Opinion ID: 1702605
Heading Depth: 1
Heading Rank: 4

Heading: Substantial Relationship Test v. Confidential Information Test

Text: In Taylor Coal Company's petition for writ of mandamus, two members of this Bar, Louis Moore and Sam Phelps, have been charged with violation of Canons 4 and 9, Code of Professional Responsibility of the Alabama State Bar. Canon 4 provides that a lawyer should preserve the confidences and secrets of his client. Providing for the preservation of confidences and secrets of a client, Disciplinary Rule 4-101(B), states: Except as permitted by DR4-101(C) a lawyer shall not knowingly: (1) Reveal a confidence or secret of his client. (2) Use a confidence or secret of his client to the disadvantage of the client. (3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure. Canon 9 provides as follows: A lawyer should avoid even the appearance of professional impropriety. Although we have diligently searched, surprisingly, we have found a paucity of authority dealing with the issues involved herein. Two cases shed scant, but insufficient, light to allow us to reach our objective. In Lester v. Gay, 217 Ala. 585, 117 So. 211 (1928), plaintiff, a female, filed suit against a physician for assault and battery she claimed was committed by the physician while she was his patient. In attempting to reverse a judgment for the defendant, the plaintiff claimed that the lawyer for the doctor had been consulted by her husband with a view toward employment; had, therefore, acquired confidential knowledge of the plaintiff's case; and, consequently, should not have been allowed to represent the doctor in the civil suit. The lawyer testified that the matter had been mentioned to him by plaintiff's husband, yet he had not advised plaintiff nor her husband, but merely said that it was a case for the grand jury. Under those facts, this Court found that the lawyer's representation of the physician was not improper. The second case is Hannon v. State, 48 Ala.App. 613, 266 So.2d 825 (Cr.App.1972). Appealing a robbery conviction, the defendant argued that the district attorney had been his lawyer while practicing in the public defender's office and had secured confidential information concerning his case that the district attorney might have turned over to the assistant district attorney who prosecuted him. The Circuit Court held a full blown evidentiary hearing on this issue. The trial court, as well as the Court of Criminal Appeals, concluded that no confidential information had passed to the assistant district attorney and, therefore, the integrity of the trial was preserved. It would seem from this scant authority that Alabama is inclined to embrace the so-called confidentiality test or fact-by-fact analysis to determine if there has been any impropriety in an attorney switching from one client to another where the same subject matter is involved. This we cannot clearly discern from the cases because there has been no mature consideration of the substantial relationship test. Indeed, the test has not even been mentioned. The substantial relationship rule is probably best described in T. C. & Theatre Corporation v. Warner Brothers Pictures, Inc., 113 F.Supp. 265, 268-69 (S.D.N.Y. 1953): [T]he former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action wherein the attorney previously represented him, the former client. The court will assume that during the course of the former representation confidences were disclosed to the attorney bearing on the subject matter of the representation. It will not inquire into the nature and extent. Only in this manner can the lawyer's duty of absolute fidelity be enforced and the spirit of the rule relating to privileged communications be maintained. To compel the client to show, in addition to establishing that the subject of the present adverse representation is related to the former, the actual confidential matters previously entrusted to the attorney and their possible value to the present client would tear aside the protective cloak drawn about the lawyer-client relationship. For the court to probe further and sift the confidences in fact revealed would require the disclosure of the very matters intended to be protected by the rule [protecting client confidences]. This substantial relationship rule is followed in the majority of the jurisdictions and was followed by the Fifth Circuit Court of Appeals in Woods v. Covington County Bank, 537 F.2d 804 (5th Cir. 1976). The confidentiality rule differs from the substantial relationship rule in that in the former, the protective cloak about the attorney-client relationship is pierced. Matters which transpired between the two are examined to determine what impact the information passed by the client to the attorney would have on the new attorney-client relationship. Seemingly, this is what was done in the Gay and Hannon cases. In each case, the attorney was put on the stand and questioned about the information he received from the client, as well as what he had done with it. The court, in each