Thomas Van Kirk v. Ward Miller, et al., 869 N.E.2d 534 (Ind. App. 2007)

Brief Summary
The court concluded that business clients could and did effectively waive any conflicts of interest arising from a business transaction in which the same lawyer represented both the buyer and seller. The court therefore held that the lawyer did not breach any duties to a former client by representing the seller in a subsequent sale of the business to a third party.

Complete Summary
Mark Summers purchased the B&T Sports Bar on contract from Hilda Dill and the real estate on which the bar was located from Mary Fryback. Mr. Summers owed Ms. Fryback $25,000 on the property; Ms. Dill, $35,000 for the bar. When Mr. Summers began having financial problems, he contacted attorney Ward Miller of More, Miller, Yates & Tracey (collectively “Miller”) for advice. Miller suggested a possible sale of the business. Mr. Summers agreed and authorized Miller to contact potential buyers.

Miller contacted Thomas Van Kirk, a businessman who had been his client for 15 years. Mr. Van Kirk expressed interest in the deal. He and Mr. Summers negotiated independently of Miller and agreed that Mr. Van Kirk would purchase the bar and real estate for $55,000. Mr. Van Kirk requested that the deal be contingent on a release of the obligations to Ms. Fryback and Ms. Dill. The contract provided a discounted pay-off to Ms. Fryback and Ms. Dill, which Ms. Dill rejected.

Despite the problem with Ms. Dill, Mr. Van Kirk and Mr. Summers agreed that Miller would prepare the closing documents to complete the transaction. Miller drafted a Waiver of Conflict of Interest, which Mr. Summers and Mr. Van Kirk both signed. Id. at 536-37. The waiver provided that Mr. Summers and Mr. Van Kirk understood the conflict of interest, had negotiated the deal largely without Miller’s assistance, and understood they had the right to demand Miller turn the transaction file over to an independent attorney of their choice, but that they had chose to continue with Miller. Id. at 543.

Miller prepared the documents and the closing date was scheduled. Subsequently both Ms. Fryback and Ms. Dill wanted more money than the original proposal provided. Ms. Dill offered to buy the bar on terms more favorable to Mr. Summers. The sale to Mr. Van Kirk fell through and Miller returned escrow funds to Mr. Van Kirk, who advised Miller he was now being represented by independent counsel Don Swanson in the matter. Miller continued to represent Mr. Summers in his sale of the business to Ms. Dill. Mr. Van Kirk sued Mr. Summers for breach of contract and the dispute was resolved by settlement. Id. at 537.

Mr. Van Kirk also sued Miller for legal malpractice and breach of fiduciary duty. The lower court dismissed the case on summary judgment and this appeal followed. Id. at 538.

On appeal Mr. Van Kirk argued that the conflict of interest was nonconsentable because a law firm could not represent both the seller and buyer in the same transaction because the interests were too adverse. Mr. Van Kirk also argued that even if consent could be obtained, he was not provided with adequate informed consent before signing the waiver. The court found few Indiana cases on the issue of waiver of concurrent conflicts of interest and turned to Professional Conduct Rule 1.7 for guidance. This rule provides that attorneys may not represent a client who has a concurrent conflict of interest with another client unless, among other things, the attorney reasonably believes that competent representation can be provided to both, the representation is not prohibited by law, and informed consent is given and confirmed in writing. Id. at *541.

The court noted the difference between what it called consentable and nonconsentable conflicts. If the parties are on opposing sides in litigation or there is a specific law prohibiting dual representation, the waiver is non-consentable. In this instance, however, the conflict was one in which a waiver and consent were possible as it involved circumstances in which the clients were “generally aligned in interest even though there is some difference in interest among them.” Id. at *541, quoting Prof. Cond. R. 1.7 comt. 28. The problems with the sale arose from the conditions placed in the sales contract at the request of Mr. Van Kirk, in order to protect his interests as to the financial obligations Mr. Summers had to Ms. Dill and Ms. Fryback. Mr. Summers and Mr. Van Kirk independently negotiated the transaction and asked Miller to draft the documents memorializing the agreement.

The court found that Miller had obtained adequate informed consent. Although Mr. Van Kirk alleged that the waiver had not been sufficiently explained to him, he failed to provide a cogent explanation of what he did not understand when he signed it. The language of the waiver was detailed and provided that the clients had independently negotiated the terms of the sale and knew they had a right to independent counsel. Miller’s role was essentially limited to documenting and closing an agreed-upon transaction. Id. at *543-44.

Mr. Van Kirk also alleged that Miller was negligent and breached his duty to Mr. Van Kirk by favoring Mr. Summers during the dual representation and continuing to represent Mr. Summers after Mr. Van Kirk terminated the attorney-client relationship with Miller. Id. at *544. Mr. Van Kirk attempted to argue that Miller breached his duty by giving Ms. Dill and Ms. Fryback an unintended veto power over the transaction. This argument was easily rejected as Mr. Van Kirk had testified in a deposition that those provisions were put in at his own request to protect his financial interests. Similarly, the court found no evidence to support the contention that Miller had somehow favored Mr. Summers’ interests over Mr. Van Kirk. Miller had no way to compel Ms. Fryback or Ms. Dill to accept the terms of the proposed discounted pay-offs to them. Finally, the court concluded that Miller did not breach his duty to Mr. Van Kirk based on the continued representation of Mr. Summers in the subsequent sale of the bar. The court found guidance in the commentary to Rule 1.7 that provided “whether revoking consent to the client’s own representation precludes the lawyer from continuing to represent other clients depends on the circumstances, including the nature of the conflict, whether the client revoked consent because of a material change in circumstances, the reasonable expectations of the other client and whether material detriment to the other clients or the layer would result.” Id. at 545-46, quoting Prof. Cond. R. 1.7 cmt. 21. Under the circumstances of this case, the court stated “[W]e conclude that Miller’s decision to represent Mr. Summers after Mr. Van Kirk had terminated his attorney-client relationship was not improper. We emphasize the transactional nature of the dual representation in this case and again note that Mr. Van Kirk and Mr. Summers employed Miller to represent them in ‘the preparation of a proposed sale and closing documents’ in the B&T transaction. While it is unfortunate that Mr. Summers and Mr. Van Kirk did not successfully close on the B&T deal as originally intended, it does not automatically follow that Miller committed legal malpractice because the anticipated deal collapsed. There is no evidence that Miller favored Mr. Summers during the dual representation and there is no evidence that Mr. Van Kirk told Miller to stop representing Mr. Summers after Mr. Van Kirk terminated Miller’s representation. In sum, we cannot conclude that Miller breached his duty to Mr. Van Kirk, and therefore, we cannot conclude that Miller committed legal malpractice.” Id. at *546. The summary judgment was therefore affirmed.

Significance of Case
The court’s decision to allow the simultaneous representation of a buyer and seller in a business transaction settles a question under Indiana law that is unsettled under the law of many states. We caution, however, that different jurisdictions might well reach a different result even on these facts and that even small changes in facts might have changed this court’s view.

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