If a lawyer learns that opposing counsel got confidential help from the lawyer's own firm and breached a prior settlement's confidentiality clause, must the lawyer tell the client and report the other lawyers?

Plain-English summary

Attorney A represented a client in an employment case against an employee represented by Attorney C. Attorney B, a lawyer in Attorney A's firm who had handled prior employment matters for the same client, was close friends with Attorney C and admitted advising him on how to litigate against the client. Attorney C then revealed he knew the confidential terms of a prior settlement the client had reached, terms Attorney B had negotiated, and had interviewed the opposing lawyer (Attorney D) and his client from that earlier matter about the confidential settlement. The questions were whether Attorney A had to tell her client about the breach of the prior settlement's confidentiality clause, and whether she had to report Attorney B and Attorney D.

The committee concluded that under Rule 1.4 Attorney A must keep the client reasonably informed and must therefore disclose the breach, because Attorney C's knowledge of the prior settlement bore directly on current settlement negotiations and the client could not make an informed decision without it. On reporting, the committee read Rule 1.6 broadly (citing ABA Formal Op. 90-358 that the rule covers all information relating to a representation), and concluded Attorney B violated Rules 1.6 and 1.8(b) by using information from his prior representation of the client to help an adversary. Because loyalty is essential to the lawyer-client relationship, that violation raised a substantial question as to Attorney B's honesty, trustworthiness, and fitness, triggering a duty to report under Rule 8.3(a). Attorney D's participation with his client in an interview about the specific terms of the confidential settlement may have violated Rule 8.4(d) and (e); if so, Attorney A would also have a duty to report him.

The committee qualified both reporting duties with Rule 8.3(c): because the reporting requirement was made subject to Rule 1.6 when the rules were promulgated in 1990, Attorney A may not report either lawyer without the client's consent, and the comment to Rule 1.6 suggests she should encourage the client to consent where disclosure would not substantially prejudice the client's interests.

In practice

Under the South Carolina rules as they stood at the time of the opinion, the committee held that a lawyer who learns that a settlement's confidentiality clause has been breached in the course of current negotiations must inform the affected client under Rule 1.4, and that a firm lawyer's use of a former client's confidences to assist an adversary violates Rules 1.6 and 1.8(b) and raises a substantial question of fitness that triggers the Rule 8.3 reporting duty. The opinion also held that the duty to report is itself limited by Rule 1.6, so the lawyer must obtain the client's consent before reporting. South Carolina revised its Rules of Professional Conduct effective 2005, and Rule 8.3 and Rule 1.6 were among the rules amended; verify the current text of Rules 1.6, 8.3, and 8.4 before relying on the specific cross-references described here.

Common questions

Q: If opposing counsel reveals he knows the confidential terms of my client's prior settlement, must I tell my client?

A: Yes. The committee concluded that Rule 1.4 required Attorney A to inform the client of the breach, because the opposing lawyer's knowledge was clearly relevant to current settlement negotiations and the client could not make an informed decision without it.

Q: A lawyer in my firm secretly coached the other side using a former client's confidences. Do I have to report him?

A: The committee concluded yes under Rule 8.3(a): using information from a prior representation to help an adversary violates Rules 1.6 and 1.8(b), and the disloyalty raises a substantial question as to the lawyer's honesty, trustworthiness, and fitness.

Q: Can I report the misconduct without my client's permission?

A: No. The committee concluded that Rule 8.3(c) makes the reporting duty subject to Rule 1.6, so Attorney A had to obtain the client's consent before reporting; the comment to Rule 1.6 suggests encouraging the client to consent where it would not substantially prejudice the client.

Q: Does it matter that the lawyer disclosed strategy rather than a labeled "confidence"?

A: No. The committee read Rule 1.6 to cover all information relating to the representation regardless of source (citing ABA Formal Op. 90-358), so advising an adversary on how to pursue a claim against the client was no less a violation than disclosing a labeled confidence.

Background and rules framework

The opinion interprets South Carolina RPC 1.4 (communication), 1.6 (confidentiality of information), 1.8(b) (using client information to the client's disadvantage), 8.3 (reporting professional misconduct, including the 8.3(c) limit tied to Rule 1.6), and 8.4(d) and (e) (conduct prejudicial to the administration of justice and implying ability to improperly influence), corresponding to the like-numbered Model Rules. The committee relied on ABA Formal Opinion 90-358 for the breadth of information protected by Rule 1.6.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.4 / Model Rule 1.4: keeping the client reasonably informed.
• South Carolina RPC 1.6 / Model Rule 1.6: confidentiality of information relating to the representation.
• South Carolina RPC 1.8(b) / Model Rule 1.8(b): using client information to the client's disadvantage.
• South Carolina RPC 8.3 / Model Rule 8.3: reporting misconduct, subject to Rule 1.6 under 8.3(c).
• South Carolina RPC 8.4(d), (e) / Model Rule 8.4(d), (e): conduct prejudicial to the administration of justice; implying improper influence.

