Narrative Opinion Summary
The Supreme Court of Oregon addressed disciplinary proceedings against attorney William H. Kinsey, who faced allegations of ethical violations related to conflicts of interest under DR 5-105(A) and (B), and the advocate-witness rule under DR 5-102(A). Kinsey, serving as corporate counsel, was involved in the formation of Air Berlin Charter Co. (ABC), allegedly excluding a minority shareholder, which raised conflicts with Berlinair, Inc., a corporation he represented. The trial board found Kinsey guilty of unethical dual representation, but the Disciplinary Review Board later cleared him of all charges. Nonetheless, concerns arose about Kinsey's failure to testify in a derivative suit, which could have impacted his client's defense. The court emphasized the necessity for full disclosure or withdrawal to avoid conflicts of interest and highlighted the accused's breach of fiduciary duty by not informing the minority shareholder about the new corporation's formation. Ultimately, Kinsey received a public reprimand, and the Oregon State Bar was awarded costs. The judgment also imposed a constructive trust on ABC for the benefit of Berlinair, Inc., and ordered further actions to ensure compliance with corporate obligations.
Legal Issues Addressed
Advocate-Witness Rule under DR 5-102(A)subscribe to see similar legal issues
Application: The accused was found guilty of not testifying in a derivative suit where his testimony was crucial, violating the advocate-witness rule.
Reasoning: The trial board found that the Accused did not violate DR 5-102(B) as alleged, but ultimately determined him guilty of charge three. The Accused’s failure to testify was significant, as it resulted in the absence of crucial testimony that could have protected his client.
Conflict of Interest under Disciplinary Rule 5-105(A)subscribe to see similar legal issues
Application: The accused was found guilty of violating DR 5-105(A) due to the absence of consent for representation from the minority shareholder and a lack of substantial reason to believe that accepting both clients' employment would not create a conflict.
Reasoning: The Oregon State Bar charged Mr. Kinsey with a violation of DR 5-105(A), which mandates that a lawyer must decline employment if it could impair their professional judgment.
Dual Representation in Derivative Actionssubscribe to see similar legal issues
Application: The accused's representation of both the corporation and the majority stockholders was deemed unethical due to the inherent conflict of interest, especially in light of potential conflicts in derivative suits.
Reasoning: The second charge asserts that since July 7, 1978, the accused engaged in unethical conduct by continuing to represent both Berlinair and Air Berlin Charter Co., creating a conflict of interest between the Lundgrens and Berlinair, which he was obligated to protect as corporate counsel.
Ethical Considerations for Corporate Attorneyssubscribe to see similar legal issues
Application: The court emphasized the need for corporate attorneys to prioritize the interests of the corporation over individual stockholders or associated persons, aligning with Oregon's ethical guidelines.
Reasoning: EC 5-18 states that a lawyer employed by a corporation owes allegiance to the entity itself, prioritizing its interests over those of individual stockholders or associated persons.
Fiduciary Duty of Corporate Counselsubscribe to see similar legal issues
Application: The accused failed to inform the minority shareholder about the formation of a new corporation, thereby breaching his fiduciary duty to the corporation he represented.
Reasoning: The accused failed to inform Klinicki about the organization of ABC or the subscription for its capital stock and believed the Lundgrens had also not informed Klinicki.