If a lawyer learns that a client is receiving oil royalties the client may not be entitled to, can the lawyer disclose that to the buyers or the oil company, and what should the lawyer do?
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This page answers the general question as of 1983. Ezel answers yours: whether it's allowed on your facts, under the current California Rules of Professional Conduct, with citations.
Plain-English summary
An attorney represented a wife in a marital dissolution. An oil lease was a presumed community asset, and the settlement agreement (incorporated in the court's order) provided for changing title from joint tenancy to tenancy-in-common and dividing royalties equally. While ordering documents to make the title change, the attorney discovered a 1970 grant deed showing that the husband and wife had sold the underlying real property without reserving mineral rights, suggesting they might no longer own the oil lease. The wife had been receiving monthly royalty payments aggregating about $5,000, refused to pay for a new title report, instructed the attorney not to pursue the ownership question, but still wanted title changed so she would be assured of half the royalties.
On whether the attorney could send the dissolution order to the oil company, the committee identified Business and Professions Code section 6068(d)'s duty to use only means consistent with truth. Because the attorney and wife were on notice that they might not be the actual owners and the wife instructed the attorney not to ascertain true ownership, the committee concluded the attorney cannot send the oil company a dissolution order the attorney knows may not be truthful. It identified that the attorney may again advise the wife that continued acceptance of royalties without verifying ownership may subject her to civil and criminal liability, and that if she refuses the advice, the attorney may withdraw under Rule 2-111(C).
On the duty to notify the buyers or the oil company, the committee identified Business and Professions Code section 6068(e)'s duty to preserve client secrets, which extends even to instances of civil fraud by the client (its Opinions 264, 274, 386) and to future crime where the information was received in confidence in connection with a past crime (its Opinions 267, 386). It identified that no disclosure is permitted as to future conduct unless the client's intended acts are so serious that the benefits of prevention outweigh the confidentiality policy (its Opinions 264, 353). Because the wife's contemplated acceptance of future royalties was revealed through her admission of past acceptance, and the question of who owned the lease remained open, the committee concluded that disclosure to anyone of the new title information, absent express client approval, is ethically proscribed.
Currency note
This opinion was issued in 1983, before California's adoption of later revisions to the Rules of Professional Conduct (including the May 27, 1989 renumbering and the November 1, 2018 renumbering). It interprets former Rule 2-111 (withdrawal) and Business and Professions Code section 6068(d) and (e); these correspond generally to current Rules 1.16 and 1.6. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.
Common questions
Q: Can a lawyer tell the oil company or buyers that the client may not own the royalties?
A: Per the opinion, no, absent the client's express approval. The committee concluded that the new title information is a protected client secret, and the duty extends even to instances of civil fraud by the client.
Q: Can the lawyer send the dissolution order to make the title change?
A: Per the opinion, no, where the attorney knows the order may not be truthful as to ownership. Section 6068(d) bars using means inconsistent with truth.
Q: What can the lawyer do if the client refuses to verify ownership?
A: Per the opinion, the attorney may advise the client of the potential civil and criminal liability and may withdraw under Rule 2-111(C).
Background and rules framework
The opinion interprets Business and Professions Code section 6068(d) and (e) (duties of truthfulness and confidentiality) and former Rule 2-111 (withdrawal), which correspond generally to current Rules 1.6 and 1.16. The confidentiality analysis follows the committee's Opinions 264, 267, 353, and 386.
Citations and references
Rules of Professional Conduct (former):
- California Rule 2-111 (withdrawal)
Statutes:
- California Business and Professions Code section 6068(d) and (e)
Other opinions cited:
- LACBA Formal Opinions 264, 267, 305, 353, 386
- San Francisco Formal Opinion 1977-2
See also
- LACBA Ethics Op. 353: Illegal Securities Issuance and the Lawyer's Duties
- LACBA Ethics Op. 520: Duty on an Adverse Party's Settlement Overpayment
- LACBA Ethics Op. 463: Disclosing a Former Client's Securities Fraud to a Current Client
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2011004
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