Volume 2, Number 3
|Table of Contents|
How To Rat Out A Client And Live To Tell About It
The most sacrosanct relationships in life are those to which privileges of confidentiality attach: husband-wife, doctor-patient, clergy-laity and group of kids who throw firecrackers in the neighbor's swimming pool (at least it should have been one when the CC needed it to be back in the day). Almost forgot, attorney-client. That's one of the first things anyone learns in law school-- you don't have to rat out your clients. Except...
In fact, some of the most difficult questions on any ethics exam involve those situations when a lawyer is not only entitled, but required, to turn-in a wayward client, be it for plans to lie, cheat, steal or murder. And as the SEC has been struggling for what seems to be ages to determine when a lawyer should have to report corporate wrongdoing up-the-ladder and eventually out the window to authorities, well it's easy to forget that there are 50 states with ethical codes already telling you, in no uncertain terms, what to do with clients who harbor a certain mens rea. In an economic world where business and practice relationships transcend geographical borders routinely and where many lawyers hold practice licenses in several states, it can get confusing to know whom you have to rat out where and why. So let's assume you're holding a license in California and New York and you have a client who is committing or about to commit a crime in both states, do you have an idea what you're up against?
Lest you think that the CC's choice of New York and California shows a somewhat coastal bias, the reason for that choice is most practical, as demonstrated by this week's download "State-by-State Comparison on Disclosure to Prevent Crime or Fraud," ably compiled by Nell Hennessy (Aon Fiduciary Counselors, Inc.). If you flip to California, you will find that it is the only state with no provision permitting disclosure of crime or fraud (that is sooooo L.A.), but if you turn to New York, you will find that New York allows a lawyer to disclose any crime: "A lawyer may reveal...the intention of a client to commit a crime and the information necessary to prevent the crime." Even that is not so harsh, as it is a permissive statute. If the same attorney holds a license in New Jersey, and the same client's crime were to occur in New Jersey and California, then things really get dicey. Under New Jersey Court Rules, a lawyer "shall" reveal crimes involving death or bodily harm or financial fraud. What's a compliant counselor to do? You snitch in Jersey, but keep your lip zipped out in the land of Arnold? That's quite a conundrum; please don't blame the messenger.
Of course, all of this stems from ABA Model Rule 1.6, which permits a lawyer to reveal crimes involving death and bodily harm. But Rule 1.6 stops there. The states have figured their own comfort-levels on this issue. And there are myriad configurations. North Dakota presents the CC's favorite. First, the Peace Garden State (you can check, that really is North Dakota's nickname; kind of outdoes New Jersey, which is just the Garden State--then again, nobody ever argues that New Jersey is peaceful) uses the word "revelation" instead of "reveal," in regard to waiver of attorney-client confidences, and that's just begging for a bad Mel Gibson joke, on which the CC passes. Second, North Dakota gives an attorney a lot of wiggle room:
• [R]evelation or use is: Required to the extent the lawyer believes necessary to prevent the client from committing an act that the lawyer believes is likely to result in imminent death or imminent bodily harm...; Permitted to the extent the lawyer reasonably believes necessary to prevent the client from committing a criminal or fraudulent act that the lawyer reasonably believes is likely as a result in non-imminent death, non-imminent substantial bodily harm, or substantial injury or harm to the financial interests or property of another.
So if you're a skeptic and don't tend to believe much that you hear around the water cooler, then consider packing your bags and moving to Fargo. If your lack of belief is reasonable, you're off the hook.
On a more serious note, the interesting part will be when and how the SEC finally acts on those reporting out proposals. Then if you find yourself and your client in California or North Dakota, all bets may be off.
Copr. (C) 2006 West, a Thomson business. No claim to orig. U.S. govt. works. This article is reprinted with permission from West, a primary sponsor of the General Practice, Solo and Small Firm Division.
This article first appeared in PLI's Compliance Counselor, May 10, 2004
Copyright Practising Law Institute