When a current client is about to borrow from the lawyer's former client, can the lawyer disclose the former client's prior securities fraud, and whose consent does the lawyer need to represent the current client?
LACBA Ethics Opinion 463: Disclosing a Former Client's Fraud to a Current Client
Short answer: The committee concluded that the law firm may not disclose to its current client that its former client committed securities fraud unless the former client consents; that the fraud will most likely be "material" under Rule 3-310(D), requiring the former client's consent before the firm takes the adverse matter; and that the current client's informed written consent is required under Rule 3-310(A) because the former client is "interested" in the representation, but that subsection does not require the former client's consent.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Los Angeles County Bar Association's view of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.
Plain-English summary
A law firm had briefly represented Corporation A and learned that A intentionally omitted a material debt from an SEC prospectus, which the firm assumed amounted to securities fraud. The firm advised A to rectify the concealment; A refused and asked the firm not to reveal the fraud. The firm withdrew. Later, its longstanding client Corporation B told the firm it had received a financing proposal from A and wanted the firm's advice in responding.
On disclosure, the committee concluded the firm may not disclose to B that A committed securities fraud unless A consents. It identified Business and Professions Code section 6068(e)'s duty to preserve client secrets, which does not expire when the representation ends, and noted that even a client's prior commission of a crime is a confidence the attorney may not disclose (People v. Singh). The committee identified that no exception applied: A was not about to commit a future crime likely to result in imminent death or serious bodily injury (citing its Opinion 436, adopting the ABA Model Rule 1.6 standard), and A had refused to consent.
On consent of the former client, the committee identified Rule 3-310(D), which bars accepting employment adverse to a former client where the lawyer obtained confidential information "material" to the employment, except with informed written consent. It identified the new rule as requiring that material information actually have been obtained, unlike the former substantial-relationship test, and defined information as "material" if it is information a reasonable attorney would be obliged to impart to the client if it were not confidential. Applying that standard, the committee assumed the prior securities fraud would sufficiently reflect on A's integrity to be material to the representation of B, so A's consent would be required; if A refused, the firm could tell B it cannot accept the representation because of a conflict.
On consent of the current client, the committee identified Rule 3-310(A), which requires the informed written consent of all affected clients when the member has or had a relationship with another party interested in the representation. Because the firm had a relationship with A and A was interested in the representation of B, B's informed written consent was required; the committee identified the necessary disclosures as the nature and duration of the prior representation and the firm's intentions regarding future representation of A. The committee concluded Rule 3-310(A) does not require the former client A's consent, reasoning from the rule's explicit reference to "client or former client" in subsection (D) and its omission in subsection (A). The committee added that the firm could not discharge its obligations to B without disclosing A's fraud if the fraud was material, so A's consent to disclose, not merely to the representation, would be needed. For matters not involving A, no disclosure or consent under Rule 3-310 would be required.
Currency note
This opinion was issued in 1990, before California's November 1, 2018 adoption of the renumbered Rules of Professional Conduct. It interprets former Rule 3-310 (avoiding adverse and conflicting interests) and former Rule 5-102(A), along with Business and Professions Code section 6068(e); these correspond to current Rules 1.7, 1.9, and the duty of confidentiality (Rule 1.6 / section 6068(e)). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.
Common questions
Q: Can a lawyer warn a current client that the person they are about to do business with, a former client, committed fraud?
A: Per the opinion, not without the former client's consent. The committee concluded that section 6068(e) protects the former client's secret, including a prior crime, and that no future-harm exception applied on these facts.
Q: Does the lawyer need the former client's consent to take on the new matter?
A: Per the opinion, yes, where the prior fraud is "material" under Rule 3-310(D). The committee defined material information as what a reasonable attorney would be obliged to impart to the client absent confidentiality, and assumed the fraud met that standard.
Q: Does Rule 3-310(A) require the former client's consent too?
A: No. The committee concluded Rule 3-310(A) requires only the current client's informed written consent, contrasting its language with subsection (D)'s explicit reference to former clients.
Q: If the former client will not consent, what can the lawyer tell the new client?
A: The committee concluded the firm may simply tell the client it cannot undertake the representation because of a conflict of interest, and that it is bound not to say more for fear of revealing confidences.
Background and rules framework
The opinion interprets former California Rule 3-310 (subsections (A) and (D)), the predecessor former Rule 5-102(A), and Business and Professions Code section 6068(e). Rule 3-310 corresponds to ABA Model Rules 1.7 and 1.9; section 6068(e) is California's confidentiality duty, paralleling Model Rule 1.6. The committee read subsection (D)'s materiality requirement against the prior "substantial relationship" line of cases.
Citations and references
Rules of Professional Conduct (former):
- California Rule 3-310 (avoiding adverse and conflicting interests)
- California Rule 5-102(A) (predecessor; disclosure of relation with adverse party)
Statutes:
- California Business and Professions Code section 6068(e) (duty to preserve client secrets)
Cases:
- People v. Singh, 123 Cal.App. 365 (1932), prior crime is a protected confidence
- Global Van Lines, Inc. v. Superior Court, 144 Cal.App.3d 483 (1983)
- Goldstein v. Lees, 46 Cal.App.3d 614 (1975), information that "inherently tempts" the attorney
- Trone v. Smith, 621 F.2d 994 (9th Cir. 1980), substantial-relationship test
- Anderson v. Eaton, 211 Cal. 113 (1930)
- Zweig v. Hearst Corp., 594 F.2d 1261 (9th Cir. 1979) and TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), securities materiality
Other opinions cited:
- LACBA Formal Opinions 159, 274, 353, 389, 395, 406, 436
See also
- LACBA Ethics Op. 501: Conflicts of Interest in Changing Law Firms
- LACBA Ethics Op. 524: Hiring Non-Lawyer Employees and Screening for Confidential Information
- LACBA Ethics Op. 519: No Self-Defense Exception to Confidentiality for Third-Party Claims
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2010980