Full opinion text
MEMORANDUM GASCH, District Judge. On November 19, 20, and 21, 1980, trial was held on allegations that defendant Eugene J. Metzger breached fiduciary and ethical obligations owed to plaintiff Financial General Bankshares, Inc. (FG). Plaintiff charges that while serving as counsel to FG, Metzger engaged in several undisclosed attempts to seize or sell control of his client corporation. Plaintiff seeks $80,000 in compensatory damages, the amount alleged to have been paid for Metzger’s legal services. FG also seeks punitive damages. The pertinent allegations are set forth in the fourth and fifth causes of action in plaintiff’s May 19, 1980 supplemental amended complaint. I. HISTORY OF LITIGATION. Plaintiff began this action on February 17,1978 with a complaint and a motion for a preliminary injunction. The complaint set forth six causes of action based on the Securities Exchange Act of 1934 (1934 Act) (Counts I, II, and III), the Virginia Takeover Bid Disclosure Act (Count VI), and common law (Counts IV and V). In addition to Metzger, the complaint named as defendants Bert Lance; the Bank of Credit and Commerce International (BCCI); Agha Hasan Abedi (Abedi), the president of BCCI; and Stephens, Inc. and its president, Jackson Stephens (collectively, the Stephens defendants). Five Middle Eastern investors alleged to be clients of BCCI were named as defendants by amended complaint filed March 21, 1978. These are Sheikh Kamal Adham (Adham); Faisal Saud AlFulaij (Al-Fulaij); His Royal Highness Sheikh Sultan Bin Zaid Al-Nahyan (Sultan); Abdullah Darwaish (Darwaish), in his individual and representative capacities; and His Royal Highness Sheikh Mohammed Bin Zaid Al-Nahyan (Mohammed), a minor. Plaintiff charged, in essence, that defendants had formed a secret group in 1977 to acquire control of FG and by January of 1978 had purchased approximately twenty percent of FG’s outstanding common shares, without filing the disclosure statements required by federal and state law. On April 27, 1978, the Court granted plaintiff’s motion for a preliminary injunction, finding that FG had shown a likelihood of prevailing on its claim that the defendants had violated section 13(d) of the 1934 Act, 15 U.S.C. § 78m(d) (Count I). The five Middle Eastern investors and Stephens, Lance, Metzger, Abedi, and BCCI were enjoined from acquiring any further interest in or proxies for FG common stock until they offered rescission to the shareholders from whom they had purchased FG stock on the open market during December of 1977 and January of 1978. The Court dismissed plaintiff’s causes of action arising under sections 14(d) and (e) and 10(b) of the 1934 Act (Counts II and III) and the Virginia Take-Over-Bid Disclosure Act (Count VI). See Financial General Bankshares, Inc. v. Lance, [1978 Transfer Binder] Fed. Sec.L.Rep. (CCH) ¶ 96,403 (D.D.C. Apr. 27, 1978). Plaintiff filed a supplemental amended complaint on May 19,1980, naming six additional defendants. Two months later, all defendants remaining in the case, except Metzger, settled with FG and were dismissed by stipulation and order. On August 2, 1980, the Court entered summary judgment for Metzger on causes of action based on section 13(d) of the 1934 Act. The Court retained pendent jurisdiction over allegations of breach of fiduciary and ethical duties, the fourth and fifth causes of action in the supplemental amended complaint. Thus, by the time of trial Metzger was the sole remaining defendant. At trial plaintiff sought to prove that from June of 1977 through January of 1978, while acting as counsel for FG, Metzger secretly (1) plotted to seize control of FG with other large shareholders; (2) attempted to generate interest in a plan to sell FG to a foreign bank at an enormous personal profit; (3) acted as agent for a group of Middle Eastern investors seeking to acquire a controlling share of FG stock; and (4) used a list of FG shareholders to identify and contact large shareholders potentially willing to sell to the Middle Eastern investors. At the conclusion of trial the Court directed counsel for both parties to submit proposed findings of fact and conclusions of law. These have been received as directed. II. EVIDENTIARY RECORD. The evidentiary record derives from four general sources: pretrial stipulations entered November 17, 1980 (Pretrial Stips. ¶¶ 1-71); testimony heard ,and depositions read at trial; and the parties’ exhibits. Based on this evidence and in accordance with rule 52(a) of the Federal Rules of Civil Procedure, the Court makes the following findings of fact and conclusions of law: III. FINDINGS OF FACT. A. Parties. 1. Plaintiff is Financial General Banks-hares, Inc., a federally chartered bank holding company incorporated in Virginia with its principal place of business in Washington, D. C. Pretrial Stip. ¶ 1. FG has twelve subsidiary banks engaged in commercial banking in Maryland, Virginia, New York, Tennessee, and the District of Columbia. Plaintiff’s Exh. 56, at 39-47. 2. Defendant is Eugene J. Metzger, an attorney in the law firm of Metzger, Shadyac & Schwarz (and its predecessor firms) in Washington, D. C. Metzger is a member of the Bar of the District of Columbia. Pretrial Stip. ¶2. B. Representation of Middendorf Investors. 3. Metzger’s first association with FG was early in 1976 as attorney for a group of investors headed by J. William Middendorf, II. 4. In March of 1977, Middendorf hired Metzger to represent 28 investors in connection with the proposed acquisition of a block of FG common stock. Pretrial Stip. ¶ 27. Middendorf had never met Metzger, but two members of his investment group had recommended Metzger as a good bank attorney on matters involving the Securities and Exchange Commission (SEC) and the Federal Reserve Board. Tr. Vol. I, at 10-II, 151. 5. The Middendorf investment group sought to purchase the FG common stock owned of record by International Bank (IB), FG’s largest and controlling shareholder since 1958. Pretrial Stip. ¶¶3, 27; Defendant’s Exh. RR, at 14-16. In March of 1977, IB owned of record 1,204,231 shares, a 22.2% interest. Plaintiff’s Exh. 1, at l. IB sought to sell the stock to moot proceedings pending against it by the Federal Reserve Board. Defendant’s Exh. RR, at 2. 6. As attorney for the Middendorf group, Metzger prepared all legal documents pertaining to the proposed acquisition. Tr. Vol. I, at 11-13. He suggested that Middendorf obtain proxies from major shareholders and the new investors, drafted a proposed proxy form, contacted new and existing shareholders, and had the proxies signed. Tr. Vol. I, at 13, 153-56; Tr. Vol. III, at 114. Metzger prepared and filed with the SEC a Schedule 13D relating to Middendorf’s acquisition of control of FG. Tr. Vol. I, at 14-15; Defendant’s Exh. XX. He also appeared with certain of the new investors called to testify at Federal Reserve Board hearings on the IB stock purchase. Tr. Vol. I, at 104-06. 7. The stock acquisition took place on April 29, 1977. The Middendorf investors purchased all of IB’s 1,204,231 shares of FG common stock owned of record at a purchase price of $12.50 per share. Plaintiff’s Exh. 1, at 1. 