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Are You Privileged? Don't Be Too Sure When It Comes
to Ethics Problems
B by Edward Poll, J.D., M.B.A., CMC
Attorney-client privilege has been a foundation of common
law for centuries. The full and frank communication established
by confidentiality ensures effective legal representation
and protects civil liberties. Even so, attorney-client privilege
is not absolute. In general, attorney-client communications
will only be privileged if the communication was between
a lawyer and a client (or prospective client), was for the
purpose of helping the client secure legal services or assistance
(and not for the purpose of committing a crime), and was
made in confidence (outside the presence of third parties).
Thus, the mere fact that an individual communicates with
an attorney does not make the communication privileged.
To understand what this means in practice consider two
ethical situations that could confront virtually any attorney.
In the first, you as an attorney learn about unethical conduct
by another attorney and face sanctions if you don't reveal
it. In the second, you as an attorney are pressured by a
government investigation of your company to produce evidence
against corporate officers. The question in either case
is fundamental: What are your obligations?
The Duty to Report Attorney Misconduct
Visualize yourself in a proceeding where you know the other
attorney is being negligent in representing his client.
Should you say something to the adverse party - or to the
state bar? Go one step further. You are representing the
adverse party in an action against the first attorney. The
first attorney agrees to settle but requires non-disclosure
of the act of negligence and the settlement. You discuss
this with your client and advise agreement in the client's
best interests. The result - the state bar takes disciplinary
action against you for not disclosing the problem!
This, in a nutshell, was what happened nearly 20 years
ago in an Illinois case, In re Himmel; and it still reverberates
in the legal community today. In this case, Himmel, an attorney
with 11 years of experience, was retained to help a client
recover money that her prior lawyer, Casey, had misappropriated.
Himmel investigated the matter by interviewing the client
(in the presence of family members), Casey's insurance company
and Casey himself. Himmel negotiated a settlement with Casey
in which the client agreed not to pursue disciplinary action
and to keep the settlement confidential. Himmel never reported
Casey to the state bar disciplinary authorities.
The Illinois Supreme Court later suspended Himmel for one
year because he possessed unprivileged knowledge of illegal
conduct and did not report it. The Court rejected Himmel's
defense that he should have been excused from reporting
the violation because his client had directed him not to
report it and thus preserve the settlement. The Court stressed
that a lawyer, as an officer of the court, is duty-bound
to uphold the ethical rules and cannot shirk this obligation
merely because his client asks him to do so. Finally the
Court rejected Himmel's claim that the information he had
was privileged because he had received it from his client,
and therefore, he was under no obligation to disclose the
matter. The justices pointed out that the information Himmel
obtained from his client was voluntarily disclosed in the
presence of third parties. This information, as well as
what Himmel obtained from the insurer and Casey himself,
was not privileged.
There are plenty of potential gray areas here. A growing
number of states require lawyers to report misconduct by
another lawyer, in spite of any applicable confidentiality
agreement, if that knowledge (in the words of the Illinois
Professional Code) is "not otherwise protected by confidence."
The court in the Himmel case concluded that confidence did
not in fact exist. What about other instances? Say you are
working with co-counsel, and you happen to notice that the
lawyer's Web site says he "specializes" in personal injury
cases. However, your state bar does not have a professional
certification in personal injury law. Do you report your
co-counsel to the bar? It's a decision each lawyer could
potentially face. This is shown by the fact that, according
to official Illinois statistics, the number of attorney
misconduct charges against fellow attorneys jumped six-fold
in the year after the Himmel decision.
The Duty to Report Corporate Misconduct
In this post-Enron, Sarbanes-Oxley world, investigating
and reporting corporate misconduct has become a major focus
for many in-house lawyers. Not surprisingly, federal prosecutors
and SEC attorneys have long coveted the results of such
internal investigations, despite the seeming likelihood
that they would be covered by attorney-client privilege.
However with the 2003 publication of the "Thompson Memorandum,"
authored by then Deputy-Attorney General Larry Thompson,
the Justice Department made it clear that the disclosure
of such reports to the government was essentially a condition
that any corporation attempting to avoid criminal prosecution
had to meet.
The Thompson Memo said that prosecutors should take into
consideration a corporation's timely and voluntary disclosure
of wrongdoing and its willingness to cooperate in the investigation
of its personnel including, if necessary, the waiver of
corporate attorney-client and work product protection that
might be part of an investigation. The Thompson Memo leaves
no doubt that an important component of the anticipated
privilege waiver is disclosure of the "complete results"
of the corporation's internal investigation.
In the years since the Thompson Memo was issued, it has,
not surprisingly, caused great concern among counsel nationwide.
The American Bar Association was moved to establish a Task
Force on Attorney-Client Privilege focused on the corporate
setting. The stated goal of the Task Force was to help preserve
confidentiality in order to ensure that a corporate lawyer's
advice will be sought by corporate managers on complex or
questionable legal matters, giving the lawyer the opportunity
to counsel legal compliance more effectively. As a result
of the Task Force's report, the ABA's House of Delegates
in August 2005 approved resolutions that declared:
- "The American Bar Association opposes policies, practices
and procedures of governmental bodies that have the effect
of eroding the attorney-client privilege and work product
doctrine and favors policies, practices and procedures
that recognize the value of those protections."
- "The American Bar Association opposes the routine practice
by government officials of seeking to obtain a waiver
of the attorney-client privilege or work product doctrine
through the granting or denial of any benefit or advantage."
Even so, enforcement officials from the Department of Justice,
the SEC and other agencies can still pursue sanctions against
in-house counsel for failing to vigorously investigate and
report allegations of misconduct within the organization.
Penalties can be imposed for advice the lawyer gave, and
also for the lawyer's failure to cooperate with government
efforts to investigate the conduct for which the advice
was given.
The Duty of Every Lawyer
Ethical conduct is the duty of every lawyer, and it is
clear that the vast majority of lawyers take their ethics
responsibilities seriously. However, many ethical issues
are not so clear-cut as misuse of client trust accounts.
In the area of confidentiality and reporting misconduct,
lawyers who honestly believe they are upholding their ethical
responsibilities to their clients can still run afoul of
their state bar disciplinary system and of regulators and
prosecutors. The bottom line is clear: when in doubt, don't
assume - seek guidance from appropriate authorities.
Compliments of:
Edward Poll
LawBiz Management Company
Venice, California
(310) 827-5415
edpoll@lawbiz.com
www.lawbiz.com
About the Author:
Edward Poll, J.D., M.B.A., CMC, advises law firms and their
leaders on practice management, business development, and
financial matters. He is a nationally-recognized practical
guide to profit. His advice has benefited national, regional,
and local law firms. Ed is unique in that he has long-term
experience in both business and law. Ed has practiced law
for 25 years, was the CEO and COO of several manufacturing
businesses, and has been a consultant to small and large
law firms for 15 years.
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