The Honorable Randy J. Holland, "President's Page,"
The Bencher (Nov./Dec. 2002) pages 2 and 22.
(The 24-page issue is posted at American Inns of Court website in Adobe Acrobat PDF.)
The theme for The Bencher this month is ethics—one of the American Inns of Court’s four fundamental principles. The ethical rules that govern the professional conduct of attorneys are adopted by the highest court in each state. Traditionally, those courts have looked to the ABA Model Rules for guidance.
My distinguished colleague, Chief Justice E. Norman Veasey, chairs the Ethics 2000 Commission. The final report of that group suggests comprehensive revisions to the Model Rules of Ethics. Chief Justice Veasey has written a scholarly analysis of that process in this month’s Bencher.
The highest courts in each state are now considering whether to adopt, in whole or in part, the changes proposed in the Model Rules. In prior columns, I have encouraged each American Inn of Court to be aware of the debates within their jurisdiction. At this time, I want to highlight one aspect of those debates as it relates to the ethical rules of confidentiality and the evidentiary rule of attorney-client privilege.
The professional ethical duty of confidentiality and the evidentiary rule of attorney-client privilege differ in that the ethical rule applies more broadly, generally prohibiting disclosure of any client information that the lawyer obtains.The evidentiary rule of attorney-client privilege solely applies in circumstances where the issue is whether a lawyer may be compelled to testify about professional communications with a client. The privilege, therefore, which is applicable only in formal legal proceedings, has a very narrow scope. It may only be invoked in response to an attempt to compel testimony, and even then, only where the testimony involves communications between a lawyer and his or her client. This contrasts sharply with the ethical rule of confidentiality. A rule that directs lawyers not to disclose information, either voluntarily or involuntarily, that they have learned about a client, regardless of where or how the information was obtained.
There is currently a national debate with regard to the relationship between the ethical rules of confidentiality and the evidentiary rule of attorney-client privilege as the effects of corporate financial collapses continue to unfold. The specific focus of that debate has been upon financial fraud. The Congress of the United States entered the debate this year when the Sarbanes-Oxley Act was passed this August.
One of the central elements of the attorney-client relationship is ability of the client to rely on their attorney to keep confidential any information that is disclosed in the course of the relationship. The ability of the attorney to maintain the client’s confidentiality depends upon a judicial application of the evidentiary rule of attorney-client privilege. If applicable, that rule permits the attorney to resist official demands to disclose client information. It is generally regarded as one of the oldest common law privileges, dating all the way back to the reign of Elizabeth I.
The law of privilege has never stood as an absolute bar to the admission of client confidences into evidence. Any compelled disclosure of confidential client information however must be based upon the preservation of higher values than the attorney-client relationship. Accordingly, such disclosure is permitted when it is necessary to preserve the integrity of the judicial process, e.g., to prevent a fraud upon the court.
One of the best known exceptions to attorney-client privilege is the “crime-fraud exception.” It was originally recognized in England during the early formulations of the professional privileges. In the case of Cutts v. Pickering, in 1671, it was held that the privilege didn’t apply because there was no secrecy (confidentiality) owing to the client when the information was used to advance a crime.
Today the law still provides that attorney-client privilege is vitiated if the consultation with the lawyer was intended by the client to further a crime or fraud. This remains so regardless of whether the lawyer was aware of the client’s true purpose at the time the meeting took place. This standard was articulated by Justice Cardozo in Clark v. United States, 289 U.S. 1, 15 (1933). He wrote,
The privilege takes flight if the relationship is abused. A client who consults
an attorney for advice that will serve him in the commission of a fraud will
have no help from law.The attorney-client privilege is also available when the client is a corporation. This point is well-settled in American law. The U.S. Supreme Court clearly held, in the case of Upjohn Company v. United States, that the corporate attorney-client privilege applied, and also that it was not confined to the “control group” of the entity, but instead, extended to communications at all levels of the corporation. Accordingly, the attorney client-privilege will attach if “1) the communication was made to corporate counsel, acting as such; 2) the communication was made at the direction of management in order to secure legal advice from counsel; 3) the communication concerned a matter within the scope of the employee’s duties; and 4) at the time the communication was made, the employee was aware that the communication was for the purpose of rendering legal advice to the corporation.” At the direction of management the lawyers contacted employees of the company to gather information in order to decide what legal advice they would recommend to the company.
Rules of ethics have always prohibited attorneys from knowingly participating in a client’s fraud. The attorney-client privilege has never protected client confidences from disclosure if they were made in furtherance of a fraud. The ethical question at issue today is whether an attorney should have discretion to disclose an individual or corporate client’s involvement in either a continuing financial fraud or certain prior financial frauds that are discovered after the fact?
As Chief Justice Veasey’s article reflects, the Ethics 2000 commission proposed Model Rules 1.6(b)(2) and 1.6(b)(3) gave limited affirmative answers to both of these questions. The ABA Model Rules currently do not include those two limited exceptions. In August 2002, the Conference of Chief Justices of the United States passed a resolution that endorsed the Ethics 2000 proposals for limited exceptions that would permit, but not require, an attorney to disclose present or prior financial fraud in limited circumstances.
Thus, issue has been joined. This would be an excellent program for a monthly meeting. It is only one example of the many ethical debates that will be taking place as comprehensive revisions to the Model Rules are considered.