Brief Fact Summary.
After attorney Goldberg (Defendant) was charged with making materially false and misleading statements in connection with a registration statement related to a public offering by Empire Fire and Marine Ins. Co. (Empire) (Defendant), he gave investor Meyerhofer’s (Plaintiff) counsel a copy of an affidavit containing confidential information received from Goldberg’s (Defendant) former client, Empire (Defendant)
Synopsis of Rule of Law.
An attorney may disclose confidences or secrets in order to defend himself against an accusation of wrongful conduct.
DR4-101 (C)(4) provides in pertinent part: (C) A lawyer may reveal: (4) Confidences or secrets necessary to defend himself or his employees or associates against an accusation of wrongful conduct.View Full Point of Law
In making a public offering of stock, Empire Fire and Marine Insurance Company (Empire) (Defendant) was represented by Sitomer, Sitomer & Porges (Defendant).Â Goldberg (Defendant) was an attorney in the firm and had performed some work on the issue.Â Meyerhofer (Plaintiff) and Federman (Plaintiff), purchasers of Empire stock, sustained losses when the market price of the stock dropped.Â They brought a class action suit against Empire (Defendant), alleging, among other things, failure to disclose a large finder’s fee arrangement with Sitomer (Defendant).Â Bernson, Hoeniger, Freitag & Abbey represented Plaintiffs.Â Goldberg (Defendant) gave Bernson a copy of an affidavit to verify his non-participation in the finder’s fee omission.Â The district court ordered that the Bernson firm and Goldberg (Defendant) be barred from acting as counsel for Mayerhofer (Plaintiff) in this or any future action against Empire (Defendant) involving the transactions at issue here and then dismissed Meyerhofer’s (Plaintiff) complaint without prejudice.Â All parties appealed
May an attorney disclose confidences or secrets in order to defend himself against an accusation of wrongful conduct?
(Moore, J.)Â Yes.Â An attorney may disclose confidences or secrets in order to defend himself against an accusation of wrongful conduct.Â In this case, the charge of knowing participation in the filing of a false and misleading registration statement was a serious one.Â Therefore, Goldberg (Defendant) had the right to make an appropriate disclosure regarding his role in the public offering and to support his version of the facts with suitable evidence.Â Nevertheless, an attorney may not represent a party in a suit against a former client where there may be the appearance of a possible violation of confidence.Â Accordingly, the district court’s order, prohibiting Goldberg (Defendant) from representing the interests of Meyerhofer (Plaintiff) and enjoining him from disclosing material information except on discovery or at trial, is affirmed.Â On the other hand, since the Bernson firm’s relationship with Goldberg (Defendant) was not tainted by violations of the Code of Professional Responsibility, the order dismissing the action and enjoining Bernson from acting as counsel is reversed
The Model Rule applied here is 1.6(b)(5) and is one of the self-defense exceptions to confidentiality.Â Comment to Rule 1.6 reveals that the attorney’s right to respond arises when an assertion of complicity has been made.Â The Model Code of Professional Responsibility does not distinguish between accusations made by a third party and those made by a client.