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Brief Fact Summary.
After Yablonski (Plaintiff) and other members (Plaintiff) of the United Mine Workers of America (UMWA) (Defendant) brought an action against the UMWA (Defendant), they moved to disqualify the Defendant’s outside counsel, on the grounds of conflict of interest, from representing the Defendant after the firm withdrew as counsel for three of its highest officers
Synopsis of Rule of Law.
Where a possibility exists of conflict of interest arising in the future, counsel must be disqualified from representing a corporate defendant and individual defendant officers of the corporation, even where no visible conflict currently exists, so as to remove even the appearance of conflict.
Where, as here, union officials are charged with breach of fiduciary duty, the organization is entitled to an evaluation and representation of its institutional interests by independent counsel, unencumbered by potentially conflicting obligations to any defendant officer.
View Full Point of Law
Yablonski (Plaintiff) and other members (Plaintiff) of the United Mine Workers of America (UMWA) (Defendant) brought an action against the UMWA (Defendant) and three officers (Defendant) seeking an accounting of funds disbursed by the three named officers (Defendant) and restitution of funds they allegedly misappropriated and misspent. The three officers were Boyle (Defendant), president of UMWA (Defendant), Titler (Defendant), vice president, and Owens (Defendant), secretary-treasurer. The regular UMWA (Defendant) outside counsel was representing both the UMWA (Defendant) and the officers (Defendant). Yablonski (Plaintiff) and the others moved to disqualify the firm. After the firm withdrew from representation of the individual officers, it remained as counsel for the UMWA (Defendant), which was sustained as proper by the district court. Yablonski (Plaintiff) and the others appealed
Issue.
Where a possibility exists of conflict of interest arising in the future, must counsel be disqualified from representing a corporate defendant and individual defendant officers of the corporation, even where no visible conflict currently exists, so as to remove even the appearance of conflict?
Held.
: (Per curiam) Yes. Where a possibility exists of conflict of interest arising in the future, counsel must be disqualified from representing a corporate defendant and individual defendant officers of the corporation, even where no visible conflict currently exists, so as to remove even the appearance of conflict. Even if the UMWA (Defendant) and its officers (Defendant) correctly stated that no visible conflict of interest exists at the present time, they cannot be sure that none will arise in the future. As in a stockholder derivative suit, this case is a derivative action for the benefit of the UMWA (Defendant). When stockholders bring a derivative suit, corporate counsel never gets involved; the counsel charged with protecting the corporation’s interest must have no personal ties with the incumbent officeholders. This case must be viewed in its relationship to the numerous cases already pending or decided, where regular counsel has already undertaken the representation of Boyle (Defendant) individually. Therefore, the public interest would be served much better by having an unquestioningly independent new counsel in this case. Reversed
Discussion.
Note the analogy between this action and the derivative suit of a shareholder. In each case, the plaintiffs bring suit against the corporation/union to enforce certain fiduciary duties on behalf of the corporation/union. At the time of this suit, Yablonski (Plaintiff) was attempting to take control of the UMWA (Defendant) from Boyle (Defendant). Yablonski (Plaintiff) and his family were later murdered, and Boyle (Defendant), along with others, was convicted of conspiring in Yablonski’s (Plaintiff) murder.