8. No member of the Middendorf group bought as much as a 5% interest. The major purchasers were: Name Shares Percentage of Vote Stephens, Inc. 268,400 (held beneficially for Jackson Stephens) 4.9% J.G.P., Ltd. 240,000 (held beneficially for Jorge G. Pereira) 4.4% Eugene J. Metzger 87,991 1.6% Thomas G. Wyman 80,000 1.5% Armand Hammer 80,000 1.5% Cape & Co. 80,000 (held beneficially for NCNB Corporation) 1.5% The remaining Middendorf investors held less than 1% interests. Plaintiff’s Exh. 1, at 2. 9. Metzger participated in the April 29 acquisition not only as an attorney for the investors but also as the third largest purchaser. He bought 87,991 shares of FG common stock in his own name, 1.6% of the vote. At $12.50 per share, his purchase price was $1,099,887.50. 10. After the acquisition, Middendorf became the controlling shareholder, with the right to vote 41.6% of the common stock. Although he owned only .8% in his own name, he obtained proxies of varying durations from all but one of the purchasers of IB stock (including Metzger) (19.9%) and all of the IB affiliates (12.4%). He also obtained proxies from Eugene Casey, the largest shareholder outside the Middendorf investors (8.6%). Pretrial Stip. ¶4; Plaintiff’s Exh. 1, at 2-3. 11. The Middendorf investors “took over” Financial General on June 20, 1977. On that date, Middendorf was elected President, Chief Executive Officer, and Chairman of the Board. Tr. Vol. I, at 5, 20. The 21 board members included all of the major new investors or their representatives. 12. Metzger continued to perform legal services for the investors after the April 29th closing. His bill to FG for services rendered in June reflected 159.6 hours on services performed for the investors: filing of Middendorf’s Schedule 13D, appearance at Federal Reserve Board hearings, and preparation of proxy material. Defendant’s Exh. K. 13. The record does not reflect the total number of hours Metzger spent on behalf of the investors. His final bill charged the group a total of $64,895.58, allocated to each of the investors pro rata. Tr. Vol. I, at 12; Defendant’s Exh. A. 14. Metzger’s representation of the Middendorf investment group did not terminate until sometime in June of 1977. Although Metzger testified that his representation of them ended on the date of closing, his final bill was not rendered until June 14, 1977. Tr. Vol. Ill, at 112; Defendant’s Exh. A. Middendorf testified that Metzger performed legal services for the investors continuously from the date of closing until the date the investors “took over,” June 20, 1977, after which Metzger represented FG. Tr. Vol. I, at 12, 21. Middendorf’s testimony is supported by the record and is credible. C. Representation of Financial General. 15. Metzger undertook representation of FG sometime in June of 1977. Pretrial Stip. ¶ 58. The precise date cannot be ascertained. However, by June 20, 1977, Metzger had already begun performing legal services for the corporation. 16. The first task performed by Metzger for FG was the preparation of a 53-page legal memorandum entitled “Where Do We Go From Here?” Plaintiff’s Exh. 7; Tr. Vol. I, at 163. The memorandum was prepared by Metzger between April 29 and June 20, 1977, and was distributed at the June 20, 1977 directors’ meeting. Tr. Vol. Ill, at 126; Tr. Vol. I, at 22. It analyzed the structure of FG and its subsidiary banks, and recommended the ways in which Metzger thought the structure could be improved. Tr. Vol. I, at 163; Tr. Vol. Ill, at 123-36. Metzger billed FG for its preparation. Tr. Vol. I, at 164 17. Starting in June, Metzger undertook three major legal projects for FG: preparation of legal documents for the merger of three of FG’s banks in Northern Virginia (Tr. Vol. I, at 22-23); research on the rights and obligations of FG under an existing computer contract FG sought to terminate (Tr. Vol. I, at 39,165-66, 168; Tr. Vol. Ill, at 119); and investigation of the feasibility of a credit life insurance subsidiary. Metzger worked on the Northern Virginia merger through December of 1977, billing FG a total of 513.55 hours on this project. He worked on the credit life insurance subsidiary question through September of 1977, billing FG a total of 232.25 hours. And he worked on the computer contract question through July of 1977, billing FG a total of 117.9 hours. Plaintiff’s Exh. 8-15; Defendant’s Exh. K. 18. Metzger also worked on two inquiries the SEC made to his firm. In August, the SEC requested information about a rumored division between pro- and anti-Middendorf factions on the FG Board. Plaintiff’s Exh. 3. Until Middendorf pulled him off this project, Metzger assumed the responsibility of responding. Defendant’s Exh. AAA; Tr. Vol. I, at 48-50; Defendant’s Exh. BBB. In November, the SEC requested information about the possible updating of Middendorf’s Schedule 13D. Plaintiff’s Exh. 51. Although at trial Metzger denied having any continuing responsibility for the 13D at that time (Tr. Vol. Ill, at 117), he responded to this inquiry as well. Plaintiff’s Exh. 51, at 3; Tr. Vol. II, at 77-80. Metzger billed FG for 55.55 hours spent on these two projects in August, September, October, and November of 1977. Plaintiff’s Exh. 10-13. 19. Metzger’s time on the Northern Virginia merger, the computer contract, the credit life insurance subsidiary, and the SEC inquiries totalled 919.25 hours in the period from June through December of 1977. Metzger did not bill FG for any work on these projects after December. Plaintiff’s Exh. 15. 20. In January of 1978, Metzger worked for FG on two matters: collecting and forwarding proxies granted to Middendorf and responding to an auditor’s request for information. Plaintiff’s Exh. 15; Tr. Vol. Ill, at 112. This amounted to 2.75 hours, for which Metzger billed FG $214.15. Plaintiff’s Exh. 15. 21. For legal services rendered to FG from June, 1977 through January, 1978, Metzger billed the corporation a total of $115,546.07. The breakdown by months is as follows: Month Services Total Rendered_ Hours Amount Billed Date of Bill 1977 June 507.35 $45,793.56 July 25,1977 July 330.85 28,460.21 Aug. 5, 1977 August 226.30 20,698.49 Sept. 16, 1977 September 64.6 5,331.86 Oct. 14,1977 October 50.3 4,176.55 Nov. 10,1977 November 54.3 4,638.75 Dec. 16,1977 December 82.85 6,232.50 Jan. 25,1978 1978 January 2.75 214.15 Feb. 23, 1978 1,319.30 $115,546.07 Plaintiff’s Exh. 8-! 15. 22. Until September, Metzger had virtually a free hand in determining the amount of work to be done on particular projects. Middendorf had no formal method of assigning or defining the scope of work, and Metzger submitted no prior estimates of expenditures. This “expansionist” method of operating resulted in bills from Metzger for hours beyond those expected by Middendorf. Tr. Vol. I, at 127-29; Defendant’s Exh. K. 23. In September, Middendorf and Jack Beddow, the corporate officer responsible for reviewing and approving bills submitted by FG’s attorneys, became concerned over the size of Metzger’s charges. Rather than approving them for payment, Beddow recommended that the bills be sent to the Audit Committee for approval. Tr. Vol. II, at 74-75. No payment was made by FG on them or on subsequent bills while the Audit Committee conducted its review. Tr. Vol. II, at 84. 