Other opinions cited:

• ABA Formal Op. 90-358 (scope of information protected under Rule 1.6).

See also

• ABA Formal Op. 04-433: Reporting misconduct of a non-practicing lawyer
• ABA Formal Op. 03-431: Reporting an impaired lawyer outside the firm
• SC Bar Ethics Op. 02-13: Reporting and warning about an impaired referral lawyer

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-02-15/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 02-15

"Attorney A" represents “Client” in an employment case. Attorney A’s “Firm” has handled employment cases for Client in the past. "Attorney B" works for Firm and has previously handled employment cases for Client.

"Attorney C" represents “Employee” in the case being handled by Attorney A. Attorney C is also very good friends with Attorney B, and the two socialize together regularly.

Attorney A was surprised when Attorney C insisted on a hearing in their case, because she believed that a direct appeal without a hearing would have been better for Employee, given the evidence in the case. Attorney B later admitted to Attorney A that he had told Attorney C a direct appeal (waiving a hearing) would be best for Employee, because cases are less likely to be overturned if a hearing is held.

A few weeks later, Attorney C told Attorney A that he knew about a prior case Client had settled and asked if Client would be willing to settle the present case with Employee on the same terms. Evidently, Attorney B had settled a case on behalf of Client with “Attorney D” a year earlier on the same terms. That settlement contained a confidentiality clause.

Attorney B denied having discussions with Attorney C about the prior confidential settlement. Attorney C admits that he has interviewed Attorney D and Attorney D’s client about the prior confidential settlement with Client.

QUESTIONS PRESENTED

1. Does Attorney A have a duty to inform Client about the breach of the prior settlement agreement’s confidentiality clause?
2. Does Attorney A have a duty to report Attorney B to his jurisdiction’s disciplinary authority for misconduct?
3. Does Attorney A have a duty to report Attorney D to his jurisdiction’s disciplinary authority for misconduct?

SUMMARY
Attorney A has a duty to keep Client reasonably informed and, therefore, has a duty to inform Client about the breach of the prior settlement agreement’s confidentiality clause under Rule 1.4. Attorney B violated Rules 1.6 and 1.8(b) when he counseled Attorney C on how best to pursue a claim against Client. Pursuant to Rule 8.3, Attorney A has a duty to report Attorney B because his violations raise a substantial question as to his honesty, trustworthiness, and fitness as a lawyer. By participating with his client in an interview regarding the specific details of the confidential settlement agreement, Attorney D may have engaged in conduct violating Rules 8.4(d) and (e). If so, Attorney A would also have a duty to report Attorney D’s misconduct. However, Rule 8.3 requires that Attorney A obtain Client’s consent in accordance with Rule 1.6 prior to reporting them to the appropriate disciplinary authority.

OPINION
Duty to inform Client
Pursuant to Rule 1.4 of the South Carolina Rules of Professional Conduct (Rule 407, S.C.A.C.R.), Attorney A has a duty to keep Client reasonably informed about the status of the pending case, as well as a duty to explain matters to the extent reasonably necessary to permit Client to make informed decisions regarding representation. The comments to Rule 1.4 further indicate that this duty requires Attorney A to inform the client of communications from another party and take other reasonable steps that permit the client to make a decision regarding a serious offer from another party.

Because Attorney A has learned that the confidentiality clause contained in the prior settlement agreement was breached in the context of a settlement demand from Attorney C, Attorney A would have an obligation to inform Client of the breach.

Under the circumstances, Attorney C’s knowledge of the prior settlement is clearly relevant to current settlement negotiations. Client could not make an informed decision about settling the present case without a full understanding of Attorney C’s position. Therefore, in order to fulfill her duty to Client under Rule 1.4, Attorney A would necessarily be required to inform Client that the confidentiality clause contained in the prior settlement had been breached.

Duty to report Attorney B
The issue of whether Attorney A has a duty to report Attorney B for misconduct is governed by Rule 8.3 of the South Carolina Rules of Professional Conduct. Under Rule 8.3(a), A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.

