Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Restatement of the Law Governing Lawyers (ALI, 2000)

§ 61. Using of Disclosing Information to Advance Client Interests

A lawyer may use or disclose confidential client information when the lawyer reasonably believes that doing so will advance the interests of the client in the representation.

§ 62. Using or Disclosing Information with Client Consent

A lawyer may use or disclose confidential client information when the client consents after being adequately informed concerning the use or disclosure.

§ 63. Using or Disclosing Information When Required by Law

A lawyer may use or disclose confidential client information when required by law, after the lawyer takes reasonably appropriate steps to assert that the information is privileged or otherwise protected against disclosure.

§ 64. Using or Disclosing Information in a Lawyer’s Self-Defense

A lawyer may use or disclose confidential client information when and to the extent that the lawyer reasonably believes necessary to defend the lawyer or the lawyer’s associate or agent against a charge or threatened charge by any person that the lawyer or such associate or agent acted wrongfully in the course of representing a client.

§ 65. Using or disclosing Information in a Compensation Dispute

A lawyer may use or disclose confidential client information when and to the extent that the lawyer reasonably believes necessary to permit the lawyer to resolve a dispute with the client concerning compensation or reimbursement that the lawyer reasonably claims the client owes the lawyer.

§ 66.  Using or Disclosing Information to Prevent Death or Serious Bodily Harm 

            (1)  A lawyer may use or disclose confidential client information when the lawyer reasonably believes that its use or disclosure is necessary to prevent reasonably certain death or serious bodily harm to a person.

            (2)  Before using or disclosing information under this Section, the lawyer must, if feasible, make a good-faith effort to persuade the client not to act.  If the client or another person has already acted, the lawyer must, if feasible, advise the client to warn the victim or to take other action to prevent the harm and advise the client of the lawyer’s ability to use or disclose information as provided in this Section and the consequences thereof.

            (3)  A lawyer who takes action or decides not to take action permitted under this Section is not, solely by reason of such action or inaction, subject to professional discipline, liable for damages to the lawyer’s client or any third person, or barred from recovery against a client or third person.

§ 67.  Using or Disclosing Information to Prevent, Rectify, or Mitigate Substantial Financial Loss      

            (1)  A lawyer may use or disclose confidential client information when the lawyer reasonably believes that its use or disclosure is necessary to prevent a crime or fraud, and:

                        (a)  the crime or fraud threatens substantial financial loss;

                        (b)  the loss has not  yet occurred.

                        (c)  the lawyer’s client intends to commit the crime or fraud either personally or through a third person; and

            (d)  the client has employed or is employing the lawyer’s services in the matter in which the crime or fraud is committed.

(2)  If a crime or fraud described in Subsection (1) has already occurred, a lawyer may use or disclose confidential client information when the lawyer reasonably believes its use or disclosure is necessary to prevent, rectify, or mitigate the loss.

(3)  Before using or disclosing information under this Section, the lawyer must, if feasible, make a good-faith effort to persuade the client not to act.  If the client or another person has already acted, the lawyer must, if feasible, advise the client to warn the victim or to take other action to prevent, rectify, or mitigate the loss.  The lawyer must, if feasible, also advise the client of the lawyer’s ability to use or disclose information as provided in this Section and the consequences thereof.

(4)  A lawyer who takes action or decides not to take action permitted under this Section is not, solely by reason of such action or inaction, subject to professional discipline, liable for damages to the lawyer’s client or any third person, or barred from recovery against a client or third person.

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U.S. v. Costanzo, 625 F.2d 465 (D.N.J., 1980)

3d Cir.  Underlying Criminal Defense (Attorney-Client Relationship and Duty of Confidentiality) 

Student Contributor: Maninder (Meena) Saini

Facts: Defendant (Costanzo), a government informant, was convicted of conspiracy to possess and possession of stolen checks. In the past, the defendant was represented by attorney (Frank Paglianite) on various civil and criminal matters. Additionally, the defendant consulted Paglianite on numerous illegal activities. Paglianite even arranged for the defendant’s bail after his arrest on the instant matter. The defendant retained another attorney to represent him with the conspiracy charge because Paglianite had a conflict of interest in this matter. The defendant alleged that he discussed trial strategies and tactics with Paglianite during the trial proceeding in which Paglianite relayed that information to F.B.I. agents. The defendant claimed that Paglianite was an informant of the F.B.I during the course of their relationship. Defendant appealed from an order of the district court denying both his motions for a new trial and to vacate the sentence he was then-currently serving. The Appeals Court remanded for an evidentiary hearing as to defendant’s claim of a Sixth Amendment violation.

Issue: Did the defendant make disclosures to Paglianite in his capacity as attorney-adviser with the expectation that it was confidential?

Ruling: The  court held that the fact the attorney was not representing defendant in the instant action does not preclude a finding that an attorney-client relationship existed. A relationship between an attorney and client does not need a payment of fee or a formal contract to be formed. The relationship can be formed implicitly, and any communications are privileged when they concern legal advice of any kind sought from an attorney in such capacity.

