Opinion 387
Question Presented
ATTORNEY'S DUTY WHERE CONFIDENTIAL COMMUNICATION OF CORPORATE CHIEF EXECUTIVE REVEALS CRIMINAL ACTIVITY AND BREACH OF DUTY BY CORPORATE OFFICER MADE TO RETAINED ATTORNEY FOR THE CORPORATION
An attorney was retained by a corporation. An officer of the corporation was the primary liaison between the corporation and retained counsel. The attorney had personally represented this officer in the past but was not retained by the officer. In investigating a claim of the corporation, this officer disclosed to the attorney facts amounting to a criminal offense and breach of duty to the corporation not only by the officer but by other directors of the corporation. (1) Should the attorney report the facts to the Board of Directors? (2) Should the attorney report the facts to the Stockholders? (3) Should the attorney report the facts to appropriate investigatory authority? (4) Was the conversation privileged?
Crucial to answering the questions is the determination of which persons or entities were clients of the attorney. Clearly the corporation was a client. However, past personal representations of the officer would not make him a continuing client.
If it be considered that both the corporation and the officer are clients, the answer is easy. They are multiple clients and the attorney's duties to each conflict and he should withdraw from representing both. DR 5-105. The revelation of a past crime is privileged and he has no duty or right to reveal the confidential communications to anyone. DR 4-101. Opinion 353 (July 1970)
If however, the corporation be considered the only client, the first 2 questions would be answered "Yes". The attorney's first duty is to zealously represent his client, the corporation. EC 7-1. Known facts should be revealed to the full directors, including those not involved and since 3 directors are involved, to the stockholders.
Since the corporation itself may be criminally liable, Art. 7.22 Penal Code and the information furnished involved past offenses the 3rd question is answered "No". DR 4-101. If there is no corporate criminal liability question 3 would be answered "Yes". The 4th question is answered "Yes" as to the corporation.
Bluebook Citation
Tex. Comm. On Professional Ethics, Op. 387 (1977)