Conflicts That Arise After Retention of a Client

Nov 28, 2023 | General Estate Planning, Podcasts, T&E Administration, T&E Litigation

​”Conflicts that Arise after the Retention of a Client,” that’s the subject of today’s ACTEC Trust and Estate Talk.

Transcript/Show Notes


This is Toni Ann Kruse, ACTEC Fellow from New York City. Ethical considerations for maintaining client confidentiality when conflicts arise. ACTEC Fellows Crystal Edwards from Morristown, New Jersey, Daniel Hayward of Wilmington, Delaware, and Robert Harper of Uniondale, New York, join us today to explain this topic. Welcome, Crystal, Dan, and Rob. I will first turn it over to Dan to start us off.

Daniel Hayward: Thank you, Toni Ann; this is Dan Hayward. We’re going to focus on two scenarios for the purposes of the podcast. The first is going to be a New York ethics opinion, and the second will be a New Jersey court case that illustrates some of these issues. The first is Nassau County Bar Opinion 304. This was an ethics opinion out of New York in 2003.

New York Ethics Opinion: Nassau County Bar Opinion 304

It has some interesting facts. It involved an individual who was involved in secret planning for a divorce. She did not want her husband to, presumably, know about the divorce until notice was given. Unfortunately, before that could happen, the individual died, and her husband was named the personal representative of her estate. In going through various files, he found that a retention letter was paid to a firm that specialized in divorce and reached out to that firm for a couple of things. One was to be reimbursed or get a return of the retainer fee and, also, they wanted a copy of the lawyer’s file. And purported to waive any attorney-client privilege that would be associated with the prior representation of the wife.

The counsel reached out to the appropriate parties to seek an ethics opinion, and what they held was that even though the attorney-client privilege was purported to be waived by the husband as a personal representative of the estate, and he had the right to waive the attorney-client privilege as the personal representative of the wife’s estate, that was only part one of the test. They also held that he would also have to consent to disclosure of the wife’s secrets in his fiduciary capacity, and they would have to wholly be in the interest of his wife and her estate.

And the board concluded that it wasn’t clear that what he was seeking, the information that he was seeking in the client’s file – his wife’s file – was actually relevant and wholly in the interest of his wife and her estate. And so it concluded that counsel did not have to disclose that confidential information and relied on the New York Lawyer’s Code of Professional Responsibility in reaching its conclusion.

It noted that the attorney-client privilege is not as broad as the duty of confidentiality, which is generally governed by Rule 1.6 and states that counsel cannot disclose confidential information unless there’s informed consent from the client or there was implied authorization. And, in this case, they found that neither of those two were present.

This was interesting because it kind of drew the distinction between the attorney-client privilege under New York law and the duty of confidentiality, and noted that these are not the same thing – that the duty of confidentiality is broader and may have broader implications. I think it was interesting. I’m going to turn it over to Rob because of some prior New York case law on the subject.

New York Appellate Case: Mayorga v. Tate

Robert M. Harper: Yeah, thank you, Dan. Building on what Dan had noted about the distinction between the attorney-client privilege under New York law and the duty of confidentiality that exists under Rule 1.6 of the Rules of Professional Conduct. New York has a case, an appellate case, Mayorga v. Tate, which dates back to the early 2000s and stands essentially for the proposition that the fiduciary of an estate stands in the shoes of a deceased client and thus has the legal capacity to waive the attorney-client privilege on behalf of the estate. This ethics opinion stands out for me as a New York lawyer, as a trust and estate lawyer, in that it is not absolute that the fiduciary of an estate can waive the attorney-client privilege on behalf of a deceased client.

Indeed, in the circumstances of this ethics opinion, where the fiduciary of an estate sought to gain access to a deceased client’s file that involved a matter that was adverse to the fiduciary individually, the guidance was, from an ethical perspective under Rule 1.6, that it should not be the case that the attorney had an obligation to disclose confidential client information to the fiduciary of the estate in those circumstances. With that, I’ll turn it over to Crystal, who will discuss another ethical issue in a case that I think terrified at least Dan, Crystal, and myself as we talked among ourselves in preparation for today’s presentation.

New Jersey: A v. B v. Hill Wallack Case

Crystal West Edwards: Thanks, Rob. So, oftentimes, as estate planners, we don’t get the most exciting facts before us, but this A versus B versus Hill Wallet case is a case that all of us could pop some popcorn and sit and read the opinion about, but also had a lot of “buyer beware” associated with it.

It pulls in a couple of ethical rules that I just want to mention. Ethical Rule 1.6 -Duty of Confidentiality, Rule 1.7 – Conflicts, and also Rule 1.10, which is about imputed conflicts, that if there’s a conflict in your firm from anyone else in the firm, that conflict applies to you as well. Essentially, in the A v. B v. Hill Wallack case, a married couple presented before their estate planning lawyer to assist with preparation of estate planning documents. As a customary first step, there was an engagement letter that was prepared and signed by the couple. The engagement letter represented that the representation of the couple would be a joint representation and that confidences – well actually it didn’t say confidences, it said: “information provided by one spouse may be shared with the other.”

The engagement letter did not affirmatively waive confidentiality, but it did wave conflicts of interest, and then it also highlighted that information would be shared between them. In the midst of the estate planning, though not known to the lawyers and certainly not known to the wife, the husband fathered a child with his paramour and his paramour sought a family court action against him. Now, the plot twist here is that the paramour sought retention by none other than the same law firm that was doing the estate planning for the husband and wife.

While this conflict of interest, a lot of us would say, clench your pearls, how did this possibly happen? How can the same law firm represent, you know, a party that is directly adverse to their client? Well, I can tell you that it was a mistake, right? No attorney would intentionally do this. Due to a clerical error with the conflict check, the conflict was not first noticed.

So, in the midst of that litigation, in an effort – well, I should say in the midst of the family court action, the husband in that case filed an action to bring in the law firm to stop them from disclosing to the wife that he had fathered this child and that he was in the midst of a court battle with her. Ultimately, the law firm sought advice as to what should happen and, ultimately, should be permitted to disclose this information to their client.

Now, this presents a number of ways. First, with respect to the confidentiality piece, the question was, did the law firm have a duty to disclose to their co-client? Said differently, did they have a duty to maintain the confidence of a co-client? Ultimately, the court said that they have a duty to disclose to their co-client the existence of – and I’m going to use air quotes that no one on this podcast can see, “illegitimate child”- because it does impact the overall disposition of what the spouse’s estate plan may be. At the same time, however, the court said that while we do have to disclose to the client, we do not have to disclose the name or identity of said child.

Conflict of Interest Take Aways

In this particular case, one of the things that we hyper-focused on here was the importance of ensuring that we have a very thorough conflict check and ensuring that sometimes, as cases continue – updating our conflict checks may not be a bad idea, but at the same time that there are these gray areas where it’s not super clear whether or not we have a duty to disclose or to maintain a confidence. But, similar to what happened in this case, seeking court intervention is oftentimes a good first step in ensuring that we are meeting our ethical obligations to our clients. So, with that, I’m going to hand it over to Toni Ann.

Toni Ann Kruse: Thank you, Crystal, Dan, and Rob, for joining us today and for this very lively discussion on the ethical considerations for maintaining client confidentiality.

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