Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
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May an attorney represent a client in a proceeding adverse to one person who consulted the attorney in connection with another matter?
An attorney may represent a client adverse to one who consulted the attorney in connection with another matter except where in doing so he would be violating a legitimate expectation of confidentiality with respect to information provided during the consultation. The consulting person is a "client" for purposes of analysis and the attorney is prohibited from disclosing his secrets or undertaking another representation where he might be called upon to use information obtained in confidence against the consulting person. There is no distinction between individuals and entities for purpose of this analysis.
Rules 4-101 and 5-102 of the Rules of Professional Conduct of the State Bar of California.
Business and Professions Code section 6068, subdivision (e).
An attorney ("Attorney") is a known specialist in the area of insurance litigation. A prospective client ("Inquirer") believed himself to have a claim against an insurance carrier and met with the Attorney to discuss the proper method of handling the claim and the possible retention of the Attorney to pursue the claim. After reviewing correspondence which indicated the nature of the claim (alleged burglary losses), the identity of the insurance carrier, and the carrier's basis for non-payment (alleged fraud in the claim), the Attorney advised the Inquirer that the Attorney routinely represents insurance carriers, including the carrier in question, and would be unable to represent Inquirer. The Attorney outlined the elements of a bad faith claim, expressed no opinion as to the Inquirer's cause and gave the Inquirer the names of some attorneys believed by the Attorney to be active and competent in handling plaintiffs' claims of the type the Inquirer might possess. Years later the Attorney was requested by the same insurance carrier to pursue an action against the Inquirer for recovery of multiple payments on a series of allegedly fraudulent insurance claims (fire losses). The Attorney inquires whether and under what conditions he may do so.
At the outset, we note that the answer is governed by the following:
"A member of the State Bar shall not accept employment adverse to a client or former client, without the informed and written consent of the client or former client, relating to a matter in reference to which he has obtained confidential information by reason of or in the course of his employment by such client or former client." (Rule 4-101 of the Rules of Professional Conduct of the State Bar of California.)
"It is the duty of an attorney: to maintain inviolate the confidence and at every peril to himself to preserve the secrets of his client." (Bus. & Prof. Code, 6068, subd. (e).)
Although the scope of the professional rules prohibiting attorneys from disclosing, or using to a client's detriment, a client's confidence and the lawyer-client privilege are not coterminous1 they are sufficiently analogous that we look for guidance to that body of law developed under the lawyer-client privilege, Evidence Code section 950 et seq. Indeed, after noting that the question were usually one of law, we have previously stated that:
"One of the rules governing the jurisdiction of this Committee provides that it will decline to issue opinions when the activities, the propriety of which are in question, depend principally on questions of law rather than ethics. But here, similarly, as stated in Los Angeles County Bar Association Committee on Legal Ethics Opinion No. 259 (1959), "The question of ethics is so closely interwoven with and related to the legal question as to justify an advisory opinion for the consideration of the inquiring attorney.'" 2
Turning then to the Evidence Code, we find that it defines "client" to include persons who do not in fact retain a lawyer but merely seek to do so:
"As used in this article, 'client' means a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity, and includes an incompetent (a) who himself so consults the lawyer or (b) whose guardian or conservator so consults the lawyer in behalf of the incompetent." (Evid. Code, 951.)
Thus, a client includes a person or entity which consults a lawyer for the purpose of retention or advice even if neither results. (See e.g., Estate of Dupont (1943) 60 Cal.App.2d 276, 288 [140 P.2d 866, 872]; People v. Dorvance (1944) 65 Cal.App.2d 125, 129 [150 P.2d 10, 12]; L.A. Formal Op. 366.) In California, there is no distinction between individuals and entities as "clients" for purposes of confidences. (Evid. Code, 175.) We conclude that the Inquirer, on the facts presented, is a former client of the Attorney by virtue of the past consultation. As a result, the Attorney owes to the Inquirer the duties set forth by Business and Professions Code section 6068, subdivision (e) and rule 4-101.
