May a lawyer who serves on a corporation's board disclose a client's financial trouble to the corporation?

Plain-English summary

Bar Counsel asked about a lawyer who served as a director of a Maine corporation and had reason to believe one of his clients was in significant financial trouble. The corporation on whose board he sat was at risk because of its business relationship with the client (a relationship the lawyer had not arranged). The question was whether the lawyer could tell the corporation about the client's financial problems so the corporation could minimize its loss, and if not, how he could fulfill his duties as a director.

The Commission concluded that if the lawyer's knowledge of the client's financial troubles was gained in the professional relationship, Maine Bar Rule 3.6(l) barred him from disclosing it to the corporation. It pointed to Rule 3.6(l)(1) and (5), which prohibit disclosing a confidence or secret of a client and define "secret" to include information gained in the professional relationship whose disclosure would be embarrassing or detrimental to the client.

If the information was gained other than in connection with the representation (for example, through a media report of the client's affairs), the Commission concluded the Bar Rules would not prohibit disclosing that public information. It noted, however, that whether the lawyer would face common-law liability for breach of fiduciary duty was a question of law beyond its authority, and observed that ABA Model Rule 1.8(b) bars a lawyer from using information relating to a representation to a client's disadvantage without consent, and that Model Rule 1.9(b)'s exception for generally known information about a former client does not apply to a present client. Finally, if the lawyer did not disclose, the Commission directed that he should determine whether non-disclosure was incompatible with his duties as a corporate director under Maine law (13-A M.R.S.A. section 716), but held the circumstances requiring resignation from the directorship were fact-specific questions of law beyond its authority.

Currency note

This opinion was issued in 1990, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer who sits on a company's board warn the company about a client's financial trouble?

A: The opinion concluded that if the lawyer learned of the trouble in the professional relationship, Rule 3.6(l) bars him from disclosing it to the corporation as a client secret.

Q: Does it matter how the lawyer learned of the client's trouble?

A: The opinion concluded yes. Information gained outside the representation, such as from a media report, is public information the Bar Rules do not bar him from disclosing.

Q: If the lawyer stays silent, does that solve the problem of his director duties?

A: The opinion held that whether non-disclosure is incompatible with his duties as a director under Maine corporate law, and whether resignation is required, are fact-specific questions of law beyond the Commission's authority.

Q: Could the lawyer face liability for disclosing even public information?

A: The opinion noted that whether the lawyer would be liable at common law for breach of fiduciary duty is a question of law it could not decide, and pointed to ABA Model Rule 1.8(b)'s bar on using representation information to a client's disadvantage.

Background and rules framework

The opinion interprets Maine Bar Rule 3.6(l)(1) and (5), which barred disclosure of a client's confidence or secret and defined "secret" to include information gained in the professional relationship whose disclosure would be embarrassing or detrimental to the client. These correspond to ABA Model Rule 1.6 (confidentiality of information) and Model Rule 1.8(b) (use of client information to the client's disadvantage), both of which the opinion cites.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 (confidentiality of information); Model Rule 1.8(b) (use of information to client's disadvantage); Model Rule 1.9(b)
• Maine Bar Rule 3.6(l)(1), 3.6(l)(5)

Statutes:

• 13-A M.R.S.A. section 716 (duties of corporate directors)

See also

• Maine Ethics Op. 134: Supervisory Liability for a Breach of Confidentiality
• Maine Ethics Op. 116: Client Funds Owed to Third Persons

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=91108

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Issued by the Professional Ethics Commission

Date Issued: June 27, 1990

Question

Bar Counsel has requested an advisory opinion regarding the following question:

A member of the Maine Bar who serves as a director of a Maine corporation has reason to believe that a client of his is in significant financial trouble. The corporation upon whose board he sits is at risk by reason of its business relationship with his client, not a relationship arranged by the attorney. Can the attorney disclose to the corporation that his client is having serious financial problems, thus enabling the corporation upon whose board he sits to minimize the extent of the loss to it? If not, how does he fulfill his duties as a director to the corporation?

Opinion

It is the opinion of the Commission that if the lawyer's knowledge of the information concerning his client's financial troubles was gained "in the professional relationship" between the lawyer and the client, the lawyer is prevented by Maine Bar Rule 3.6(l) from disclosing that information to the corporation. See Maine Bar Rule 3.6(l)(1) and (5) (prohibiting disclosure of a "confidence or secret" of a client and defining "secret" as including "information gained in the professional relationship . . . the disclosure of which would be embarrassing or detrimental to the client").

If that information concerning the client's financial difficulties was gained by the lawyer other than in connection with the lawyer's representation of the client, for example, through a media report of his client's financial affairs, the lawyer would not be prohibited by the Maine Bar Rules from disclosing that public information. Whether the lawyer would be subject to common law liability for breach of fiduciary duty for reporting that information under circumstances that would be detrimental to the client is a question of law, which is beyond the authority of the Commission. In that regard, however, it should be noted that ABA Model Rule 1.8(b) prohibits a lawyer from using information relating to representation of a client to the disadvantage of the client unless the client consents thereto after consultation. ABA Model Rule 1.9(b) permits disclosure of information generally known about a former client, but that public information exception does not apply regarding a present client. ABA Model Rule 1.8(b).

Under the circumstances presented, if the lawyer does not disclose the information in question to the corporation, the lawyer should determine whether the non-disclosure of the information in question to the corporation is incompatible with his duties as a director of a corporation under Maine law, 13-A M.R.S.A. § 716. The circumstances under which the lawyer's resignation from his directorship would be mandated are fact-specific and involve questions of law beyond the authority of the Commission.