f/k/a archives . . . real opinions & real haiku

Specifically, the following subsections were added to section (b) of the current ABA Model Rule 1.6, which states that “A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:”

(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services.

(3) to prevent, mitigate or rectify substantial injury to the financial interest or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime or fraud in furtherance of which the client has used the lawyer’s services.

As the close vote within the ABA shows, this decision was very controversial.   For example, the California Bar strenuously opposed the amendments (The Record, 08/04/03), as did the Florida Bar (JaxDailyRecord.com, President’s Column, 08/06/03), and the folks at TalkLeft, who pointed out last night (08/11/03) that “The incoming ABA President, Dennis Archer, supported the change. But the new President Elect, Robert Grey Jr, opposed them.” TalkLeft quotes Grey as saying:

“This is not the proper time to bow to threats by others who seek to regulate us,” argued ABA President-elect Robert Grey Jr., who will succeed Archer in 2004. “It is not a time to take the position that the core values of the profession are subject to compromise.”

An article in yesterday’s New York Times discusses both sides of the controversy, with quotes from supporters and opponents . (“Lawyers Pressed to Give Up Ground on Client Secrets,” by Jonathan D. Glater, 08/11/03). Simultaneously, however, the Times editorial page urged adoption of the amendments because, “in the post-Enron era, the legal profession should be holding itself to higher ethical standards” and “a client who engages in fraud forfeits the right to confidentiality.”

In addition, on August 7th, Bloomberg reported that The Conference of Chief Justices had unanimously endorsed a similar plan “to let lawyers at publicly traded companies set aside client confidentiality to tell regulators about accounting fraud and other corporate wrongdoing.”

With all the sparks and barbs flying, Jason Hoppin at The Record wondered, last week (Piercing the Privilege, 08/04/03)

[I]f the majority of states have already implemented crime-fraud exceptions, why all the hullabaloo?  (emphasis added)

The answer can perhaps be found in this morning’s Washington Post  (ABA Eases Rule On Informing, by Brooke A. Masters, Aug. 12, 2003):

Supporters of the approved change said that allowing voluntary reporting is necessary to head off a far more drastic mandatory proposal being floated by the Securities and Exchange Commission. The SEC has asked for comment on a “noisy withdrawal” rule that would require an outside law firm to quit if it believed the management of a public company was condoning fraud. The company would then be required to report to the SEC that their lawyers had quit and why.

The ABA’s proposal “is a reasonable compromise between the existing rules — which needed revising — and the SEC’s ‘noisy withdrawal’ proposals, which go too far,” said Bart Schwartz, general counsel to Mony Group Inc., a financial services firm. “The permissive ‘reporting out’ rule approved by the ABA leaves more discretion to corporate lawyers about when it is necessary to divulge client confidences, and should give corporate clients more comfort that their lawyers can continue to handle sensitive information without turning into SEC informants.” (emphases added)

Now, I understand.   In an attempt to avoid federal regulation, we are left with a new Model Rule 1.6 that allows but does not require disclosure of a crime or fraud likely to cause significant financial or injury. The ABA hopes this will allow more lawyers to follow their consciences and do the societally right thing — while making sure the feds don’t actually make them all do it.

It seems to me, it is far more likely that the new rule will (1) cause clients to demand steelclad promises of confidentiality, unless disclosure is mandated by law; and (2) prompt law firms to explicitly adopt “no tell” rules to maintain current clients, attract new ones, and silence any firm members with overactive consciences .

As Fordham University law professor Jill E. Fisch said before the vote, it is unclear how many lawyers would take advantage of a rule that allowed them to report their clients to authorities. “It’s not economically feasible for a lawyer looking to build client relationships to be a whistle-blower.” (emphasis added)

Perhaps we’ll see red and white international no-whistle decals on law firm windows, and similar logos on letterhead and in marketing brochures. And, to soothe guilty lawyer consciences, clients who insist upon a confidentiality guarantee will be charged increased Omerta fees, with proceeds going to fund an ethics chair at a local law school.

I’m not necessarily against loosening up confidentiality rules in order to protect important societal interests, such as preventing clients from using a lawyer’s services to perpetrate a crime or fraud. The “basic tenets” of our profession are not absolutes — they spring from the needs and values of our society, not vice versa. It is difficult to imagine, however, that there is a truly pressing need to restrict the client’s right to confidentiality, if permissive disclosure is a sufficient solution.  

Two Cents from Jack Cliente: If the ABA has amended Rule 1.6 merely to avoid regulation of the profession by “outsiders” like the federal government, perhaps someone should turn in the Association for perpetrating a fraud of its own.

P.S.  You can check out some of the variations on Rule 1.6 that already exist:

The New Hampshire Rule, which is very similar to the New Model Rule, and allows disclosure “to prevent the client from committing a criminal act that the lawyer believes is likely to result in death or bodily harm or substantial injury to the financial interest or property of another.”

D.C. Rule 1.6, which only allows disclosures of confidences to the extent reasonably necessary “To prevent a criminal act that the lawyer reasonably believes is likely to result in death or substantial bodily harm.”

The Virginia Rule which requires that a lawyer promtly reveal that a client has the intention to commit a crime or to perpetrate fraud on a tribunal.  (at 23)

And the California situation, under which “The lawyer’s duty to maintain, protect and safeguard client information is almost absolute.”  As articulated in Business & Professions Code