ATTORNEY'S DISCLOSURE TO INTERNAL REVENUE SERVICE ¾ An attorney should not comply with a letter request from the Internal Revenue Service for information concerning a client's personal injury lawsuit which had been settled unless released by DR 4-101(C), Code of Professional Responsibility.
Canon 4; DR 4-101(B).
Is it unethical for an attorney to comply with a letter request from the Internal Revenue Service for information concerning a client's personal injury lawsuit which had been settled, such request being for the following information:
1. Who was the claim against and what were the reasons for it being filed?
2. What was the final amount of settlement awarded to Mrs. __________?
3. What was the distribution of the claim - how much were the doctor bills, lawyers' fees, etc.?
Where the attorney has been unable to obtain instructions from the client as to how to proceed.
Canon No. 4, Code of Professional Responsibility, states, "A lawyer should preserve the confidences and secrets of a client." (Emphasis added.)
Disciplinary Rule (DR) 4-101(A) states, "`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." (Emphasis added.) DR 4-101(B) provides that, except when permitted under DR 4-101(C) that a lawyer shall not knowingly reveal a "confidence" or "secret" of his client.
Ethical Considerations (EC) 4-6 provides that the obligation of a lawyer to preserve the confidences and secrets of his client continues after the termination of his employment.
DR 4-101(C)(1) provides that a lawyer may reveal confidences or secrets "with the consent of the client or clients affected, but only after a full disclosure to them," and DR 4-101(C)(2) provides that a lawyer may reveal confidences and secrets "when permitted under Disciplinary Rules or required by law or court order."
It is believed that certain of the requested information by the Internal Revenue Service may constitute a "confidence" under DR 4-101 and constitute protected information. Furthermore, it has been held that the attorney-client privilege may be invoked in a proceeding to obtain information under Internal Revenue Code Section 7602. See U.S. v. Summe, 208 F. Supp. 925 (E.D. Ky. 1962), 123 2d TM, IRS Procedure - Production of Documents. Whether or not such information is "information protected by the attorney-client privilege under applicable law" would essentially be a legal question of admissibility of evidence regarding a confidential communication as opposed to an ethical question of preserving the client's secrets and confidences.
The Committee recognizes that certain of the requested information is, or most probably is, of public record, particularly the information requested in Item 1 of the letter request. However, the ultimate motive of litigation is a privileged matter within the attorney-client privilege. Baird v. Koener, 279 F2d 623, 630 (9th Cir. 1960). See also American Bar Association Informal Opinion No. 393 with regard to the amount of fees paid to an attorney by his former client. It is also possible that the information requested in Item 2 is known to parties other that the attorney and his client by virtue of communication among all parties, their respective counsel, and the court during the course of the litigation and settlement. However, the restriction on disclosure is broader. Article 38.10, Code of Criminal Procedure, provides that an attorney at law shall not disclose a communication made to him by his client during the existence of that relationship, nor disclose any other fact which came to the knowledge of such attorney by reason of such relationship. This article applies to both criminal and civil cases, during the existence of the relationship and after it has ceased. Williams v. Williams, 108 SW 2d 297 (Tex. Civ. App. 1937, no writ); Cochran v. Cochran, 333 S.W. 2d 635 (Tex. Civ. App. 1960, Ref. N.R.E.).
The State Bar of Texas Committee on Professional Ethics' Opinion No. 378 (December, 1974) states:
"The cases interpreting the privilege as a `rule of evidence' provide that the privilege protects only communications which are made in confidence, and that unless it is clear State Bar of Texas that secrecy was desired, the reason for the privilege ceases. 1 Texas Law of Evidence (McCormack and Ray) 406. Such a requirement, however, does not seem to exist when the attorney-client relationship is considered in light of DR 4-101. There, the attorney is duty bound to preserve confidences and secrets of his client `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.' (Emphasis added.) The Disciplinary Rules place on the lawyer a broader duty than does Article 38.10 and the cases interpreting same. See 23 Baylor Law Review 751."
