COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 71871 KAMAL ABADIR, ET AL. : ACCELERATED DOCKET : Plaintiffs-appellees: JOURNAL ENTRY : AND -vs- : OPINION : ADEL FANOUS, ET AL. : PER CURIAM : Defendants-appellants: DATE OF ANNOUNCEMENT OF DECISION: SEPTEMBER 18, 1997 CHARACTER OF PROCEEDING: Civil appeal from the Court of Common Pleas Case No. CP-CV-302144 JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiffs-Appellees: For Defendants-Appellants: SHARON L. TOEREK, ESQ. JOHN J. KULIG, ESQ. MACEDONIA & TOEREK, P.L.L. 6325 York Road, Suite 305 29525 Chagrin Blvd., Suite 208 Parma Hts., Ohio 44130 Cleveland, Ohio 44122 DAVID J. PASZ, ESQ. 15910 Pearl Road Strongsville, Ohio 44136 2 PER CURIAM: Appellants, Adel Fanous, Nabil Abdalla, and A&F Corporation, appeal the decision of the trial court to disqualify attorney John J. Kulig from representing appellants. For the following reasons, we affirm. John Kulig provided legal representation to A&F Corporation for seven years. A&F had three equal shareholders, appellee Kamal Abadir, appellant Fanous and appellant Abdalla. A&F desired to sell its assets, consisting of land and a liquor store. An offer to purchase the assets was made by Great Lakes Beverage, Inc., owned by Stacey Marotta, and represented by Joseph Marotta. The three shareholders of A&F held a meeting on November 1, 1995, and rejected the offer. Kulig was present at the meeting, and later, typed the minutes of the meeting. The minutes state that the three shareholders voted to sell the assets for the best price obtainable, and that the sale agreement must be signed and approved by all the shareholders. Thereafter, without notifying appellee-Abadir, appellants- Fanous and Abdalla, executed a purchase agreement with Great Lakes and Stacey Marotta. Kulig performed work on the contract for the sale of assets to Great Lakes (see transcript of shareholder's meeting of 8-26-96, attached to appellee's motion to disqualify). Appellee filed a lawsuit, claiming Fanous and Abdalla breached the contract made at the shareholder's meeting. Appellee also claimed that Fanous, Abdalla and A&F Corporation fraudulently represented that they had authority to sell the assets. Appellee 3 also made claims of replevin against Great Lakes and Stacey Marotta, and misrepresentation claims against Joseph Marotta.1 Fanous, Abdalla and A&F filed a counterclaim against appellee and his wife for tortious interference with contract. Great Lakes and Marottas were denied leave to file a third party complaint against Kulig. The trial court granted the motion to disqualify pursuant to D.R. 5-105(A) and (B). This order disqualifying Kulig was a final appealable order. See State ex rel. Keenan v. Calabrese (1994), 69 Ohio St.3d 176. As a preliminary matter, we will address appellee's assertion that this appeal should be dismissed for failure to comply with App. R. 16(A)(3). Appellant has sufficiently referred to the portions of the trial record from which the alleged error arose. This court has not been required to search the record for evidence to support the alleged error. Cf. Slyder v. Slyder (Dec. 29, 1993), Summit App. No. 16224, unreported. Appellant's first assignment of error states: THE COURT ERRED IN RULING THAT THE APPELLANTS' ATTORNEY, JOHN J. KULIG, WAS BARRED FROM REPRESENTING DEFENDANTS NABIL ABDALLA, ADEL FANOUS AND A&F CORPORATION BY VIRTUE OF DISCIPLINARY RULES 5-105(A) AND 5-105(B) BECAUSE THEIR INTERESTS WERE ADVERSE TO THE PLAINTIFF WHO IS ALSO A SHAREHOLDER OF DEFENDANT A&F CORPORATION. A trial court has wide discretion to regulate the practice before it and protect the integrity of proceedings, which includes 1A journal entry states that at a pre-trial, plaintiff- appellee said he would dismiss Great Lakes and the Marottas. Plaintiff has yet to effectuate this dismissal. 4 the duty to see to ethical conduct by attorneys. Royal Indemn. Co. v. J.C. Penney Co. (1986), 27 Ohio St.3d 31. In determining whether attorney conduct is ethical, the court can look to disciplinary rules for guidance. Id. Disciplinary Rules 5-105(A) and (B) state in pertinent part: A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment . . . A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of his client will be or is likely to be adversely affected by his representation of another client . . . Kulig continued to serve as corporate counsel for A&F corporation, and represented A&F corporation and two of its three shareholders in the subject lawsuit. Kulig's representation of both the corporation and shareholders Fanous and Abdalla, but not shareholder Abadir, compromised Kulig's independent professional judgment. Kulig asserts that the interests of the corporation and shareholders Fanous and Abdalla are identical. In fact, the evidence shows the corporation made a resolution at the shareholders meeting not to sell the assets without approval by all the shareholders. Fanous and Abdalla went