January 1998
Ethics And The Law
A Lawyer's Duty of Truth and Candor to Non-Clients
by Barrie Althoff, WSBA Chief Disciplinary Counsel
Opinions expressed herein are the author's and are not official or unofficial WSBA positions.
The Rules of Professional Conduct ("RPCs") require you both to be truthful and to maintain the confidences and secrets of your client. Sometimes these duties conflict. The RPCs categorize the duty of truthfulness as a duty to courts (RPC 3.3), a duty to opposing parties and counsel (RPC 3.4), and a duty to other persons (RPC 4.1). This article looks at the last of these, your duty to other persons, and at possible conflicts of this rule with your duty to maintain your client's confidences and secrets. Although RPC 4.1 may also apply in some cases to your statements to a court or to opposing counsel, this article focuses on your duty to other third persons.
Requirement of Truthfulness
RPC 4.1 requires that in representing a client you
shall not knowingly (a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless the disclosure is prohibited by rule [RPC] 1.6.
RPC 8.4 also makes it professional misconduct to "engage in conduct involving dishonesty, fraud, deceit or misrepresentation."
The duty of truthfulness applies to acting "knowingly." The RPCs define that as "actual knowledge of the fact in question. A person's knowledge may be inferred from circumstances." It likely also includes recklessly negligent lack of knowledge. For example, in Slotkin v. Citizens Casualty Co., 614 F.2d 301 (2d Cir. 1979), cert. den. 449 U.S. 981 (1980), a defense lawyer was found liable for fraud in settlement of a medical malpractice suit after stipulating that to the best of his knowledge there was no excess insurance coverage when client files in his possession included letters from excess carriers. In Wyle v. R.J. Reynolds Indus., 709 F.2d 585 (9th Cir. 1983), a client's complaint was dismissed as a sanction for a law firm's knowingly false denial of a client's rebating practice when it had met with the client to discuss rebating and knew the client had been fined for rebating.
A lawyer often retains experts or consultants to assist in litigation. Even though under RPC 1.8(e) it is clear that the client should be ultimately responsible for such expenses, the lawyer may be liable for these expenses vis-à-vis the third persons if the lawyer gives those persons the impression that the lawyer will be responsible for such expenses. See WSBA Formal Opinion 140 (1969). In Copp v. Breskin, 56 Wn. App. 229 (Div. I, 1989), review denied 114 Wn.2d 1026 (1990), the court found, under RPC 4.1 and 8.4, a law firm liable for an expert's fee where the firm had stated that the expert's bills would be paid within 30 days of his testimony and then declined to pay when the client refused to pay the bill.
Excluding your duties to courts under RPC 3.3 and opposing clients and counsel under RPC 3.4, you generally do not have an obligation affirmatively to inform third persons of information. You may have this duty, however, if you affirm or incorporate a statement made by another person which you know is false, or if you subsequently learn that your own or your client's prior statement or document is now false. Your ability to make a disclosure may be limited, however, by your duty to maintain your client's confidences and secrets, discussed below.
It is unclear to what extent your RPC 4.1 obligation to be truthful applies in the context of negotiations where there is likely a certain amount of bluffing, posturing and poker-playing. RPC 4.1 does not itself exclude such situations. The ABA's comment to Rule 4.1 of its Model Rules of Professional Conduct, on which Washington's RPC 4.1 is based (although Washington did not adopt the ABA comments), observes,
Whether a particular statement should be regarded as one of fact can depend on the circumstances. Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party's intentions as to an acceptable settlement of a claim are in this category, and so is the existence of an undisclosed principal except where nondisclosure of the principal would constitute fraud.
The Slotkin decision, above, suggests limitations to such exclusion, however, as does Virzi v. Grand Trunk Warehouse & Cold Storage Co., 571 F.Supp. 507 (E.D.Mich. 1983), which vacated a final settlement negotiated by plaintiff's lawyer who failed to disclose his client's death to defense counsel, even though he knew defense counsel believed plaintiff would make an excellent trial witness.
The duty to be truthful to others is difficult to apply where your silence or failure to disclose may assist a criminal or fraudulent act by your client. In these cases, you may be subject to discipline if you do not disclose the information. If you know your client is engaged in a fraud or crime, and you know that your silence will assist your client in the criminal or fraudulent conduct, you must disclose the information. Thus, if your client refuses to make the appropriate disclosure, you must make disclosure if, for example, in helping your client prepare a securities disclosure statement, a sale of a business or property, or a listing of assets for a bankruptcy, marriage dissolution or estate proceeding, you find that your client is committing a crime and that your silence will assist that conduct. The same conclusion would appear to apply where the client is prepared to perjure himself or herself and your silence will assist that perjury. The only exception is where that "disclosure is prohibited by Rule [RPC] 1.6," discussed below.
