California Court of Appeal Clarifies Joint Representation in LLC Context

In Havasu Lakeshore Investments, LLC v. Fleming (, the Fourth Appellate District of the Court Appeal reversed a trial court order disqualifying a law firm from representing an LLC, the partnership which was the managing member of the LLC, and the individual who was the primary actor for the partnership in a lawsuit against minority investors in the LLC.  The trial court disqualified based upon the potential for a conflict of interest.  The Court of Appeal reversed, finding no actual conflict and no reasonable likelihood of such a conflict developing.  While the facts of the case and complicated and unique, Havasu generally supports the long-standing rule that one law firm can represent a corporate entity and its managers, even when the attack comes from other owners of the corporate entity.  There are, of course, exceptions in the case of derivative suits and suits for control that might apply in some circumstances.  But, Havasu should make it more difficult for plaintiffs to disqualify counsel (and thereby raise costs for defendant corporate entities and their managers) in the LLC context.