instance, finding no compromise of the confidential relationship, held that the integrity of the proceedings was not impeached. Unfortunately, the confidentiality rule has an inherent defect. It cannot be applied uniformly. In jury trial cases, the court could hold an in camera hearing to determine whether confidential information will be used. On the other hand, in many cases the trier of fact will be the judge. This is the situation in this casea bill to quiet title. To hold that the trier of fact would not be compromised under such circumstances borders on the ridiculous. We hold that the substantial relationship test is preferable to the confidentiality test, thereby adopting the majority view and that of the Fifth Circuit Court of Appeals. This is not to say that whenever a substantial relationship is found the lawyer is automatically disqualified. See United States v. Miller, 624 F.2d 1198 (3d Cir. 1980); Church of Scientology of California v. McLean, 615 F.2d 691 (5th Cir. 1980); Central Milk Producers Cooperative v. Sentry Food Stores, Inc., 573 F.2d 988 (8th Cir. 1978); Novo Terapeutisk Laboratorium A/S v. Baxter Travenol Laboratories, Inc., 607 F.2d 186 (7th Cir. 1979). Although later overruled on the procedural issue of appealability, the case of State of Arkansas v. Dean Foods Products Company, Inc., 605 F.2d 380, 383 (8th Cir. 1979), still provides cogent reasoning appropriate to the instant case, viz.: Disqualification of counsel, like other reaches for perfection, is tempered by a need to balance a variety of competing considerations and complex concepts. Disqualification in spasm reaction to every situation capable of appearing improper to the jaundiced cynic is as goal-defeating as failure to disqualify in blind disregard of flagrant conflicts of interest. Between these ethical extremes lie less obvious influences on the interest of society in the orderly administration of justice, on the interest of clients in candid consultation and choice of counsel, and on the interest of the legal profession in its representational soul. We now turn to applying the law which we have enunciated to the facts in this case. Judge Junkin held that neither Louis Moore, nor anyone else in the firm of Holder, Moore and Grocholski received any information of a confidential nature from Taylor Coal Company during the period of time in which Mr. Moore was rendering title opinions to Taylor Coal Company. His holding was based on his findings that the extent of the attorney-client relationship between Mr. Moore and Taylor Coal Company was the rendering of title opinions based on public records in Fayette County. An alternate basis for his holding was his finding that Taylor Coal Company discussed the title opinions rendered by Mr. Moore with other persons, as well as the Drummond Coal Company, during negotiations for the sale of stock of Taylor Coal Company. We disagree with the Court's holding that no confidential information passed in the attorney-client relationship of Mr. Moore and Taylor Coal Company. Furthermore, we do not believe that this holding is indispensable to our determination that Mr. Moore did not violate Canons 4 and 9, Code of Professional Responsibility of the Alabama State Bar. Once there is a determination of an attorney-client relationship, the attorney's lips are sealed concerning information furnished to him, as well as the fruits of his labor. An attorney-client relationship is evidenced by the record here. Taylor Coal Company furnished Mr. Moore with an abstract of title prepared by Lucy Crutcher. Then, Mr. Moore examined the abstract, rendered an opinion, kept a copy of it and the abstract in his office file, rendered a bill and presumably got paid for his services. The attorney's lips are sealed, even though the client may have discussed the subject matter of the attorney-client relationship with other persons, as was done here when Taylor Coal Company discussed the subject matter of the attorney-client relationship with Drummond Coal Company and others. A substantial difference in the law is made between the attorney's ethical responsibility with reference to disclosure of confidential information and his privilege not to testify in court concerning his client's secrets. In the latter instance, the attorney can be required to testify if it is demonstrated that the attorney and client discussed the subject matter of the attorney-client relationship in the presence of a third person. Doe v. A Corporation, 330 F.Supp. 1352 (S.D.N.Y.1971), aff'd, 453 F.2d 1375 (1972). However, this does not mean that the lawyer is allowed to reveal his client's secrets, even after such a disclosure in court. It has been said that the confidential relationship between the attorney and client is the soul of lawyering. See Fred Weber, Inc. v. Shell Oil Company, 566 F.2d 602 (8th Cir. 1977) (later overruled on a procedural matter unimportant to the issues at hand). This relationship is the cornerstone of the legal profession, without which the adversary system would not work. The client simply must