Multistate Professional Responsibility Examination (MPRE)Different Roles of a LawyerHard
A lawyer represents a startup company and its primary investor in negotiating the terms of a seed funding agreement. Both parties desire the startup's success and agree on the general framework, but they have different perspectives on control and equity distribution. The lawyer has explained the potential for conflicts of interest and obtained informed consent from both the company and the investor, each acknowledging the risks of joint representation. During negotiations, a significant disagreement arises regarding the valuation of intellectual property, which could severely impact the equity split. The lawyer attempts to mediate this specific point, suggesting compromises. However, the investor becomes adamant, threatening to withdraw funding if their terms are not met, while the startup refuses to concede. What is the lawyer's ethical obligation at this point?
- AAdvocate for the startup, as they were the initial client.
- BAdvocate for the investor, as they provide critical funding.
- CContinue to represent both parties, attempting to find a resolution.
- DWithdraw from representing both parties, as the conflict cannot be resolved.
Show answer & explanationAnswer & explanation
Correct answer: D. Withdraw from representing both parties, as the conflict cannot be resolved.
When acting as an intermediary, if a conflict arises that cannot be resolved amicably, or if the lawyer can no longer reasonably believe that the common interests of the clients can be served, the lawyer must withdraw from representing all clients in that matter. The conflict here has become too severe.
Why the other options are wrong
- A. Advocating for one party over the other would be a breach of loyalty to the other client in a joint representation.
- B. Advocating for one party over the other would be a breach of loyalty to the other client in a joint representation.
- C. Continuing representation when a conflict becomes too severe and cannot be resolved violates the duty to both clients.
Intermediary Withdrawal
A lawyer acting as an intermediary must withdraw from representing all clients if a conflict of interest arises that cannot be resolved, or if the lawyer can no longer reasonably believe that common interests can be served.
- Triggered by irreconcilable conflicts.
- Requires withdrawal from all jointly represented clients in the matter.
- Cannot then represent one client against the other in the same matter.
Memory trick: When common ground is lost and gone, the intermediary must move on.