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ect). While this would be unlikely to occur when the underlying
project is fairing well, this scenario may be cause for concern if a
project is foundering. Furthermore, if other investors follow suit
and race for the exit, the project at issue would be jeopardized.
Another potential pitfall of a lack of informed consent:
litigation. Again, should a project “go south,” and investor
expectations not be met (i.e., the investor is not in a position
to receive I-829 approval due to an arguable failing on the part
of the project –a change in TEA designation, an inability to
demonstrate the requisite number of jobs created, etc.), the lack
of knowing consent to a conflict of interest could – in and of
itself – form a basis for disqualifying a firm from representing
either the regional center/developer or the investor(s). Further,
a lack of knowing consent could form the basis for a malpractice
and/or professional liability claim against the attorneys involved,
as well as fee disgorgement or disallowance, sanctions, and in
cases of willful misconduct, discipline by local bar associations
(including but not limited to suspension and disbarment).
A recent case that was brought in the U.S. District Court for
the Eastern District of Louisiana demonstrates just how thorny
the issue of dual representation can become in the litigation
context when investors turn against their regional center partners. In Terence K. Sump FW"WB