Attorneys Have Greater Freedom to Disclose Serious Misconduct

Most corporate constituents believe that you are their attorney and anything they tell you is confidential and must never be disclosed. But alas, we do not live in a "Matlockian" world. A lawyer's confidentiality obligations have never been absolute, but post-Enron, attorneys have had additional freedom to disclose confidential information that will prevent or rectify serious misconduct. Resorting to this option could destroy one's career and, at least in Minnesota, the state whistleblower laws will not protect you.

Confidentiality has been the bedrock of the attorney-client relationship. The Commentary to Model Rule 1.6 states the public policy behind confidentiality: "This contributes to the trust that is the hallmark of the client-lawyer relationship. The client is thereby encouraged to seek legal assistance and to communicate fully and frankly with the lawyer even about embarrassing or legally damaging subject matter. The lawyer needs this information to represent the client effectively and, if necessary, to advise the client to refrain from wrongful conduct. The Model Rules have never imposed an absolute duty of confidentiality; indeed, a lawyer has traditionally been permitted to disclose confidential information when he reasonably believes doing so is likely to prevent death or substantial bodily harm. Still, until recently, information relating to financial frauds was not reportable.

When the corporate autopsies of Enron, World Com and Adelphia were concluded, the examiners reasonably asked, "Where were the lawyers?" The conclusion was that an attorney's confidentiality commitments to his/her client no longer made sense when weighed against the harm that large-scale financial frauds assuredly cause to innocent victims. In the words of one SEC commissioner, "An absolute emphasis on confidentiality is incomprehensibly out of balance."

As a result, the Model Rules of Professional Conduct (Rules 1.13 and 1.6) and most state rules installed a "relief valve" permitting lawyers, in limited circumstances, to disclose otherwise confidential information relating to financial frauds.

These changes were designed so a corporate gatekeeper would be better equipped to prevent corporate wrongdoing if he/she could wave the threat of disclosure over the executives. Using that threat, however, may cost you your job without any meaningful remedy. That is what the Court of Appeals in Minnesota recently ruled in Kidwell v. Sybaritic (see "Court Rejects Blanket Ban on In-House Whistleblower Claims," p. 77).

In that case, a general counsel was fired after sending an e-mail to company executives that included the following:

"It is my firm conviction that [the company] intends to engage in tax evasion, the unauthorized practice of medicine and obstruction of justice. I do this with no ill-will. To the contrary, I wish that I was not obligated to do so."

The general counsel wrote the e-mail because he hoped "to pull the company back into compliance." This is the very conduct that the framers of the liberalized disclosure rules had hoped for; it also was the death knell to the lawyer's whistleblower claims.

The court held that a whistleblower claim under Minnesota law may not be upheld if the report is a communication that was made to fulfill the employee's job responsibilities. Thus, because the general counsel was doing his job in communicating with the company executives, he was not protected by the whistleblower statute.

This leaves us with the uneasy realization that gatekeepers may not be financially protected for discharging their ethical obligations. Still, protecting the client is the calling, even if doing so has personal consequences. That's the job. "The timorous may stay at home."

Contributing Author

Brian Martin

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