Case Title: A. v. B. v. Hill Wallack

Citation: 

Docket Number: a-86-98

State: new-jersey

Court: New Jersey Supreme Court

Date: 1999-04-15T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). POLLOCK, J., writing for a unanimous Court. This interlocutory appeal addresses in a situation of joint representation the issue of a law firm's disclosure of confidential information of one co-client to another co-client, a subject that involves a conflict between an attorney's ethical duty to maintain client confidences and the obligation to inform a client of material facts. In this case, the specific question is whether the law firm that drew wills for a husband and wife should be permitted to reveal to the wife that the husband has an illegitimate child, a fact learned by the firm after the wills were executed. The husband and wife retained Hill Wallack (the firm), a law firm of approximately sixty attorneys, in October 1997 for estate-planning purposes, and because the firm was to represent both spouses, signed letters captioned Waiver of Conflict of Interest. The letters explained that information provided by one spouse could become available to the other and recited that a testamentary transfer of property by one spouse to the other would permit the spouse receiving the property to dispose of it as that spouse desired. Each spouse consented to and waived any conflicts arising from the firm's joint representation. The husband and wife later executed wills drawn by the firm's estate-planning department, under which they agree to leave their respective residuary estates to each other. If the other spouse does not survive, the contingent beneficiaries are the testator's issue, which by statute includes legitimate and illegitimate children. In January 1998, before the wills were signed, the firm was retained to represent a woman (the mother) to pursue a paternity claim against the husband. Although the firm conducted a computer search of its files to detect any possible conflict of interest before agreeing to represent the mother, the search did not reveal the husband as an existing client because the surname had been misspelled due to a clerical error when the estate-planning files of the husband and wife were opened. When the husband was contacted by the attorney from Hill Wallack's family law department on behalf of the mother, he did not reveal that he, too, was a client of the firm and did not object to the firm's representation of the mother. He had retained another firm to represent him in connection with the paternity claim, which he initially disputed. DNA testing revealed the husband to be the father of the mother's child and suit was instituted against the husband when negotiations over child support broke down. The firm learned of its conflict of interest when the husband's attorney in the paternity action told the firm's family law attorney representing the mother that the firm's estate-planning department had done legal work for the husband. The firm immediately withdrew from representing the mother in the paternity suit. The firm wrote to the husband to state that because of the wife's estate plan, it believed it had an ethical obligation to disclose to the wife the existence, but not the identity, of the husband's illegitimate child, and said it would make this disclosure unless the husband did so himself by a date certain. The husband joined the firm as a third-party defendant in the paternity action to prevent the firm from making the disclosure. The Family Part denied the husband's requested restraints, but the Appellate Division reversed and remanded for the entry of an order imposing preliminary restraints and for further consideration. The firm moved for leave to appeal that order and this Court granted leave to appeal and decided the appeal summarily ( R. 2:8-3(a) ), without oral argument. HELD: The husband's deliberate failure to reveal the existence of his illegitimate child during a law firm's joint estate planning for husband and wife constituted a fraud on his wife, and the attorneys whose services, in effect, were used in furtherance of the fraudulent act are authorized to disclose to the wife the existence of the child. 1. Under New Jersey's Rules of Professional Conduct ( RPCs) for attorneys, a lawyer is required to explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. RPC 1.4(b). And although an attorney is ethically bound by RPC 1.6 (a) not to disclose a client's confidential communications, RPC 1.6 ( c ) (1) permits an attorney to disclose confidential information to the extent the lawyer reasonably believes necessary to rectify the consequences of a client's criminal, illegal, or fraudulent act in furtherance of which the lawyer's services have been used. The husband's deliberate omission of the existence of his illegitimate child during estate planning constitutes a fraud on the wife in the preparation of her estate and he has in effect used the firm's services to defraud her. (pp. 7-11) 2. The firm did not learn of the existence of the illegitimate child from the husband, who concealed the fact from his wife and his estate-planning attorney, so the husband's expectation of non-disclosure may be less