BAR ASSOCIATION OF NASSAU COUNTY
COMMITTEE ON PROFESSIONAL ETHICS
Opinion No. 2001-08
(Inquiry No. )
Preservation of confidences and secrets of a client, attorney’s obligation to disclose former client’s admission, made after conclusion of the representation, that representations made by client and certified by attorney, were known by client to be false
A matrimonial attorney whose former client advises him, after the representation has ended, that a Statement of Net Worth prepared by a former counsel falsely withheld assets has an obligation to call upon the client to rectify the fraud and may reveal the fraud to the person affected or the tribunal.
DR 4-101 (A)
DR 4-101 (B)
Inquiring Attorney was substituted as the attorney for the client/husband (“Client”) in Client’s divorce action against his wife. Prior to the substitution withdrawing counsel (“Prior Counsel”) had prepared Client’s Net Worth Statement which Client had signed. Upon his substitution as counsel for the client, Inquiring Attorney received the Net Worth Statement as well as other documents in order to pursue the divorce action.
During the divorce action, Inquiring Attorney responded to several motions by Client’s wife in which she alleged that Client was hiding assets, specifically cash from his business, which Client never declared either in the Net Worth Statement submitted in the matrimonial action or in his income tax returns. Client denied these allegations throughout the divorce action. Inquiring Attorney, relying on Client’s representations, successfully defended against a pendente lite motion by Client’s wife and certified that he had no knowledge of any false facts contained in the response to the pendente lite motion. Based on the absence of any extrinsic proof of the wife’s unsubstantiated allegations, the matrimonial court found that the Client was not hiding assets. Ultimately, the divorce action settled and the terms of the settlement gave no consideration to any hidden assets or cash. Inquiring Attorney received his fee and the matter was closed as to his representation of Client.
After conclusion of the matrimonial matter, Inquiring Attorney and Client entered into a business relationship and joint venture in which both parties were to contribute capital. During discussion about capital contributions, Client advised Inquiring Attorney that Client’s contribution would come from substantial cash assets he had secreted from his wife during the divorce. This was the first time Client admitted this to Inquiring Attorney. Subsequently, Inquiring Attorney dissolved the joint venture on other grounds.
Does Inquiring Attorney have any obligation to report to the matrimonial court or to the ex-wife that Client has admitted secreting assets during the divorce?
If the information revealed by Client to Inquiring Attorney does not constitute a “confidence” or “secret” under Disciplinary Rule (“DR”) 4-101(A), Inquiring Attorney is required under DR 7-102(B)(1), to call upon Client to rectify his fraud upon the matrimonial court and his ex-wife. If Client refuses to do so or is unable to rectify the fraud, Inquiring Attorney must reveal the fraud explicitly to the ex-wife, as the person affected, or to the matrimonial court. Whether the information is a confidence depends upon whether it is protected by the attorney-client privilege pursuant to CPLR §4503, which is a mixed question of fact and law beyond this Committee’s competence. The information at issue herein is not a secret, pursuant to DR 4-1-1(A)because it was gained by Inquiring Attorney after the conclusion of, and not during or in, the professional relationship.
If the information in question does constitute a confidence or secret, the only permissible revelation is the “implicit” disclosure of withdrawing, under DR 4-101(C)(5), Inquiring Attorney’s prior certification of the papers submitted in opposition to the pendente lite motion, and such withdrawal would be required by DR 1-102(A)(5) and Ethical Consideration (“EC”) 85. If upon withdrawal of the certification, the court, by final order, directing Inquiring Attorney to disclose the admission made by Client, Inquiring Attorney can and must do so.
Under DR-7-102(B)(2) regardless of whether the information constitutes a confidence or a secret, in Inquiring Attorney has information which “clearly establishes” that Prior Counsel, not just the Client, perpetrated a fraud upon a tribunal, Inquiring Attorney would be obligated to report the conduct to the matrimonial court.
DR 1-102(A)(5) provides that a lawyer or a law firm shall not “engage in conduct that is prejudicial to the administration of justice.” EC 8-5 provides that “[f]raudulent, deceptive, or otherwise illegal conduct by a participant in a proceeding before a tribunal or a legislative body id inconsistent with fair administration of justice.” DR 7-102(B) provides that if a lawyer receives information that clearly establishes that “[t]he client has, in the course of the representation, perpetrated a fraud upon a person or a tribunal,” the attorney must 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 where the information is protected as a confidence or secret.” The Commentary to DR 7-102(B) notes that “[l]awyers should take this obligation seriously. A lawyer should confront the client as soon as the lawyer believes the client has defrauded a person or tribunal … [and] if the client admits to fraud or does not convincingly deny it, they the lawyer should explain the legal consequences of getting caught. Simon’s New York Code of Professional Responsibility Annotated, 2000 Edition, p. 440.