24. The concern over Metzger’s bills resulted in a formal statement by FG of its attorney-client relation with Metzger. On September 8, 1977, Middendorf sent Metzger a memorandum directing him not to undertake any future assignments unless they were given in writing by Middendorf. Middendorf disclaimed any responsibility on the part of FG for payment for services not performed in accordance with such instructions. He also reserved authority to cancel by written notice further work by Metzger on existing projects. Defendant’s Exh. B. 25. In subsequent memos, the last dated October 3,1977, Metzger’s authority to perform legal services for FG was restricted to the Northern Virginia merger, a tender offer for additional stock in the Northern Virginia banks, and any other work for which Metzger received specific written instructions. Defendant’s Exh. C-H. 26. Metzger asserts that as a result of these directives he performed no significant legal services for FG after September of 1977. His assertion is not supported by the record. After September, he billed FG over $15,000 for 190 hours of work. Moreover, the Northern Virginia merger was not, as characterized by Metzger, a “modest assignment.” Tr. Vol. Ill, at 102-03 It was the primary task on which Metzger worked for FG, accounting for over a third of the total hours billed to FG during his representation. After September, Metzger billed 196.2 of those hours, approximately forty percent of the total time the project absorbed. Plaintiff’s Exh. 11 — 14. 27. In December of 1977, the Audit Committee reached an agreement with Metzger to pay $20,000 less than he had billed FG for the first four months of his representation. Pretrial Stip. ¶ 59; Defendant’s Exh. I-M. Accordingly, on December 20, 1977, FG paid Metzger $80,-284.12 for services rendered from June through September of 1977. Plaintiff’s Exh. 16; Pretrial Stip. ¶ 59. 28. FG did not pay Metzger for services performed in the months of October, 1977 through January, 1978. Those bills, totalling $15,261.95, remain unpaid. Tr. Vol. II, at 84; Plaintiff’s Exh. 17. 29. Metzger’s representation of FG was effectively terminated on February 1, 1978. Before that date, FG considered him to be one of its lawyers. Tr. Vol. II, at 90. Metzger had performed legal services for FG in January of 1978 and billed his hours to the corporation. Plaintiff’s Exh. 15. On February 1, 1978, Beddow and other officials of FG visited Metzger in his law offices to inquire into activities suspected to be in conflict with FG’s interests. Tr. Vol. II, at 84-87. The meeting ended when Metzger threw Beddow and the others out of his office; Beddow’s last words were, “You are going to have a hell of a time getting any money out of our company after this.” Tr. Vol. II, at 90; Plaintiff’s Exh. 17. After February 1, 1978, Metzger performed no legal services for FG. The Court accordingly discredits Metzger’s testimony that his representation of FG halted at the end of December, 1977 (Tr. Vol. Ill, at 112, 148), and finds that it continued through the end of January, 1978. D. Participation in Watergate Group. 30. Metzger early became dissatisfied with Middendorf’s business management. The source of his dissatisfaction was Middendorf’s failure to act on certain business proposals made by Metzger in the “Where Do We Go From Here?” memorandum presented at the June 20, 1977 Board meeting. Tr. Vol. I, at 178-81. 31. Metzger also became dissatisfied with Middendorf’s decisions concerning the scope of Metzger’s legal employment. Metzger desired to be FG’s general counsel, a suggestion rebuffed by Middendorf. The friction increased with the September reduction in Metzger’s work authorizations and suspension of payment of his bills. Tr. Vol. Ill, at 102, 116, 157; Tr. Vol. I, at 70, 126, 129-30, 178-79. 32. Metzger’s dissatisfaction found company in a group of dissident FG Board members. These members were unhappy with Middendorf’s failure to name a Chief Operating Officer with prior extensive banking experience. They also desired a greater break with IB. Tr. Vol. I, at 159-60, 171, 181-82; Tr. Vol. Ill, at 53-54. 33. The group included most of the major new shareholders of FG: Stephens (and his representative W. W. Johnson), Pereira, Metzger, Wyman, McColl, and Armand Hammer. Tr. Vol. I, at 156-58; Plaintiff’s Exh. 23, at 38-39; Defendant’s Exh. CCC. Collectively this group owned 15.4% of FG’s voting stock. Plaintiff’s Exh. 1, at 2. 34. The group held its first meeting on June 30,1977 at the Watergate Hotel. Pretrial Stip. ¶ 28; Tr. Vol. I, at 156; Defendant’s Exh. CCC. Middendorf did not attend the meeting. Tr. Vol. I, at 161. He had not been invited by Metzger or any other person and had not been informed that the meeting was going to take place. Tr. Vol. I, at 42, 161; Plaintiff’s Exh. 23, at 52. Metzger did. Tr. Vol. Ill, at 166. The group reached three primary agreements. It selected Thomas Wyman to represent the group in discussions with Middendorf. Defendant’s Exh. CCC. It agreed that a qualified banker should immediately be brought in as Chief Operating Officer. Tr. Vol. I, at 172; Tr. Vol. Ill, at 54; Defendant’s Exh. CCC. And the group agreed that FG’s general counsel should be dismissed in order to sever all ties with IB. Plaintiff’s Exh. 23, at 26; Plaintiff’s Exh. 54, at ll. 35. After the first meeting, Wyman and several others visited Middendorf to discuss their concerns. Plaintiff’s Exh. 23, at 83-90; Tr. Vol. I, at 44. Metzger did not attend this discussion. Tr. Vol. I, at 45. 36. The second meeting of the Watergate group took place in July, a few days before an upcoming July 17 Board meeting. Pretrial Stip. ¶30. Middendorf was not invited and was not in attendance. Plaintiff’s Exh. 23, at 61. Metzger was. The dissident Board members expressed the same concerns as previously, but resolved to recommend two specific changes in FG management. The group recommended that Bud Manderfield, president of one of FG’s subsidiary banks, be named as Chief Operating Officer. It also recommended that Wyman replace the existing Vice-Chairman of the Board, and that the bylaws be amended to make the position that of an officer with a salary. Pretrial Stip. ¶ 30; Tr. Vol. I, at 171-72; 174-75; Plaintiff’s Exh. 23, at 60-61, 96-97, 111. 37. A few days after the second meeting, Wyman and other members of the group again visited Middendorf. Plaintiff’s Exh. 23, at 112-15; Pretrial Stip. ¶31. Middendorf concurred with their suggestions, calling in Metzger to draft appropriate by-law changes. Pretrial Stip. ¶ 32; Plaintiff’s Exh. 23, at 111-12,114; Tr. Vol. Ill, at 59. But sometime before the July 17, 1977 Board meeting, the proposed appointments and by-law changes were taken off the agenda. The Watergate group’s suggestions were therefore not considered by the FG Board. Plaintiff’s Exh. 23, at 121-25; Tr. Vol. I, at 46-48. 38. By August of 1977, rumors of the division on the FG Board had reached the SEC. The SEC wrote Metzger for information. Plaintiff’s Exh. S. Metzger responded in his legal capacity, informing Middendorf of the inquiry and noting, “I will handle this request . . . . ” Defendant’s Exh. AAA. 39. The third and final meeting of the group occurred in December of 1977, again at the Watergate. Metzger again was present and Middendorf was not. Plaintiff’s Exh. 19, at 19-20, 51, 142. The group was still concerned that its suggestion respecting a Chief Operating Officer had not been accepted. Plaintiff’s Exh. 19, at 145-46. There is no indication in the record that this meeting was ever subsequently brought to the attention of Middendorf. 