Attorney Professionalism Forum: Did General Counsel Violate Client Confidentiality?
To the Forum:
I am a shareholder in Newtide Corporation and have recently encountered an issue with regard to the company’s general counsel, whom I will refer to as Ms. Weaver. In addition to serving as the company’s general counsel, Ms. Weaver has also represented me individually in matters unrelated to Newtide. A few months ago I discovered that the majority managers of Newtide were stealing funds from the corporation for their own personal use. I reached out to Ms. Weaver to seek advice as to an appropriate resolution for the shareholders. We were never able to resolve the issue and ended up at an arbitration hearing to litigate the issue. The other shareholders and I sued the majority managers derivatively and obtained separate litigation counsel to represent our interests. The majority managers also retained separate litigation counsel to represent them at the hearing.
During the arbitration hearing I learned that Ms. Weaver had been blind copying the majority members and managers of the company on communications between her and me where I sought counsel on how to resolve the issue. I also learned that she had produced private email communications between her and me to counsel representing the majority managers for use at the hearing. I never gave Ms. Weaver my consent to waive privilege or a conflict waiver and was very upset to learn that communications that I had thought were confidential attorney-client communications were divulged to my adversary.
Are Ms. Weaver’s actions ethical? Do I have any recourse to deal with her conduct, assuming it is improper?
Dear Ms. Conflicted,
Your question about Ms. Weaver’s actions gives us an opportunity to address an interesting and important ethical topic. Lawyers must at all times have a clear understanding as to whom they are representing – i.e., who their client is. Ms. Weaver is general counsel to Newtide Corporation but previously represented you on unrelated personal matters. These facts alone create a potential conflict for Ms. Weaver, since it is unclear who she would represent in the event an issue arises between you and Newtide.
First, in order to determine whether there is a conflict, we must assess whether Ms. Weaver may represent you and the corporation simultaneously. The answer depends on a few facts that were not contained in your question. That said, the Rules of Professional Conduct (RPC) give us clear guidance. Specifically, RPC 1.13(a) states: “When a lawyer employed or retained by an organization is dealing with the organization’s directors, officers, employees, members, shareholders or other constituents, and it appears that the organization’s interests may differ from those of the constituents with whom the lawyer is dealing, the lawyer shall explain that the lawyer serves as counsel for the organization and not for any of the constituents.” This also has been colloquially referred to as the corporate Miranda warning stemming from the seminal 1981 case Upjohn Co. v. United States. An organization’s constituents may include, but are not limited to, officers, directors, employees and shareholders. We have discussed client identification and its vital importance in a previous Forum.
One factor that is central to our analysis is whether Ms. Weaver told you that she was a lawyer for the organization, rather than for you, the shareholder. It is not clear from your question whether this occurred. As a practical matter, the mere fact that Ms. Weaver is general counsel for Newtide does not automatically mean that she is a lawyer for shareholders or other constituents of the company, including yourself. Instead, Ms. Weaver solely represents Newtide since it is clear that your interests differed from the managing members of Newtide.
So, what should have Ms. Weaver told you when you approached her for legal advice? The New York State Bar Association’s Committee on Standards of Attorney Conduct added Comments [2A] and [2B] to Rule 1.13 to address this question:
[2A] There are times when the organization’s interests may differ from those of one or more of its constituents. In such circumstances, the lawyer should advise any constituent whose interest differs from that of the organization: (i) that a conflict or potential conflict of interest exists; (ii) that the lawyer does not represent the constituent in connection with the matter, unless the representation has been approved in accordance with Rule 1.13(d); (iii) that the constituent may wish to obtain independent representation; and (iv) that any attorney-client privilege that applies to discussions between the lawyer and the constituent belongs to the organization and may be waived by the organization. Care must be taken to ensure that the constituent understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent, and that discussions between the lawyer for the organization and the constituent may not be privileged.
[2B] Whether such a warning should be given by the lawyer for the organization to any constituent may turn on the facts of each case.
Rule 1.13(d) referred to in Comment [2A] permits a lawyer to represent both an organization and any of its constituents subject to certain conditions, pursuant to RPC 1.7. These conditions are met when the lawyer can provide competent representation, the representation is not prohibited by law, the clients are not involved in the same litigation and each client gives informed consent in writing regarding the representation.