From the facts presented in the inquiry, we will assume that the filing of a false Net Worth Statement by Prior Counsel and the filing with the matrimonial court of false statements (albeit unknown to Inquiring Attorney) certified by Inquiring Attorney, in connection with the pendent lite motion, constituted fraud on a tribunal and fraud on the ex-wife. For a more detailed discussion of what constitutes fraud on a tribunal see BANC Op. #94-10 and the report of the Committee on Professional Responsibility of the Association of the Bar of the City of New York entitled “The Attorneys’s Duties to Report the Misconduct of other Attorneys and to Report Fraud on a Tribunal,” 47 The Record of the Association of the Bar of the City of New York 905 (1992) Therefore, Inquiring Attorney should promptly call upon his former Client to reveal to his ex-wife and/or the matrimonial court that the financial statements submitted during the divorce action were false in that they omitted certain cash assets. Inquiring Attorneys should also explain the consequences to the Client. If the client refuses to correct his fraud, Inquiring Attorney must determine whether the exception for a “confidence” or “secret” to DR 7-102(B)’s mandatory disclosure rule applies.
DR 4-101 (A) defines “confidence” as “information protected by the attorney-client privilege under applicable law” and “secret” as “other information gained in the professional relationship that he client has requested be held inviolate or the disclosure of which will be embarrassing or would be likely to be detrimental to the client.” 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 for the advantage of the lawyer or of a third person, unless the client consents after full disclosure.” DR 4-101(C)(2) provides, however, that a lawyer may reveal “[c]onfidences or secrets when permitted under Disciplinary Rules or required by law or court order.” DR 4101(C)(5)_provides that a lawyer may reveal “[c]onfidences or secrets to the extent implicit in withdrawing a written or oral opinion or representation previously given by the lawyer and believed by the lawyer still to be relied upon by a third person where the lawyer has discovered that the opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud.” Accordingly, if the information constitutes a confidence or secret, the only allowed revelation is that provided for under DR 4-101(C)(5): the “implicit” revelation by virtue of the attorney’s withdrawal of his prior certification of the client’s financial disclosure in the matrimonial action.
As noted previously, DR 4-101 (A) defines “confidence” as information protected by the attorney-client privilege under “applicable law”. The “applicable law” in New York is CPLR §4503 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. #98-1 at p. 3; BANC Op. #94-12, at p. 3. Although we decline to reach that legal issue in this opinion, we refer Inquiring Attorney to our prior option for a review of the applicable case law. See, BANC Op. #93-41 (information conveyed to an attorney acting in a business capacity and not a the client’s attorney may, in fact, not be privileged); See also, BANC Op. #94-21 (defining attorney-client privileged communications as “a communication made for the purpose of obtaining legal advice and directed to an attorney who has been consulted for that purpose”).
If Inquiring Attorney determines that the information disclose by Client is not privileged, then he must determine if it is a “secret”. Although there is no question that the information at issue would be detrimental to Client if revealed, the determining question here is whether the information revealed by the client was “gained in the professional relationship.” As the inquiry has been stated, the information that Client’s prior financial disclosure in the matrimonial was false was gained not during the attorney-client relationship, but after the relationship had been concluded and a new business relationship in which the parties were co-venturers, not attorney and client, was commenced. The revelation was unrelated to the attorney-client relationship. BANC Op. #95-2 (1995). Under DR-4-101(A), an attorney may disseminate and make use of information acquired after the conclusion of a client’ representation even though it would be to attorney’s advantage and former client’s disadvantage, since the information is neither a confidence, because it does not arise from communication between the attorney and client, nor is it a secret because it was not gained during the professional relationship. The information at issue here is not a secret because it was not gained during the professional relationship. See, Commentary to DR 4-101(A), Simon’s New York Code of Professional Responsibility Annotated, 2000 Edition, p. 245. See also, BANC Op. #93-41 at pp. 6-7 (to be a “secret,” information and the manner of its acquisition must be connected to the attorney-client relationship, not just gained during that relationship).
DR-4-101(C)(5) provides that a lawyer may reveal “[c]onfidences or secrets to the extent implicit in withdrawing a written or oral opinion or representation previously given by the lawyer and believed by the lawyer still to be relied upon by a third person where their lawyer has discovered that he opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud.” As the Commentary indicates “DR 4-101(C)(5) … does not permit any explicit disclosures. Rather, it permits representation. Simon’s New York Code of Professional Responsibility Annotated, 2000 Edition, p. 273-74. The Commentary notes further “[w]ithdrawing a previous representation … sends a clear message to those who understand its implicit meaning: `[m]y client lied to me earlier, and I swallowed the bait, and now I’m taking back what I said earlier so don’t rely on it anymore.’
While DR 4-101(C)(5) permits an attorney to implicitly reveal a client’s confidence or secret by making a “noisy withdrawal” by withdrawing a prior representation without disclosing the reasons (see, AA Formal Op. 93-366 (1993)), DR 1-102(A)(5) expressly requires that the false certification be withdrawn since it deals with “misconduct” and provides in relevant part that “[a] lawyer or law firm shall not … [e]ngage in conduct that is prejudicial to the administration of justice.” EC 8-5 also provides that “[f]raudulent, deceptive, or otherwise illegal conduct by a participant in a proceeding before a tribunal or legislative body is inconsistent with fair administration of justice, and it should never be participated in or condoned by lawyers.” EC 8-5 therefore obligates an attorney to avail him/herself of any Disciplinary Rule that allows fraudulent, deceptive or illegal conduct to be prevented. Together, DR 1-102(A)(5) and make limited disclosure by withdrawing the prior certification he now knows is false. In other words, regardless of whether the client’s revelation of the falsity of the financial disclosure is a confidence or secret, Inquiring Attorney must now withdraw his prior certification.