Lesson:  The question of whether a person is a client or not is crucial to the issue of what duties the lawyer owes to that person. A relationship can form when the clients seeks legal advice from a lawyer in a professional capacity. Attorneys have an ethical duty of confidentiality not to disclose information received from clients.  The rule of confidentiality is to encourage clients to fully and truthfully disclose information relevant to their case. Attorneys cannot take that information and relay it to others for their disadvantage without impeding their role and the administration of justice.

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Heartbreak Cabaret Corp. v. Cruz & Toledo Restaurant Corp., 699 F.Supp. 1066 (S.D.N.Y. 1988)

Underlying Action: Purchase of Real Property

Student Contributor: Candice L. Deaner

Facts: Attorney represented a corporation in negotiations for a nightclub. In the course of negotiations, the attorney also began to represent defendants who were the owner’s of the lease where the club was intended to be. The venture between the parties quickly became bitter and resulted in litigation. Soon after, the corporation brought suit against the attorney for breach of fiduciary duty; however, when the corporation brought this claim against the attorney, they immediately moved to disqualify any testimony that attorney may proffer in his own defense, using the protection of the attorney client privilege.

Issue: Whether an attorney may be excused from the duty of confidentiality when using the communications to defend against a legal malpractice claim

Ruling: The District Court used the following factors to dismiss the corporation’s claim:
1) Disciplinary Rule 4-101(c) provides:

“A lawyer may reveal … Confidences or secrets necessary … to defend himself or his employees or associates against an accusation of wrongful conduct.”

2) The court reasoned that “as a matter of common sense, when a former client sues his former attorney, the client places the attorney in a position where previously confidential communications must be revealed to trial counsel defending the attorney in the suit.” The court held that this is necessary to provide an attorney a reasonable opportunity to defend against such a professional criticism.

Lesson: An attorney defending against a claim of legal malpractice is relieved of  the duty of confidentiality for the purposes of defending himself. This exclusion does not render an attorney immune from his duty to his former client with regard to disclosures to third parties. In such an instance, the attorney may still barred from disclosing client confidences to a third party.

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Costco Warehouse v. Greg Randall (2009 CAL LEXIS 12375) (pdf)

Decided Nov. 30, 2009.

CA: Attorney Client Privilege

FACTS: In June of 2000, Costco retained Sheppard, Mullin, Richter & Hampton to provide legal advice regarding whether certain warehouse managers in California were exempt from California wage and overtime laws. One of Sheppard’s wage and hour law attorneys interviewed warehouse managers and produced a 22-page opinion letter on the issue. Costco, the interviewed managers and the lawyer all testified that they understood the communications between the managers and Hensley were, and would remain, confidential.
Several years later, a group of Costco employees filed a class-action suit against Costco alleging that between 1999 and 2001, Costco had misclassified some of its managers as ‘exempt’ and had therefore failed to pay overtime wages. In the course of the litigation, Costco employees sought to compel discovery of the lawyer’s opinion letter. Costco objected on grounds that the letter was subject to the attorney-client privilege and the attorney work product doctrine. Plaintiffs argued that the letter contained unprivileged information and that Costco had waived the privilege by placing the contents of the letter in issue.

RULING: Overruling the intermediate appellate court, the California Supreme Court reiterated California’s strong policy in favor of maintaining client confidences and secrets.

1. In Costco, after finding that an attorney-client privilege existed by virtue of an opinion letter written by independent counsel who had interviewed and taken witness statements from company employees, the Supreme Court found the entire letter, including the witness statement summaries, to be privileged.

2. Additionally, the majority ruled that, while the court can require an in camera hearing to determine whether the relationship constituted an attorney-client relationship, there is no authority for allowing the court to require in camera disclosure of the communications themselves. Those communications are privileged from disclosure, even in camera. If “ the dominant purpose” of the relationship was to provide legal advice from lawyer to client, no disclosure of communications is permitted.

3. Additionally, the Supreme Court held that it was not necessary to demonstrate any harm resulting from the disclosure; the intrusion into the attorney-client relationship was deemed to be harm in itself.

'[T]he privilege is absolute and disclosure may not be ordered, without regard to relevance, necessity or pany particular circumstance peculiar to the case.'

LESSON: From a legal malpractice point of view, it is crucially important to maintain client confidences, even in the face of a judicial order to reveal confidential material in camera. At least in California, it has long been held that a lawyer has a duty to preserve client secrets and confidences, even in the face of a contempt citation. See, In Re Navarro, 93 Cal. App. 3d 325,330 (pdf). 

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To the extent consistent with the lawyer's other legal duties and subject to the other provisions of this Restatement, a lawyer must, in matters within the scope of the representation:

1. proceed in a manner reasonably calculated to advance a client's lawful objectives, as defined by the client after consultation;

2. act with reasonable competence and diligence;

3. comply with obligations concerning the client's confidences and property, avoid impermissible conflicts interest, deal honestly with the client, and not employ advantages arising from the client-lawyer relationship in a manner adverse to the client; and

4. fulfill valid contractual obligation to the client.

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