NEW YORK COUNTY LAWYERS’ ASSOCIATION
Committee on Professional Ethics
Opinion No. 686
TOPIC: DISCLOSURE OF CLIENT CONFIDENCES AND SECRETS
DIGEST: If, during a negotiation, the lawyer makes an oral representation based on information from the client, which is still being relied upon by the other side, and the lawyer discovers the information was materially inaccurate, the lawyer may withdraw the representation even if the client objects. The Code does not require the lawyer to disclose the misrepresentation.
CODE: DR 2-110(C)(1)(g), DR 4-101(A), DR 4-101(B), DR 4- 101(C)(1), (2), (3), (4) & (5), DR 7-102(B)(1), EC 4-7.
If, based on information imparted by the client, a lawyer makes an oral representation in a negotiation, which is still being relied upon by the other side, and the lawyer discovers the representation was based on materially inaccurate information, may the lawyer withdraw the representation even if the client objects? Does the Code of Professional Responsibility require the lawyer to disclose the misrepresentation?
The answer to the first question has become much easier, and the answer to the second question more complicated, with the adoption of the 1990 amendments to the Code in New York.
The lawyer’s discovery of the misstatement is a “secret” of the client, since it is information gained in the professional relationship the disclosure of which would be embarrassing or detrimental to the client. DR 4-101(A). Canon 4 of the Code is highly protective of the confidences and secrets of the client. DR 4-101(B) states that a lawyer may not knowingly reveal a confidence or secret of a client unless permitted under DR 4- 101(C). Furthermore, disclosure under DR 4-101(C) is never mandatory.
Discretion to Disclose
New DR 4-101(C)(5) authorizes (but does not itself require) a lawyer to disclose client confidences and secrets:
to the extent implicit in withdrawing a written or oral opinion or representation previously given by the lawyer and believed by the lawyer still to be relied upon by a third person where the lawyer has discovered that the opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud.
This provision complements and is broader than DR 4-101(C)(2), which authorizes the lawyer to disclose client confidences and secrets when required by law or court order, and DR 4-101(C)(3), which authorizes the lawyer to disclose the intention of the client to commit a crime and the information necessary to prevent the crime. There will be times when the misrepresentation made by the lawyer as a result of the client’s information will not rise to the level of a crime or other violation of law (for example, aiding and abetting a fraud). DR 4-101(C)(5) authorizes the lawyer to withdraw the statement either if it was based on materially inaccurate information or if it is being used to further a crime or fraud.
Although disclosure under DR 4-101(C)(1) requires consent of the client, no client consent is required for disclosure under each of the other subsections of DR 4-101(C), including DR 4-101(C)(5). Thus, the lawyer may inform the party to whom the statement was made that the statement is withdrawn, even if the client objects on the grounds that disclosure will be detrimental to the negotiations. (DR 4-101(C)(5) speaks only in terms of “withdrawing” the opinion or representation. It does not address broader disclosure.) Cf. EC 4-7 (A disclosure adverse to the client’s interest should be no greater than the lawyer reasonably believes necessary to the purpose.)
Should the lawyer exercise the discretion under DR 4- 101(C)(5) to disclose the earlier misstatement? New EC 4-7 lists some factors that should be considered in determining whether to disclose, under DR 4-101(C)(3), the intention of the client to commit a crime. We believe that many of the same factors are relevant in determining whether to make disclosure of client confidences that do not constitute crimes. These include the seriousness of the potential injury to others, the apparent absence of any other feasible way in which the injury can be prevented, whether the client intentionally used the lawyer’s services to introduce the misstatement, and other aggravating or extenuating circumstances.
In our opinion, if the misstatement was material and the lawyer does not disclose it, the lawyer should consider whether to withdraw from the representation of the client, Cf. DR 2- 110(C)(1)(g).
We do not address the question of whether disclosure of the misstatement is required by law, such as common law prohibiting aiding and abetting a fraud. If the misstatement constituted fraud by lawyer or aiding and abetting a fraud of the client, and the lawyer could become disassociated from the fraud only by disclosing it, then 4-101(C)(2) and (4) would allow the disclosure.
The question we address is whether the lawyer is required by the Code of Professional Responsibility to withdraw the misstatement. DR 7-102(B)(1) states:
A lawyer who receives information clearly establishing that . . . the client has, in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon the client to rectify the same, and if the client refuses or is unable to do so, the lawyer shall reveal the fraud to the affected person or tribunal, except when the information is protected as a confidence or secret, (emphasis supplied)
The “except” clause was added to the Code in 1974 to ensure that a lawyer was not required to disclose under DR 7-102(B)(1) what he or she was prohibited from disclosing under DR 4-101 (B)(1) and the law of evidence, See ABA 341 (1975). Otherwise, DR 7- 102(B)(1), combined with DR 4-101(C)(2)(lawyer permitted to reveal confidences and secrets when permitted under the Disciplinary Rules), would result in mandatory disclosure of client confidences and secrets. The amendment was an indication that the duty of the lawyer to preserve the client’s confidences prevails over the duty to reveal fraud or deception, either to a court or to a third person. As the ABA stated: “The tradition (which is backed by substantial policy considerations) that permits a lawyer to assure a client that information (whether a confidence or a secret) given to him will not be revealed to third parties is so important that it should take precedence, in all but the most serious cases, over the duty imposed by DR 7- 102(B).” ABA Opin. 341 (1975). See also, ABA 287 (1953).
The issue that arises as a result of the 1990 amendment to the Code is whether information that the lawyer is authorized to reveal under DR 4-101(C)(5) is “protected as a confidence or secret” and thus immune from mandatory disclosure under DR 7-102(B)(1). In ABA 314, the ABA Committee on Ethics and Professional Responsibility opined that where disclosure of client confidences was required by a law, the “privileged communication” exception of DR 7-102(B) would not be applicable, and thus disclosure would be required. See ABA 341 at 109. We believe that this result is mandated by the definition of “confidence” under the Code. (A confidence is information protected by the attorney-client privilege under applicable law. Where applicable law does not protect the information, the information no longer qualifies as a confidence.) However, the same logic does not apply to “secrets”.
As noted above, a “secret” is any information disclosure of which would be embarrassing or detrimental to the client. The fact that the lawyer is given discretion to reveal the information does not mean that the information is no longer protected as a secret. Indeed, the information is protected unless the lawyer chooses to reveal it. We believe that by placing DR 4-101(C)(5) in the list of discretionary disclosures, the drafters of the 1990 amendments meant to leave disclosure within the discretion of the lawyer, and did not intend to have such discretion turned automatically into required disclosure by DR 7-102(B)(1).
If, based on information imparted by the client, a lawyer makes an oral representation in a negotiation, which is still being relied upon by the other side, and the lawyer discovers the representation was based on materially inaccurate information, the lawyer may withdraw the representation even if. the client objects. The Code of Professional Responsibility does not require the lawyer to disclose the misrepresentation.
July 9, 1991