosed to him by 56 counsel. his client. The lawyer must carefully balance these two requirements when representing multiple N-3

7 The possibility of a conflict between an A. Introduction organization and its constituents does not preclude an attorney from representing both the organization Attorneys are often asked to invest in their 57 and its individual constituents. Before agreeing to small business clients, either directly through a cash 58 do so, the attorney must do the following: investment or indirectly by accepting an equity interest in the client in lieu of fees. More important reasonably believe that he can than the financial decision of whether the client's represent the interests of both the securities would be a good investment, the attorney organization and the constituent; and should carefully consider the ethical and legal issues that may arise by investing in the client. Issues that fully disclose to both parties the may arise by investing in a client include: advantages and risks involved with representing them both. C the effect the investment will have on the attorney's role as an Both parties must consent to such a representation; evaluator and advisor to the however, the consent does not need to be in client; 59 writing. A prudent lawyer would provide at least a written summary of the considerations disclosed to C in the case of stock for fees, 60 each of the parties. whether the shares received could be construed as an In the event that a conflict arises between the unconscionable fee; organization and the constituent, neither the lawyer nor his firm may represent either party in the dispute C whether the attorney's 61 unless both parties consent. The lawyer may investment is consistent with the continue to represent the parties on other matters client's best interest; that do not create a conflict of interest. 62 C whether the investment will C. Conclusion cause the lawyer's interest to conflict with the client's; and Representing a business after representing its founders it is not unethical, so long as the attorney C whether the attorney complied has followed the Rules. Before agreeing to do so, with the Rules in making the the attorney must discuss with the founders the investment. effect of the representation being transferred on his relationship with the founders, such as: B. Discussion the attorney will represent the company A lawyer is prohibited from entering into a not the founders; business transaction with a client unless four criteria are met: 63 the attorney s duty is to the company not to the founders; and C the transaction and its terms are "fair and reasonable to the the attorney will not be able to client"; represent the founder in the event a conflict arises between the company C the lawyer fully discloses the and a founder, and he may not be able transaction and its terms to the to represent the business on the issue. client in a manner which the client can reasonably IV. INVESTING IN THE CLIENT understand; N-4

8 C the client has a "reasonable position, the collection risk, the time required, the opportunity" to counsel with an lawyer's experience, ability and reputation, and the independent third party 77 results obtained. Unfortunately for the lawyer who regarding the transaction; and has accepted stock for fees, most claims of C the client gives written consent reasonableness or unconscionability arise after the contingencies and uncertainties are resolved. to the transaction. Since the "standard of 'reasonableness' is too The criteria do not apply to standard commercial vague and uncertain to be appropriate for 64 transactions between a client and its attorney. disciplinary action," the standard for disciplinary These restrictions are unnecessary and impractical purposes is whether the fee charged is illegal or in commercial transactions because the lawyer does 78 unconscionable. Except in very unusual situations, not have an unfair advantage in dealing with the "the circumstances at the time a fee arrangement is 65 client. Examples of exempt transactions including made should control in determining" whether the fee banking or brokerage services, medical services, 79 was unconscionable. Thus, for disciplinary 66 manufactured products, and utilities services. purposes, the lawyer is given the benefit of any uncertainties or contingencies that existed at the Loyalty is an essential element in a lawyer's time the fee was agreed to by the client and the 67 relationship with a client. Investing in a client may 80 attorney. impair the attorney's loyalty to the client. Before agreeing to invest in a client, the attorney should This perspective only applies in disciplinary determine whether the investment could materially 81 actions against the attorney. Texas law requires and adversely affect the lawyer's independent that transactions between attorneys and their clients 68 professional judgment. Further, the lawyer should 82 be subject to strict scrutiny. Moreover, the determine whether the investment would adversely attorney has the burden of proof that the transaction effect his ability to represent his client and provide 83 with a client is fair, adequate, and equitable. 69 detached advice. Although the client is ultimately Courts in several other states have visited this issue responsible for deciding whether to accommodate a and have consistently ruled in favor of the business lawyer's potential conflict of interest, if the answer owner on claims of unconscionable fees based on a to either consideration is yes, the lawyer must either 84 lawyer receiving stock for fees. The best defense terminate the engagement or decline to invest in the for such claims is to have followed the requirements 70 client. of Rule 1.08 by fully disclosing the potential conflicts that will result from the lawyer's In deciding whether to accept stock for fees, investment in his client and directly advising the the lawyer should also determine whether the fee is client to seek independent counsel on the transaction 71 reasonable. Determining a proper fee requires the best defense. lawyer to consider both the client's interest and his 72 own. The lawyer may consider many factors when C. Conclusion determining whether a fee is reasonable, such as 73 those set forth in Rule 1.04(b). An attorney should think very carefully before investing in a client or taking stock for fees. If the It is often difficult to determine whether a fee lawyer decides to be a stockholder in a client he is unreasonable or unconscionable. The eight must take the following steps: factors to determine whether a fee is reasonable set 76 forth under Rule 1.04(b) are highly subjective. C be sure the terms are fair and The lawyer's determination to accept stock for fees reasonable to the client; will have been based on the contingencies and uncertainties that existed at the time after having C fully disclose the terms to the considered factors such as the client's financial client; N-5

