Ethics Opinion

Opinion No. 81-1

January 1981

Summary: An attorney's duty to preserve confidences and secrets may arise even from a "threshold" interview which does not lead to further representation. Therefore, if the non-lawyer at such an interview discloses matters relating to a potential claim against one of the lawyer's clients, the lawyer may be prohibited from disclosing them to the client and from disclosing them in connection with an auditor's letter inquiring about potential litigation. The American Bar Association's Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information does not, in any case, mandate such disclosure. The committee has not been asked, and therefore expresses no opinion on, the question of the extent to which a threshold interview may disqualify an attorney in some matter.

Facts: A law firm represents a corporation for essentially all purposes (incorporation, financing, preparation of corporate minutes, asserting claims against others, etc.). Part of the representation includes advising the corporation of unasserted possible claims which may call for disclosure to the auditors of the corporation pursuant to Paragraph 6 of the American Bar Association's Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information. The law firm anticipates receiving the annual request for such information to be delivered to the auditors and has reason to know that the financial statements prepared by the auditors will be relied upon by third parties. The law firm further states:
A member of the law firm conducts a "threshold" interview with a potential client during the course of which facts are disclosed to the lawyer which puts him on notice of a potential claim which would constitute a material loss contingency to the corporation. The lawyer advises the potential client of the conflict and does not undertake to represent him.
A lawyer in a firm inquires as to whether the firm may, or is required to, disclose the information to the corporate client and to the auditors of the corporate client in response to their annual request for information about unasserted possible claims.

Discussion: The issues can best be divided into ones relating to disclosure directly to the corporate client and disclosure to the auditors.
1. Disclosure to the Corporate Client. Because of its duties to represent its clients zealously (see DR 7-101), the law firm would be required to reveal the information to its corporate client if it is material and if doing so were not forbidden by another disciplinary rule.
DR 4-101(B) provides that, with certain exceptions, a lawyer "shall not knowingly ... (r)eveal a confidence or secret of his client." The first question, then, is whether the interviewee at the "threshold" interview (the "interviewee") was protected by this rule. In MBA Opinion 76-6, this committee stated that ''(w)here an attorney has been shown a document by a person who sought (unsuccessfully) to retain him as trial counsel, while advising the person as to some of the basic legal considerations involved in the suit, the attorney-client relationship existed ... ." See also MBA Opinion 75-7 (term "client" in DR 4-101(B) includes former client). Even where no legal advice is given, the communications made by an interviewee in a preliminary interview looking to the establishment of an attorney-client relationship are generally made in the expectation of confidentiality and courts have recognized that they should be protected. See Commonwealth v. O'Brien, 1979 Mass. Adv. Sh. 985, 987 (stating in dictum that ''(t)he attorney-client privilege may extend to preliminary communications looking toward representation even if representation is never undertaken"); Wigmole on Evidence SS2292, 2304 (McNaughton rev. 1961); Westinghouse Elec. Corp. v. Kerr-McGee Corp., 508 F.2d 1311 (7th Cir.) cert. denied, 439 U.S. 955 (1978) (indicating that a duty to preserve confidences arises where they are disclosed to the lawyer by a party who reasonably believes that a confidential relationship exists).
Whether or not the interviewee was protected depends on all the facts and circumstances, of course, but it is likely that in this case he was. The duty to preserve client confidences and secrets survives termination of the attorney-client relationship. See MBA Opinion 75-7 and EC 4-6, which provides in part that the obligation of a lawyer to preserve the confidences and secrets of his client continues after termination of his employment.
Therefore, if there was a confidential relationship within the meaning of these rules, the law firm may not reveal the information in question without consent if the information was a "confidence or secret." Those terms are broadly defined in DR 4-101(A) as follows:
"Confidence" refers to information protected by the attorney-client privilege under applicable law, and "secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.
Although the matter turns, in part, upon facts not communicated to this committee, it seems likely that the information disclosed by the interviewee included confidences or secrets, since an unasserted claim was involved.
Confidences and secrets may, however, be revealed "with the consent of the client ... after full disclosure." DR 4-101(C)(1). Therefore, in order to represent its corporate client zealously, as required by DR 7-101, the law firm should seek such consent, after making it clear to the interviewee that the law firm no longer represents him and that it may be in his interest to seek other counsel regarding his consent. If the interviewee was protected within the meaning of the relevant rules, if the information in question is a confidence or secret of the interviewee, and if such consent is not obtained, the law firm may not reveal the information.
2. Disclosure to the Auditors. For the same reasons, dis-closure may not be made to the auditors if it may not be made to the corporate client: that is, if the interviewee was protected, if the information in question is the interviewee's confidence or secret, and if consent from the interviewee is not obtained after full disclosure.
If the law firm is permitted to disclose to the auditors under this standard, nevertheless it should not do so without also obtaining the informed consent of the corporate client. The firm should consider, in this connection, American Bar Association, Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information (1975), reprinted in 31 Bus. Law. 1709 (1976) and, especially, Paragraph 1 thereof, which discusses the nature of informed consent under these circumstances. The firm should also consider, and perhaps discuss with the corporate client, whether disclosure to the auditors is in fact necessary. See id, P 5, in which the statement that it is proper for a lawyer to disclose unasserted claims against his client in some circumstances is qualified by the phrase: "if the lawyer has been engaged by the client to represent or advise the client professionally with respect thereto and he has devoted substantive attention to them in the form of legal representation or consultation." (Emphasis added.)

Permission to publish granted by the Board of Delegates on February 25, 1981. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.