Blogs > Shareholder Disputes in New Jersey

In Business Divorce Litigation, Who Gets Custody of the Company’s Lawyer?

In a divorce, an obvious issue to be resolved is who gets custody of the children. In a business divorce, an issue that often arises is who gets custody of the company’s lawyer.

Many New Jersey corporations and LLC’s have a long-standing lawyer, who has often represented one or more of the shareholders in their individual capacity, as well. What happens when one of the owners discovers that his business partner has been defrauding him, or stealing from the company, or committing some other form of shareholder oppression? Who will the lawyer represent? Who CAN the lawyer represent?

Of course, an attorney may decline to represent anyone, on the grounds that he is too close to everyone. Or, as is often the case, the lawyer who has represented the company for years does not have expertise in shareholder dispute litigation. In such a case, the attorney will probably refer you to someone who routinely handles such matters. But can the lawyer choose sides, and represent one of the shareholders while being adverse to the other[s]?

This may seem like an unimportant issue at first blush. After all, it is not as if the attorney for the company is the only lawyer in New Jersey. But it does become an issue when the attorney on the other side of the case is someone who not only represents the company you partially own, but who personally represented you in your real estate closing, speeding ticket, or some other situation in which you found yourself over the years.

The easy answer, as is so often the case, is that it depends on the particular circumstances of both the prior and current representations. In New Jersey, the company lawyer is not prohibited per se from representing one shareholder against the other, or even from representing the company in a suit against a shareholder. But, if the matter in which the lawyer previously represented the shareholder personally is either the same as, or substantially similar to, the new matter, then a conflict exists, and the representation is not allowed.

If you find yourself embroiled in shareholder dispute litigation and find yourself in a similar situation, the first question you ask your attorney may involve whether or not the lawyer on the other side has a conflict or not.