As you can see, the determination of whether Ms. Weaver should have warned you that she was the lawyer for just Newtide is fact-specific. Merely acting as general counsel for a corporation does not automatically mean that such counsel may act as the constituent’s attorney. Rather, based on the above, general counsel for an organization may only represent one or more of the organization’s constituents at the same time as the organization if certain circumstances are met, such as gaining consent from the corporation and the attorney providing diligent representation to all clients.
In our view, and based on the facts provided, when you approached Ms. Weaver about the majority managing members stealing funds from the corporation for their own personal use, the RPC suggests that Ms. Weaver should have given you an Upjohn warning and informed you that she represents Newtide and not you personally for that matter since your interests appear to be in conflict with Newtide’s. Although she had represented you personally in matters unrelated to Newtide in the past, the circumstance at issue is different since it appears to put you directly at odds with Newtide. RPC 1.13, Comment [2A] tells us that Ms. Weaver should have disclosed that anything you say to her may not be privileged and that she cannot advise or provide legal representation to you. Thus, by failing to advise you that she only represents Newtide, Ms. Weaver’s actions run afoul of RPC 1.13.
Additionally, Roy Simon mentions that when a lawyer for a corporation communicates with the corporation’s constituents, those constituents are not considered to be represented by counsel. Rather, these constituents are deemed to be “unrepresented” within the meaning of RPC 4.3, which provides that when a lawyer communicates with an unrepresented person who misunderstands the lawyer’s role in the matter, the lawyer has a duty to make reasonable efforts to correct the misunderstanding. Moreover, the lawyer is not permitted to give legal advice to the unrepresented person if it is possible that there is a conflict with the lawyer’s client. The circumstances presented in your question appear to mirror the prohibitions of RPC 4.3. Thus, Ms. Weaver should have treated you as “unrepresented” and provided you with the warnings required by RPC 1.13(a) and 4.3 to ensure she complied with her ethical obligations.
As you can tell, there is much overlap between RPC 1.13(a) and 4.3. RPC 4.3 necessitates that a lawyer correct an unrepresented person’s misinterpretation about whom the lawyer represents. The main takeaway is that RPC 1.13(a) applies even if the constituent does not display a misunderstanding; instead, the lawyer has a duty to recognize the differences between the corporation’s interests and the constituent’s interests. When this becomes apparent, the lawyer must advise the constituent that the lawyer represents the organization and does not represent the individual constituent.
Additionally, in our view, the fact that Ms. Weaver previously represented you in unrelated personal matters raises the bar even higher for her to be clear about who she represents. Ms. Weaver’s failure to advise you that she did not represent you when you clearly were seeking legal advice concerning Newtide’s managing member was most likely unethical. Put simply, Ms. Weaver has an obligation to explain to you, a lay person and shareholder, exactly what her role is with respect to the company and its individual constituents, and her failure to appropriately inform you of that role may have resulted in a violation of her ethical obligations under several provisions of the RPC.
As stated briefly above, RPC 1.7(b) provides that a lawyer is allowed to represent the client even if there is a concurrent conflict of interest if “(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing.” We briefly discussed the application of RPC 1.7 in a prior Forum.
Pursuant to RPC 1.7, assuming Ms. Weaver believed that she could competently represent both you and Newtide, and that representation was not prohibited by law, it may be permissible under the RPC for Ms. Weaver to represent you individually on matters unrelated to Newtide so long as she obtained informed written consent from both Newtide and yourself. However, this is a matter that is not unrelated to Newtide, and further you stated in your question that you did not consent to waive privilege or provide a conflict waiver. Nor does it appear that Ms. Weaver ever raised the issue of her potential conflict. Nonetheless, pursuant to Rule 1.7, it appears that Ms. Weaver could not have reasonably believed that she would be able to competently and diligently represent you and Newtide simultaneously regarding the majority managers stealing funds from the corporation. We see this as an unwaivable conflict; Ms. Weaver should have immediately told you that she could not represent you.
Whether Ms. Weaver’s actions were improper also depends on whether you were acting as a representative of Newtide at the time. Here, you appear to have notified Ms. Weaver when you found out the majority managers were stealing from the corporation in your capacity as a shareholder to seek redress of the situation, thus, acting as a constituent of the corporation. Your communications with Ms. Weaver seeking legal advice concerning possible recourse against the officers of Newtide would generally be protected under RPC 1.6. Under RPC 1.6, Ms. Weaver should not have revealed information that was confidential without your informed consent, which you stated you did not provide. Additionally, Ms. Weaver could only provide your communications to the majority members and their counsel if the disclosure advanced the best interests of Newtide and was reasonable or customary, or the disclosure would prevent reasonable certain death or a crime. Since none of these factors applied, the communications between you and Ms. Weaver were confidential.