Each of those duties is keyed to the transmission to the attorney during the relationship (here the consultation) of a certain kind of information.3 Although we are not privy to the specific communications here involved, their generic description leads us to presume that they included information protected by rule 4-101 and Business and Professions Code section 6068, subdivision (e).4 Indeed, California law presumes that all communications between an attorney and his client are confidential (Sharon v. Sharon (1889) 79 Cal. 633, 678 [22 P. 26, 40] rehg. den. (1889) 79 Cal. 701 [22 P. 131].) This is true whether or not an attorney-client relationship is formed. People v. Canfield (1974) 12 Cal. 3d. 699, 705 [117 Cal. Rptr. 81, 84-85]: "[W]here a person seeks the assistance of an attorney with a view to employing him professionally, any information acquired by the attorney is privileged whether or not actual employment results."
Information imparted in confidence to an attorney is protected by ethical constraints without regard to the nature and source of the information or the fact that others share the knowledge. (L.A. Formal Opinions 386, 267.) It is primarily in this regard that the ethical constraints and the lawyer-client privilege diverge. The lawyer-client privilege protects confidential "communications" and emphasizes the method of transmission (Evid. Code, 952). The ethical constraints protect confidential and secret information and emphasize the matter being communicated. A further distinction is explained in E. F. Hutton & Co. v. Brown (S.D. Tex. 1969) 305 F. Supp. 371, 393-394:
"The evidentiary privilege and the ethical duty not to disclose confidences both arise from the need to encourage clients to disclose all possibly pertinent information to their attorneys, and both protect only the confidential information disclosed. The duty not to represent conflicting interests, on the other hand, is an outgrowth of the attorney-client relationship itself, which is confidential or fiduciary, in a broader sense. Not only do clients at times disclose confidential information to their attorneys; they also repose confidence in them. The privilege is bottomed only on the first of these attributes, the conflicting-interests rule, on both."
Although, as noted, we are unable to characterize the particular communication here involved, we think it proper to presume that matters, most probably disclosed in the interview, such as the intent to sue, the range of recovery sought, and the basic facts underlying the prospective claim constitute information subject to the ethical constraints of Business and Professions Code section 6068, subdivision (e) and rule 4-101. We turn then to the effect of those rules on the attorney who possesses protected information obtained from one seeking, unsuccessfully, to retain the attorney.
Business and Professions Code section 6068, subdivision (e), standing alone, requires little explanation. In the absence of a client's consent5 it prohibits the disclosure by the attorney of secret information.6
However, rule 4-101, which, in part "implements Business and Professions Code section 6068, subdivision (e)" (People v. Johnson, supra, 105 Cal.App. 3d 884, 890, fn. 4) requires further analysis. In particular, it is necessary to focus on the connections among the first client relationship, the confidential information there obtained, and the second client relationship and the potential for use therein of the previously obtained information, Rule 4-101 states:
"A member of the State Bar shall not accept employment adverse to a client or former client, without the informed and written consent of the client or former client, relating to a matter in reference to which be has obtained confidential information by reason of or in the course of his employment by such client or former client."
Given such language, two possible interpretations present themselves: (1) the disqualifying confidential information must have been given with reference to (i.e., in the course or in contemplation of) the "matter" in question; or (2) the confidential information must merely be of a type which is relevant to, or useable to the disadvantage of the client/former client in, the "matter" for which the subsequent employment was undertaken.
California courts have adopted the latter approach, consistently holding not only that an attorney may not represent a position adverse to a former client in a given matter, but also that an attorney may not use confidential information of a former client against the former client in any matter.
Thus, in the seminal case of In re Boone (N.D. Cal. 1897) 83 F. Supp. 944, 952, the court, interpreting California law, clearly articulated the distinction and stated:
"It is the general and well-settled rule that an attorney who has acted as such for one side cannot render services professionally in the same case to the other side, nor, in any event, whether it be in the same case or not, can he assume a position hostile to his client, and one inimical to the very interests he was engaged to protect; and it makes no difference, in this respect, whether the relation itself has been terminated, for the obligation of fidelity and loyalty still continues. [Citations omitted.] Of course, it is conceded that an attorney may represent his client's adversary with perfect propriety whenever their interests are not hostile to each other. The test of inconsistency is not whether the attorney has ever appeared for the party against whom he now proposes to appear, but it is whether his accepting the new retainer will require him, in forwarding the interests of his new client, to do anything which will injuriously affect his former client in any matter in which he formerly represented him, and also whether he will be called upon, in his new relation, to use against his former client any knowledge or information acquired through their former connection. [Citations omitted, emphasis added.] . . . The relation being, in the highest degree, a confidential one, [the attorney] is bound to the strictest secrecy and the most scrupulous good faith. He is not allowed to divulge information and secrets imparted to him by his client or acquired during their professional relation, except, perhaps, in very rare circumstances, or when authorized to do so by the client himself .... The relation may terminate, but the obligation nevertheless continues."