have the secure feeling that whatever he tells his lawyer or gives his lawyer, even though it may be public information, will be held by his lawyer inviolate. Let us hasten to add that there are many exceptions to the rule. Some of the exceptions occur where there exist: (1) two or more clients employing the same attorney as in business transactions (drafting of deeds, execution of real estate agreements, etc.), (2) waiver, and/or (3) no public sense of impropriety involved in an attorney's representing a client whose interests are hostile to those of his former client where the subject matter of the litigation is substantially the same. The attorney's lips are not completely sealed in these exceptional situations, and the attorney may sue the former client concerning substantially the same subject matter. In In re Bauer's Estate, 79 Cal. 304, 21 P. 759, 762 (1889), it was said: When two persons address a lawyer as their common agent, their communications to the lawyer, as far as concerns strangers, will be privileged, but as to themselves they stand on the same footing as to the lawyer, and either can compel him to testify against the other as to their negotiations. In 1 E. Thornton, A Treatise on Attorneys at Law, 183-84 (1914), it is said: When two or more clients employ the same attorney in the same business, communications made by them in relation to such business is not privileged inter sese; nor are such communications privileged as between any one of the parties and the attorney. It is the secrets of the client which affect his right that the law does not permit the attorney to divulge. By selecting the same attorney, in making their communications in the presence of each other, each party waives his right to place those communications under the shield of professional confidence. [Footnotes omitted.] In Croce v. Superior Court, 21 Cal.App.2d 18, 68 P.2d 369 (1937), an attorney who had represented several clients associated in a business enterprise, in the defense of an action involving a common interest, was allowed to represent one of his former clients in a subsequent litigation instituted against his associates wherein substantially the same subject matter was being re-litigated. The Court ruled that this was an exception to the confidentiality rule because all of the clients were involved in a common business enterprise and had selected the same lawyer. In the case at bar, there can be no question that the subject matter of this litigation is substantially related to the work done by Mr. Moore when he wrote two title opinions for Taylor Coal Company. We have already said that once an attorney-client relationship is established all information coming to the attorney from his client, whether it be from public records or not, is confidential. However, we find this case very close to the exception that allows a lawyer to sue a former client where both have employed him with reference to the same business transaction. Judge Junkin has already found that the only information which was given to Mr. Moore was an abstract of title prepared by Lucy Crutcher from public documents. Here, the confidential information is not only known to Taylor Coal Company, Mr. Sigler and the Pearson Heirs, but in a legal sense is known to the whole world. Indeed, Mr. Moore had represented Ensearch Exploration, Inc., since 1971 and prior to his rendering title opinions to Taylor Coal Company had rendered title opinions to Ensearch land agents on some of the mineral rights involved in this litigation. Was it, therefore, improper for Mr. Moore to render a title opinion on this same property to Taylor Coal Company? We think not. The Court is not unaware that Fayette County is a small, principally rural county in western Alabama. There are probably about a dozen lawyers in the whole county. In weighing the important considerations of Canons 4 and 9, we must, of necessity, balance the weighty considerations of those Canons against the need of the public to obtain counsel of its choosing. In the realm of ethical consideration, there is no more apt a statement than Shakespeare's observation that there is nothing either good or bad, but thinking makes it so. We cannot honestly conclude that the public, or the bar, particularly in Fayette County, would see an impropriety in Mr. Moore's representing Mr. Sigler and the Pearson Heirs against his former client, Taylor Coal Company, when the only act which he performed for them which is substantially related is the rendering of two title opinions concerning rights involved in the present litigation. On the other hand, we can see a public outcry if we were to strip from the members of this community the opportunity to employ an attorney who apparently has developed some expertise in title work in the Fayette area. Having concluded that there has been no violation of Canons 4 and 9 with reference to Mr. Moore, a fortiori, there can be no violation of these Canons with reference to Sam Phelps and his law firm and Mr. Sigler, because they are implicated only if Mr. Moore is.