than if he had revealed the information in confidence. Also, the spirit of the conflict-waiver letters signed by the husband and wife, which contained an acknowledgment that confidential information of one co-client might become available to the other, supports the firm's decision to reveal the information to the wife. (pp.11-14) 3. Persuasive secondary authority is in accord. An attorney who represents clients jointly should have with the clients at the outset an explicit agreement about the sharing of confidential information. In the absence of such an agreement, the Restatement (Third) of The Law Governing Lawyers leaves to the attorney's discretion the resolution of the lawyer's competing ethical obligations. The Restatement suggests that in estate planning, disclosure of one client's confidential information to the co-client is appropriate only if the failure of the co-client to have the spouse's information would be materially detrimental to the co-client or frustrate that party's intended testamentary arrangement. (pp. 14-21 ) 4. Unlike the Restatement and other authorities favoring a discretionary rule, the Professional Ethics Committees of Florida and New York have concluded that disclosure to a co-client is prohibited. Neither state, however, has a rule like New Jersey's RPC 1.6 (c) (1) that permits disclosure to rectify the consequences of a fraud. (pp. 21-23) 5. Permitting the firm to disclose to the wife the existence, but not the identity, of the husband's child does not violate N.J.S.A. 9:17-42, the confidentiality provision of the New Jersey Parentage Act. (p.24 ) The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Family Part. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, GARIBALDI, STEIN, and COLEMAN join in JUSTICE POLLOCK's opinion. JUSTICE O'HERN did not participate. SUPREME COURT OF NEW JERSEY A- 86 September Term 1998 A., individually and on behalf of minor child, C., Plaintiff, v. B., Defendant and Third-Party Plaintiff-Respondent, v. HILL WALLACK, Attorneys at Law, Third-Party Defendant-Appellant. Submitted April 1, 1999 -- Decided April 15, 1999 On appeal from Appellate Division, Superior Court. John J. Gibbons submitted a brief on behalf of appellant (Gibbons, Del Deo, Dolan, Griffinger & Vecchione, attorneys). Mark Z. Segal and Neil M. Day submitted a brief on behalf of respondent (Fox, Rothschild, O'Brien & Frankel, attorneys; Kenneth H. Mack, of counsel). The opinion of the Court was delivered by POLLOCK, J. [Restatement (Third) of The Law Governing Lawyers, supra, 112 comment l.] Additionally, the Restatement advises that the lawyer, when withdrawing from representation of the co-clients, may inform the affected co-client that the attorney has learned of information adversely affecting that client's interests that the communicating co-client refuses to permit the lawyer to disclose. Ibid. In the context of estate planning, the Restatement also suggests that a lawyer's disclosure of confidential information communicated by one spouse is appropriate only if the other spouse's failure to learn of the information would be materially detrimental to that other spouse or frustrate the spouse's intended testamentary arrangement. Id. 112 comment l, illustrations 2, 3. The Restatement provides two analogous illustrations in which a lawyer has been jointly retained by a husband and wife to prepare reciprocal wills. The first illustration states: Lawyer has been retained by Husband and Wife to prepare wills pursuant to an arrangement under which each spouse agrees to leave most of their property to the other (compare 211, Comment c, Illustrations 1-3). Shortly after the wills are executed, Husband (unknown to Wife) asks Lawyer to prepare an inter vivos trust for an illegitimate child whose existence Husband has kept secret from Wife for many years and about whom Husband had not previously informed Lawyer. Husband states that Wife would be distraught at learning of Husband's infidelity and of Husband's years of silence and that disclosure of the information could destroy their marriage. Husband directs Lawyer not to inform Wife. The inter vivos trust that Husband proposes to create would not materially affect Wife's own estate plan or her expected receipt of property under Husband's will, because Husband proposes to use property designated in Husband's will for a personally favored charity. In view of the lack of material effect on Wife, Lawyer may assist Husband to establish and fund the inter vivos trust and refrain from disclosing Husband's information to Wife. In authorizing non-disclosure, the Restatement explains that an attorney should refrain from disclosing the existence of the illegitimate child to the wife because the trust would not materially affect Wife's own estate plan or her expected receipt of property under Husband's will. Ibid. The other illustration states: Same facts as [the prior Illustration], except that Husband's proposed inter vivos trust would significantly deplete Husband's estate, to Wife's material detriment and in frustration of the Spouses' intended testamentary arrangements. If Husband will neither inform Wife nor permit Lawyer to do so, Lawyer must withdraw from representing both