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Changes In Ethical Rules Governing Confidentiality Between A Lawyer And Client

by Cyrus D. Mehta

Information that arises from a relationship between a lawyer and client is confidential. There are two types of rules protecting confidentiality. The first is the attorney-client privilege under applicable law, which is more limited, and protects any communication between the lawyer and the client when requested in a judicial or administrative proceeding. The ethical rule protecting confidentiality is broader, and protects all information gained during the lawyer-client relationship, even though it may not be protected under the attorney-client privilege. Thus, the client may reveal certain embarrassing secrets about himself or herself, which may be tangential to the lawyer’s representation of the client, but those secrets are nevertheless protected under the ethical rule governing confidentiality.

The American Bar Association formulates rules governing lawyer conduct, known as Model Rules of Professional Conduct. The Model Rules have been incorporated in most states, which regulate the conduct of attorneys, as attorneys derive their licenses to practice law by complying with the requirements of a particular state.

The primary ABA Model Rule on confidentiality, 1.6(a), states:

“A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).”

There has never ever been an absolute rule of confidentiality, and there have always been exceptions, as we shall note under Rule 1.6(b).

In response to the collapse of Enron; the indictment conviction, and eventual demise of Arthur Andersen; and the troubles at Imclone, Tyco, Worldcom, and HealthSouth, among others, the ABA broadened the exceptions to the rule governing lawyer-client confidentiality.

Below is the latest version of the ABA’s exceptions to the rule governing confidentiality:

“Rule 1.6(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:

(1) to prevent reasonably certain death or substantial bodily harm;

(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services;

(3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime or fraud in furtherance of which the client has used the lawyer’s services;

(4) to secure legal advice about the lawyer’s compliance with these Rules;

(5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer’s representation of the client; or

(6) to comply with other law or a court order.”

In 2003, the ABA added paragraphs 2 and 3 to Rule 1.6(b). A lawyer may now reveal information of a client to prevent him or her from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another.

This new modification allows a lawyer to prevent himself or herself from being used by a client to hurt the financial interests of another through fraud. Rule 1.6(b)(3) also allows the lawyer to prevent, mitigate or rectify substantial injury to the financial interests or property of another if the lawyer is reasonably certain that his or her legal services were used by the client to commit a crime or fraud.

On July 25, 2002, Congress passed what is known as the Sarbanes-Oxley Act (or SOX informally). § 307 of SOX allows the Security and Exchange Commission (SEC) to issue rules of professional conduct with respect to attorneys appearance and practice before the Commission. In order to preempt promulgation of any overreaching SEC rule, the ABA introduced Model Rule 1.13, applicable to lawyers who represent any organization, such as corporations, partnerships, not-for-profits and other entities:

“Rule 1.13

(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.

(b) If a lawyer for an organization knows that an officer, employer or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the organization as determined by applicable law.

(c) Except as provided in paragraph (d), if

(1) despite the lawyer’s efforts in accordance with paragraph (b) the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a violation of law; and

(2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization,

they the lawyer may reveal information relating to the representation whether or not rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.”

Rule 1.13 now allows a lawyer representing an organization to report “up the ladder” when he or she knows that an officer or an employee associated with the organization is engaging in conduct relating to the representation that is a violation of a legal obligation to the organization, and which is certain to result in substantial injury to the organization.

Although Rule 1.13 was designed to prevent the kind of legal representation that led to the collapse of Enron, it could also apply to immigration attorneys representing an entity that files many visa petitions on behalf of foreign national employees. If, for example, the lawyer comes to know that an officer within the corporation is not complying with the H-1B and Labor Condition Application obligations of an employer, this lawyer may have to refer the matter to a higher authority in the organization, especially if it is certain to result in financial injury to the organization. Under the Department of Labor (DOL) regulations governing H-1B related labor attestation requirements, an employer could be fined very heavily for violating the program, including debarment from filing future H-1B visas. This DOL sanction could result in substantial injury to an organization that files many H-1B petitions.

Although confidentiality between a lawyer and client continues to remain sacrosanct, there are exceptions, especially if the lawyer is being used by the client to perpetrate a crime or fraud.


About The Author

Cyrus D. Mehta, a graduate of Cambridge University and Columbia Law School, practices immigration law in New York City. He is First Vice Chair of the American Immigration Law Foundation and recipient of the 1997 Joseph Minsky Young Lawyers Award. He is also Chair of the Immigration and Nationality Law Committee of the Association of the Bar of the City of New York. He frequently lectures on various immigration subjects at legal seminars, workshops and universities and may be contacted at 212-425-0555 or info@cyrusmehta.com.


The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.


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