An insurance company retained a law firm to defend a civil suit brought against an insured and two of the insured's former employees. The law firm solicited discovery from each of the three defendants. As part of the discovery process, the firm tape recorded various conversations between the firm and the two former employees. Tape recording such conversations is a standard operating procedure for the firm.
During the telephone conversations, one of the former employees indicated hostility toward his former employer and expressed dissatisfaction with the manner in which the former employer had treated him. The ex-employee stated his refusal to sign his completed discovery. He indicated that he was arranging for his own defense counsel and instructed the firm to withdraw immediately from his defense. The ex-employee also suggested that his recollection of facts might change in the absence of some type of "financial reward" from his former employer.
The firm immediately forwarded a motion for withdrawal to the ex-employee, a transcript of the telephone conversation in which the former employee discussed his desire for a financial reward, and a reminder that perjury charges might possibly arise from his failure to tell the truth during sworn testimony. The firm tells the ex-employee that his transcript would remain confidential "at that point in time."
Questions Presented1. May the law firm release the contents of the transcript to either the insurer, the insured, or the other employee? If so, under what circumstances?
2. Has a conflict of interest arisen sufficient to require the firm to withdraw from its defense of the employer?
1. The firm may not disclose the contents of the transcript to the insurer, the insured, or the other ex-employee. The firm gained this information as part of the attorney-client relationship and cannot disclose it without the client's informed consent. If the client perjures himself in open court, the firm may reveal the contents of the transcript to the court in order to avoid assisting the client's commission of a criminal or fraudulent act. Until the ex-employee definitely manifests an intention to commit perjury, however, the firm cannot disclose the confidential information.
2. The factual situation creates a conflict of interest that requires the firm's withdrawal from its representation of the employer and the remaining ex-employee.
Confidentiality Arising from Attorney-ClientRule 1.05 (All references to rules are to the Texas Disciplinary Rules of Professional Conduct ), sets forth the protection afforded to information gained during the attorney-client relationship. The rule states that a lawyer shall not knowingly reveal confidential information of a client or a former client to (i) a person that the client has instructed is not to receive the information; or (ii) anyone else, other than the client, the client's representatives, or the members, associates, or employees of the lawyers' law firm.
The rule provides that a lawyer may reveal confidential information "when the lawyer has reason to believe it is necessary to do so in order to prevent the client from committing a criminal or fraudulent act." (Rule 1.05(c)(7)). Thus, the requirement of confidentiality does not override all competing policy interests.
Although Rule 1.05(c)(7) provides the law firm with the latitude to prevent a criminal or fraudulent act from being committed, the exception does not allow blanket disclosure of confidential communications. Even where disclosure to the court would be appropriate under this subsection, disclosure to the other defendants would not be permissible unless it were necessary to prevent the client's proposed criminal or fraudulent act. Similarly, Rule 3.03 requires the lawyer to "disclose a fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act." The rule does not contemplate disclosure to parties to the lawsuit.
Under the facts presented, the issue of the law firm's disclosure of the information to the court may be premature. The former employee's threatened change of testimony is thus far only a threat; the attorney's warming about the consequences of perjury may have changed the ex-employee's mind about committing perjury. Until the attorney has some more definite indication that the defendant intends to perjure himself, he may not disclose the contents of the transcript.
Conflict of Interest Sufficient to Require Withdrawal
The disciplinary rules discuss potential conflicts of interest that would require the attorney's withdrawal from the representation. Rule 1.09 states that without prior consent, a lawyer who personally has formerly represented a client in a matter shall not thereafter represent another person in a matter adverse to the former client:
The purpose of Rule 1.09 is to protect a former client's interests (Rule 1.09, Comment 10). The rule guards against an attorney who, having previously represented a client, would use information gained during that representation to the former client's detriment. Rule 1.09 refers specifically to Rule 1.05, which underscores the importance of protecting the confidentiality of previous communications of a former client.
Rule 1.09 applies to the present factual situation. The ex-employee has assumed a position hostile to his former employer. Were the law firm to continue to represent the former employer or the other former employee, it could be forced to choose between thoroughly representing its remaining client and maintaining the confidentiality of information obtained from its former client. Rule 1.09 protects a client in situations such as this one.
When an attorney undertakes a dual representation, the attorney owes obligations to each client. The attorney may not lessen the scope of those duties. To the extent the firm represented the former employee, it is bound to protect any confidences the firm received. In order to adequately safeguard those confidences, the firm must withdraw from representing any of the parties.