Ethics Opinions

 
NASSAU COUNTY BAR ASSOCIATION
COMMITTEE ON PROFESSIONAL ETHICS
Archive of Ethics Opinions
Opinion No.: 1998-9
Topics: Obligation of inquiring attorney to inform existing client of information material to its interests which was imparted to inquiring attorney by another attorney in discussion of attorney's availability to serve as co-counsel on a prospective matter
Digest:
Information regarding identities of the parties and general nature of proposed representation disclosed to an attorney in the course of a preliminary conversation with another attorney regarding the first attorney's availability to serve as co-counsel in a prospective new matter must not be disclosed to a client which the attorney is representing in an unrelated matter. Such information is generally expected both by prospective clients and counsel speaking on their behalf to be kept confidential. Communication of the limited information necessary for an attorney to conduct the requisite conflicts check for a prospective client should not ordinarily give rise to an attorney-client relationship disqualifying an attorney from continuing representation of an existing client.
Code Provisions: EC 4-1
EC 4-2
DR 3-310
DR 4-101
DR 5-105(E)
DR 5-501
DR 7-101
Facts Presented:
The inquiring attorney has represented a client on a specific matter for a number of years. The inquiring attorney was approached by a second attorney regarding the possibility of working as co-counsel on a matter unrelated to the one the inquiring attorney has been handling for the existing client. The second attorney explained the facts of the case for "perhaps 30 seconds." At that time the inquiring attorney, realizing that the new matter involved an action to be brought against the existing client, informed the second attorney that the inquiring attorney represented the would-be defendant in an ongoing matter. The second attorney specifically requested that the inquiring attorney not disclose this information to the existing client.

 

The contemplated action could have severe financial consequences for the inquiring attorney's existing client, who may be able to engage in certain defensive maneuvering to mitigate its possible impact.
Inquiry:
Must an attorney inform an existing client that an ;action is being planned against the client by a prospective client, where the attorney-learned of the contemplated action during a brief introductory conversation initiated by counsel already representing the prospective client in an unrelated matter, who contacted the inquiring attorney to discuss availability to act as co-counsel in that matter?
Determination:
No. The Committee believes that an attorney has no obligation to inform an existing client whom the attorney represents in an unrelated matter that another attorney has inquired as to the attorney's availability to serve as co-counsel in a prospective matter to be brought against the existing client. The Committee also believes that inquiries by prospective clients or counsel representing them are generally expected to be kept confidential, even though they ordinarily do not give rise to an attorney-client relationship.

 

Initial discussions with a prospective client, or with counsel acting for a prospective client, should be limited to the information needed to confirm that the prospective new matter does not raise any potential conflict issues. Although the Committee recognizes that an attorney's obligation to diligently and zealously represent an existing client's interests might favor permitting, or even mandating, disclosing to the existing client the inquiry which the attorney received, the Committee believes that the confidential nature of a prospective client's inquiry also must be considered and, on balance, militates against its disclosure.
Analysis:
Initially, the Committee notes that the inquiring attorney properly terminated the conversation upon learning of his conflict of interest; clearly, the inquiring attorney could not serve as co-counsel in the proposed litigation. See Rule 5- 105(A) (requiring an attorney to decline to represent multiple clients if the representation would adversely affect his individual judgment); Flatt v. Superior Court, 885 P.2d 950, 36 Cal. Rptr. 2d 537 (1994)(subject to limited exceptions, courts and ethical codes alike prohibit an attorney from simultaneously represent-ling two client adversaries, even where the representations are unrelated).

 

The issue presented by this inquiry is whether, pursuant to Rule 7-101 requiring that an attorney zealously represent a client's interests, the inquiring attorney must (or may) disclose to an existing client information the attorney received in an inquiry as to the attorney's availability to represent a prospective client in litigation which that person intends to bring against the existing client.

 

An attorney is bound "to pursue his client's interests diligently and vigorously thin the limits of the law (Code of Professional Responsibility, canon 7)." Greene v. Greene, 47 N.Y.2d 447, 451, 418 N.Y.S.2d 379, 381 391 N.E.2d 1355, 1357 (1979). A lawyer, however, "may not disclose or adversely use confidential information obtained from a former or current client." Talvy v. American Red Cross, 205 A.D.2d 143, 148, 618 N.Y.S.2d 25, 28 (1st Dept. 1994).

 

The basic information needed for an attorney to ascertain whether a prospective new matter presents any conflict of interest issues (i.e., the identities, of the parties involved and, if appropriate, the nature of the matter) generally is conveyed with the expectation that it will be kept confidential -- as was expressly requested here. In this Committee's view, the confidentiality of that information generally should be maintained, even if an attorney-client relationship does not come into existence (a factual issue as to which the Committee expressly does not opine). See AMBAC Indem. Corp. v. Bankers Trust Co., 145 Mise.2d 52, 59, 546 N.Y.S.2d 265, 270 (N.Y. Sup. 1989) (noting prospective client's expectations may create "professional confidentiality" even without a formal attorney-client relationship).

