Ethics Opinion 383

Disclosure of Client Confidences or Secrets in Compliance With the Outside Counsel Guidelines of Another Client; Advance Agreement to Withdraw from Representation in the Event of a “Midstream” Conflict

Absent informed consent, a lawyer generally may not disclose to a client or prospective client information about another client or prospective client that is protected by Rule 1.6 or Rule 1.18.  Such information includes all confidences and secrets, as defined in Rule 1.6, which typically include the identity of another client or prospective client and the nature of the other client or prospective client’s matter.  Even requesting or agreeing to a commitment to make such disclosures, whether pursuant to Outside Counsel Guidelines or otherwise, may constitute a prohibited inducement to another to violate, or an attempt to violate, the Rules of Professional Conduct.

Rule 1.7(d), and not an advance agreement between one client and its outside lawyer, governs whether the lawyer must withdraw from a representation if a “midstream” conflict arises.

Also, a lawyer may not permit a client to have access to the lawyer’s records if such access might disclose confidences or secrets of other clients.

Applicable Rules

• 1.6 (Confidentiality of Information)
• 1.7(d) (Conflict of Interest: Generally)
• 1.16 (Declining or Terminating Representation)
• 1.18(b) (Duties to Prospective Client)
• 8.4(a) (Misconduct)

Inquiry

In recent years, numerous issues have arisen regarding the relationship between outside counsel and their clients or prospective clients.  These issues frequently arise in the context of engagement letters, outside counsel guidelines, or similar undertakings (collectively, “OCGs”) generated by large institutional clients.  Such OCGs sometimes require outside counsel, as a matter of contract, to engage or refrain from engaging in specified conduct or practices.

OCGs may raise issues regarding information that is protected under the D.C. Rules of Professional Conduct (“D.C. Rules” or “Rules”).  By way of example, lawyers or law firms may be asked to agree as a matter of contract to advise a client, or obtain the client’s consent, before the lawyer or law firm agrees to represent a competitor of the client in an unrelated matter not involving the client.  Sometimes such requests extend to situations where the issue involved might be of interest to the client, even if the prospective client is not a competitor of the requesting client and the requesting client is not involved in the prospective matter.  These types of issues may arise even before a lawyer and a prospective client reach the point of establishing an attorney-client relationship—for example, when a prospective client is interviewing lawyers for possible retention.  Importantly, these are representations that would not constitute conflicts of interest under the D.C. Rules.¹

Whether lawyers may request, or agree to, such commitments is beyond the scope of this opinion. The Legal Ethics Committee is issuing this opinion principally to remind lawyers that in the absence of informed consent,² (1) the D.C. Rules prohibit disclosure of a client’s protected information in connection with such a request or commitment, and (2) agreeing to make such a disclosure or intentionally requesting such information may constitute a violation of the Rules even if no disclosure ultimately is made.

The Committee also has examined the propriety of two additional requirements found in some OCGs, namely that (1) the outside lawyer must withdraw from representing another current client if a so-called midstream conflict arises and (2) the client be permitted to audit the lawyer’s records.

Discussion

The D.C. Rules strike a balance between allowing clients and lawyers latitude to contract with one another as they see fit, on the one hand, and protecting essential elements of the practice of law, on the other.  These essential elements include confidentiality of specified client information.

With certain exceptions, Rule 1.6 prohibits a lawyer from revealing a “confidence” or “secret” of a client³ as well as from using such information “for the advantage of the lawyer or of a third person.”⁴ Rule 1.18(b) provides similar protection for confidences and secrets of a prospective client. “Confidences” are information protected by the attorney-client privilege.⁵ “Secrets” are defined broadly as “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.”⁶

Information that is neither a confidence nor a secret—for example, information that is “harmless or unexceptionable”⁷ and information about a former client that is “generally known”⁸ —is not protected by Rules 1.6 and 1.18. Note, however, that “the lawyer must err on the side of protecting information where any doubt exists” whether it qualifies as a confidence or secret.⁹

Information relating to representation of other clients

A client’s identity comes within the protection of Rule 1.6, at least where disclosure might be detrimental to that client.¹⁰ The same is true with respect to a prospective client.¹¹ The nature of the representation or prospective representation also is a protected secret¹² and in some circumstances may be a confidence as well.

