The trustee for shareholders of a corporation under a liquidating trust agreement was charged with the duty of receiving funds, paying the creditors of the corporation, and then distributing remaining funds to the beneficiary-shareholders. Subsequently, garnishment actions were filed by two creditors of the corporation and of certain shareholders who were beneficiaries of the trust and the creditors obtained orders directing the trustee not to distribute funds further. The trustee then asked Attorney A. to represent him with respect to these garnishment actions, giving Attorney A various documents needed in defending the actions. Attorney A began going over the materials with his law partner Attorney B and learned for the first time that Attorney B represented a creditor who had previously filed suit against some of the beneficiary-shareholders. These beneficiary-shareholders had not informed the trustee of this litigation. Attorney A immediately notified the trustee that he was disqualified to represent the trustee, but did not give details at that time as to the reason for the disqualification. All materials were returned by Attorney A to the trustee. Thereafter, Attorney B proceeded to file another garnishment action on behalf of Attorney B's client whose suit against the beneficiary-shareholders was pending. All materials and information given by the trustee to Attorney A were matters of public record.
1. Is information which is a matter of public record considered confidential when the information is given by the client to the attorney in connection with the representation?
2. If the information is not confidential, may an attorney use such information acquired from a prospective client to the detriment of such prospective client and for the advantage of an existing client, which client would have not had actual knowledge of the public information had it not been for the disclosure of the public information to the attorney?
In this case the trustee was a prospective client with respect to Attorney A and Attorney A's law firm, including Attorney B. Confidences and secrets of prospective clients conveyed to a lawyer in an initial consultation with a view to obtaining legal services are included within the scope of a lawyer's general obligation to preserve confidences and secrets of clients. See American Law Institute Restatement of the Law Third, The Law Governing Lawyers Tentative Draft No. 1 (April 11, 1988) Section 122. Disciplinary Rule (DR) 4-101(B) of the Texas Code of Professional Responsibility provides that, with exceptions not here relevant, "a lawyer shall not knowingly: . . . (2) Use a confidence or secret of his client to the disadvantage of the client." or "(3) Use a confidence or secret of his client for the advantage of himself or a third person, unless the client consents after full disclosure." DR 4-101(A) defines "confidence" as referring to "information protected by the attorney-client privilege under applicable law" and "secret" as referring 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."
The materials received by the attorney from the trustee were not confidential under the definition given in DR 4-101(A) because, as matters of public record, they could not be protected by the attorney-client privilege. They were not secret within the definition given in DR 4-101(A) since the trustee did not request that the materials be held inviolate and the disclosure of the materials would not have been embarrassing in view of the fact that they were simply matters of public record with respect to a law suit and garnishment and it was not likely that disclosure of such publicly available information would be detrimental to the trustee as prospective client.
Attorney B did not know of the suit and learned of it from the trustee. No provision of the Texas Code of Professional Responsibility prevents an attorney from using for the benefit of his client information obtained from a prospective client that is neither confidential nor secret. Indeed, Attorney B would have a duty to his client to use such matters of public record for the interest of his client even though such use might be to the detriment of the trustee. Attorney B has a duty to his client, which was a client before Attorney A talked to the trustee, to represent his client zealously and within the bounds of the law.
1. The information is not confidential.
2. Attorney A's partner is not prohibited under the Texas Code of Professional Responsibility from using the information, which was of public record, for the benefit of his client and to the detriment of the trustee.