40. Metzger at no time disclosed to Middendorf his plans to attend or his participation in any of the three Watergate group meetings. Tr. Vol. I, at 43. Even after the SEC inquiry, Metzger did not inform Middendorf of his participation in the dissident faction. E. Solicitation of Foreign FG Purchaser. 41. In October of 1977 Metzger devised a plan to sell FG to a European bank. He outlined the plan in a letter to Hugh L. McColl, Jr., President of North Carolina National Bank Corporation (NCNB Corp.), a major FG shareholder and Metzger’s client for ten years. Plaintiff’s Exh. 4; Tr. Vol. Ill, at 175. Metzger intended McColl to show the letter to potential purchasers during McColl’s planned visit of NCNB Corp.’s corresponding banks in Europe. Tr. Vol. Ill, at 135, 175. 42. Metzger’s letter, dated October 14, 1977, was entitled “Re: Sale of Financial General.” In it he proposed offering the stock of FG’s eight largest shareholders at a price of $25 per share to a European bank. With the approximately 30% interest acquired, the purchaser could make a tender offer at $14 per share, bringing in an estimated 40% more of FG’s common stock. At that point the new purchaser could “go private” under state law, freezing out the remaining one-third of FG’s shareholders. The total cost to the purchaser would be $103 million. Plaintiff’s Exh. 4. 43. Metzger included himself among the major shareholders listed. At the proposed sales price of $25 per share, Metzger stood to net $1,099,887.50 if his plan was adopted. 44. Metzger concluded his letter by offering his legal services and his knowledge of Financial General matters to any bank interested in acquiring FG. Tr. Vol. Ill, at 188, 197. The final paragraph stated: I am generally familiar with the structure of F.G. and the legal problems which might interest a potential purchaser— have gun, will travel. Plaintiff’s Exh. 4. 45. Aside from the potential acquiring bank, Metzger purported to represent three entities with substantial financial stakes in his plan: himself, as a FG shareholder; NCNB Corp.; and Financial General. Tr. Vol. Ill, at 175, 191. 46. Metzger was not authorized by Middendorf or any other FG official to sell FG. He at no time sent a copy of the October 14 letter to Middendorf. Nor did he ever disclose the fact that he had proposed such a scheme. Tr. Vol. Ill, at 172-74. 47. Metzger asserted at trial that he did not give copies of the letter to anyone other than McColl and that his plan did not result in any legal employment. Tr. Vol. Ill, at 138, 174, 221-22. The record does not support his contention. Although McColl immediately disclaimed any involvement of NCNB Corp. in Metzger’s scheme, it is highly probable that McColl discussed the letter with Stephens. Stephens was also aware of Metzger’s scheme to sell FG and desire to represent any prospective purchaser through his own discussions with Metzger. Approximately one month later, in November of 1977, Stephens recommended Metzger’s legal services to a European bank interested in acquiring FG stock. Pretrial Stip. ¶36; Plaintiff’s Exh. 20, at 119; Tr. Vol. I, at 297-98. The bank hired Metzger, who over the next few months arranged for the purchase or attempted purchase of the shares of seven of the eight major shareholders listed in Metzger’s October 14 letter. Pretrial Stip. ¶¶ 45 (Stephens, Metzger, NCNB Corp.), 48 (Wyman, Pereira), 41 (Saul), 42 (Casey). Metzger’s plan was thus successful to the extent that a European bank hired him to represent it in the attempted purchase of a controlling share of FG’s common stock. F. Representation of Middle Eastern Investors. 48. On November 30, 1977, at a meeting at the Hilton Hotel in Washington, D.C., Metzger was retained by Agha Hasan Abedi, the president of BCCI, to represent BCCI clients in the purchase of FG stock. Plaintiff’s Exh. 22, at 54; Tr. Vol. I, at 185-86, 298. BCCI was in the practice of giving its clients advice on investment opportunities in the United States. Tr. Vol. I, at 276-77; Plaintiff’s Exh. 21, at 10-11. Abedi had become interested in FG as one such opportunity in early November, through his contact with Stephens on another matter. 49. Abedi instructed Metzger to find available blocks of FG stock, determine the price, and report the information back to Abedi. Abedi would then decide whether or not to authorize a purchase for a particular client. Tr. Vol. I, at 200; Tr. Vol. Ill, at 91-92; Pretrial Stip. ¶ 13. Metzger understood that the names of the principals— the BCCI clients — were not to be revealed. Tr. Vol. Ill, at 90. 50. Under these instructions, Metzger began to solicit sales of FG stock from its major shareholders. Metzger first attempted to purchase a block of FIC stock. Tr. Vol. I, at 187-88; Plaintiff’s Exh. 22, at 5S. At an FIC Board meeting on November 30 or December 1, 1977, Metzger offered to buy approximately 115,000 shares of FIC’s Financial General stock (approximately 2.2% of vote) at $12.50 per share, on behalf of an undisclosed principal. Tr. 'Vol. I, at 191 — 200; Pretrial Stip. ¶¶ 16-17. When Metzger refused to disclose the name of his principal, FIC rejected his offer. Tr. Vol. I, at 197-99. 51. Metzger next approached B. F. Saul, II, holder of the third largest block of FG stock (approximately 7.0% of vote). On about December 3, 1977, Metzger offered to buy for cash all of his stock at $12.50 per share. Tr. Vol. I, at 199-200; Pretrial Stip. ¶41; Plaintiff’s Exh. 55, at 41-46. Metzger again refused to disclose the name of his principal, although it was requested by Saul. Tr. Vol. I, at 201; Plaintiff’s Exh. 55, at 46. Saul later decided not to sell his FG stock. Plaintiff’s Exh. 55, at 51-53. 52. About the same time he approached Saul, Metzger solicited the stock of Eugene Casey, FG’s largest shareholder with 8.6% of the vote. In early December, Metzger requested one of his clients, Dr. Sachs, to speak with Casey. Dr. Sachs offered to buy all of Casey’s stock at $12.50 per share, on behalf of “a Washington law firm who was representing an undisclosed principal.” Casey was not then interested in selling. Pretrial Stip. ¶ 42; Tr. Vol. I, at 201-04. 53. In mid-December of 1977, Metzger directed members of his firm to contact other large FG shareholders. Two or three were contacted, but none were interested in selling their stock. Tr. Vol. I, at 204-05; Plaintiff’s Exh. 18. 54. Thus, by mid-December, Metzger had solicited over 17.8% of FG’s stock. When none of the solicitations resulted in sales, BCCI, through Abdul Sami, authorized Metzger to start purchases on the open market. Tr. Vol. II, at 10. 55. The open market purchasing program involved primarily Sami, George H. Davis, who was an officer of Stephens, Inc., and Metzger. Davis was authorized to buy FG stock in maximum amounts of 10,000 shares per day, to keep the market price of the stock from sharply increasing. Davis was also instructed to keep Sami and Metzger informed of the purchases. Tr. Vol. II, at 8-11; Pretrial Stip. ¶¶ 18-20. The stock was charged to and placed in an account at Stephens, Inc. opened by Metzger. The account was in Metzger’s name — “Eugene J. Metzger, Agent” — to shield the identity of the BCCI principals. Tr. Vol. I, at 210-12; Plaintiff’s Exh. 31, 32. Each purchase was noticed to Metzger by a ticket. Tr. Vol. I, at 212. Sami monitored the entire operation. He authorized purchases only when he had a BCCI client willing to pay for the shares. Tr. Vol. I, at 240. Then he kept “a careful finger on how much was bought and at what price.” Tr. Vol. I, at 215-16; Tr. Vol. II, at 11, 173-74; Plaintiff’s Exh. 43-47; Pretrial Stip. ¶22. 