Jesse by Reinecke v. Danforth
169 Wis.2d 229, 485 N.W.2d 63 (1992)
23 doctors wanted to pool
their resources to buy an MRI machine. They hired a lawyer named Flgyt
who worked for a law firm named DeWitt. He helped them create a
Later, a guy named Jesse sued
two of the doctors (Danforth and Ullrich) for an issue unrelated to MRIGM.
Jesse hired a lawyer named Farnsworth, who also worked for DeWitt.
Farnsworth did a conflict of
interest check, but didn't see Danforth and Ullrich as clients of the
firm (only MRIGM was listed as a client).
Danforth and Ullrich tried to
disqualify Farnesworth, claiming that the firm had a conflict of
Danforth and Ullrich argued
that since they owned part of MRIGM, and MRIGM was a client, that was a conflict
They also argued that they
were personal clients of DeWitt during the phase prior to incorporation.
The Wisconsin Court found that
there was no conflict of interest.
The Wisconsin Court found
that the Entity Rule holds that
where a lawyer represents a corporation, the client is the corporation,
not the corporation's constituents.
See Rule 1.13.
The Court found that where a
person retains a lawyer for the purpose of organizing a business entity,
and the lawyers involvement is directly related to that incorporation,
and the entity is eventually incorporated, the Entity Rule applies retroactively such that the lawyer's
pre-incorporation involvement with the person is deemed to be
representation of the entity, not the person.
Basically, if you help
someone set up a corporation, you are and always have been the
corporations' lawyer, even if you were working on the project before the
corporation legally came into existence.