(See also, Wutchumnaw Water Co. v. Bailey (1932) 216 Cal. 564, 573-74 [15 P.2d 505, 508-509]; Gailsbraith v. State Bar (1933) 218 Cal. 329, 333 [23 P.2d 291,292]; Jacuzzi v. Jacuzzi Bros., Inc. (1963) 218 Cal. App. 2d 24, 28 [32 Cal.Rptr. 188, 191].)
More recently, the Court in Yorn v. Superior Court (1979) 90 Cal.App.3d 669, 675 [153 Cal.Rptr. 295, 297-298] summarized the twin obligations as follows:
"Few precepts are more firmly entrenched than that the fiduciary relationship between attorney and client is of the very highest character [citations omitted] and, even though terminated, forbids (1) any act which will injure the former client in matters involving such former representation or (2) use against the former client of any information acquired during such relationship."
Further, rule 4-101 precludes acceptance of employment where an attorney may use confidential information to the detriment of a former client, whether or not he knows that he must or will do so. As stated in Gailsbraith v. State Bar, supra, 218 Cal. at p.332:
"A reasonable construction of this rule suggests that the subsequent representation of another against a former client is forbidden not merely when the attorney will be called upon to use confidential information obtained in the course of the former employment, but in every case when, by reason of such subsequent employment, he may be called upon to use such confidential information." (Emphasis added.)
Finally, as the language of In re Boone, supra, 83 F.Supp. 944, and its progeny makes clear, there need be no independent nexus between the matter in which the attorney and former client relationship was formed and the matter in which the attorney may be called upon to use the former client's confidential information. (See e.g., L. A. Formal Op. 31, representing former client's wife in divorce; prior representation of former client was in unrelated rent dispute.) Indeed, it is our opinion that certain categories of confidential information obtained in a prior matter or relationship and not related in the usual sense to the matter of the subsequent employment, are inherently likely to have the potential for adverse use in any contested matter. Such information includes, but is hardly limited to, the former client's financial and emotional ability to withstand litigation, past settlement patterns, and the priority of certain of his or her needs over others (e.g., cash flow, emotional satisfaction, tax deferral, etc.). (See e.g., Cal. Formal Op. 1980-52.)
In light of the foregoing, we are of the opinion that the Attorney cannot represent the insurance carrier in pursuing insurance fraud claims against the Inquirer unless the Attorney is wholly satisfied that by virtue of the passage of time or the nature of the confidential information in his possession there is no reasonably foreseeable likelihood that the confidential information might be useable to the detriment of the Inquirer.
In view of the foregoing, we feel it appropriate to sound a few cautionary warnings. The potential for violation of rule 4-101 is a significant one. Particularly in large law firms, among practitioners in less densely populated areas where the availability of attorneys may be limited, or among specialists in certain substantive areas, there is a material risk that information imparted in an initial interview may subsequently disqualify one or more attorneys even though no representation was undertaken. Certain practices therefore commend themselves. First, to the extent feasible, attorneys and firms should include in their conflict-of-interest records, however maintained, the identities of prospective clients from whom confidential information has been obtained. Second, the attorney(s) or their, agents who conduct the pre-representation interview(s) should maintain notes sufficient to enable them later to determine whether disqualifying information was obtained. Third, conflict checks made on new matters should include checks of prospective as well as existing clients. Fourth, attorneys should be cautious in conducting pre-retention interviews not to solicit, and where possible to avoid receiving, potentially disqualifying information unless it is necessary to do so in order to determine whether the attorney can undertake the representation. Naturally this presumes a situation where the information the attorney needs at the outset to determine whether he is ethically able, and desires, to undertake the engagement differs from the information needed to advance the client's cause. That is, however, frequently the case. Finally, any attorney who has obtained any confidential information from a former client or prospective client and who determines that the information is not disqualifying under rule 4-101 with respect to a matter for which his services are sought by a potential adversary of the former client or prospective client would be well advised to advise his current client of the past relationship and of the potential, however remote, of a disqualification motion. Although we do not here address the question whether the attorney's past involvement with the former client or prospective client is necessarily a "relation" within the meaning of rule 5-102, the concept that a new client should be aware of past matters which might impede his cause is a salutary one and served by the disclosure we suggest.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
1 Industrial Indemnity Co. v. Great American Ins. Co. (1977) 73 Cal. App. 3d 529, 536, fn.5 [140 Cal. Rptr. 806, 810, fn.5].