Based upon the facts presented it appears that Attorney B discussed Employee’s case with Attorney C. If so, Attorney B violated Rule 1.6[1] and Rule 1.8(b)[2] when he counseled Attorney C on how best to pursue a claim against Client. Such advice was based, presumably, upon knowledge gained in his prior representation of Client. The question then becomes whether Attorney B’s violation of Rule 1.6 and Rule 1.8 does, in fact, raise a substantial question as to his honesty, trustworthiness, or fitness as a lawyer.

While Attorney B may not have disclosed “confidential” information to Attorney C, the scope of information protected from disclosure under Rule 1.6 is intentionally broad. Rule 1.6, which is based upon the model rule, has been interpreted by the American Bar Association to cover all information relating to the representation of a client, whatever the source of the information and regardless of when the information is obtained. ABA Formal Op. # 90-358. Therefore, Attorney B’s disclosure of information on how best to pursue a claim against Client is no less a violation of Rule 1.6 than if he had disclosed “confidential” information.

This Committee would submit that such a violation of Rule 1.6 and Rule 1.8 does, in fact, raise a substantial question as to Attorney B’s “honesty, trustworthiness, or fitness as a lawyer.” Without question, loyalty is an essential element in an attorney’s relationship with a client.[3] Attorney B’s advice to Attorney C, his friend, and his admission of the same demonstrates that his loyalties lie with his friend, and not with Client as the Rules of Professional Conduct require. His casual disregard for Client certainly raises a question as to Attorney B’s trustworthiness and fitness as a lawyer. The question is substantial because his conduct constitutes more than a mere technical violation of the Rules of Professional Conduct. In fact, his conduct belies his very purpose as a lawyer. Therefore, Attorney A has a duty report Attorney B’s conduct under Rule 8.3(a).[4]

However, even if Attorney A has a duty to report Attorney B’s conduct under Rule 8.3(a), she may not disclose this information without Client’s consent pursuant to Rule 8.3(c). When the Rules of Professional Conduct were promulgated in 1990, the reporting requirement now embodied in Rule 8.3 was explicitly made subject to Rule 1.6 to protect information relating to the representation of a client.[5] While Client’s consent must be obtained before the violation may be reported, the official comments to Rule 1.6 suggest that Attorney A should encourage Client to consent to disclosure if it would not substantially prejudice Client’s interests.

Duty to report Attorney D
The issue of whether Attorney A has an affirmative duty to report Attorney D’s conduct must also be evaluated according to the test set forth in Rule 8.3 of the South Carolina Rules of Professional Conduct. Again, according to Rule 8.3, Attorney A must report Attorney D’s breach of the confidentiality clause contained in his settlement agreement only if (1) that breach violates the Rules of Professional Conduct and (2) raises a substantial question as to Attorney D’s honesty, trustworthiness, or fitness as a lawyer.

Based upon the facts presented, Attorney D and his client were required to keep their settlement with Client confidential. By participating with his client in an interview regarding the specific details of this “confidential” settlement agreement, Attorney D may have engaged in conduct violating Rules 8.4(d) and (e).

However, even if Attorney A has a duty to report Attorney D’s conduct under Rule 8.3(a), she may not disclose this information without Client’s consent pursuant to Rule 8.3(c) and Rule 1.6. As discussed above, the scope of information covered by Rule 1.6 is construed broadly and would certainly include information pertaining to a confidential settlement agreement and the breach thereof. Rule 1.6 requires Attorney A to consult Client about the breach of the confidentiality and to obtain Client’s consent prior to reporting Attorney D’s conduct to the bar.

[1] According to Rule 1.6(a), “A lawyer shall not reveal information relating to the representation of a client unless the client consents after consultation …”

[2] Rule 1.8(b), reads, in pertinent part: “A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client consents after consultation …”

[3] See the official comment to Rule 1.7.

[4] Note that it is unclear from the facts presented whether Attorney B or Attorney D are members of the South Carolina Bar. While the conduct of Attorney B and Attorney D may or may not violate the rules of professional conduct applicable in their jurisdictions (note that South Carolina’s Rules 1.6, 1.8 and 8.4 are substantially the same as the corresponding model rules), this does not relieve Attorney A of her duty under South Carolina’s Rule 8.3. Attorney A is bound by Rule 8.3 to report Attorney B and Attorney D to their respective bars under these facts.

[5] See John Freeman, Reporting Lawyer Misconduct, 5 Jun. S.C. Law. 7 (1994).