Husband and Wife. In the light of all relevant circumstances, Lawyer may exercise discretion whether to inform Wife either that circumstances, which Lawyer has been asked not to reveal, indicate that she should revoke her recent will or to inform Wife of some or all the details of the information that Husband has recently provided so that Wife may protect her interests. Alternatively, Lawyer may inform Wife only that Lawyer is withdrawing because Husband will not permit disclosure of information that Lawyer has learned from Husband. Because the money placed in the trust would be deducted from the portion of the husband's estate left to his wife, the Restatement concludes that the lawyer may exercise discretion to inform the wife of the husband's plans. Ibid. An earlier draft of the Restatement described the attorney's obligation to disclose the confidential information to the co-client as mandatory. Id. (Council Draft No. 11, 1995); cf. Collett, supra, at 743 (arguing that nature of joint representation of husband and wife supports mandatory disclosure rule). When reviewing the draft, however, the governing body of the American Law Institute, the Council, modified the obligation to leave disclosure within the attorney's discretion. Similarly, the American College of Trust and Estate Counsel (ACTEC) also favors a discretionary rule. It recommends that the lawyer should have a reasonable degree of discretion in determining how to respond to any particular case. American College of Trust and Estate Counsel, supra, at 68. The ACTEC suggests that the lawyer first attempt to convince the client to inform the co-client. Ibid. When urging the client to disclose the information, the lawyer should remind the client of the implicit understanding that all information will be shared by both clients. The lawyer also should explain to the client the potential legal consequences of non-disclosure, including invalidation of the wills. Ibid. Furthermore, the lawyer may mention that failure to communicate the information could subject the lawyer to a malpractice claim or disciplinary action. Ibid. The ACTEC reasons that if unsuccessful in persuading the client to disclose the information, the lawyer should consider several factors in deciding whether to reveal the confidential information to the co-client, including: (1) duties of impartiality and loyalty to the clients; (2) any express or implied agreement among the lawyer and the joint clients that information communicated by either client to the lawyer regarding the subject of the representation would be shared with the other client; (3) the reasonable expectations of the clients; and (4) the nature of the confidence and the harm that may result if the confidence is, or is not, disclosed. Id. at 68-69. The Section of Real Property, Probate and Trust Law of the American Bar Association, in a report prepared by its Special Study Committee on Professional Responsibility, reached a similar conclusion: Faced with any adverse confidence, the lawyer must act as a fiduciary toward joint clients. The lawyer must balance the potential for material harm to the confiding spouse caused by disclosure against the potential for material harm to the other spouse caused by a failure to disclose. [Report of the Special Study Committee on Professional Responsibility: Comments and Recommendations on the Lawyer's Duties in Representing Husband and Wife, supra, 28 Real Prop. Prob. Tr. J. at 787.] The report stresses that the resolution of the balancing test should center on the expectations of the clients. Id. at 784. In general, the available ruling authority . . . points toward the conclusion that a lawyer is not required to disclose an adverse confidence to the other spouse. Id. at 788. At the same time, the report acknowledges, as did the Restatement, that the available ruling authority is scant and offers little analytical guidance. Id. at 788 n.27. The Professional Ethics Committees of New York and Florida, however, have concluded that disclosure to a co-client is prohibited. New York State Bar Ass'n Comm. on Professional Ethics, Op. 555 (1984); Florida State Bar Ass'n Comm. on Professional Ethics, Op. 95-4 (1997). The New York opinion addressed the following situation: A and B formed a partnership and employed Lawyer L to represent them in connection with the partnership affairs. Subsequently, B, in a conversation with Lawyer L, advised Lawyer L that he was actively breaching the partnership agreement. B preceded this statement to Lawyer L with the statement that he proposed to tell Lawyer L something in confidence. Lawyer L did not respond to that statement and did not understand that B intended to make a statement that would be of importance to A but that was to be kept confidential from A. Lawyer L had not, prior thereto, advised A or B that he could not receive from one communications regarding the subject of the joint representation that would be confidential from the other. B has subsequently declined to tell A what he has told Lawyer L. [New York State Bar Ass'n Comm. on Professional Ethics, Op. 555, supra.] In that situation, the New York Ethics Committee concluded that the lawyer may not disclose to the co-client