Must a Tennessee lawyer report another lawyer's escrow-account misappropriation if doing so could hurt the lawyer's own client's chances of recovering the misappropriated funds?

Currency note

This opinion was issued in 1984, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility. 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 Treat this page as historical context, not current guidance.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.

Plain-English summary

Attorney B, while representing a savings and loan association, diverted substantial amounts from an escrow account that were intended to be paid to a borrower of the association. Attorney B agreed to return the funds, made a substantial refund, assigned expected fees from a lawsuit, and separately owed the association on various loans. Attorney A, who represented the savings and loan association, learned of the diversion when Attorney B admitted it and provided copies of escrow-account checks substantiating it. Attorney A asked whether he was obligated to report the ethics violation, given that a suspension or disbarment of Attorney B might be detrimental to the client's effort to recover the misappropriated funds from him.

The opinion applied Disciplinary Rule 1-102(A), which "provides that a lawyer possessing unprivileged knowledge of misconduct or violation of a Disciplinary Rule is required to report such knowledge to the proper disciplinary authority," and Disciplinary Rule 7-101(A)(3), which states "that a lawyer shall not intentionally prejudice or damage his client, except as required by DR 7-102 to report the perpetration of a fraud by the client or a third party." Reading those rules together, the opinion concluded that, "in order to maintain the integrity of the profession," Attorney A is obligated to report the ethics violation by Attorney B "even though such report may be detrimental to the effort of the client savings and loan association to recover funds misappropriated by Attorney B."

Common questions

Q: Must a lawyer report another lawyer's misappropriation even if it could hurt the reporting lawyer's own client's recovery?

A: Yes. The opinion held that, "in order to maintain the integrity of the profession," the reporting lawyer is obligated to report the violation "even though such report may be detrimental to the effort of the client... to recover funds misappropriated."

Q: What rule creates the duty to report another lawyer's misconduct?

A: Disciplinary Rule 1-102(A), which the opinion quotes as providing "that a lawyer possessing unprivileged knowledge of misconduct or violation of a Disciplinary Rule is required to report such knowledge to the proper disciplinary authority."

Q: Doesn't a lawyer's duty not to prejudice his own client override the reporting duty here?

A: No. The opinion reconciled the two rules by reading DR 7-101(A)(3)'s prohibition on prejudicing a client together with its built-in exception for reports required under DR 7-102, concluding the reporting duty controls.

Background and rules framework

The opinion applied Disciplinary Rule 1-102(A) (mandatory reporting of unprivileged knowledge of another lawyer's misconduct) and Disciplinary Rule 7-101(A)(3) (prohibition on prejudicing a client, subject to the DR 7-102 exception for required fraud reporting) of the Code of Professional Responsibility. The modern correlates are Model Rule 8.3 (reporting professional misconduct) and Model Rule 1.15 (safekeeping property, the rule governing the underlying escrow-account violation), cited here as navigational cross-references rather than rules the opinion itself applied.

Citations and references

(No cases or other Tennessee opinions are cited in the opinion text.)

See also

• VSB Op. 1468: Obligation to Report Attorney Misconduct
• NYSBA Op. 854: Reporting Known or Suspected Violation of Rules of Professional Conduct by Another Lawyer

Source

• Landing page: https://www.tbpr.org/ethic_opinions/84-f-69

Original opinion text

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

84-F-69 - Reporting Misappropriation

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 84-F-69

Inquiry is made as to the obligation of Attorney A to report an ethics violation by Attorney B when such a report may be detrimental to the client of Attorney A in recovering funds from Attorney B in event of suspension or disbarment.

Attorney B, while representing a savings and loan association, diverted substantial amounts from his escrow account that was intended to be paid to a borrower of the savings and loan association. The attorney has agreed to return the funds. He has made a substantial refund and assigned expected fees from a lawsuit. In addition, Attorney B owes the savings and loan association substantial amounts in various loans to him over the years.

Attorney A represents the savings and loan association and inquires as to his obligation to report the ethics violation by Attorney B, citing that a suspension or disbarment of Attorney B may be detrimental to his client in recovering from Attorney B.

Attorney B has admitted to Attorney A the diversion of clients' funds and has provided Attorney A with copies of checks from his escrow account substantiating the diversion of funds from the savings and loan association.

Disciplinary Rule 1-102(A) of the Code of Professional Responsibility provides that a lawyer possessing unprivileged knowledge of misconduct or violation of a Disciplinary Rule is required to report such knowledge to the proper disciplinary authority.

Disciplinary Rule 7-101(A)(3) of the Code states that a lawyer shall not intentionally prejudice or damage his client, except as required by DR 7-102 to report the perpetration of a fraud by the client or a third party.

Therefore, in order to maintain the integrity of the profession, Attorney A is obligated to report the ethics violation by Attorney B even though such report may be detrimental to the effort of the client savings and loan association to recover funds misappropriated by Attorney B.

This 12th day of April, 1984.

ETHICS COMMITTEE:

G. Wilson Horde

T. Maxfield Bahner

Charles T. Herndon, III

APPROVED AND ADOPTED BY THE BOARD