56. Open market purchases began on December 20, 1977. By December 30, 25,-700 shares of FG stock had been purchased for Metzger’s account. In January an additional 212,500 shares were acquired. By January 27, the date on which the last open market purchases were made, 238,200 shares — approximately 4% of FG’s stock— had been acquired on the open market on behalf of Metzger’s BCCI principals. Plaintiff’s Exh. 6; Pretrial Stip. ¶¶ 43, 54. 57. Metzger supplemented the open market purchases with a series of private transactions. On January 6, 1978, NCNB Corp. sold its 83,200 shares to Metzger at $12.50 per share. Tr. Vol. I, at 219; Plaintiff’s Exh. 6; Pretrial Stip. ¶ 45. On the same date Metzger sold 35,000 of his own shares at $12.50 per share while Stephens, Inc. sold 70,000 of its shares at $12.63 per share. Tr. Vol. I, at 208; Plaintiff’s Exh. 6; Pretrial Stip. ¶45. On January 6 and 31 Wyman sold 113,760 FG shares owned by him and his brother at $13.00 per share. Tr. Vol. I, at 219-20; Plaintiff’s Exh. 6. On January 6 and 24 General Olmsted sold 263,480 shares at $15.00 per share. Tr. Vol. I, at 221-22; Plaintiff’s Exh. 6. On January 31, Peter Flanigan, who had invested in FG with Middendorf, sold 16,640 shares at $13.00 per share. Tr. Vol. I, at 220; Plaintiff’s Exh. 6. And on January 31, Pereira sold his entire interest of 249,600 shares, also at $13.00 per share. Tr. Vol. I, at 221; Plaintiff’s Exh. 6. These January transactions accumulated for Metzger’s BCCI clients 838,390 shares of FG stock, approximately 15% of the common stock outstanding. 58. In December of 1977 and January of 1978, through open market and private transactions, Metzger acquired a total of 1,076,590 shares of FG stock for his BCCI clients, nearly 20% of the vote. Plaintiff’s Exh. 6. 59. The stock ultimately went to the accounts of four BCCI clients. Initially, the stock was bought for Sheikh Kamal Adham. Tr. Vol. I, at 185. By January 6, 1978, nearly 5% of FG’s stock had been accumulated for his account. Metzger believed that if his shares reached 5%, a Schedule 13D disclosure statement would have to be filed, revealing Adham’s identity. Sami accordingly “developed” a second purchaser. Tr. Vol. I, at 227, 241; Tr. Vol. Ill, at 104-05. 60. The second purchaser was Faisal Saud Al-Fulaij. Tr. Vol. I, at 228; Pretrial Stip. ¶ 23. Until his ownership approached 5%, purchases of FG stock were made for his account. A third purchaser was then brought in, Sheikh Sultan Bin Zaid Al-Nahyan (Sultan), the Crown Prince of Abu Dhabi. Tr. Vol. I, at 229. Metzger purchased nearly 5% of FG shares for his account. The fourth purchaser was the Sultan’s brother, Sheikh Mohammed, a minor who purchased through Abdullah Darwaish. Tr. Vol. I, at 229-30. Nearly 5% of FG shares were purchased for him. 61. Metzger testified at trial that the only purchaser of whom he was aware in December was Adham. Tr. Vol. Ill, at 99-100. This statement is misleading. Metzger was well aware from the outset of his retention by Abedi that he was being asked to represent more than one purchaser. Metzger testified that he was excited at the prospect of bring to FG “a substantial additional pool of investors.” Tr. Vol. Ill, at 88. He also testified that when he asked Abedi whether Adham would be the only investor, Abedi replied, “No. ... If this stock is available I might prefer to put two or three of my investors, if they were available, into this investment.” Tr. Vol. Ill, at 89, 92. 62. When each subsequent purchaser was brought in, Metzger knew their identities. He knew that the first investor was Adham. Tr. Vol. Ill, at 96-97. He knew that the second investor for whom he purchased Wyman’s stock on January 6 was Al-Fulaij. Pretrial Stip. ¶ 44; Tr. Vol. I, at 241; Tr. Vol. Ill, at 104. Metzger knew the Sultan’s identity when he closed the agreement to purchase Olmsted’s shares on January 24. Tr. Vol. I, at 229. And at a minimum he knew that Sami had lined up a fourth principal for whom Metzger purchased Pereira’s and Flanigan’s shares at the end of January. Tr. Vol. I, at 236-40. 63. Metzger was also well aware that the foreign clients of BCCI, purchasing FG shares on Abedi’s advice and through Metzger as agent, were likely to be perceived as a control group for the purposes of filing disclosure statements. Metzger testified that he so advised Abedi on November 30, 1977. Tr. Vol. Ill, at 90-91. In early January, Metzger advised Sami to the same effect. Tr. Vol. I, at 227, 241; Tr. Vol. Ill, at 106. In January, Metzger obtained powers of attorney from the Middle Eastern investors, so that he could file the requisite 13D statements. Tr. Vol. III, at 107, 109. Sometime the same month he hired a Virginia law firm to discuss with him and with Sami their responsibilities under the Virginia Take-Over-Bid Disclosure statute and to reinforce Metzger’s advice on filing the 13D’s. Tr. Vol. Ill, at 80-81, 107. 64. Metzger testified at trial that he did not view his BCCI principals as constituting a “group”, but advised filing disclosure statements only as “an act of prudence.” Tr. Vol. Ill, at 214^15. Metzger further testified that he never had “any ... intimation” that Abedi’s investors would act in concert with regard to FG’s stock. Tr. Vol. Ill, at 106. These assertions are not supported by the record. Metzger was informed by Abedi at the outset of the representation that the investors might seek a seat on FG’s Board of Directors. Tr. Vol. Ill, at 89. In February, when the Middle Eastern investors had acquired nearly 20% of FG’s shares, Metzger sent Pereira a telex soliciting his presence on the Board and asking him to meet to discuss the subject. Plaintiff’s Exh. 33, 34. At about the same time, Metzger discussed with Sami the fact that certain of the shares acquired by BCCI were subject to proxies held by Middendorf. Metzger advised Sami that with regard to the Olmsted shares, when the shares were transferred, the proxies were extinguished. Plaintiff’s Exh. 22, at 158-60. Sami understood that the four Middle Eastern investors who then held the shares had the power to vote them. Plaintiff’s Exh. 22, at 160. 65. Metzger testified at trial that he “did everything but stand on the walls” to disclose his representation of BCCI to FG. Tr. Vol. Ill, at 93. The record reveals no such effort. Metzger’s only disclosure to FG was indirect and incidental to his attempt to purchase stock. Metzger asserted at trial that he “announced” his representation through Guy Martin — attorney both for FIC and FG — and Justin Bowersock, a director of both corporations. Tr. Vol. Ill, at 93-96; see note 45 supra. Neither of these men were officers of FG. Neither were asked by Metzger to relay their information to Middendorf or another officer. And to neither did Metzger disclose any information beyond the fact that he was authorized to purchase FIC’s stock for an undisclosed principal. This information was not intended to be a disclosure to FG of Metzger’s representation, and omitted critical details about the BCCI representation. 