The Supreme Court of Pennsylvania has agreed to consider whether an attorney for a public charity who believes that charitable assets are being unlawfully diverted for private purposes may notify the Attorney General.
Since the party claiming such a right does not base the action on Rule 1.6 of the Rules of Professional Conduct that permits breach of confidentiality in limited situations, presumably the disclosure is in violation of the Rule. The petitioner claims that counsel owes a fiduciary to the Attorney General as representative of the ultimate beneficiary of the charity, the general public. The petitioner argues that by structuring itself as a public charity supported by tax exemptions, the entity has foregone any right to have its lawyer “hide its activities from the Commonwealth,” and presumably has waived its rights as a client under Rule 1.6. (Redacted v. Redacted, No. 173 MM 2014, 12/30/14.)
The specific question the Court will consider, as framed by the petitioner, is this: “When counsel for a nonprofit corporation believes that charitable assets are being unlawfully diverted, may counsel disclose this information to the Attorney General’s office, as parens patriae for the public to whom the charity and its counsel owe a fiduciary duty?”
The case itself is totally under seal. Neither the parties, the other issues, nor the identity of the attorneys is available to the public. Although the order allowing the consideration of the attorney-client confidentiality question was filed on December 30, it was not made public until March 2.
The case was originally commenced in the Commonwealth Court, primarily a mid level appellate court that has original jurisdiction in a few types of cases, including certain actions against the Commonwealth or its officers. The statement of jurisdiction says the question involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal may materially advance the ultimate termination of the matter. The Supreme Court proceeding is an appeal from a Commonwealth Court order that refused to say that the disclosure was permissible.
Rule 1.6 allows, but does not require, an attorney to breach client confidentiality in limited circumstances, including when the lawyer reasonably believes it is necessary to prevent reasonably certain death or substantial bodily harm, or to prevent the client from committing a criminal act that is likely to result in substantial injury to the financial interests or property of another. Apparently the attorney in this case released information to the Attorney General that did not fit within the limited exceptions.
The petition argues that attorneys for private trusts have duties to the beneficiary “that transcend those that a lawyer normally owes to a client” and that the same rule should apply to the relationship that exists among a public charity, its attorney, and the Attorney General. The brief supporting the request for consideration says: “[Redacted], as a public charity, owed a fiduciary duty to the public; thus, when [redacted] lawyer had reason to believe that the corporation was diverting public charitable resources into private pockets, she was at least permitted, if not obliged, to disclose that information to the Attorney General.”
No response to the petition and no copy of the Commonwealth Court order has been disclosed. According to published reports, the appellee’s brief is due March 23 but the Court has not decided whether to hold oral argument.
YOU NEED TO KNOW
It is always risky to comment on a case when it is impossible to know the facts or the issues. But the Rules of Professional Conduct have been honed over generations, perhaps even centuries, of jurisprudence, and the concept of attorney-client confidentiality is one of the bedrocks of our legal system. We want people to consult with lawyers so that they can get legal advice to comply with the law. A client’s willingness to consult with a lawyer on anything would be seriously chilled if the client thought that the lawyer could run off and tell the Attorney General of anything the lawyer had “reason to believe” was improper. Confidentiality can be breached only in egregious situations.
The Rules also provide in Rule 1.13 a series of steps an attorney may take within the organization to try to rectify a problem, including asking for reconsideration, or taking the issue to higher levels of authority within the organization. Any measures the attorney takes must be designed to minimize the risk of revealing information to persons outside the organization. If the attorney is not satisfied that the situation has been corrected, the attorney may resign the representation. This Rule does not authorize disclosure to third parties, and even on withdrawal, the attorney must take reasonable steps to protect the client’s interests.
The Rule on confidentiality starts with the requirement for confidentiality for all clients — individuals, for-profit businesses, and charities alike. It allows, but never requires, a breach in a few circumstances where the interest of protecting another party overrides the interests of the client. As a society, we are properly concerned about wrongdoing by any client, but we have made a judgment that having a client seek legal advice will more likely prevent more wrongdoing in the long run than dissuading the client from talking to a lawyer for fear that the lawyer will run to authorities if he or she has “reason to believe” that something is wrong. Wrongdoers are subject to sanctions for their actions, but we have not made our lawyers the first source of complaint. Charities play an important role in our society and our economy. There is no reason to apply a different rule to them than we apply to others.