Detter v. Schreiber

In 1991, Jere Detter (plaintiff) and Jeffrey Schreiber (defendant) started closely held Nebraska professional corporation Miracle Hills Animal Hospital, P.C. Detter and Schreiber each owned 50 percent of its shares and were its only directors. In 1992, Schreiber signed two promissory notes in exchange for a $19,000 loan from Detter. In 1996, Schreiber retained his personal attorney, Thomas Young, to negotiate a commercial lease and draft a proposed shareholder agreement on behalf of the corporation, which was billed and paid for Young’s services. The shareholder agreement restricted buying and selling shares and governed how stock would be purchased upon a shareholder’s death or disability. Young dealt with the corporation primarily through Schreiber but met with Detter once for an hour and a half to discuss the shareholder agreement. Detter later sued Young to recover on the promissory notes. Schreiber denied owing any balance and counterclaimed for management fees allegedly due him under an oral agreement with Detter. Detter moved to disqualify Young from representing Schreiber. Schreiber and Young both submitted affidavits denying Young had represented Detter in connection with the shareholder agreement or received any confidential information from him. Schreiber claimed another attorney was the corporation’s attorney and that Detter had refused to allow Young or his firm to represent the corporation. Schreiber admitted he had contacted Young to draft a proposed shareholder agreement for the corporation and that Young met with Detter but never discussed his personal finances with him and the agreement was never executed. Detter countered that he believed Young was representing him and had given Young a great deal of information about the circumstances leading to the lawsuit and Detter’s personal financial plans and needs. Detter claimed Young never said he did not represent the shareholders in connection with drafting the shareholder agreement. The trial court concluded Young had a conflict of interest and disqualified him from representing Schreiber. Schreiber appealed.