Ontiveros v. Constable

The same attorney cannot represent both a corporation and those of its officers or shareholders who are sued by a minority shareholder in a derivative action.  The same attorney cannot represent both a corporation and those of its officers or shareholders who are sued by a minority shareholder in a derivative action.  Though the corporation is named nominally as a defendant, its true position in the derivative action is as the plaintiff, and its interests necessarily conflict with those of the defendants, who cannot consent on the corporation’s behalf to waive the conflict.  So counsel hired by both the corporation and the true defendants must be disqualified from representing the corporation.  On the other hand, it was error to disqualify counsel from continuing to represent the true defendants since during the period of joint representation, counsel would not have learned any confidential information from the corporation to which the insider defendants were not already privy.  In both respects, this decision follows Forrest v. Baeza (1997) 58 Cal.App.4th 65 and Blue Water Sunset, LLC v. Markowitz (2011) 192 Cal.App.4th 477.

California Court of Appeals, Fourth District, Division 1 (Haller, J.); February 18, 2016 (published March 14, 2016); 2016 WL 945702

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