9 C have the client discuss the terms discouraged in most cases" because of its inherent with an independent third party; 86 risks, and many malpractice insurance carriers and 87 concur with this conclusion. Although the Rules do not expressly prohibit a lawyer from serving on C have the client give written a client's board of directors; the decision to do so consent to the transaction. can create both ethical and legal issues. The attorney should be circumspect before B. Discussion agreeing to invest in a client and ask the following questions: When asked to serve on a client's board of directors, the lawyer should realize the two roles in C Would a disinterested lawyer which the two positions place him. As a practicing conclude the client should not attorney, the lawyer advises the client regarding its agree to the representation under legal rights and obligations, explains the the circumstances? implications of such rights and obligations, and represents the client in matters and negotiations with C Is the lawyer's investment others consistent with the rules of ethics and the inconsistent with the client's best 88 requirement of honest dealing. As a member of a interest? corporation's board of directors, a director has a general responsibility for the management of the C Does the investment further the 89 corporation's business and affairs. The Rules lawyer's financial interest to the recommend that a lawyer who is serving on a client's detriment of the client? board of directors "determine whether the 90 responsibilities of the two roles may conflict." C Would a non-lawyer conclude the arrangement was Factors an attorney should consider before unreasonable? agreeing to serve on a client's board of directors include the how often conflicts might arise, the C Would a non-lawyer with the potential intensity of such conflicts, the effect the luxury of hindsight conclude director's absence or resignation would have on the that the investment terms were board, and the possibility that another attorney unreasonable? could represent the company if such a conflict 91 arose. Risks that may arise as a result of serving V. SERVING ON A CLIENT'S BOARD OF on a client's board which an attorney should DIRECTORS consider include the probability that the attorney- 92 client privileged would be waived, the potential A. Introduction disclosure of confidential information, the possibility the attorney and his firm could be The practice of lawyers serving on a client's 93 disqualified as a result of a conflict, the potential board of directors is a widespread practice that is for individual liability and for the firm's vicarious 85 subject to much debate within the profession. 94 liability, and whether the lawyer's malpractice Many attorneys believe the opportunity to serve as insurance specifically excludes coverage for the a director of a client is invaluable. The position 95 lawyer-director. The lawyer should not serve on a provides the attorney the opportunity to be better client's board of directors if he concludes the risk is informed about the client, to identify potential material "that the dual role [would] compromise his problems sooner, to strengthen the relationship 96 independence or professional judgment." between the attorney and the client, and to broaden his business experience. The American Bar Under Texas law, corporate directors possess Association believes "this practice should be a duty of obedience, a duty of loyalty, and a duty of N-6

10 97 care to the corporation. Claims that the attorney applied a higher standard of duty of care to breached his duty of loyalty to the corporation by 99 attorneys serving as a corporation's director. encouraging its board to take actions that would result in substantial fees to the attorney and his firm C. Conclusion 98 at the corporation's expense have been legion. An attorney serving as a director may be held to a Serving on a client's board of directors is not higher standard than other directors, thus exposing unethical. Before accepting the position, the himself to greater liability than other board attorney should carefully weigh the position's risks members. For example, courts in other states have and benefits. The safest decision to propose an alternate arrangement such as agreeing to attend board meetings as a legal advisor TEX. DISCIPLINARY R. PROF L CONDUCT reprinted in TEX. GOV T CODE ANN., subtit. G app. A (Vernon 1997)(TEX. STATE BAR R. art. X, 9). TEX. DISCIPLINARY R. PROF L CONDUCT preamble 7. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 1. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 11. ; TEX. DISCIPLINARY R. PROF L CONDUCT preamble 7. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 11. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 2. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 7. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 9. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 1. Another example of how the Rules defer to the lawyer s duty to the client relative to the lawyer s duty to the legal system or to society in general is the term confidential information. Confidential information, as defined by the Rules, includes more than privileged information protected by either the Texas Rules of Criminal Evidence or the Federal Rules of Evidence. In addition to privileged information, confidential information includes all information, of any kind, the lawyer receives about or from the client. TEX. DISCIPLINARY R. PROF L CONDUCT 1.05(a). TEX. DISCIPLINARY R. PROF L CONDUCT 1.05(c),(e),(f). TEX. DISCIPLINARY R. PROF L CONDUCT 1.05(c)(8). N-7

