Saving the Attorney-Client Privilege
LACBA Update, June/July 2005
By John W. Amberg, litigation partner in the Santa Monica office of Bryan Cave LLP. Amberg is a member and former chair of LACBA's Professional Responsibility and Ethics Committee and also a member of the State Bar's Committee on Professional Responsibility and Conduct. The opinions expressed are his own.
The attorney-client privilege is under attack, and the profession's wounds are largely self-inflicted—though not by California lawyers.
No principle is more fundamental to the attorney-client relationship than the duty of confidentiality, unless it is the duty of loyalty. The protection of communications between client and lawyer has been a bedrock of our judicial system for hundreds of years. In California, the duty of confidentiality in Business and Professions Code Sec. 6068(e)(1) was enacted more than 130 years ago and recognized in California Supreme Court decisions predating the statute.
Access to legal counsel is a fundamental individual liberty that serves the public interest because legal advice fosters compliance with the law and protects the rights of the accused. To perform these vital functions effectively, lawyers need clients to disclose information fully and candidly. Similarly, for our system of justice to function, attorney work product needs to be secure. However, clients are much less likely to seek legal advice or to make necessary disclosures if they believe others can compel them or their attorneys to disclose their communications.
Sound obvious? Noncontroversial?
Roll the tape back a few years. In the wake of corporate scandals at Enron, WorldCom, and Adelphia, the cry went up: "Where were the lawyers?" Lawmakers and regulators attacked the legal profession for supposedly enabling greedy corporate insiders to defraud the investing public. Never mind that lawyers have never been immune from liability for participating in crimes or fraud, or that in the wake of the scandals, few lawyers have been convicted, much less formally charged, with any wrongdoing.
The entire concept of a lawyer's independence was attacked. Congress passed the Sarbanes-Oxley Act of 2002, which directed the Securities and Exchange Commission to promulgate rules regulating lawyers, and in 2003, the SEC published regulations that, among other things, invite lawyers to violate their duty of confidentiality by blowing the whistle on their clients without the clients' knowledge or consent. (Rule 205.3(d)(2)). Don't worry, the SEC said, if you act in "good faith" while turning in your client, you will be immune from state bar discipline or liability! (Rule 205.6(c)). The federal law also imposed new duties of disclosure on corporate auditors.
Instead of responding to the momentary hue and cry by mounting a principled defense of lawyer independence and attorney-client confidentiality, the American Bar Association hastily amended the duty of confidentiality in its Model Rules of Professional Conduct to permit lawyers to blow the whistle on their clients to, among other things, prevent "substantial injury to the financial interests or property of another." (See ABA Model Rules 1.6(b)(2) ("Confidentiality of Information") and 1.13 ("Organization as Client")). The amendments were hotly debated, but expediency prevailed. Ironically, the ABA feared that resistance to political pressure would jeopardize its cherished rule of self-regulation.
Instead of placating the enforcers, the ABA's weakness emboldened them. This has affected us in California even though the Model Rules don't apply here. California has its own Rules of Professional Conduct, and Sec. 6068(e)(1) of the Business and Professions Code requires an attorney to preserve the secrets of his or her client "at every peril to himself or herself." Indeed, Rule of Professional Conduct 3-600 states that a California lawyer who learns an agent of a corporate client is violating the law or acting in a manner likely to result in substantial injury to the corporation may take action to protect the client but "shall not violate his or her duty of protecting all confidential information" under Sec. 6068(e).
However, the SEC doesn't recognize California's duty of confidentiality and takes the view that its regulations preempt our law. The agency has invited California lawyers to blow the whistle on their clients so it can mount a test case against our law. The federal Department of Justice has a policy of demanding that targets of its investigations waive the attorney-client privilege, and the Patriot Act permits the government to eavesdrop on attorney-client conferences. Here in California, the statutory duty of confidentiality was amended last year for the first time in 132 years to permit lawyers to disclose confidential information to prevent a crime that the lawyer reasonably believes is likely to result in death or substantial bodily harm. (Bus. & Prof. Code Sec. 6068(e)(2)). While unobjectionable in itself, the amendment is a good example of the false tension between the perceived public good in disclosure and a privilege that is thought to serve only the profession or the guilty.
Fast-forward now. Clients nationwide are beginning to pay a price for the ABA's expediency. They are being pressured to waive the attorney-client privilege as never before by prosecutors, regulators, and auditors, and are being threatened if they do not comply. The results not only are destructive to the attorney-client relationship but also undermine the rule of law. Our legal system is largely self-enforcing for the obvious reason that regulators are limited and cannot be everywhere. Also, many of our laws are complex and require lawyers to interpret them. It is vain to believe that shredding the attorney-client privilege in the name of stricter enforcement will lead to better informed citizens, greater compliance with the law, or more respect for our legal system. Similarly, it is vain to believe that more justice will result if lawyers are compelled to surrender their work product and our adversarial justice system is converted to an inquisitorial system in which lawyers become deputized whistle-blowers.
Last year, the ABA woke up to the danger and formed a Task Force on the Attorney-Client Privilege. The Task Force is holding public hearings around the country and taking testimony from lawyers, clients, and others, and will make recommendations to the ABA House of Delegates regarding the attorney-client privilege and work product doctrine, though perhaps not this year. Southern California lawyers Steven K. Hazen from the Corporations Committee of the State Bar Business Law Section, and Brad Brian, president-elect of the ABA Litigation Section, testified at the first public hearing last winter in strong support of attorney-client confidentiality. For information about the work of the Task Force, including the schedule of its public hearings, visit www.abanet.org/buslaw/attorneyclient. The Task Force also seeks information from in-house and outside counsel through two questionnaires prepared in conjunction with the American Corporate Counsel Association. The in-house counsel questionnaire is available at http://survey.acca.com/rendersurvey.asp?id=84059 and the outside counsel questionnaire is available at http://survey.acca.com/rendersurvey.asp?id=84769.
For the sake of your clients, let your views be known.