66. The record reveals a pattern of deliberate nondisclosure to Middendorf of all aspects of Metzger’s representation of BCCI. He did not seek Middendorf’s consent before accepting Abedi’s offer of retention on November 30, 1977. Tr. Vol. Ill, at 86-88. He did not subsequently inform Middendorf that he had entered an agreement with BCCI to represent Adham. Tr. Vol. I, at 65-66. When Metzger’s representation expanded to include second, third, and fourth purchasers, he did not tell Middendorf. Tr. Vol. I, at 65-66; Tr. Vol. Ill, at 96. Metzger did not inform Middendorf of his attempt to purchase FIC stock (Tr. Vol. I, at 64), his attempts to make other private purchases of FG stock (Tr. Vol. I, at 64), or his open market purchases in conjunction with Stephens, Inc. (Tr. Vol. I, at 66, 68). And Metzger did not advise Middendorf that he was representing certain FG investors who might like to have a representative on the Board of Directors. Tr. Vol. Ill, at 156-57. 67. Even when an FG officer approached Metzger for information about his possible dual representation, Metzger refused to reveal his principals, their intent, or the extent of their acquisitions. On February 1,1978, Jack Beddow and two FG attorneys met with Metzger in his law offices. Because of unusually heavy trading of FG stock in January and reports of some of Metzger’s offers to purchase large blocks of stock, Middendorf had become suspicious about Metzger’s activities. At the meeting Beddow attempted to find out who Metzger was representing and the purpose and extent of the acquisitions. Metzger, however, did not reveal his retention by Abedi, the names of any of the Middle Eastern purchasers, or that he had accumulated nearly 20% of FG stock. Tr. Vol. II, at 84-90. In fact, Metzger initially resisted meeting with the FG representatives at all. Then he refused to answer their questions, deferring to Ralph Long, one of his partners, until nearly the end of the meeting. Tr. Vol. II, at 86-87, 89. The meeting ended when Metzger threw Beddow and others out of the office. Tr. Vol. II, at 90; Tr. Vol. Ill, at 213. 68. Financial General was not informed of Metzger’s representation of BCCI or its Middle Eastern clients until after his representation of FG terminated. On February 7, 1978, Middendorf and Saul, then FG’s Chairman of the Board (Pretrial Stip. ¶ 71), had a luncheon meeting with Bert Lance. Pretrial Stip. ¶ 25. The purpose of the meeting was to discuss a report that had reached FG of an “Arab raid” led by Lance. Plaintiff’s Exh. 54, at 33-39. During and after lunch Lance made it clear that BCCI then owned 20% of FG’s stock, planned to buy more, and intended to have control. Plaintiff’s Exh. 55, at 193-95. Lance also stated that his group included Metzger. Plaintiff’s Exh. 54, at 43-44, 60. This was the first time Middendorf learned of the existence of Abedi and BCCI. Tr. Vol. I, at 61-62. 69. Ten days after the February 7, 1978 revelations of Lance, FG commenced this litigation. G. Use of Shareholder List. 70. Metzger testified at trial that on April 29, 1977, after investing over $1 million of his own money in FG, he asked for and received a list of 1,000 or more FG shareholders. Tr. Vol. Ill, at 117-18; Tr. Vol. I, at 166-67. 71. In mid-December of 1977, Metzger directed members of his firm to use the shareholder list to get names of large shareholders to solicit. Tr. Vol. I, at 204-05. Members of Metzger’s firm contacted three of the names to solicit stock on behalf of the Middle Eastern investors. Plaintiff’s Exh. 18. 72. On February 1, 1978, at the meeting with Jack Beddow and two FG attorneys, Metzger admitted that he once had the shareholder list, but thought he had returned it. Tr. Vol. II, at 89-90. At his deposition one month later, Metzger adhered to this position. Plaintiff’s Exh. 19, at 44. Beddow, however, testified that FG had never received back the list given to Metzger. Tr. Vol. II, at 89-90. The Court accordingly concludes that Metzger was either unable or unwilling to comply with the request of FG that its shareholder list be returned. IV. CONCLUSIONS OF LAW. Plaintiff posits that the conduct of Metzger throughout his representation of Financial General violated Canons 4 and 5 of the American Bar Association Code of Professional Responsibility (Code). These two canons delineate the fundamental ethical obligations of loyalty and confidentiality imposed on all attorneys. Canon 5 requires a lawyer to exercise independent professional judgment on behalf of a client. It embodies the duty of undivided loyalty long recognized in common law as the essence of an attorney’s fiduciary relationship to his client. See, e. g., Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225, 232-33 (2d Cir. 1977); Bryant v. Lewis, 27 S.W.2d 604, 606 (Tex.Civ.App.1930). Canon 4 requires a lawyer to preserve the confidences and secrets of a client. It also incorporates ethical precepts fundamental to common law rules governing the fiduciary relationship between an attorney and client. See, e. g., Reardon v. Marlayne, Inc., 83 N.J. 460, 416 A.2d 852, 857-58 (1980). See generally H. Drinker, Legal Ethics, 103-04, 131-32 (1953); Developments in the Law— Conflicts of Interest in the Legal Profession, 94 Harv.L.Rev. 1251-55, 1265-70 (1981). Defendant asserts that the Code cannot be used as á basis for private litigation. In a strict sense, however, the basis for a civil action for disgorgement of attorneys’ fees is the common law of fiduciary and ethical obligations. See, e. g., Fielding v. Brebbia, 399 F.2d 1003, 1005 (D.C. Cir. 1968); Zeiden v. Oliphant, 54 N.Y.S.2d 27, 28 (Sup.Ct.1945); Bryant v. Lewis, 27 S.W.2d at 606, 608. Whether or not a breach of those obligations has occurred may be determined by resort to the standards set forth in the Disciplinary Rules. See, e. g., Jeffry v. Pounds, 67 Cal.App.3d 6, 136 Cal.Rptr. 373, 376, 377 (1977); In re Hansen, 586 P.2d 413, 415 (Utah 1978). As stated in the Preamble and Preliminary Statement to the Code, “The Disciplinary Rules state the minimum level of conduct below which no lawyer can fall without being subject to disciplinary action.” Although it does not “undertake to define standards for civil liability of lawyers for professional misconduct,” a violation of its mandatory provisions may be penalized by disciplinary action, disqualification, or disgorgement of attorneys fees. See, e. g., In re Hansen, 586 P.2d at 414 (review of state disciplinary proceedings from Code violation); International Business Machines Corp. (IBM) v. Levin, 579 F.2d 271, 274 (3d Cir. 1978) (review of disqualification from Code violation); Jeffry v. Pounds, 136 Cal.Rptr. at 374 (attorneys’ fees refund from Code violation); U.S.Dist.Ct.