Court Disqualifies Skadden Arps

December 31, 2002

Lawyers representing corporations should avoid the accidental creation of a separate attorney-client relationship with company executives. Otherwise, they could find themselves unable to represent the corporation if adversity develops between it and the executive with whom the company’s lawyers have dealt.

In Home Care Industries, Inc. v. Murray, 154 F. Supp. 2d 861, 864, 869 (D.N.J. 2001) (citation omitted), the court disqualified the Skadden Arps law firm from representing its client HCI in an action against the company’s former CEO Murray. The court found that Murray could have reasonably believed that Skadden Arps was representing him in addition to the company, noting that “at no time did the Skadden Firm indicate that the attorney/client relationship was lacking” and that “the record does not contain a copy of the retainer agreement between Plaintiffs and the Skadden Firm,” and explaining that “the Skadden Firm should have take precautions to clarify any ambiguity concerning its duty to represent HCI as separate and distinct from its officers.”

Although there are undoubtedly two sides to this story, the Home Care decision should remind all lawyers who represent companies to carefully articulate (preferably in writing) the nature of their relationship with the company and its executives.