A LAWYER'S DUTY TO REMAIN SILENT AND RIGHT TO SPEAK OUT CONCERNING CLIENT MISCONDUCT

• Jurisdiction: Derecho Internacional

Mining and Oil and Gas Law, Development, and Investment - Book 1
(Apr 2007)
CHAPTER 7B
A LAWYER'S DUTY TO REMAIN SILENT AND RIGHT TO SPEAK OUT CONCERNING CLIENT MISCONDUCT
Paul J. Schlauch ^*
Attorney
Holland & Hart
Denver, Colorado, USA
Melisa Meitus ^**
Candidate for Juris Doctorate
Sturm College of Law, University of Denver
Denver, Colorado, USA

PAUL J. SCHLAUCH

Paul Schlauch has more than 30 years experience in legal issues relating to the mining industry. He regularly advises some of the world's leading mining companies. His practice has included representing clients in a wide array of transactions and litigation and arbitration proceedings and counseling in respect of operational and regulatory issues. Mr. Schlauch has assisted in the structuring and negotiation of hundreds of transactions including mergers and acquisitions, joint ventures, mineral and surface right leases, royalty transfers, purchases and sales of mineral interests, privatization agreements, ore sales agreements, and cooperative operating agreements.

Mr. Schlauch has been active in natural resource industry professional organizations. He is a past President of the Rocky Mountain Mineral Law Foundation and a past President of the International Mining Professionals Society. He is a frequent speaker on topics relating to the mining industry and is the author of numerous articles on industry issues. Mr. Schlauch is an Adjunct Professor of Law at Denver University School of Law, where he teaches courses on international mineral law and policy. He also holds an appointment as an Honorary Lecturer on the Faculty of the Center for Energy, Petroleum and Minerals Law and Policy at the University of Dundee, Scotland.

In 2005 and again in 2006 the International Who's Who of Business Lawyers named Mr. Schlauch as "the World's leading mining lawyer." He is listed in The Best Lawyers in America, Colorado Super Lawyers, Who's Who in America, Who's Who in American Lawyers, Who's Who in International Business, and the International Who's Who of Mining Lawyers.

Introduction

The spate of corporate scandals in the United States in the late 1990s and the early part of this decade -- Enron, WorldCom, Global Crossing, HealthSouth and others -- that rocked the financial markets and called into question many aspects of corporate governance, also brought to the fore once again questions relating to the proper role of lawyers. The demise of these companies was widely and properly viewed as being due primarily to the malfeasance of accountants and corporate officers. However, lawyers were also actively involved in many of the schemes that led to these failures.¹

Do lawyers have the responsibility to be "gatekeepers" or "whistle blowers" for their public corporate clients whose past or impending conduct fails to meet applicable legal standards? At what point, if ever, do a lawyer's responsibilities to her profession and society outweigh her duty of loyalty to a client? A recent report of the Association of the Bar of the City of New York on the role of lawyers in corporate governance concluded that there were no clear answers to these questions and summarized the situation by stating that "there remains `controversy, confusion and uncertainty concerning a lawyer's duties' in the contexts relevant to this report."²

It is clear that in certain circumstances, there can be significant tension between a lawyer's duty to represent his or her client with the utmost loyalty and zeal, on the one hand, and that lawyer's responsibilities as a member of the legal profession and of civil society, on the other. This tension has long been manifest in the various rules applicable to lawyers concerning the preservation of the confidentiality of client communications. It has been exacerbated in the United States by recent statutory and promulgated and proposed regulatory mandates.

This paper will briefly examine the origin and evolution of rules relating to attorney-client privilege, describe the currents status of those rules in the United States, and consider the manner in which the wave of large scale corporate fraud in the past decade has highlighted and may be changing the answer to the question: "When, if ever, should or must, an attorney disclose to third parties information provided by a client"?