-D.C.R. 4-3(IV) (acts which violate Code constitute misconduct and are grounds for discipline). The principal Disciplinary Rules implicated by Metzger’s representation of FG are DR 5-101, 5-105, and 4-101. DR 5-101(A) prohibits the dilution of loyalty to a client by the attorney’s own personal or financial interests. It states: Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property, or personal interests. DR 5 — 105 bars the acceptance and continuation of employment by clients with adverse interests. It provides: (A) 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, or if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C). (B) A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, or if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C). Subsection (C) allows multiple representation only if “it is obvious that [the lawyer] can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.” DR 4-101(B) prohibits a lawyer from revealing the confidential information imparted by his client: (B) Except when permitted under DR 4— 101(C), a lawyer shall not knowingly: (1) Reveal a confidence or secret of his client. (2) Use a confidence or secret of his client to the disadvantage of the client. (3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure. As illuminated by pertinent Ethical Considerations (EC’s), formal and informal opinions of the American Bar Association Committee on Ethics and Professional Responsibility (ABA Ethics Committee), opinions of the District of Columbia Bar Legal Ethics Committee (D.C. Legal Ethics Committee), and judicial precedent, these are the standards against which Metzger’s conduct as attorney for Financial General is measured. A. Identity of Corporate “Client”. Like any other corporate attorney, Metzger could not fulfill his duty of undivided loyalty to FG without first determining who, among the corporation’s directors, officers, and shareholders, in theory and in fact represented the entity’s interests. EC 5-18, the only Code provision that expressly addresses this subject, provides limited guidance. It states: A lawyer employed ... by a corporation ... owes his allegiance to the entity and not to a stockholder, director, officer, employee, representative, or other person connected with the entity. In advising the entity, a lawyer should keep paramount its interests and his professional judgment should not be influenced by the personal desires of any person or organization. In theory, the ultimate interests of the entity are those of the shareholders. They own the corporation and elect its directors; it is for their collective benefit that the board exercises its policymaking authority. In practice, the spokesmen for the corporation are its managers. Subject to the board’s final authority, the incumbent management runs the corporation, determining on a daily basis the interests of the entity and translating those interests into business decisions. Some of these decisions are what attorneys to hire and what legal tasks to perform. Thus, both practically and theoretically, the corporate attorney should consider himself as representing the entity interests articulated by those in current control of the management. See ABA Informal Opinion 1056 (1968); ABA Division of Education, Professional Education Publications, Professional Responsibility, A Guide for Attorneys 271, 277-79 (1978); Developments in the Law, 94 Harv.L.Rev. at 1334-36. When Metzger began to perform legal services for FG in June of 1977, the management hierarchy of FG was indisputably headed by Middendorf. As of June 20, Middendorf was President, Chief Executive Officer, and Chairman of the Board. Finding of Fact 11. He was the controlling shareholder as well, holding proxies on 41.6% of the voting stock. Finding of Fact 10. Throughout the course of Metzger’s representation, Middendorf retained these positions. Among FG’s shareholders, directors, and officers, no other individual could reasonably have been deemed to be the spokesman for the entity’s interests. Of this Metzger was well aware. Middendorf was the sole company official to authorize and direct Metzger’s legal work. In the early months of Metzger’s representation, the authorization was informal, but understood. Finding of Fact 22. When a dispute arose over the size of Metzger’s bills, Middendorf’s status as.the sole official to authorize, limit, and terminate Metzger’s legal work became express. Findings of Fact 24-25. And from his three-month involvement in FG politics as attorney for the Middendorf investors and a major new investor, Metzger was familiar with the proxies and board nominations that brought Middendorf into control. Findings of Fact 6, 8-12. In sum, Metzger’s duty of undivided loyalty to his client corporation should have been directed toward advancement of the corporate goals articulated by Middendorf as the incumbent manager of FG. B. Secret Participation in Watergate Group. Plaintiff asserts that Metzger’s participation in the Watergate group violated two Canon 5 obligations peculiar to corporate attorneys: to remain neutral in the face of a corporate client’s factional conflict, and to subordinate to the fiduciary obligations of an attorney any privileges otherwise accruing as a shareholder. The Court agrees with both contentions. 1. Requirement of Neutrality. A corollary of the duty of undivided loyalty, or as stated in DR 5-105, the duty to exercise “independent professional judgment in behalf of a client,” is the requirement that a corporation’s legal adviser remain neutral when confronted with an internecine conflict. As stated by the ABA Ethics Committee in a seminal 1932 formal opinion, In acting as the corporation’s legal adviser [an attorney] must refrain from taking part in any controversies or factional differences which may exist among stockholders as to its control. When his opinion is sought by those entitled to it, or when it becomes his duty to voice it, he must be in position to give it without bias or prejudice and to have it recognized as being so given. Unless he is in that position his usefulness to his client is impaired. ABA Opinion 86 (1932). Since then, the Ethics Committee has consistently adhered to its interpretation of Canon 5 as prohibiting a corporate attorney from taking part in factional differences among the shareholders, management, or directors of a corporation. See ABA Informal Opinion 516 (1962); ABA Informal Opinion 1056 (1968). The same principle of neutrality was applied by this Circuit in Yablonski v. United Mine Workers, 448 F.2d 1175 (D.C.Cir.1971) (per curiam), later appeal, 454 F.2d 1036 (D.C.Cir.1971) (per curiam), cert. denied, 406 U.S. 906, 92 S.Ct. 1609, 31 L.Ed.2d 816 (1972). In a struggle for power between certain members of the United Mine Workers of America (UMWA) and incumbent UMWA officers, the court ruled that outside and inhouse counsel should represent neither side. The court reasoned: “The corporation has certain definite institutional interests to be protected, and the counsel charged with this responsibility should have ties on a personal basis with neither the dissident stockholders nor the incumbent officeholders.” 