ahead and sold the property without Abadir's approval. The interests of the corporation include the interests of all the shareholders, including appellee Abadir. Therefore, Kulig could not adequately represent the corporation, while representing two of the shareholders in this lawsuit. Conversely, Kulig could not 5 adequately represent the interests of Fanous and Abdalla, while representing the interests of the entire corporation. Kulig's representation of the corporation and two of the three shareholders violated D.R. 5-105(A) and (B). Even if Kulig ceased to represent Fanous and Abdalla, the trial judge could not have allowed Kulig to continue to represent the corporation only. Kulig had already shown his bias in favor of Fanous and Abdalla, whose position may not be in the best interests of the corporation. In fact, Kulig personally participated in the sale which appellee asserts was wrongful. Kulig was serving as corporate counsel, so he would still have a conflict if he did not represent the corporation in the lawsuit, but represented only Fanous and Abdalla. By representing Fanous and Abdalla in the lawsuit, Kulig undertook representation against a current client, the corporation. Where an attorney undertakes representation against a current client, adverse representation is prima facie improper. Henry Filters, Inc. v. Peabody Barnes, Inc. (1992), 82 Ohio App.3d 255, Sarbey v. Natl. City Bank (1990), 66 Ohio App.3d 18. The attorney must show there are no actual or apparent conflicts. In this case, it is clear a conflict does exist in representing both the corporation and appellants Fanous and Abdalla. Additionally, in the case of a closely held corporation with two or three shareholders, a shareholder may have a reasonable belief that the attorney is representing him personally. See 6 Rosman v. Shapiro (S.D.N.Y 1987), 653 F.Supp. 1441, 1445-1446. If the corporate attorney for a corporation with two fifty percent shareholders represents one shareholder and the corporation in a suit against the other shareholder, this may result in the appearance of impropriety. Id. The shareholder expects the attorney to remain loyal to him. Id. In this case, Abadir reasonably believed that Kulig was his attorney and would remain loyal to him. Allowing Kulig to represent Fanous and Abdalla against Abadir results in the appearance of impropriety. See EC 9- 6. Although the trial court did not rely on this grounds, disqualification could also be based on the fact that Kulig would probably be called as a witness. DR 5-101(B) requires that an attorney not accept employment if it is clear the attorney will be called as a witness. DR 5-102(B) states that if an attorney learns he will be called as a witness after accepting employment, the attorney must discontinue the employment if his testimony is or may be prejudicial to the client. In this case, Kulig knew he was personally involved in both the corporate resolution to require unanimous approval for the sale, and the subsequent sale. Kulig's testimony might be prejudicial to his client. Appellant asserts that appellee did not show a significant risk of trial taint, so disqualification was improper. See Spivey v. Bender (1991), 77 Ohio App.3d 17, 22, Jackson v. Bellamy (1995), 105 Ohio App.3d 341. Trial taint is not the only ground for disqualification. An attorney may be disqualified if he can not 7 take part in the proceedings with a reasonable degree of propriety. Royal Indemnity, supra. Kulig can not act as counsel for the corporation, Fanous and Abdalla and maintain a reasonable degree of propriety. We emphasize that corporate counsel is not required to withdraw as legal counsel every time a shareholder files suit against a corporation or majority shareholders. In this case, counsel represented two shareholders whose interests were not the same as the corporation's interest. Under a different set of facts, there may not be a conflict between the interests of the corporation as a whole and the individual shareholders. Additionally,in the case of a corporation with many shareholders, a shareholder can not reasonably believe that corporate counsel is his individual counsel. When there are a multitude of shareholders, anonymous and unknown to corporate counsel, counsel is most likely unaware of the intentions and desires of the shareholders. In this case, Kulig was aware of the intentions of the three shareholders to require unanimous approval in selling the property, yet Kulig chose to side with the two shareholders who went ahead and sold the property. Thus, Kulig could not represent the interests of the corporation as a whole. Our holding is limited to the facts of this case. The trial court did not abuse its discretion in disqualifying attorney Kulig from representing appellants. Accordingly, this assignment of error is overruled. II. Appellant's second assignment of error states: 8 THE COURT ERRED IN NOT GRANTING A HEARING ON