I. Origin and Evolution of the Common Law Concept of Attorney-Client Privilege

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The concept that information passing between a lawyer and a client is confidential can be traced back to England and the reign of Elizabeth I.³ The English courts did not want lawyers to be forced to "breach the code of a gentleman" by revealing a client's secrets.⁴ Therefore, confidentiality was a privilege belonging to the lawyer.⁵ This may have been a result of the distinction between barristers and solicitors.⁶ The solicitor prepared the case and gave legal advice.⁷ The barrister presented the evidence after being briefed.⁸ As a result, "[a] barrister was considered not merely an `officer' of the court but a member of it, who could no more properly be asked to reveal a client's confidence than a modern judge could be asked to disclose matters heard in camera."⁹ As the rules relating to the privilege evolved, it may also have come to reflect the law in 19^th century England that a party to a case was not competent to testify as a witness.¹⁰ As case law concerning attorney-client privilege developed eventually the client, rather than the lawyer, became the holder of the privilege."¹¹

The concept that a lawyer is compelled to keep information revealed by a client confidential is now referred to as "the attorney-client privilege." It exists today in the United States in the rules governing the professional conduct of lawyers and in the law of all of the States. Because the privilege is largely a creature of laws of the various States, and as such its articulations vary somewhat, the authors will use the American Bar Association's Model Rules of Professional Conduct as a proxy for and statement of rules generally applicable to United States lawyers regarding the preservation of client confidential information.¹²

II. Sources of Confidentiality Obligations for Lawyers

Rules and guidelines pertaining to attorney-client privilege in the United States come primarily from three sources: (i) rules applicable to the professional conduct of attorneys, (ii) statues and the common law, and (iii) concepts of "best practices" for attorneys.¹³ At its core, the set of rules that protect information obtained by a lawyer from her client from disclosure are founded on considerations of public policy. The prohibition against disclosure of confidential information is a means to an end -- the promotion of justice. The traditional view is that if

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attorney-client communications are not protected, clients will be less likely to confide in their lawyers and the result of that more limited and guarded communication will be that the lawyer will be less likely to provide the timely and competent advice the client may need in order to comply with the law. The United States Supreme Court has said that the purpose of attorney-client privilege is "to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client."¹⁴

The American Bar Association first approached what is now called attorney-client privilege in its 1908 Canons of Ethics.¹⁵ Canon 37 declared "It is the duty of a lawyer to preserve his client's confidences."¹⁶ Canon 32, though, reminded the lawyer of the limits of that duty: "No client, corporate or individual, however powerful, nor any cause, civil or political, however important, is entitled to receive nor should any lawyer render, any service or advice involving disloyalty to the law whose ministers we are, or disrespect of the judicial office which we are bound to uphold."¹⁷ These two Canons embody the dual (and sometimes dueling) roles a lawyer must balance: the role of advocate and the role of officer of the court.

The general guidelines from the Canons were incorporated into common law by the courts and were widely utilized until the ABA replaced the Canons with the Code of Professional Responsibility in 1969.¹⁸ Unlike the Canons, which were utilized for over a century, the Code did not long endure and was replaced by the ABA Model Rules of Professional Responsibility in 1983.¹⁹ The ABA Model Rules have been adopted "as formal rules of court" in most jurisdictions and, as modified in these jurisdictions, they generally have the force of law.²⁰ Rule 1.6 of the Model Rules provides that, except in a very few delineated circumstances: "A lawyer shall not reveal information relating to the representation of a client."²¹ The Model Rules were updated in 2003 in response to Enron and other corporate scandals.²²

All States recognize the attorney client privilege and their courts define its contours and exceptions as circumstances are presented to them. The American Law Institute defines the type of communication to which the attorney-client privilege applies as "a communication made between privileged persons in confidence."²³ The Restatement (Third) of the Law Governing Lawyers requires a lawyer to "comply with obligations concerning the client's confidences."²⁴

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Those obligations arise under, statutes, the common law and rules governing the professional conduct of attorneys.

There was an attempt to codify attorney-client privilege in the Federal Rules of Evidence.²⁵ Proposed Rule 503 defined stated, "A client has a privilege to refuse to disclose and to prevent any other person form disclosing confidential communications made for the purpose of facilitating the...