11 TEX. DISCIPLINARY R. PROF L CONDUCT 1.05(c)(5),(6). TEX. DISCIPLINARY R. PROF L CONDUCT 1.05(c)(5). TEX. DISCIPLINARY R. PROF L CONDUCT 1.05(c)(4). TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 1. See TEX. DISCIPLINARY R. PROF L CONDUCT preamble 2. As intermediary between clients, a lawyer seeks to reconcile their divergent interests as an advisor and, to a limited extent, as a spokesperson for each client. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07(a)(2). TEX. DISCIPLINARY R. PROF L CONDUCT 1.07(a)(1). TEX. DISCIPLINARY R. PROF L CONDUCT preamble 7. The risk of failure is high if the parties relationship is already antagonistic. If the lawyer reasonably expects the negotiations between the parties to be highly contentious or devolve into litigation, the attorney cannot agree to undertake the multiple representation. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 4. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 5. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 6. For example, an attorney s may not be able to be impartial since he may either be a friend of, or have previously represented one of, the founders. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 7. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt.2. A lawyer shall keep a client reasonably informed about the status of a matter and promptly reply to requests for information. TEX. DISCIPLINARY R. PROF L CONDUCT 103(a). TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 2. N-8

12 TEX. DISCIPLINARY R. PROF L CONDUCT 1.07(a)(1). TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 2. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 2. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 9. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 6. ( If litigation arises between the joint clients, it must be assumed that the attorney-client privilege will not protect any communications between the clients and the attorney. ) TEX. DISCIPLINARY R. PROF L CONDUCT cmt. 9. TEX. DISCIPLINARY R. PROF L CONDUCT 1.07 cmt. 6. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12(a). TEX. DISCIPLINARY R. PROF L CONDUCT 1.06(c)(2). TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12(a). TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 2. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 3. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 4. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12(e). TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 4. TEX. DISCIPLINARY R. PROF L CONDUCT 1.12 cmt. 5. TEX. DISCIPLINARY R. PROF L CONDUCT TEX. DISCIPLINARY R. PROF L CONDUCT 1.06 cmt. 8. N-9

13 TEX. DISCIPLINARY R. PROF L CONDUCT 1.06(d),(f). TEX. DISCIPLINARY R. PROF L CONDUCT 1.06(e). TEX. DISCIPLINARY R. PROF L CONDUCT 1.08(a). TEX. DISCIPLINARY R. PROF L CONDUCT 1.08 cmt. 2. TEX. DISCIPLINARY R. PROF L CONDUCT 1.06 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.06 cmt. 4., See also ABA CODE PROF'L. RESP., DR 5-101(A) ("Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property or personal interest.") TEX. DISCIPLINARY R. PROF L CONDUCT 1.06 cmt. 5. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 4. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 7. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 1. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 7. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 1. Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1964). N-10

14 Ginther v. Taub, 570 S.W.2d. 516, (Tex. Civ. App. -- Waco 1978, writ ref'd n.r.e.). See Lawyer's Profit on Inventions Held Unethical, THE NEW YORK LAW JOURNAL, March 16, 1998, In re McGlothern, 663 P.2d (Wash. 1983); In re Neville, 708 P.2d 1297 (Ariz. 1985); In re Bartlett, 584 P.2d 296 (Ore. 1978). Christophe, Kirsten L., Corporate Governance, THE NATIONAL LAW JOURNAL, Monday September 15, 1997, p. B05, Bencivenga, Dominic, Corporate Boards, THE NEW YORK LAW JOURNAL, July 17, 1997, at?; Hanna, Jett, Business Ties With Clients Still Perilous, txlie/riskmgmt/news/95isu2.htm. TEX. DISCIPLINARY R. PROF L CONDUCT preamble 2 TEX. BUS. CORP. ACT. ANN. ART A (Vernon 1998). TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 16. See Zenith Radio Corp. v. Radio Corp. of America, 121 F. Supp. 792 (D. Del 1954); U.S. V. nd SILVERMAN, 430 F.2d 106, modified on other grounds, 439 F.2d 1198 (2 Cir. 1970), cert.denied. 402 U.S. 953 (1971) See Harrison v. Keystone Coca Cola Bottling Co., 428 F. Supp. 149 (M.D. Pa. 1977) See Feder v. Martin Marietta Corp., 406 F.2d 260 (2d Cir. 1969), cert denied, 396 U.S (1970). Bencivenga, supra. TEX. DISCIPLINARY R. PROF L CONDUCT 1.04 cmt. 16. See also ABA CODE OF PROF. RESP. EC 5-1 ("The professional judgment of the lawyer should be exercised, within the bounds of the law, solely for the benefit of his clients and free of compromising influences and loyalties.) 97. th Gearhart Ind., Inc. v. Smith Internat l, Inc., 741 F.2d 707, 719 (5 Cir. 1984) Hanna, supra. See Escott v. BarChris Constr. Corp., 283 F. Supp. 643 (S.D. N.Y. 1968); IN RE GEORGE C. KERN, Exch. Act Rel. No. 29,356 (June 21, 1991); Feit v. Leasco Data Processing Equip. Corp., 332 F. Supp. 544 (E.D. N.Y. 1971). N-11

15 100. Hanna, Jett, "Director? To Be or Not To Be", riskmgmt/news/89summer.htm; Bencivenga, supra. N-12