 

As both the Restatement of the Law Governing Lawyers § § 112 and 122 (adopted in May 1998 -- to be published in 1999), and ABA Formal Opinion 90-358 (1990), recognize, information provided to an attorney in the course of an initial discussion with a prospective client should be deemed confidential, in order to encourage candid discussion. The rationale for treating such conversations as confidential is that "would-be clients are virtually indistinguishable from actual clients during the period in which forming a relationship is under mutual consideration". 1 Hazard & Hodes, The Law of Lawyering § 1.6:115 (Supp. 1996). See also, ABA Model Rules of Professional Conduct Scope (although most of the duties flowing from the client-lawyer relationship attach only after the client has requested the lawyer to render legal services and the lawyer has agreed to do so, some duties, such as confidentiality, may attach before the lawyer agrees, to consider whether a client-lawyer relationship shall be established).

 

Attorneys are cautioned, however, that such introductory conversations should be limited. Specifically, attorneys should avoid any discussion of substantive issues until after the attorney has both confirmed that no conflicts are present and that the attorney is willing and able to undertake the client's representation. As one authority has noted:

 

"Under normal circumstances, disqualification should not result from an initial consultation alone, so long as the lawyer did not extend the consultation for too long a time or discuss items of confidential information irrelevant to determining , whether a conflict existed. The lawyer must also have acted in good faith and may not, for example, use the initial consultation as a subterfuge to gain confidential information for- the adverse use of an existing client. In order for sufficient information to be disclosed to permit a lawyer to know whether a conflict exists, there must be some disclosure of information that is confidential.. Without such disclosure, lawyers could not effectively police and prevent conflict problems. Although authority on the point seems not to exist, it must be clear that a lawyer who in good faith acquires the information needed to do a review of possible conflicts should not be barred from representing a present client adversely to the inquiring, prospective client." Wolfram, Modern Legal Ethics § 7.1.6, at 327 (2d ed. 1986).

 

Where information beyond that needed to perform a conflicts search is revealed, difficult issues may arise. 1/ For example, some courts have held that a brief conversation may create an attorney-client relationship, even if the prospective client has not formally retained the attorney. See, e.g., Decora Inc. v. DW Wallcovering, Inc., 899 F. Supp. 132, 134 (S.D.N.Y. 1995) (1.25 hours of legal research performed by attorney sufficient to establish attorney-client relationship under the "substantial relationship" test); Bennett Silvershein Assocs. v. Furrnan, 776 F. Supp. 800, 803 (S.D.N.Y. 1991) (attorney-client relationship "exists when the party divulging confidences and secrets to an attorney believes that he is approaching the attorney in a professional capacity with the intent to secure legal advice"). Even in the absence of such circumstances, the nature of the information and extent of the information disclosed by the prospective client may be sufficient to create grounds for disqualification. See, e.g., Bridge Products, Inc. v. Quantum Chem. Corp., 1990 WL 70857 (N.D. I11. 1990).

 

ABA Formal Opinion 90-358 addressed an issue similar to the one before this Committee. The ABA Professional Ethics Committee found:

 

Information imparted to a lawyer by a would-be client seeking legal representation is protected from revelation or use under Model rule 1.6 even though the lawyer does not undertake representation of or perform legal work for the would-be client. If the lawyer takes adequate measures to limit the information initially imparted by the would-be client, in most situations the lawyer may continue to represent or to undertake representation of another client in the same or a related matter. When the information imparted by the would-be client is critical to the representation of an existing or new client in the same or related matter, however, the lawyer must withdraw or decline the representation unless a waiver of confidentiality has been obtained from the would-be client.

 

The ABA Professional Ethics Committee concluded that Model Rule 1.6 and DR 4-101 of the Model Code "apply to protect information imparted by a would-be client seeking to engage the lawyer's service's even though no legal services are performed and the representation is declined."

 

This Committee concludes that the disclosure of the basic information needed to conduct a conflicts check (1) should be kept confidential, and (2) should not create grounds for disqualifying the attorney from further representing the client in the existing matter. Indeed, to conclude otherwise would defeat the underlying rationale for checking for conflicts, because the very act of performing the conflicts check might itself give rise to a conflict. Among other considerations, an existing, client could be enormously disadvantaged if its counsel of choice could be abruptly disqualified from further representing it -- perhaps after representing the client in a particular matter for a substantial period of time -- simply because of a fortuitous inquiry- received from a prospective client as to the attorney's potential availability to serve is counsel in a matter adverse to the existing client's interests.

