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 corporation, MRIGM.
  • 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 interest.
    • Danforth and Ullrich argued that since they owned part of MRIGM, and MRIGM was a client, that was a conflict of interest.
      • 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.