February 24, 2020

February 24, 2020

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Attorney Representing LLC Does Not Necessarily Owe A Professional Duty To Co-Equal Owner

An attorney who represents a corporation does not inevitably become the attorney for the corporation's stockholders.  However, the Court of Appeal in Responsible Citizens v. Superior Court, 16 Cal. App. 4th 1717 (1993) held that an attorney who represents a partnership may by his or her conduct enter into an "implied" attorney-client relationship.  The Court's opinion in that case includes a list of "factors which might support, or undercut, implication of an attorney-client relationship".  The first on the Court's list of factors was the type an size of the partnership.

In an opinion certified for publication yesterday, the Court of Appeal made it clear that representation of a limited liability company with two equal owners does not necessarily give rise to an individual attorney-client relationship with each of the two members.  Sprengel v. Zbylut, 2019 Cal. App. LEXIS 978.  Instead, the Court made it clear that courts must look at the "totality of the circumstances" and assess whether the parties conducted themselves in a way that "would reasonably cause a shareholder to believe the attorney would protect the shareholder's individual interests."

An LLC Is Not A Corporation (Again)

The Court of Appeal's opinion is muddied by references to the LLC's owners as "shareholders" rather than "members" (e.g., "Sprengel has not identified any harm that defendants' representation of Purposeful Press is alleged to have cause to her in her representative capacity as a shareholder." (emphasis added)).

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...