the like.” This so-called “noisy withdrawal” provision allows a lawyer to distance
himself or herself from any work done for
a client that might be tainted by client
fraud. It does not require disclosure as the
original DR7-102(B)( 1) did. In fact, it does
not allow actual disclosure at all. It merely
allows the lawyer to refuse to be used by a
client in defrauding third parties. Of
course, in one sense, the lawyer has already been misused by the client but, at
least, the lawyer can reclaim some lost integrity by distancing his or her work product (and services rendered) from the client’s fraudulent scheme. This approach
walks a fine line. It does not permit actual
disclosure. It just refuses to force the lawyer to stand by and be misused for the client’s illegal purposes.
What happened after the 1983 Model
Rules were passed was very different from
what had happened after the passage of
the 1908 Canons and the 1969 Code. Previously, the states had acted quickly to
adopt the document, and to adopt it
nearly always as passed by the ABA. The
road to the adoption of the Model Rules
was longer and considerably rockier.
First of all, state-by-state acceptance of
the Rules went slowly. Even now, twenty
years later, a few states still have not adopted the Rules. Most importantly, the
confidentiality provisions were attacked
and seriously modified in most states
from the beginning of the adoption process. Very few kept the narrow exceptions to confidentiality provided by Rule
1. 6. Most allowed for a more traditional
“future crimes” exceptions. Many, too,
permitted or required disclosure when
the lawyer’s professional services were
misused. The result of this process is the
astonishing fact that there is more diver-
sity in the rules governing exceptions to
confidentiality state-by-state than has
ever been the case before. The situation is
a disaster for lawyers who are licensed to
practice in different states when they try
to work together. It has undermined the
idea of a unified profession, maybe even
undermined the idea of law as a profes-
sion altogether.
Fast forward to the aftermath of the
Enron scandal. With respect to exceptions
to confidentiality generally, the SEC has
adopted a rule that will permit (but not require) a lawyer to reveal information to the
SEC itself to prevent fraud or perjury or to
rectify the consequences of a material violation of securities laws in which the lawyer’s services had been used. This rule
comports with the ethics rules in many
states after they rejected the narrowing of
exceptions in the Rules. The SEC is still debating whether or not to require outside
lawyers to resign and issue a “noisy withdrawal” if they reasonably believe fraud is
ongoing or will occur, or to have discretion
to resign and issue a “noisy withdrawal”
for past occurrences.
Conclusion
The debate within the securities community continues and is the same debate that
is current in the larger community of lawyers. A serious public policy issue exists
about how the role of gatekeeper is to be
regarded by lawyers and how seriously lawyers are to understand their role as officers
of the law. Shall lawyers be required or permitted to disclose ongoing or future fraud?
Should it depend upon whether or not the
fraud is criminal? Shall lawyers be required
or permitted to disavow work they have
done in assisting clients in perpetuating
fraud on third parties?
Over the past several years a special ABA
Ethics Commission 2000 has been working
to revise the Model Rules. On the subject of
confidentiality, the commission has recom-
mended a set of exceptions that captures
the spirit and letter of ethics rules as adopt-
ed in many states. Leaving the mandatory
disclosure of perjury under Rule 3. 3 more
or less in place, the commission has recom-
mended the following discretionary excep-
tions to confidentiality:
( 1) to prevent death or substantial bodily
harm.
( 2) to prevent a crime or fraud resulting in
substantial financial injury where the
lawyer’s services had been and were
being used.
( 3) to prevent, mitigate or rectify substantial financial injury from a client’s commission of a crime or fraud where the
lawyer’s services were used.
( 4) to obtain legal advice about compliance
with the Rules.
( 5) to establish a claim or defense on behalf of the lawyer in any controversy
with the client or in any proceeding.
The ABA itself rejected numbers ( 2) and
( 3) above, but accepted the rest in a
pre-Enron vote. After Enron, an ABA
Task Force on Corporate Responsibility
recommended not only that ( 2) and ( 3) be
added as exceptions to the Rules, but that
they be made mandatory rather than discretionary. The debate continues. As is evident from the work of the commission, the
rejection by the ABA, and the recommendation by the task force, these issues are
deeply dividing the organized bar. Those
who demand exceptions to confidentiality
that are based on the misuse of the lawyer’s services believe that the lawyer’s primary obligation is to the processes, procedures, and institutions of the law. Those
who have voted to exalt confidentiality
over disclosure in these cases believe that
the lawyer’s primary obligation is to his
client, even in matters of great public
harm. In the wake of Enron, is that narrow position any longer tenable?
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Study Abroad
award
initiated
National Forum
becomes Phi Kappa
Phi Forum
294
chapters
Love of
Learning awards
initiated
Number of
chapters
exceeds 300
Forum
returns to
Baton Rouge
Partnering for
Success
introduced
Headquarters
moves to its
own building
Literacy
Award
introduced
Hurricane Katrina
devastates
New Orleans
First woman
Speaker of
the House
Barack Obama
elected
president
Economic
recession
George W. Bush
elected
president
September 11 attacks,
war on terror begins in
Afghanistan
Iraq War
begins