PLAINTIFF'S MOTION TO DETERMINE IF REPRESENTATION OF THE DEFENDANTS- APPELLANTS PRESENTED A CONFLICT OF INTEREST OR A BREACH OF CONFIDENCE OR TRUST. An oral hearing is not required on a motion to disqualify. Carnegie Medical Partners Assn. v. Weiss & Krumer, Inc. (June 23, 1994), Cuyahoga App. No. 65422, unreported. Even if a hearing was required, appellants must show the denial of a hearing was an abuse of discretion and prejudiced appellants. Id. Appellants have not shown how an oral hearing would have altered the court's decision. It was clear from the relationship of the parties, and their positions in this lawsuit that there was a conflict of interest. The trial court did not abuse its discretion by granting the motion to disqualify without a hearing. Accordingly, this assignment of error is overruled. III. Appellant's third assignment of error states: THE COURT ERRED IN GRANTING PLAINTIFF'S MOTION ALMOST ELEVEN MONTHS AFTER THE CASE WAS FILED TO THE DETRIMENT OF THE DEFENDANTS-APPELLANTS. Appellants did not raise this argument at the trial court level. In any case, the trial court did not err in granting the motion to disqualify, although it was filed ten months after appellee filed suit. The motion was granted five months before the scheduled trial, providing sufficient time to obtain new counsel. The court must balance the prejudice of delayed disqualification with the ethical implications of the attorney's conflict of 9 interest. Sarbey, supra. In this case, the ethical implications outweighed the prejudice to appellants. Waiver is not implied from a delay in seeking disqualification, unless (1) there is serious prejudice, (2) there is substantial hardship, or (3) it is clear that movant knowingly delayed filing of the motion in order to cause prejudice or hardship. Sarbey, supra. Appellants have not shown any of the above three factors. The trial court did not abuse its discretion in granting disqualification eleven months after the suit was filed. Accordingly, this assignment of error is overruled. The decision of the trial court is affirmed. 10 It is ordered that appellees recover of appellants its costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. ANN DYKE, PRESIDING JUDGE JOHN T. PATTON, JUDGE TERRENCE O'DONNELL, JUDGE DISSENTS (SEE ATTACHED DISSENTING OPINION) N.B.This entry is an announcement of the court's decision. See App. R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App. R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the clerk per App.R. 22(E). See, also S.Ct.Prac.R. II, Section 2(A)(1). COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 71871 KAMAL ABADIR, ET AL. : : DISSENTING Plaintiff-Appellees : : OPINION vs. : : ADEL FANOUS, ET AL. : : Defendant-Appellants : : DATE: SEPTEMBER 18, 1997 O'DONNELL, J., DISSENTING: Appellants have raised three assignments of error challenging the trial court's decision to disqualify John Kulig, Esq. from representing the A&F Corporation and two of its shareholders, Nabil Abdalla and Adel Fanous, in a case brought by a minority shareholder, Kamal Abadir, who alleged that Fanous and Abdalla, as shareholders, breached an agreement regarding sale of the corporation and intentionally misrepresented their authority to sell; Abadir also alleged that the corporation fraudulently misrepresented its authority to convey its assets. The determination of whether or not the trial court abused its discretion when it disqualified Kulig in this case requires 12 a careful examination into the nature of the professional relationship existing between counsel and his client. All parties agree that Kulig at all times represented the A&F Corporation. I respectfully disagree with the majority's conclusion, "In this case, counsel represented two shareholders whose interests were not the same as the corporation's interest." Corporations act through officers who are appointed by a board of directors, elected in turn by vote of the shareholders. Here, Abdalla and Fanous held controlling interest in the corporation, operated it, and their individual and collective interests formed the corporate interest. I cannot conclude that by representing them individually, Kulig acted against the corporate interest. Further, I am not convinced Kulig cannot continue to represent the corporation in the situation where Abadir has filed thisbreach of contract and/or fraudulent misrepresentation suit against the corporation which the evidence suggests Kulig has represented evenprior to the time Abadir became a shareholder in it. The decision of the majority, it seems to me, could require all longstanding corporate counsel to withdraw from representation whenever a dissident minority shareholder files suit against the majority shareholders and the corporation. This effectively denies the corporation and the majority shareholders of their most knowledgeable counsel at a time when the expertise of that individual is most needed. 13 .