Absent the informed consent of the affected client or prospective client, disclosure of that person’s identity or the issues on which the lawyer is representing that person would violate Rule 1.6, Rule 1.18, or both where the client or prospective client has requested that the information be held inviolate or where its disclosure would be embarrassing or likely detrimental to the client or prospective client.

Thus, an outside lawyer for Client A ordinarily may not reveal to A the identity of that lawyer’s client or prospective client B, or the nature of B’s legal issue, unless permitted by an exception to Rule 1.6.  Typically, the only potentially applicable exception will be “with the informed consent of [B].”  Such consent presumably will not be forthcoming where A and B are competitors or where B does not want its engagement of the lawyer to be disclosed.  Moreover, waivers of confidentiality “may not be implied from waivers of conflicts of interest” and are subject to “particular scrutiny” if challenged.¹³

A lawyer who agrees to disclose such information risks violating D.C. Rule 8.4(a) even if she never actually discloses protected information, as that rule prohibits not only violations of the Rules but also attempts to violate them.¹⁴

Moreover, an in-house lawyer who secures outside counsel’s agreement to an OCG that requires outside counsel to violate the Rules may herself become subject to discipline: “It is professional misconduct for a lawyer to . . . knowingly . . . induce another to [violate the Rules].”¹⁵ Indeed, even seeking such an agreement might constitute a prohibited attempt to violate the Rules or to induce another to do so.¹⁶ Further, an in-house lawyer cannot avoid the restrictions discussed in this opinion by having a non-lawyer request such an agreement, as violating the Rules “through the act of another” is prohibited as well.¹⁷

That said, an in-house lawyer does not induce or attempt a violation if her request for information about other clients is conditioned upon such disclosure being consistent with the Rules’ restrictions regarding client confidences and secrets. (If a conflict of interest is present, the outside lawyer would have to decline the proposed representation if she would have to disclose another client’s confidences or secrets in order to seek informed consent.¹⁸ Moreover, a lawyer making an inquiry of another lawyer does not induce or attempt a violation if she reasonably believes that her inquiry will not elicit information protected by Rule 1.6 or Rule 1.18.

“Midstream” conflicts of interest

Another type of OCG that has come to the Committee’s attention requires the lawyer to withdraw from representing another current client if a so-called midstream conflict arises.  A midstream conflict is one that arises after a representation has commenced and that was “not reasonably foreseeable at the outset of the representation.”¹⁹ In such an instance, “a lawyer need not withdraw from any representation unless the conflict [would adversely affect one of the representations in question].”²⁰ Absent such an adverse effect, a lawyer may not withdraw under such circumstances if withdrawal would have a “material adverse effect on the interests of the client” from whose representation the lawyer proposes to withdraw unless one of the specialized circumstances set out in Rule 1.16(b)(1) through (5) is present.²¹ Thus, an advance agreement to make such a withdrawal may contravene Rule 1.7(d).

Client access to law firm records

OCGs requiring that the client be permitted to audit a lawyer’s records also may implicate the rules protecting client confidences and secrets.  This depends not only upon the breadth of the OCG but also the nature of the lawyer’s record keeping systems.

One provision of which the Committee is aware states: “[CLIENT] shall have full access to all electronic and paper records the firm maintains and the right to examine any such materials during this period upon reasonable notice.”

A client is entitled to its entire file, with a narrow exception for lawyer work product in some instances where full payment of fees has not been made.²² That is a far cry, however, from “full access” to a lawyer’s records, which is not permitted where such access might reveal confidences or secrets of other clients (e.g., if the lawyer’s electronic records are stored on an information system with relatively open architecture).

Conclusions

Absent informed consent, a lawyer generally may not disclose to a client or prospective client information about another client or prospective client that is a protected secret or confidence under Rule 1.6 or Rule 1.18.  Such information often includes (1) the identity of another client or prospective client, and (2) the nature of the other person’s matter. Even requesting or agreeing to a commitment to make such disclosures, whether pursuant to an Outside Counsel Guideline or otherwise, may constitute a prohibited attempt or inducement to another to violate the Rules.

Rules 1.7(d) and 1.16, and not an advance agreement between one client and its outside counsel, govern whether a lawyer must—or may—withdraw from her representation of another client if a “midstream” conflict arises.

