If a lawyer learns from non-clients that another lawyer misappropriated funds, must the lawyer report it even when the client wants silence because disclosure could hurt the client financially?

Plain-English summary

A lawyer was retained to investigate a delayed estate settlement because the beneficiaries suspected wrongdoing. During the investigation, the estate's lawyer admitted unauthorized use of estate funds for personal gain. With the beneficiaries' consent, the investigating lawyer negotiated a settlement to repair the estate's economic injury, and the beneficiaries then said they wished to take no further action against the estate lawyer. The investigating lawyer asked whether there was still a duty to disclose the estate lawyer's conduct.

The opinion concluded there was. It noted the estate lawyer appeared to have violated MCPR DR 1-102(A) and the client-funds rule, and that MCPR DR 1-103(A) required a lawyer possessing unprivileged knowledge of a DR 1-102 violation to report it, in mandatory terms, to a tribunal or other authority (here the probate court and the Attorney Grievance Commission). Following CI-572, the opinion reasoned the information was not privileged because it came from the offending lawyer, not from the client. The opinion parsed MCPR DR 4-101's distinction between a "confidence" (privileged information) and a "secret" (other detrimental or embarrassing information): the estate lawyer's admission was neither a confidence the beneficiaries could assert nor protected from the mandatory reporting duty, because DR 1-103(A) is keyed to "unprivileged" knowledge.

The opinion concluded that reading DR 1-103(A) to bar disclosure of secrets and privileged information would be professionally intolerable, because a lawyer caught misappropriating client funds could escape discipline by conditioning restitution on the client's and successor lawyer's silence, leaving the wrongdoer free to harm other clients. So when a lawyer learns of another lawyer's ethical misconduct from persons other than the client, the duty to disclose is mandatory and the client has no say, even where disclosure may be to the client's economic detriment.

Currency note

This opinion was issued in 1983 under the former Michigan Code of Professional Responsibility (MCPR), which the Michigan Supreme Court replaced with the Michigan Rules of Professional Conduct effective October 1, 1988, and amended further thereafter. The disciplinary rules it construes (MCPR DR 1-102, DR 1-103, DR 4-101) are no longer in force; the modern reporting duty appears in MRPC 8.3. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Must a lawyer report another lawyer's misappropriation learned during an investigation?

A: The opinion concluded yes. Unprivileged knowledge of a DR 1-102 violation, gained from someone other than the client, triggered the mandatory reporting duty under DR 1-103(A).

Q: Can the client block the report by accepting restitution?

A: No. The opinion concluded the client has no say, because allowing a wrongdoer to buy silence through restitution would be professionally intolerable and would leave the wrongdoer free to harm others.

Q: Was the offending lawyer's admission a protected client confidence?

A: No. The opinion concluded the admission was not privileged because it came from the offending lawyer, not the client, so the beneficiaries had no standing to assert a privilege over it.

Q: Does it matter that disclosure could hurt the client financially?

A: No. The opinion concluded the reporting duty applies even where disclosure may be to the client's disadvantage or economic detriment.

Background and rules framework

The opinion applied MCPR DR 1-103(A) on reporting another lawyer's misconduct, MCPR DR 1-102 defining the misconduct, and MCPR DR 4-101's confidence-and-secret framework, the predecessors of today's Michigan rules (the analogues of Model Rule 8.3 on reporting professional misconduct and Model Rule 1.6 on confidentiality). It relied on CI-572.

Citations and references

Rules of Professional Conduct (as cited):

• MCPR DR 1-102 (misconduct)
• MCPR DR 1-103(A) (reporting unprivileged knowledge of misconduct)
• MCPR DR 4-101 (confidences and secrets)

Other opinions cited:

• Michigan CI-572: duty to report a lawyer's self-disclosed rule violation

See also

• NY State Bar Op. 742: confidentiality and the duty to report client illegality
• AL Ethics Op. 1992-09: duty to report a judge's conduct

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=20&Type=6

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

C-229

May, 1983

SYLLABUS

A lawyer who receives unprivileged knowledge of another lawyer's violation of the Code of Professional Responsibility from persons other than the lawyer's client, is obligated to report that misconduct to the Attorney Grievance Commission, even though the lawyer's client instructs the lawyer to remain silent because the disclosure may be detrimental to the client's economic interests.

References: MCPR DR 1-102, DR 1-103(A), DR 4-101; CI-572.

TEXT

A lawyer is retained to investigate the delay in the settlement of an estate because the beneficiaries suspect wrongdoing. During the investigation the lawyer contacts the lawyer for the estate, who admits unauthorized use of estate funds for personal gain. The investigating lawyer, with the consent of the beneficiaries, negotiates a settlement that will repair the economic injury to the estate. The beneficiaries then advise that they wish to take no further action against the estate lawyer. The investigating lawyer asks whether there is nevertheless a duty to disclose the conduct of the estate lawyer.