2 Cal. Formal Op. 1971-25. We have also been asked to consider the implications of certain disclosures by the Inquirer as possibly constituting a waiver of his privilege against self-incrimination. That is a purely legal question with respect to which we do not opine.
3 Although it is possible to distinguish between the "secrets" referred to in Business and Professions Code section 6068, subdivision (e) and the "confidential information" referred to in rule 4-101, (See CAL 1980-52; L. A. Formal Op. 386) we see no reason to do so here. We interpret both to refer to information conveyed to the attorney as to which the client has an expectation that it will not be disclosed to others nor used against him. (See Yorn v. Superior Court, infra.)
4 If no confidential information was transmitted, there is no Rule of Professional Conduct which prohibits the subsequent representation. There are, however, California cases preceding our current rules which would appear to prohibit representing one adverse to a former client in the same matter as that in which the prior representation occurred, even if no confidential information was obtained. (See Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564.) Yet another concept was developed to implement the ABA Canons of Ethics, which often conflict with the California Rules of Professional Conduct and are not binding in this jurisdiction (see CAL 1983-71; Los Angeles Formal Opinion 392, rev. Sept. 21, 1983). That concept is that subsequent representation against a former client in a "substantially related" matter is prohibited even if no confidential information is involved. (See Trone v. Smith (9th Cir. 1980) 621 F.2d 994, 999; Global Van Lines, Inc. v. Superior Court (1983) 144 Cal.App.3d 483.) That concept is in conflict with the language of rule 4-101 and appears to have been incorporated into California cases unnecessarily. Thus, cases referring to the ABA standard have usually either involved confidential information (see Industrial Indemnity Co. v. Great American Ins. Co. (1977) 73 Cal.App.3d 529; Yorn v. Superior Court (1979) 90 Cal.App.3d 669) or were resolvable under the wholly different analysis of California Rule 5-102. (See People ex. rel. Deukmejian v. Brown (1981) 29 Cal.3d 150; Anderson v. Eaton (1930) 211 Cal. 113.) Indeed, recently in Civil Service Comm'n of the County of San Diego v. Superior Court (1984) 163 Cal.App.3d 70, Justice Weiner noted the apparent inconsistency in the use of a rule 4-101 analysis by the Supreme Court in a case clearly governed by rule 5-102. More recently, the Court of Appeal, Fifth District, avoided the inconsistencies among the California Rules, the ABA standard and the decision in Civil Service Commission by holding that a written agreement constituted a waiver of a "right" to disqualify based upon a presumption that confidential information had been conveyed and that no showing had been made below that such information had been conveyed. (Elliot v. McFarland Unified School District (1985) 165 Cal.App.3d 562, 573.) The conflict among rule 4-101, the "same matter" and the "substantial relationship" tests has not to our knowledge been resolved by any California court. Until it is, it is our view that conduct expressly permitted by rule 4-101 would not be prohibited by the general concepts articulated in other contexts, eras, and jurisdictions.
5 We are of the opinion that consent, express or implied, by a client to unqualified disclosure refutes the notion that the information is secret. (See People v. Johnson (1980) 105 Cal. App.3d. 884, 892 [164 Cal.Rptr. 746, 751] (express or implied consent is "established exception").) We note, however, that while implied consent to disclosure eliminates the need to preserve a secret pursuant to Business and Professions Code section 6068, subdivision (e); express written consent is required to authorize a conflicting representation pursuant to rule 4-101. (See Cal. Formal Op. 1980-52.)
6 We have found no authority regarding, and render no opinion on the question whether, exceptions to Business and Professions Code section 6068, subdivision (e) may be created, or disclosure of otherwise protected information mandated, by a tribunal. We note that exceptions to the duty of non-disclosure are extremely limited. (See L.A. Formal Op. 353 and cases there cited.)
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