Client Confidences and Secrets
Your duty to maintain your client's confidences and secrets is governed both by the attorney-client privilege and by ethical rules. Both are premised on the assumption that you can best provide legal advice if your client can fully disclose confidences and secrets to you, without fear that you will reveal them, without your client's consent, to any other person. In most cases, the obligation of confidentiality applies to your present clients and your past clients (even if now dead).
Attorney-client Privilege
Washington's attorney-client privilege rule, RCW 5.60.060(2), provides:
[a]n attorney or counselor shall not, without the consent of his or her client, be examined as to any communication made by the client to him or her, or his or her advice given thereon in the course of professional employment.
As an evidentiary rule, it is directed to courts and restricts what you or your client can be compelled in court to testify about a communication between you for purposes of the client's obtaining legal advice. It applies only to client confidences, that is, matters communicated between your client and yourself in the course of your representation where there is an expectation of confidentiality.
Because the public generally has a right to everyone's evidence, privileges against testimony are to be construed carefully and narrowly. See United States v. Bryan, 339 U.S. 323 (1950), cited approvingly in Dietz v. Doe, 131 Wn.2d 835, 843 (1997). The leading federal attorney-client privilege case is Upjohn Co. v. United States, 449 U.S. 383 (1981). Dietz, the most recent Washington case to consider the privilege, observes that the attorney-client privilege is imperative to preserve the sanctity of communications between clients and attorneys. 131 Wn.2d 835, 851. In Dietz, the widow of an accident victim unsuccessfully sought to compel a lawyer to disclose the identity of his client, the court remanding the case to determine whether, in fact, there was an attorney-client relationship.
Ethical Requirement of Confidentiality
The basic client confidentiality rule is RPC 1.6. Section (a) generally prohibits disclosure of client confidences and secrets, and section (b) permits certain disclosures, while section (c) permits disclosure relating to court-appointed fiduciaries. Since, under RPC 5.3, you must make reasonable efforts to ensure that your employees' conduct is compatible with your professional obligations, your staff must also maintain your client's confidences and secrets under RPC 1.6 and may, under your supervision, disclose such information only where you would be permitted to do so. RPC 1.6 is broader than the attorney-client privilege rule and may prevent you from disclosing information even if that information is not covered by attorney-client privilege. The RPCs define the term "confidence" as "information protected by the attorney-client privilege under applicable law," and "secret" as "other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client."
RPC 1.6(a) prohibits you from revealing confidences or secrets relating to representation of a client "unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in sections (b) and (c)." The rule's authorization to disclose information where the client consents or where the disclosures are "impliedly authorized in order to carry out the representation" covers the great bulk of the disclosures that routinely take place in most representations. The consent must, of course, be "after consultation," which the RPCs define as "communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question." You should advise the client not only what confidential or secret information you propose to disclose, but should also explain to the client the likely consequences of the disclosure. Where your client has specifically refused to consent to make disclosure, the specific refusal would negate the implied authorization of RPC 1.6(a) and would thus not permit you to disclose the information. In this case, you may have no choice but to withdraw from the representation unless some other exception to the nondisclosure rule applies.
RPC 1.6(b) sets out several situations wherein you may, "to the extent" you reasonably believe is necessary, reveal client confidences and secrets. This is not a general permission to disclose all client confidences and secrets, but only those reasonably necessary. RPC 1.6(b) allows disclosure
(1) To prevent the client from committing a crime; or (2) To establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, to respond to allegations in any proceeding concerning the lawyer's representation of the client, or pursuant to court order.
The crime exception permits you to disclose information to the extent you believe reasonably necessary to prevent any crime. Although Washington's crime exception is based on the ABA Model RPC, Washington's exception is much broader, since it permits disclosure to prevent any crime, whereas the ABA Model RPC permits disclosure only to prevent "a criminal act that the lawyer believes is likely to result in imminent death or substantial bodily harm." In Washington, for example, if you came to know that your client's conduct in an ongoing securities offering or commercial transaction was criminally fraudulent, or that your client was intending to embezzle assets, or that your client was intending to commit perjury, or that your marriage dissolution client was intending to harm his or her spouse, you could reveal that information under RPC 1.6. But suppose you were not sure that the intended client conduct was a crime? Could you still disclose the information if you believed that the intended acts were fraudulent under civil law, but were unsure whether the intended conduct was fraudulent under criminal law, for example, because of the higher burden of proof in criminal cases? RPC 1.6(b)(1) does not explicitly permit such a disclosure. Arguably, the provisions of RPC 1.2(d), prohibiting you from assisting a client in conduct that you know is "criminal or fraudulent," or RPC 4.1(b) discussed below, may permit the disclosure where your silence, in effect, assists or becomes a part of that fraudulent conduct.