In response to the second part of your question, generally the attorney-client privilege covers confidential communications even between a prospective client seeking legal advice and an attorney. Although there are many exceptions to the attorney-client privilege – such as the crime/fraud exception, testamentary exception, breach of duty, intention or competence of a client and the common interest exception – we do not see any of them being applicable to the facts you describe. Ms. Weaver should have given you the corporate Miranda warning and should have told you that she does not represent you and instead represents solely Newtide. Her failure to do so may allow you to claim that a prospective attorney-client relationship was established.
After you approached Ms. Weaver for legal advice regarding the stealing of funds, Ms. Weaver blind copied the majority members and managers of Newtide on communications between you and her where you were asking her for legal advice. Ms. Weaver also provided those emails to counsel that was representing the majority members for use at the hearing. We will assume for the purposes of answering your question that the email communications Ms. Weaver shared with the majority members included privileged communications, since what was described above constitutes seeking legal advice. A privileged communication is a protected conversation between a certain relationship, such as an attorney and a client. Privileged communications cannot be used as evidence in court. Therefore, assuming your communications with Ms. Weaver were privileged, it was unethical and impermissible for her to provide them to counsel representing the majority managers for use at the arbitration hearing.
When a lawyer divulges communications between them and their client to a third party, the client can seek to disqualify their lawyer and/or sue for damages. However, disqualification of general counsel is not something that one sees every day and is a subject perhaps for another Forum.
As always, the devil is in the details and, while we may not have all the necessary facts to fully answer your question, in our view Ms. Weaver crossed the proverbial line.
Vincent J. Syracuse
Alyssa C. Goldrich
Lillianna R. Iorfino
QUESTION FOR THE NEXT FORUM
To The Forum:
I recently conducted a virtual deposition of the defendant in a case in which I was plaintiff’s counsel. Given that this was a virtual deposition, it seemed that defense counsel felt that this was an informal encounter and did not have to abide by any sort of professional standards and appeared dressed only in, as far as I could tell, a t-shirt. Additionally, throughout the deposition, defense counsel repeatedly interjected or made improper objections to almost every question I asked the defendant. Defense counsel also instructed their client not to answer nearly 30 questions without any true, lawful basis. Countless times throughout the deposition, defense counsel made inappropriate comments including “you’re a joke,” “that was a horrible question,” and “well, I can tell who you voted for with that question,” all while laughing and scoffing at almost everything I said. At one point, counsel stated that “this must be your first deposition, since it is obvious that you don’t know what you are doing.” In one exchange in which I forgot to unmute my microphone, defense counsel groaned and stated that it would have been better had I’d stayed on mute so that no one would have to listen to my “dumb” questions. Throughout the deposition, defense counsel objected to even the most standard questions on the (improper) grounds that it was an effort to protect the defendant from my “harmful” questioning. Defense counsel even went so far as to advise the defendant not to answer my questions regarding their occupation.
Is the behavior of defense counsel unethical and/or sanctionable and, if so, should I move for sanctions? What about the civility guidelines that I have heard so much about?
Riley S.O. Offended
 RPC 1.13(a).
 449 U.S. 383 (1981).
 See New York State Bar Association’s Committee on Standards of Attorney Conduct Comment  on Rule 1.13.
 See Vincent J. Syracuse, Maryann C. Stallone & Alyssa C. Goldrich, Attorney Professionalism Forum, N.Y. St. B.J., March/April 2021, Vol. 93, No. 2.
 See RPC 1.13(a).
 See id.
 See Roy Simon, Simon’s New York Rules of Professional Conduct Annotated Volume 1, at 837 (2020–21 ed.).
 See RPC 1.7(b).
 See RPC 1.13(a).
 See RPC 1.7(b).
 See RPC 1.13(a).
 See Roy Simon, Simon’s New York Rules of Professional Conduct Annotated Volume 1, at 235 (2020–21 ed.).
 See RPC 4.3.
 See id.
 See RPC 4.3.
 See id.
 See id.
 See Vincent J. Syracuse, Maryann C. Stallone, Carl F. Regelmann & Alyssa C. Goldrich, Attorney Professionalism Forum, N.Y. St. B.J., May 2020, Vol. 92, No. 4.
 See RPC 1.7.
 See RPC 1.6.
 See id.
 See id.
 See New York Civil Practice Law and Rules § 4503(a)(1).
 See RPC 1.18.