This reasoning is emphasized in Ethical Consideration 4-4, which provides in part:
"The attorney-client privilege is more limited than the ethical obligation of a lawyer to guard the confidences and secrets of his client. This ethical precept, unlike the evidentiary privilege, exists without regard to the nature or source of information or the fact that others share the knowledge."
Therefore, it must be assumed that the disclosure of the requested information, gained through the lawyer's professional relationship, could be embarrassing or detrimental to the former client, even if that former client has not requested that such information be held inviolate. The attorney may reveal such information to the Internal Revenue Service only under the conditions enumerated under DR 4-101(C)(1), which provides:
"A lawyer may reveal confidences or secrets with the consent of the client or clients affected, but only after a full disclosure to them, or DR 4-101 (C) (2), confidence or secrets when permitted under Disciplinary Rules are required by law or court order." (Emphasis added.)
State Bar Opinion 378 referred to above dealt with a fairly analogous situation to that being considered here. There the State Bar Professional Ethics Committee determined that a lawyer owes a duty to a former client under the Code to preserve that client's confidences and secrets when subpoenaed by the Securities and Exchange Commission to testify in an investigation into the client's affairs. In discussing the ethical duty imposed upon the attorney by DR 4-101 the State Bar Committee stated that:
"The determination of whether to disclose or testify or not should not be determined by the S.E.C., but by a Court of Law. In light of the various circumstances and highly-involved questions, [the lawyer] should not be required to pick and choose which questions are covered by the [attorney-client privilege] - which questions may be covered by the ethical considerations, and which questions to which he should make full answer."
The State Bar Committee then proceeded to consider the effect of the exceptions to DR 4-101(B)(1) contained in DR 4-101(C)(1) and (2), with emphasis upon what it felt was the more difficult interpretation of the language of (C)(2). The State Bar Committee noted that although the evidentiary privilege can be waived a lawyer will be relieved from his ethical duty under DR 4-101 not to reveal confidences and secrets only by the express consent of a client. Otherwise, DR 4-101 compels silence by the lawyer in such matters "even though the client may have been determined to have waived the confidentiality of the communication." However, Opinion 378 further points out that if a court orders the attorney to testify concerning such confidences and secrets, then the attorney would be obligated to testify.
The Committee interprets DR 4-101(C)(1) and (2) in a similar manner when applied to the instant facts. The attorney is obligated by DR 4-101 to decline compliance with the Internal Revenue Service letter request. Thereafter, if the former client expressly waived the attorney-client privilege by giving the attorney a full and informed consent to reveal the requested information, then the attorney should respond to the questions posed by the Internal Revenue Service. The Committee emphasizes that only an express waiver or consent will satisfy DR 4-101(C)(1), and the mere failure of the former client to respond to the attorney's letters requesting such consent should not be construed as constituting "constructive" consent.
Thereupon, if no action is taken by the attorney's former client which would invoke the applicability of the exception to DR 4-101(C)(1), then the attorney must withhold the requested information pending enforcement action by the Internal Revenue Service. If a summons is issued by the Internal Revenue Service under Internal Revenue Code Section 7602, the attorney is authorized and should resist same until ordered to respond by a court order. See Reisman v. Kaplan, 375 US 440 (1964); U.S. v. Hodgson, 492 F2d 1175 (10th Cir. 1974); U.S. v. Ponder, 475 F2d 37 (5th Cir. 1973); U.S. v. Johnson, 465 F2d 793 (5th Cir. 1972); U.S. v. Finley, 434 F2d 596 (5th Cir. 1970). (See also, discussion of attorney-client privilege under DR 4-101 in U.S. v. Kasmir, 499 F2d 444 (5th Cir. 1974 - petition for writ of certiorari granted 1/27/75) which considers the constitutional right against self-incrimination in an action to enforce an Internal Revenue Service summons served upon a taxpayer's attorney.)