Can a lawyer for a partnership tell the limited partners about the general partner's misconduct?

Plain-English summary

An attorney engaged by the general partner to render services for a limited partnership, with fees paid from a partnership account, discovered through his own investigation and outside sources that the general partner had committed acts that, while in the attorney's view not criminal or fraudulent, would adversely affect the limited partners' interests. The general partner admitted the acts but refused the attorney's request to disclose them to the limited partners. The communications had never been designated confidential. The attorney asked whether he could disclose the information to the limited partners without violating his duty to respect the general partner's confidences. The committee answered in the affirmative.

Assuming the limited partnership entity was the client, the committee reasoned that the attorney owed primary allegiance to the partnership, not to any individual connected with it. Where a lawyer for an entity discovers improprieties by an officer, partner, or member that may adversely affect others in the entity, the lawyer may disclose to the entity's governing body so it can act to protect the entity's interests. But where the governing body itself is implicated, disclosure to partners or shareholders outside the governing body may be warranted so they can protect their interests if the governing body could not reasonably be expected to do so. Because the general partner was the sole governing body and could not be expected to protect the limited partners, the attorney could disclose the improprieties to them.

The committee concluded the disclosure was not barred by the duty to preserve client confidences, because the duty of loyalty to the partnership was paramount to any duty to respect the secrets of an individual partner. It distinguished N.Y. State 555 (1984), where a confidential communication from one partner in a two-person partnership could not be disclosed to the other; there the lawyer had learned the disadvantageous fact solely from the partner who had designated it confidential in advance, while here there was no such designation and the attorney had learned of the acts through his own investigation and outside sources. Finally, the committee cautioned that the differing interests of the general and limited partners might require the attorney to discontinue representing the partnership, the general partner, or any limited partner in partnership matters if he determined his independent professional judgment would likely be affected, citing DR 5-105(B).

Currency note

This opinion was issued in 1986, before New York replaced the Code of Professional Responsibility (the Disciplinary Rules cited here) with the New York Rules of Professional Conduct, effective April 1, 2009. Representation of an organization as the client is now addressed by Rule 1.13, confidentiality by Rule 1.6, and conflicts by Rule 1.7. 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: Who is the client when a lawyer represents a partnership?

A: The committee assumed the limited partnership entity was the client, so the attorney owed primary allegiance to the partnership rather than to any individual partner.

Q: Can the lawyer disclose a managing partner's misconduct to the other partners?

A: The committee concluded the lawyer may disclose to the governing body, and to partners outside it where the governing body is implicated and cannot be expected to protect the others, as was the case here.

Q: Does the duty of confidentiality prevent the disclosure?

A: The committee concluded it did not, because the duty of loyalty to the partnership was paramount to any duty to keep an individual partner's secrets, especially where the information was not designated confidential and came from the lawyer's own investigation.

Q: Does the lawyer have to keep representing everyone after disclosing?

A: The committee concluded the differing interests might require the lawyer to discontinue representing the partnership or a partner in partnership matters if his independent judgment would likely be affected, citing DR 5-105(B).

Background and rules framework

The opinion applied the loyalty principles of EC 5-1 (material information for the client) and EC 5-18 (the entity, not its constituents, is the client), the confidentiality duty of Canon 4, and the conflict-withdrawal rule DR 5-105(B) read with EC 5-14. These correspond to ABA Model Rule 1.13 (organization as client), Model Rule 1.6 (confidentiality), and Model Rule 1.7 (conflicts of interest).

Citations and references

Rules of Professional Conduct:

• New York Code DR 5-105(B); EC 5-1, EC 5-14, EC 5-18; Canon 4 (applied in the opinion)
• MR 1.13 (organization as client); MR 1.6 (confidentiality); MR 1.7 (conflicts)

Cases:

• Spector v. Mermelstein, 361 F. Supp. 30 (S.D.N.Y. 1972), duty to provide material information to the client

Other opinions cited:

• N.Y. State 555 (1984): confidence of one partner not disclosable to the other (distinguished)
• ABA Formal Op. 202 (1940); ABA Inf. Op. 1318 (1975); ABA Inf. Op. 1441 (1979): disclosure within an entity and withdrawal
• Tex. Op. 387 (1977); Fla. Op. 65-59 (1965): disclosure to constituents when the governing body is implicated

See also

• NYC Bar Formal Op. 1994-10: Confidences and the Disclosure of Organizational Wrongdoing
• NYC Bar Formal Op. 1999-07: Joint Representation, Duty of Loyalty, and Client Confidences

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-1986-2/