When a lawyer for an estate, who represents the co-administrators, learns that a beneficiary has stolen money from the estate and that one co-administrator may be implicated, the lawyer must inform the other co-administrator of the theft. Whether the lawyer may or must take other action depends on the development of other facts concerning the activities and knowledge of the co-administrator who may be involved.
Lawyer (L) represents the two co-administrators of an estate. They are also two of the five beneficiaries of the estate. L has learned that one of the beneficiaries has stolen money from the estate and has given some of it to another beneficiary who is one of the co-administrators (Client A). L reports that Client A has confirmed that he has received cash from the estate, but it is unclear that he knew the cash had been taken wrongfully from the estate. L asks whether she should inform the other co-administrator (Client B) and the other beneficiaries.
This inquiry raises a number of interrelated issues that we dealt with in Opinion 93-3 under the previous version of the Massachusetts disciplinary rules. In that Opinion we advised that when a lawyer for a fiduciary discovers that the trustee has misappropriated trust property and that it is "reasonably likely" that the trustee intends the commission of a future crime, the lawyer may reveal that intention to the beneficiaries or the court or both. Since that Opinion, the Rules have changed in significant fashion and the Massachusetts Supreme Judicial Court has decided Spinner v. Nutt, 417 Mass. 549 (1994). In that case, the SJC decided that a lawyer for an estate does not represent the beneficiaries of the estate and owes them no duty, at least none that may be enforced in a suit by the beneficiaries for negligent performance of duty. In our view, however, Spinner
does not resolve the issues raised by this inquiry. The principal person alleged to have misappropriated property of the estate is someone who is not L's client. Clearly, L has a duty to her Client B to reveal that theft. See Mass. R. Prof. C. 1.4 ("lawyer shall keep a client reasonably informed"). The problem is that carrying out that duty may necessarily damage her other joint client, Client A..
The primary disciplinary rule relating to a lawyer's confidentiality obligations to joint clients is Rule 1.7. The Supreme Judicial Court adopted special Massachusetts Comments that speak to this issue directly:
[12B] A particularly important factor in determining the appropriateness of joint representation is the effect on lawyer-client confidentiality and the attorney-client privilege. With regard to the evidentiary attorney-client privilege, the prevailing rule is that as between commonly represented clients the privilege does not attach. Hence, it must be assumed that if litigation eventuates between the clients, the privilege will not protect any such communications, and the client should be so advised.
[12C] As to the duty of confidentiality, while each client may assert that the lawyer keep something in confidence between the lawyer and the client, which is not to be disclosed to the other client, each client should be advised at the outset of the joint representation that making such a request will, in all likelihood, make it impossible for the lawyer to continue the joint representation. This is so because the lawyer has an equal duty of loyalty to each client. Each client has a right to expect that the lawyer will tell the client anything bearing on the representation that might affect that client's interests and that the lawyer will use that information to that client's benefit. But the lawyer cannot do this if the other client has sworn the lawyer to secrecy about any such matter. Thus, for the lawyer to proceed would be in derogation of the trust of the other client. To avoid this situation, at the outset of the joint representation the lawyer should advise both (or all) clients that the joint representation will work only if they agree to deal openly and honestly with one another on all matters relating to the representation, and that the lawyer will have to withdraw, if one requests that some matter material to the representation be kept from the other. The lawyer should advise the clients to consider carefully whether they are willing to share information openly with one another because above all else that is what it means to have one lawyer instead of separate representation for each.
[12D] In limited circumstances, it may be appropriate for a lawyer to ask both (or all) clients, if they want to agree that the lawyer will keep certain information confidential, i.e., from the other client. For example, an estate lawyer might want to ask joint clients if they each want to agree that in the eventuality that one becomes mentally disabled the lawyer be allowed to proceed with the joint representation, appropriately altering the estate plan, without the other's knowledge. Of course, should that eventuality come to pass, the lawyer should consult Rule 1.14 before proceeding. However, aside from such limited circumstances, the lawyer representing joint clients should emphasize that what the clients give up in terms of confidentiality is twofold: a later right to claim the attorney-client privilege in disputes between them; and the right during the representation to keep secrets from one another that bear on the representation. (emphasis added).
The Comment makes clear that the normal rule in joint client representation is that there is no confidentiality between joint clients, unless they agree otherwise, and that the lawyer should explain this at the outset of the representation. The Comment does not address directly whether their lawyer should apply the normal rule if she has not explained it to the clients before an issue arises. L's inquiry does not state whether she did so. If she did, then her course is clear. Her obligation is to inform Client B.
If L did not do so, then her course is less clear. While Client A might claim that his expectation was that she would keep his confession confidential, Client B's likely expectation, however, is that he will be kept informed of all matters relating to the representation. Whatever L does is likely to defeat the expectation of one of her clients. We believe that there is not one answer for lawyers in all situations in which clients have not been informed of the ramifications of the joint client rule. It will depend on the circumstances of each case, including whether other Rules of Professional Conduct apply.
In this situation, Rule 1.6(b)(1) seems relevant. That Rule permits L to reveal confidential information "to prevent the commission of a criminal or fraudulent act that the lawyer reasonably believes is likely to result . . . in substantial injury to the financial interests or property of another," and Rule 1.6(b)(3) permits L to reveal confidential information "to the extent the lawyer reasonably believes necessary to rectify client fraud in which the lawyer's services have been used . . . ." See A v. B, 158 N.J. 51 (1999). We do not have enough information to know whether the conditions of these provisions have been met. As we noted in Opinion 93-3, the possible future crimes or frauds that may be involved here are "the successful completion of embezzlement by a fiduciary, larceny, the filing of false tax returns, and there are may be others as well." Moreover, it is possible that somehow L's services were misused by Client A so as to involve the provisions of Rule 1.6(b)(3).
Another relevant provision of the Rules is Rule 3.3(a), which provides
that a lawyer shall not knowingly "(2) fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client, except as provided in Rule 3.3 (e) . . . ." While this Committee does not give advice as to substantive law, it is common knowledge that L's co-administrator clients are fiduciaries for an estate that is subject to the jurisdiction of the Probate Court and that they have accounting obligations with respect to the assets and disbursements of the estate. Comment 2A notes the special meaning of the word "assist" in this Rule.
The term assisting in Rule 3.3 is not limited to conduct that makes the lawyer liable as an aider, abettor or joint tortfeasor. Rule 3.3(a) is intended to guide the conduct of the lawyer as an officer of the court as a prophylactic measure to protect against the contamination of the judicial process. Thus, for example, a lawyer who knows that a client has committed fraud on a tribunal and has refused to rectify it must disclose that fraud to avoid assisting the client's fraudulent act.
If L concludes that Client A's actions involved the commission of a fraud on the court supervising this estate, then this Rule mandates disclosure to the court if the client will not rectify it.
Considering all these Rules together, the Committee is of the view that in the circumstances of this case the obligation that L owes to Client B trumps whatever confidentiality obligation L may have to Client A. Client B has a fiduciary obligation to protect the estate that he needs to act upon immediately and he cannot do so without knowing what L knows. Whether other action on L's part with respect to Client A is required or permitted by Rules 1.6 and 3.3 will depend on the development of further facts with respect to the knowledge and activities of Client A.
This advice is that of a committee without official governmental status.
Permission to publish granted by the Board of Delegates on May 29, 1998. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official government status.