448 F.2d at 1181. The Code encompasses this proscription in DR 5-105(A) and (B) and EC 5-14. The sections preclude continued employment when an attorney is. faced with the likelihood of involvement in the representation of “differing interests.” Like any situation of multiple employment, continued representation of the corporate client in spite of differing internal interests should be permitted only if it, represented by incumbent management, consents after full disclosure. DR 5-105(C). Metzger’s allegiance to the incumbent management of FG was almost immediately put to the test. In late June of 1977, Metzger was invited to attend a meeting at the Watergate of six major shareholders/directors unhappy with Middendorf’s management. By that time, Metzger was well into his representation of FG. He had already accumulated 507 hours for his corporate client, for which he would bill FG over $45,000. Findings of Fact 17, 21. His simplest option, and one dictated by his duty to FG, the President and Chief Executive Officer of which was Middendorf, would have been to advise Middendorf of the invitation to attend the June 30, 1977 Watergate meeting. Middendorf could then have advised Metzger with respect to attending and reporting on that and any subsequent meetings. Instead, Metzger chose to attend the meeting, without disclosing his intent to attend or even notifying Middendorf of the fact the meeting was planned. Finding of Fact 40. By the end of the first Watergate meeting, it should have been apparent to Metzger that by any definition of “differing interests,” the Watergate group involved a faction with divergent views from Middendorf on the needs of Financial General. The group opposed Middendorf on the choice of a general counsel, the need to sever ties with IB, and the identity of a Chief Operating Officer. Findings of Fact 32, 34. There is even some suggestion that the group opposed Middendorf personally, to the extent that the role of Chief Operating Officer was contemplated as replacing, rather than supplementing, the key operational responsibility assumed by Middendorf. Finding of Fact 34 n.33. Metzger’s personal support of these views clearly would diminish the zeal with which he would perform for FG at Middendorf’s behest. Nevertheless, Metzger declined even to join the post-Watergate meeting discussion with Middendorf, and did not otherwise advise Middendorf of his participation in or sympathy with the group. Findings of Fact 35, 40. As the group’s opposition continued into July, it should have become increasingly clear to Metzger that he could not advance the positions held by the Watergate group without at the same time threatening the ability of Middendorf to exercise control over the operations of FG. The Watergate faction included the major shareholders/directors from the Middendorf investors: over one-half of Middendorf’s board nominees and one-third of the total board of directors. Findings of Fact 8, 11, 33. In addition, they supplied a substantial portion of the proxies forming the basis of Middendorf’s voting control; their revocation would reduce Middendorf’s holdings from 41.6% to 26.2%. Findings of Fact 10, 33. Metzger still failed to advise Middendorf, or the full board, of his participation in the group, even after being invited by Middendorf into the second post-Watergate discussion to draft proposed by-law changes. Finding of Fact 37. The potential threat to the management of FG was not lost on the SEC, which took steps in August to obtain information about the rumored “pro- and anti-Middendorf factions.” Findings of Fact 18, 38. A change in the control of FG also carried serious implications with respect to the Federal Reserve Board, which in the summer of 1977 was in the process of determining whether to require complete divestiture of General Olmsted’s interests. Finding of Fact 5. Since he drafted the proxies consolidating control in Middendorf, filed Middendorf’s 13D, and appeared with certain of the Middendorf investors at Federal Reserve Board hearings (Findings of Fact 6, 12), Metzger could not have missed the implications of the SEC’s interest and the Federal Reserve Board’s potential interest in the intra-board conflict. Nevertheless, Metzger continued to withhold the fact of his personal participation in the first two Watergate meetings, even after communicating with Middendorf on the subject of the SEC request. Findings of Fact 18, 38, 40. In short, through the months of June and July of 1977, and again in December, Metzger actively represented FG while secretly supporting a dissident group of shareholder/directors, in violation of his professional obligations toward FG. 2. Status as FG Shareholder. Metzger asserts that as a shareholder of FG he retained the right to express his views on the management of the company. Had he not also- been an attorney for the corporation, he would, indeed, have been free to join the Watergate group. Metzger, however, fundamentally misconstrued the significance of his dual status as shareholder in and attorney for the same entity. Because “what is in the best interests of the corporation” generally furthers an individual’s interests as a stockholder, the lawyer-shareholder combination is not prohibited. ABA Informal Opinion 1057 (1968). But the combination is subject to the limits set forth in DR 5-101: the professional employment may not be affected by the lawyer’s own personal interests. When an attorney’s privileges as a shareholder collide with his obligations as a lawyer for the company in which he has invested, the lawyer’s professional obligations predominate. Formal Opinion 86 (1932). At that point, the attorney should advise the corporate client to seek outside counsel. ABA Informal Opinion 1057 (1968). If that is not appropriate, the attorney should relinquish his privileges as a shareholder, ABA Opinion 86 (1932), or resign. See DR 2-110(B)(2), 2-110(C)(2). In like manner, any privilege of Metzger as a major FG shareholder to dissent from the business decisions made by Middendorf should have been subordinated to his obligation as counsel for FG to adopt as his own the views of incumbent management. C. Solicitation of Foreign FG Buyer. Plaintiff contends that Metzger’s October Have Gun Will Travel letter breached fiduciary and ethical obligations arising under Canons 5 and 4. With regard to both theories, the Court agrees. 1. Personal Interest in Sale. DR 5-101, as discussed, encompasses the situation in which an attorney has invested in his client corporation. Acceptance or continuation of the employment is not prohibited, but only with full disclosure to incumbent management and only so long as the personal interests do not affect the exercise of professional judgment on behalf of the corporation. In this case, there is no doubt that Metzger continued to represent FG in October of 1977; by ironic coincidence, Metzger’s September bill to FG for $5,331.86 shared the October 14, date of the Have Gun Will Travel letter to McColl. Findings of Fact 21, 42. There is also no doubt that Metzger would have profited by over $1,000,000 on the sale of his own stock, had his plan been adopted as proposed. Finding of Fact 43. The issue is thus whether Metzger’s contemplated pecuniary gain as a shareholder would reasonably be predicted to affect his obligations to the corporation. As proposed in the Have Gun letter, Metzger’s plan to sell FG conflicted with several prerogatives of FG management. In his June “Where Do We Go From Here?” memorandum, Metzger had recommended “freezing out” the minority shareholders in FG’s subsidiary banks. Findings of Fact 16, 30. The proposal not only was expressly rejected by Middendorf, but was a cause of the increasing friction with Metzger. Finding of Fact 30. Metzger’s revival of the theory in his plan to sell FG to a foreign investor effectively substituted his own business judgment for the contrary views of FG’s elected managers. The outlined sale of control raises similar conflicts. Particularly in view of the contemporaneous Federal Reserve Board proceedings and the SEC’s expressed interest in challenges to Middendorf’s control, the incumbent management would have been likely to oppose or at a minimum supervise any such sale of control. See Findings of Fact 5, 18. Moreover