MCPR DR 1-102 provides in part:

"(A) A lawyer shall not:

". . .

"(4) engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.

"(5) engage in conduct that is prejudicial to the administration of justice.

"(6) engage in any other conduct that adversely reflects on his fitness to practice law."

While the committee does not sit as a fact-finding body, it appears from the information provided that the attorney for the estate has violated MCPR DR 1-102(A) and MCPR DR 9-102 regarding preservation of the identity of client funds.

MCPR DR 1-103(A) states:

"A lawyer possessing unprivileged knowledge of a violation of DR 1-102 shall report such knowledge to a tribunal or other authority empowered to investigate or act upon such violation."

MCPR DR 1-103(A) imposes a duty upon all lawyers to report another lawyer's misconduct, except where the information is protected as a privileged communication. In this instance, the "tribunal" would be the probate court having jurisdiction over the estate, and the "other authority empowered to investigate or act upon such violation" would be the Attorney Grievance Commission. MCPR DR 1-103(A) speaks in mandatory terms requiring disclosure of "unprivileged knowledge."

In CI-572 the committee opined that where a lawyer discloses a personal violation of MCPR DR 5-103(B) concerning advancing funds to the client during litigation, with repayment contingent upon recovery, the lawyer to whom the matter is disclosed had a duty to report the first lawyer's violation of the ethics rule. The information was not privileged since it had been furnished by the first lawyer, not by a client.

This inquiry adds the element that the client, the estate beneficiaries, have advised that they do not care to take further action against the first lawyer, since the first lawyer has agreed to make restitution. MCPR DR 4-101 obligates all lawyers to preserve "confidences" and "secrets" of the client. These terms are defined in DR 4-101(A) as follows:

"'Confidence' refers to information protected by the attorney-client privilege under applicable law, and 'secret' refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client."

It is evident that MCPR Canon 4 makes a distinction between a "confidence" and a "secret" beyond mere technical considerations of secrecy in the evidentiary sense ("confidence") and other information gained in the professional relationship ("secret"). Most, but not all, information received by a lawyer from a client within the professional relationship is protected.

The ethics rules do not contemplate the possibility that client confidences and secrets may have to be revealed in order to satisfy the requirements of other Disciplinary Rules. MCPR DR 7-102(B)(1) requires a lawyer to reveal client fraud committed in the course of the lawyer's representation, and MCPR DR 4-101(C)(2) authorizes a lawyer to disclose client confidences or secrets when permitted "under Disciplinary Rules or required by law or court order."

Admissions made to a lawyer in the course of his or her representation of a client by persons other than the client or client's agent are not protected as privileged communications under applicable law. If the investigating lawyer were called as a witness and asked about the conduct of the attorney for the estate, the estate beneficiaries would have no standing to assert the privileged communication rule, since the investigating lawyer's testimony would not disclose any communication made to the lawyer by the clients, much less a privileged one. Therefore it is clear that the information concerning the first lawyer's wrongdoing is not a "confidence."

A "secret" is defined in part to include "other information gained in the professional relationship that the client has requested be held inviolate, or the disclosure of which . . . would be likely to be detrimental to the client." This "other information" received by the lawyer during the representation of the client necessarily refers to "unprivileged knowledge" or information relating to the client and client affairs. Since MCPR DR 4-101(A) clearly distinguishes between privileged information and unprivileged information, there is no basis to conclude that the term "unprivileged" in MCPR DR 1-103(A) was selected without regard to the limited meaning of that word which flows from the MCPR DR 4-101 definition of a "confidence." MCPR DR 1-103(A) clearly obligates a lawyer to disclose "unprivileged" knowledge of a violation of MCPR DR 1-102.

To rule that MCPR DR 1-103(A) prohibits disclosure of both "secrets" and "privileged information" would result in a professionally intolerable situation. Whenever a lawyer is caught misappropriating client funds, the offender could insulate himself or herself from disciplinary action by conditioning restitution upon agreement by the client and the client's new lawyer not to disclose the misconduct. The client would likely agree, since the client is primarily concerned with return of the money, and will have no particular interest in maintaining the integrity of the profession. The consequences of leaving an unscrupulous wrongdoer in the professional marketplace to perpetuate similar acts of misconduct upon other unsuspecting clients is unthinkable, even under circumstances where disclosure may be to the client's disadvantage or economic detriment.

When during the course of professional employment a lawyer learns of the ethical misconduct of another lawyer from persons other than the lawyer's client, the lawyer is required to disclose the wrongdoing. The client has no say in the matter; the lawyer has a mandatory obligation to divulge unprivileged knowledge of another lawyer's violation of the Disciplinary Rules.