BAR ASSOCIATION OF NASSAU COUNTY
COMMITTEE ON PROFESSIONAL ETHICS
Opinion No. 1998-1
(Inquiry No. )
Attorney’s obligation to disclose to the court information received from a client during the course of representation that may affect the decision by the court in the client’s pending or past litigation.
An attorney is obligated to disclose client information to the court only if it would be material to the resolution of a disputed issue in the litigation, and then only if the information is not a confidence or secret.
Inquiring attorney represents a client who is the plaintiff in a mortgage foreclosure action affecting certain real property. The client bought the property at a foreclosure sale. The client then moved for a deficiency judgment against the borrower for an amount equal to the remaining balance due under the note and mortgage, after giving credit for the “fair market value” of the real estate, The court heard testimony from appraisers for both the client and the borrower as to the property’s fair market value. The court adopted the valuation of the client’s appraiser, which was approximately $20,000 to $45,000 lower than the range of value estimated by the borrower’s appraiser, and rendered judgment accordingly. The Inquiring Attorney states that his client advised him “subsequent to the date of the appraisal” that he had received an offer to purchase the property for $50,000 more than the valuation adopted by the court. No contract of sale was ever executed, and no terms of sale were ever negotiated, and the Client still owns the property.
1) Is the inquiring attorney under a duty to advise the court of the offer to purchase the property?
2) Is the inquiring attorney under a duty to consider any credit to the judgment-debtor (the borrower) during the execution of the deficiency judgment?
3) Is the inquiring attorney under any duty to take any other steps arising from the circumstances?
This inquiry involves two conflicting goals of the Code of Professional Responsibility. One primary goal of the Code of Professional Responsibility is to promote and preserve the fiduciary relationship which exists between a lawyer and client by prohibiting the lawyer- from disclosing confidences and secrets of the client. DR 4-101(B). See also N.Y. State 38-83 (“Without the rule of confidentiality, clients are less likely to seek timely legal assistance or to provide their lawyers with sufficiently complete information to permit the lawyer to render legal advice that often will keep clients from overstepping the bounds of the law”); N.Y. State 33-74 (“[T]he interests served by the strict rule of confidentiality are far broader than merely those of the client, but include the interests of the public generally and of effective judicial administration”). A second, conflicting goal of the Code is to promote and maintain the integrity of the legal profession by requiring the lawyer to represent the client “within the bounds of the law.” DR 7-102.
There is no provision in the Code which requires an attorney to disclose a client’s confidences or secrets. N.Y. State 84-76. Pursuant to DR 4- I OI(B), “[e]xcept,,when permitted in DR 4-101 (C), a lawyer shall not knowingly: 1) Reveal a confidence or secret of a client; 2) Use a confidence or secret of a client to the disadvantage of the client; 3) Use a confidence or secret of a client for the advantage of the lawyer or a third person, unless the client consents after full disclosure.”
Limited exceptions are set forth in DR-401© under which a lawyer- may reveal the confidences or secrets of the client, at the lawyer’s discretion, without fear of violating the Disciplinary Rules. However, none of the exceptions to that rule are applicable in this inquiry, unless the Client consents to the dissemination of the information after being told of the potential consequences. SeeDR4-101(C)(1). From the facts presented it does not appear that the client has consented to disclosure of the offer, although it is certainly advisable for a lawyer to inform the client of the possible consequences of not disclosing such information.
DR 4-101 protects only information which qualifies as a confidence or a secret. A “confidence” is defined by DR 4-101(A) of the Code as “information protected by the attorney- client privilege under applicable law.” Under New York case law, “[t]he attorney-client privilege extends only to confidential communications made to an attorney for the purpose of obtaining legal advice.” Hoopes v. Carota, 74 N.Y.2d 716, 717, 544 N.Y.S.2d 808, 809 (1989).
This Ethics Committee does not have jurisdiction to determine whether the offer to purchase the property is information protected by the attorney-client privilege, because: … What is protected as privileged “under applicable law” is a mixed question of law and fact, determination of which is not within the competence of this Committee.” BANC Op. 94-12.
The Code definition of a “secret” under DR 4-1 01 (A), however, is much broader. A”secret” is defined as “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.” DR 4-101 (A). “[T]he rules define “secret” in terms of the client’s request (that the information be held “inviolate”) or the effect of disclosure on the client (“embarrassing” or “detrimental” to the client”). BANC Op. 94-12. The Inquiring Attorney can easily and accurately make the determination as to whether the information would constitute a client secret.
Even if failure to disclose the information were to constitute a fraud on the court, a lawyer is still under an ethical obligation not to disclose secrets of the client. In DR 7-102, the Code directs that lawyers are required to represent their clients within the bounds of the law. “A lawyer who receives information clearly establishing that … [the client has, in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon the client to rectify the same, and if the client refuses or is unable to do so, the lawyer shall reveal the fraud to the affected person or tribunal, except when the information is protected as a confidence or secret.” DR 7-102(B)(I:) (emphasis added).
To determine the ethical obligation under DR 7-102(B)(1), the lawyer must first make a determination as to whether the failure to disclose the information “was material” enough to constitute “fraud” on the [court] within the meaning of the Code. . .” BANC Op. 94-2 1. See also BANC Op. 94-10 (information constitutes “fraud” only if it would be “material to the court’s resolution of any issue in dispute”). If the conduct does not constitute fraud, DR 7-102(B)(1) is not implicated and there is no duty on the inquiring attorney to report.
In this inquiry the court heard testimony regarding the appraised value of the property from both competing interests and made a considered neutral decision. An offer to purchase at a higher price in no way invalidates the prior appraisals submitted to the court. While questions of law are not within the competence of this Ethics Committee to decide, as a matter of law, a mere offer to purchase property is not admissible evidence. See Adirondack Trust Company v. ROS Associates 144 A.D.2d 827, 828, 534 N.Y.S.2d 568, 569 (3rd Dept. 1988).
The determination, however, as to whether the failure to disclose the information “clearly establishes” that a fraud has been perpetrated upon the tribunal is “a fact determination [which] must be made by inquiring counsel.” BANC Op. 44-87. Even if the inquiring attorney determines that the failure to disclose the offer to the court clearly establishes fraud, the Inquiring Attorney may not reveal the information if the information is a confidence or secret. The Code requires disclosure by the attorney ” . . . except when the information is protected as a confidence or secret.” DR 7.- 102(B)(1). “[W]here … the information is protected as a confidence or secret (E)R 4-1 01 (A)), the disclosure is not required. Obligations of continuing loyalty (DR7-101(A))preclude the inquiring, attorney from making a voluntary disclosure.” BANC Op. 94-1 0, quoting, BANC Op. 93-39
For the reasons stated above, the inquiring attorney is under an ethical obligation not to disclose to the court or to the Buyer the information provided by the client, unless the client consents after full disclosure of possible risks and consequences of disclosure versus non-disclosure.
[Approved by the Executive Committee on January 20, 1998; approved by the Full Committee on January 25, 1998.]