The crime exception applies only to the commission by the client of intended or future crimes. It does not permit you to disclose information about past crimes. In the context of a securities offering, and perhaps other mandatory disclosure areas, however, where past criminal activity must generally be disclosed, the failure to disclose past criminal activity could constitute criminal fraud under the securities, wire fraud and mail fraud laws. Your client's intentional refusal to disclose the past crimes would likely be a material omission and an ongoing or continuing fraud on investors, as well as a continuing or future crime. RPC 1.6(b)(1) would perhaps permit, but not require, you to disclose that information; RPC 4.1(b) may require you to disclose such information.
You may also disclose confidential information to defend yourself against claims and charges against you in a controversy between yourself and your client, or to establish a defense to a criminal charge or civil claim against you based upon conduct in which your client was involved. It has been suggested that this defense may be "preemptive," such that you would not have to await an actual charge or claim against you. Where you know your client has engaged in material misrepresentations or omissions and has refused to correct them, you should withdraw from the representation and may, if you reasonably believe a claim or charge is likely to be made against you, disclose the misrepresentation or omission, but only to the extent reasonably necessary to defend yourself. If it is highly improbable that any claim or charge could be made against you, however, you could still withdraw but would not be permitted under the RPC 1.6(b)(2) "defense" provision to make any disclosure.
RPC 1.6(b)(2) also permits you to make disclosure "pursuant to court order." The court in United States v. Blackman, 72 F.3d 1418 (9th Cir. 1995) held that an Oregon lawyer was required by law to disclose the client's name and the nature of the transaction on an IRS Form 8300 (cash transactions report), rejecting the lawyer's claim that the information was protected under Oregon law by attorney-client privilege and as confidences and secrets of his client. Since there was also an IRS summons and subsequent enforcement proceeding, the "court order" exception to nondisclosure was also involved. As to disclosure pursuant to IRS Form 8300, see WSBA Formal Opinion 194 (1997), which discusses a lawyer's responsibilities under Washington's RPC 1.6.
RPC 1.6(c) permits, but does not require, you to reveal to a tribunal a client's confidences or secrets which disclose a breach of fiduciary responsibility by your client who is a guardian, personal representative, receiver, or other court-appointed fiduciary. If you represent a guardian or personal representative, for example, and become aware he or she is dissipating estate assets, you may disclose that information to the tribunal. If you wish to disclose the information more broadly, however, for example, to estate beneficiaries, you may want to seek authority to do so under RPC 1.6(b) by seeking a court order permitting such disclosure.
Consider Withdrawing from Representation
If your client has made material misrepresentations or omissions and refuses to rectify the situation, you should consider withdrawing from the representation. RPC 1.15 governs your ability to do so, only requiring withdrawal in this context where your continued representation will result in a violation of the RPCs or other law. For example, in State v. Berrysmith, 87 Wn. App. 268 (Div. I, 1997), the court upheld the right of a criminal-defense counsel to withdraw after raising with the court, in camera, his belief that his client intended to commit perjury (rather than requiring the lawyer to remain and allow the client to testify and see if perjury was committed). The court noted that RPC 1.15 required such withdrawal unless the court ordered otherwise.
The drafter's Comment to ABA Model RPC 1.6 states that when you are withdrawing from representation the RPCs do not prevent you "from giving notice of the fact of withdrawal," and that you "may also withdraw or disaffirm any opinion, document, affirmation, or the like." This in effect permits a "noisy withdrawal." The comment, which has generated considerable controversy, originated in the context of disclosure of a crime or fraud being committed by the client and in the context of the model RPC's narrower crime exception to nondisclosure. Washington, in adopting its version of the ABA's Model RPCs, did not adopt any of the ABA comments. Thus, for purposes of determining the meaning of Washington's version of RPC 1.6, the ABA comment remains merely persuasive evidence of the meaning of the Model Rule, on which Washington's version is loosely based.
