Website Heading

CALIFORNIA CORPORATE & SECURITIES LAW

Why Keeping Corporate Lawyers Quiet Is Good For Us All

In a recent post in The New York Times DealBook, Berkeley Law School Professor Steven Davidoff Solomon argues that keeping corporate lawyers silent “can shelter wrongdoing”.  I completely agree that the attorney-client privilege limits society’s access to information.   If access to information is the only societal value to be considered, then the attorney-client privilege should be abolished forthwith.  Other societal interests, however, should be considered before we give carte blanche to corporate lawyers to disclose their clients’ confidences.

The Attorney-Client Privilege Facilitates Legal Compliance.  A lawyer can’t advise her client properly if the client doesn’t provide the pertinent facts.  Without the attorney-client privilege and the statutory obligation (in California) that lawyers preserve “at every peril” their clients’ secrets, clients quite understandably will be reluctant to provide full disclosure to their lawyers.  While not every client will follow her lawyer’s advice, many clients want to be in legal compliance and society benefits when they can consult their lawyers without fear.

The Attorney-Client Privilege Promotes Remediation of Legal Violations.  Clients don’t only seek prospective legal advice.  Sometimes, they seek legal advice concerning actions that they have already taken.  Lawyers then have the opportunity to counsel their clients not only on how to come into compliance, but also what steps may be taken to address past transgressions.  For example, an issuer may have sold securities without qualification under the Corporate Securities Law.  A lawyer can advise issuer on how to conduct a rescission offer under Corporations Code Section 25507.   If clients aren’t assured of confidentiality, however, they won’t see this advice.

The Attorney-Client Privilege Reduces Moral Hazard.  A lawyer’s obligation to assert the attorney-client privilege (Cal. Evid. Code § 955) and preserve client secrets (Bus. & Prof. Code § 6068(e)) reduces the risk that a lawyer will be tempted to make disclosures in her own interests.  For example, a lawyer might be tempted to disclose client confidences to promote her own standing with regulators.  A lawyer may even see the possibility of a whistleblower’s bounty.  Note that under the Securities and Exchange Commission’s whistleblower award rules, it is currently possible that a lawyer could be eligible for an award.  See Does An SEC Attorney Commit An Ethical Violation By Encouraging Whistleblowing Lawyers?  A lawyer may even be motivated by personal enmity against the client.  For example, the lawyer may have been fired or unpaid.  The legal system benefits when ethical and other rules strictly limit a lawyer’s opportunities to put her self-interest above her client’s interest.

What’s Good For The Goose Is Good For The Gander.  The government benefits from the existence of the attorney-client privilege as well.  For example, the California Public Records Act includes an exception for “Attorney-client confidential communication, Section 6068, Business and Professions Code, and Sections 952 and 954, Evidence Code”.  Cal. Gov’t Code § 6276.04.  Does the this exception limit the public’s access to information?  It sure does, but the exception exists because of the importance of the other benefits that protection of attorney-client communications.

It’s easy to make the case that the attorney-client privilege limits access to information.  There is no question that it does, but there are many good reasons that the privilege is “the oldest of the privileges for confidential communications known to the common law”.  Upjohn Co. V. U.S., 449 U.S. 383, 389 (1981).  As the California Supreme Court observed more than a quarter-century ago:

[T]the protection of confidences and secrets is not a rule of mere professional conduct, but instead involves public policies of paramount importance which are reflected in numerous statutes.”

In re Jordan, 500 P.2d 873, 879 (Cal. 1972).

Sure, we’d all like to know everyone else’s secrets, but how many of us want our lawyers blabbing our confidences to others?

For more on the attorney-client privilege, see my article:  “The Attorney-Client Privilege and the Corporate Lawyer”, California Business Law Practitioner (Spring 2014).

Share on:

ANY QUESTIONS REGARDING CALIFORNIA CORPORATE AND SECURITIES LAW? CONTACT US DIRECTLY

We offer expert advice with the intricacies of California law.

Our years of experience and expertise allow us to help clients navigate the business laws in California.

CONTACT US

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

Related Articles