the communicating client's statement. The Committee based its conclusion on the absence of prior consent by the clients to the sharing of all confidential communications and the fact that the client specifically in advance designated his communication as confidential, and the lawyer did not demur. Ibid. The Florida Ethics Committee addressed a similar situation: Lawyer has represented Husband and Wife for many years in a range of personal matters, including estate planning. Husband and Wife have substantial individual assets, and they also own substantial jointly-held property. Recently, Lawyer prepared new updated wills that Husband and Wife signed. Like their previous wills, their new wills primarily benefit the survivor of them for his or her life, with beneficial disposition at the death of the survivor being made equally to their children. Several months after the execution of the new wills, Husband confers separately with Lawyer. Husband reveals to Lawyer that he has just executed a codicil (prepared by another law firm) that makes substantial beneficial disposition to a woman with whom Husband has been having an extra-marital relationship. [Florida State Bar Ass'n Comm. on Professional Ethics, Op. 95-4, supra.] Reasoning that the lawyer's duty of confidentiality takes precedence over the duty to communicate all relevant information to a client, the Florida Ethics Committee concluded that the lawyer did not have discretion to reveal the information. In support of that conclusion, the Florida committee reasoned that joint clients do not necessarily expect that everything relating to the joint representation communicated by one co-client will be shared with the other co-client. In several material respects, however, the present appeal differs from the hypothetical cases considered by the New York and Florida committees. Most significantly, the New York and Florida disciplinary rules, unlike RPC 1.6, do not except disclosure needed to rectify the consequences of a client's . . . fraudulent act in the furtherance of which the lawyer's services had been used. RPC 1.6(c). But see New York Code of Professional Responsibility DR 4-101; Florida Rules of Professional Conduct 4-1.6. Second, Hill Wallack learned of the husband's paternity from a third party, not from the husband himself. Thus, the husband did not communicate anything to the law firm with the expectation that the communication would be kept confidential. Finally, the husband and wife, unlike the co-clients considered by the New York and Florida Committees, signed an agreement suggesting their intent to share all information with each other. Because Hill Wallack wishes to make the disclosure, we need not reach the issue whether the lawyer's obligation to disclose is discretionary or mandatory. In conclusion, Hill Wallack may inform the wife of the existence of the husband's illegitimate child. Finally, authorizing the disclosure of the existence, but not the identity, of the child will not contravene N.J.S.A. 9:17-42, which provides: All papers and records and any information pertaining to an action or proceeding held under [the New Jersey Parentage Act] which may reveal the identity of any party in an action, other than the final judgment or the birth certificate, whether part of the permanent record of the court or of a file with the State registrar of vital statistics or elsewhere, are confidential and are subject to inspection only upon consent of the court and all parties to the action who are still living, or in exceptional cases only upon an order of the court for compelling reason clearly and convincingly shown. The law firm learned of the husband's paternity of the child through the mother's disclosure before the institution of the paternity suit. It does not seek to disclose the identity of the mother or the child. Given the wife's need for the information and the law firm's right to disclose it, the disclosure of the child's existence to the wife constitutes an exceptional case "for compelling reason clearly and convincingly shown." The judgment of the Appellate Division is reversed and the matter is remanded to the Family Part. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, GARIBALDI, STEIN, and COLEMAN join in JUSTICE POLLOCK's opinion. JUSTICE O'HERN did not participate. NO. A-86 A., individually and on behalf of minor child, C., Plaintiff, v. B., Defendant and Third-Party Plaintiff-Respondent, v. HILL WALLACK, Attorneys at Law, Third-Party Defendant-Appellant. DECIDED Motion for Summary Disposition (a) Supreme Court. On an appeal taken to the Supreme Court as of right from a judgment of the Appellate Division, any party may move at any time following the service of the notice of appeal for a summary disposition of the appeal. Such motion shall be determined on the motion papers and on the briefs and record filed with the Appellate Division and may result in an affirmance, reversal or modification. The pendency of such motion shall toll the time for the filing of briefs and appendices on the appeal. The Supreme Court may summarily dispose of any appeal on its own motion at any time, and on such prior notice, if any, to the parties as the Supreme Court directs.