 

This Committee recognizes that information that an action is being contemplated against the existing client may be viewed as "critical". See ABA Formal Opinion 90- 358. In the Committee's view, however, the nature, extent and duration of the initial conversation must be taken into consideration in evaluating the inquiring attorney's obligations to both the existing client and the prospective client. [In weighing these competing concerns, the Committee is mindful of the fact that, unlike the situation presented in Flatt and in ABA Opinion 90-358 referenced above, the circumstances presently before the Committee do not involve a discussion directly between an attorney and a prospective client. It is unclear from the presented facts whether the second attorney contacted the inquiring attorney at the request of the client, or with the client's permission, or whether the second attorney did so unilaterally. 2/]

 

The Committee expressly does not opine on whether, based upon the presented facts, an attorney-client relationship existed, which we view as a question of fact. Nonetheless, in the Committee's view, the disclosure of the identity of a prospective client's name and that of its intended adversary -- the basic information usually needed by an attorney to determine if a prospective client's matter involves a potential conflict of interest -- generally should not, of itself, give rise to an attorney-client relationship.

 

As this inquiry demonstrates, "the avoidance of conflicts is so important ... that the mere fact that ... a firm had no intention of acting improperly does not dispose of the issue." AMBAC Indem. Co. v. Bankers Trust Co., 145 Mise.2d 52, 56, 546 N.Y.S.2d 265, 269 (N.Y. Sup. 1989) (citing Desbiens v. Ford Motor Co., 81 A.D.2d 707, 439 N.Y.S.2d 452 (3d Dept. 1981)). Attorneys must take every precaution to identify potential conflicts before engaging in substantive discussions with prospective clients, in order to avoid potential conflicts. The Committee believes it bears reiterating that initial discussions with prospective clients or with counsel acting for a prospective client should be limited to the information needed to confirm that the prospective new matter does not raise any potential conflict issues. As noted above, attorneys should avoid any detailed substantive discussions with prospective clients (or their counsel) until after a conflicts check has been completed. "[L]awyers who opt ... to be warmly hospitable to all prospective clients must bear the risk - as a "cost of doing business" - of an unexpected and insoluble conflict of interest." 1 Hazard & Hodes, The Law of Lawyering, § 1.6:115-1.

 

In summary, on the presented facts the Committee concludes that the communication between the inquiring attorney and the prospective client's counsel should be kept confidential.

 

[Approved by the Executive Subcommittee on July 14, 1998; approved by the Full Committee on June 24, 199]

 


1/ The problematic issues that may arise as between competing duties to separate clients are illustrated by the decision of the Supreme Court of California in Flatt v. Superior Court, 885 P.2d 950, 36 Cal. Rptr. 2d 537 (1994). In Flatt, a prospective client had a substantive, hour-long meeting with an attorney, during which the prospective client discussed confidential information concerning a contemplated action to be brought against a party who was represented by the attorney's firm in an unrelated matter. Upon learning of the conflict the next day or so, the attorney informed the prospective client that she could not represent him in the contemplated action against her firm's existing client; she did not advise him of the statute of limitations governing those claims, or that he should seek other counsel. The prospective client ultimately brought a malpractice action against the attorney for failing to so advise him.

The Supreme Court of California held, in a 4-3 opinion, that the requirement of undivided loyalty to the existing client negated any duty on the part of the attorney to give advice to the prospective client adverse to the existing client's interests. The Court opined that where an attorney's potentially conflicting representations are simultaneous (as opposed to successive), "[the primary value at stake . . . is the attorney's duty -- and the client's legitimate expectation -- of loyalty, rather than confidentiality." (Emphasis in original). The Court noted that "[e]ven though the simultaneous representations may have nothing in common, and there is no risk that confidences to which counsel is a party in the one case have any relation to the other matter, disqualification ma: nevertheless be required." (Emphasis in original.)

Although the California Supreme Court assumed, for purposes of its analysis, that the meeting between the attorney and the prospective client was sufficient to give rise to an attorney-client relationship, it then concluded that the attorney's duty of loyalty to her firm's existing client required her- both to sever any professional relation with the prospective client and "absolved her of a duty to provide any advice" to him adverse to the existing client's interests. The Court reasoned that any advice given by the attorney to the prospective client- regarding the statute of limitations governing his claim against the existing, client "would have run counter to the interests of an existing client of [the attorney] and her firm and of their obligation of undivided loyalty to [the existing client]".

The three dissenting justices, however, criticized that holding, because it "divid[ed] clients into two classes and [held] that lawyers may injure a second- class client with impunity so long as they do so to advance the interest of a first- class client". The dissent argued that if, as the majority assumed, an attorney- client relationship between the attorney and the prospective client had been created during the course of their meeting, "the inevitable consequence" was that the attorney owed the prospective client the same duty of care owed to the existing client. In the dissent's view, the dilemma created by the attorney's conflicting responsibilities was, in essence, the attorney's, rather than the client's problem, since the lawyer had assumed a duty of care to each client. In the dissent's view, the critical issue was whether an attorney-client relationship existed and, if so, the duty of care owed to the client in withdrawing from the representation because of the conflict of interest presented by the concurrent but unrelated representations.

2/ EC 4-2 states that "[i]n the absence of consent of his client after full disclosure, a lawyer should not associate another lawyer in the handling of a matter; nor should he, in the absence of consent, seek counsel from another lawyer if there is reasonable possibility that the identity of the client or his confidences or secrets would be revealed to such lawyer."

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