You are here

Reporting Up or Out -Continuing Developments on a Lawyer's Duty to Disclose

In October 2003, this column discussed the brewing battle over attorney-client privilege under the then newly adopted Sarbanes-Oxley Act. Under the provisions of the Act, the SEC adopted regulations obliging a lawyer to report and disclose certain client actions, primarily to prevent the client from committing fraud and criminal violations. The Washington State Bar Association issued an Interim Formal Ethics Opinion finding that certain disclosure requirements under the SEC Rules were broader than those permitted under the Washington Rules of Professional Conduct, and a Washington lawyer could not reveal such protected confidences. This resulted in an exchange of letters between the SEC and the bar associations of several states over this issue.

The column stated at that time: “The SEC – as well as other governmental agencies – has long been attempting to push the legal profession toward having a public enforcement function. Such a function not only would force lawyers to violate long held confidentiality obligations to their clients, but would contravene the fundamental concept that the lawyer owes his or her obligation first to the client – not to the public. . . . Stay tuned for further developments.”

The first “further developments” were amendments to ABA Model Rules 1.6 and 1.13 (adopted in most states, including Illinois, though with some local variations). As reported in the ABA Bar Leader in December 2003: “By a 218-201 vote, the ABA Delegates amended Model Rule 1.6(b) to permit a lawyer to reveal confidential client information to prevent a crime or fraud that is reasonably certain to result in substantial injury to the property or financial interest of another. The ABA also voted to amend Model Rule 1.13 to require a corporate lawyer to report certain violations of law by officers or employees to higher authorities within the organization, unless the lawyer believes that disclosure would not be in the best interest of the organization.” The general concept underlying these rules is that the lawyer’s client is the entity, and the duty of the lawyer is to protect the interests of the entity even if it may be against the personal interests of certain of the officers or employees of the entity,

The compromise between the ABA and the SEC seemed to work. But what if the lawyer does not “report up” or “report out” such information? This was the question brought in 2016 before the Michigan Attorney Grievance Commission concerning six former General Motors in-house counsel who failed to disclose either “up” or “out” information they allegedly had about the defective ignition switches in GM cars that resulted in numerous injuries and deaths. As reported in the public media and trade press, the Grievance Commission declined to commence any disciplinary action against these lawyers after a complaint was filed by the father of an alleged victim. The Commission did not give their reasons for taking no action, and there has been much speculation – much of which revolves around the specific wording Michigan’s Rules of Professional Conduct, which gives attorneys very limited discretion to disclose client confidences, even if necessary to prevent death or bodily injury.

Can an Illinois lawyer rely on Michigan’s “no action” decision? I would suggest not. Illinois Rule 1.6(c) states that: “[a] lawyer shall reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary to prevent reasonably certain death or substantial bodily harm.” Comment 6 to Illinois Rule 1.6 is fairly explicit in stating: “Paragraph (c) recognizes the overriding value of life and physical integrity and requires disclosure reasonably necessary to prevent reasonably certain death or substantial bodily harm. . . . Thus, a lawyer who knows from information relating to a representation that a client or other person has accidentally discharged toxic waste into a town’s water must reveal this information to the authorities if there is a present and substantial risk that a person who drinks the water will contract a life-threatening or debilitating disease and the lawyer’s disclosure is necessary to eliminate the threat or reduce the number of victims.” I believe that were this matter to be considered under the Illinois Rules, the attorneys in question would have been found to have been in violation of the rules.

Issues related to a lawyer’s obligation to the client versus obligation to the public continue to arise.