Finally, a lawyer may not permit a client to have access to the lawyer’s records if such access might disclose confidences or secrets of other clients.

Published: April 2022

1. See D.C. R. Prof. Conduct 1.7 (general conflicts rules). Although the current D.C. Rules permit a lawyer and her client to expand—arguably without limit—Rule 1.7’s definition of what constitutes a conflict of interest, the D.C. Bar has recommended that the D.C. Court of Appeals eliminate this open-ended provision and limit the definition of conflicts of interest to those set out expressly in the Rules. D.C. BAR, RULES OF PROF. CONDUCT REVIEW COMM., REPORT TO THE BOARD OF GOVERNORS PROPOSING CHANGES TO THE D.C. RULES OF PROFESSIONAL CONDUCT RELATING TO CLIENT-GENERATED ENGAGEMENT LETTERS AND OUTSIDE COUNSEL GUIDELINES (Jan. 2022) at 4-12, 23-26
(http://sctf.esr990.com/getmedia/a2fed463-f33e-4155-82e4-3622e1e37afb/Report-of-OCGs-2022-Final-Transmittal-to-DCCA)
2. See D.C. R. Prof. Conduct 1.6(e)(1). “‘Informed consent’ denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” D.C. R. Prof. Conduct 1.0(e).
3. D.C. R. Prof. Conduct 1.6(a)(1).
4. D.C. R. Prof. Conduct 1.6(a)(3).
5. D.C. R. Prof. Conduct 1.6(b).
6. Id.
7. D.C. Bar Legal Ethics Op. 312 (2002).
8. D.C. R. Prof. Conduct 1.6, cmt. [10]. The ABA’s Standing Committee on Ethics and Professional Responsibility has explained that “generally known” means “widely recognized by members of the public in the relevant geographic area or . . . widely recognized in the former client’s industry, profession, or trade” and not merely, say, mentioned in open court, a public record, or a document available in a public library. ABA Formal Ethics Op. 479 (2017); see N.Y. State Bar Ass’n Op. 1088 ¶ 8 (2016) (discussing examples of generally known information). The fact that information appears in a public filing somewhere does not ipso facto remove such data from the “secrets” category. D.C. Bar Legal Ethics Op. 246 (1994).
9. D.C. Bar Legal Ethics Op. 312 (2002).
10. In re Hager, 812 A.2d 904, 920 (D.C. 2002); accord ABA Formal Op. 480 at 2 (2018); ELLEN J. BENNETT & HELEN W. GUNNARSSON, ANNOTATED MODEL RULES OF PROFESSIONAL CONDUCT 112-13 (9th ed. 2019) (“ANNOTATED MODEL RULES”).
11. D.C. R. Prof. Conduct 1.18(b); accord D.C. R. Prof. Conduct 1.6, cmt. [9]; ANNOTATED MODEL RULES 312-13.
12. See N.Y. State Bar Ass’n Op.720 (1999) (interpreting N.Y. version of Rule 1.6).
13. D.C. Bar Legal Ethics Op. 309 n. 10 (2001).
14. See In re Fink, 22 A.3d 461 (Vt. 2011) (disciplining lawyer who contracted for unreasonable fee, even though lawyer did not attempt to collect it).
15. D.C. R. Prof. Conduct 8.4(a); see In re Asher, 772 A.2d 1161 (D.C. 2001) (inducing another lawyer to lie to court); In re Isaacson, 860 N.W.2d 490 (Wisc. 2015) (directing other lawyer to file court documents containing false and offensive statements).
16. See Fink, 22 A.3d 461.
17. D.C. R. Prof. Conduct 8.4(a)
18. D.C. R. Prof. Conduct 1.7, cmt. [27]; D.C. Bar Legal Ethics Op. 312 n. 9 (2002).
19. D.C. R. Prof. Conduct 1.7(d).
20. D.C. R. Prof. Conduct 1.7(d).
21. See D.C. R. Prof. Conduct 1.16(b).
22. D.C. R. Prof. Conduct 1.8(i), 1.16(d); D.C. Legal Ethics Op. 333 (2005); D.C. Legal Ethics Op. 250 (1994); D.C. Legal Ethics Op. 230 (1992).