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                                         125 N.J.L.J. 1097
                                        April 26, 1990


Appointed by the Supreme Court of New Jersey


Privileged Communications: Disclosure
of Client's Non-Material Misrepresentation

    Issues regarding attorneys' duties and responsibilities in cases of client misconduct are seemingly simple but, in truth, are fraught with complexity and conflict.
        An attorney serves two masters: his client and the law. As a servant of the law, he is an "officer of the court," charged with the duty to see that justice is done. He is required to deal with the Court fairly and candidly and may not "suppress evidence that he or his client has a legal obligation to reveal." In all his actions he must act in good faith and within the framework of the law. But at the same time, the attorney must serve as an advocate on behalf of the client. He must represent the interests of the client "zealously" and with "undivided loyalty" and he must do nothing to prejudice or damage the client during the course of the professional relationship. The attorney must use proper care to safeguard the interests of the client and to preserve his "confidences and secrets."

J. M. Callen & H. David, "Professional Responsibility And The Duty of Confidentiality: Disclosure of Client Misconduct In An Adversary System," 29 Rugers L. Rev. 332 (1976).
    It is hypothesized here that a firm of attorneys represents a claimant in a suit for damages against an insurance company and an insurance agency. The claim involves damages by reason of a theft of a motor vehicle insured for loss under a comprehensive policy obtained by the agent and issued by the insurance company. At the time of the issuance of the policy claimant represented that he was a resident of a suburban community in New Jersey and that the vehicle would be principally garaged in that community. Actually, plaintiff was, and is, a resident of New York. The vehicle was garaged there and was stolen while parked there. The denial of payment by the insurance company is based on issues unrelated to residence. Claimant asks the attorneys to prepare and file a complaint. During the course of the suit interrogatories will be propounded and will have to be answered. Other discovery may also take place.
    The questions to be answered may be framed as follows:See footnote 1 1
    1. May counsel in the complaint or in answers to interrogatories either omit any reference to the residence address of his client; set out a fictitious New Jersey address, if client demands; or must he set out client's correct address?
    2. Must counsel now reveal the fact of plaintiff's misrepresentation at the time of the application to his adversary?
    3. May the former merely do no further work on the case, thereby satisfying his ethical obligations?
    4. If one member of the firm prepared the complaint and answers to interrogatories and another member of the firm learns of the client's misrepresentation, must the latter inform the ethics committee thereof?
    The statutory and evidentiary basis for the attorney-client privilege is set out in Evid. R. 26, N.J.S.A. 2A:84A-20. The foundation of the privilege is grounded in the need for full and frank communication between lawyer and client. A rule requiring disclosure serves to destroy the element of trust necessary for a lawyer to adequately serve his client. See Matter of Nackson, 114 N.J. 527 (1989). The privilege, however, is circumscribed by ethical considerations involving public policy, the public welfare, and the interests of all parties subject to the operation of non-disclosure. Thus, our Supreme Court has promulgated rules intended to set ethical guidelines which affect the attorney-client privilege; e.g. RPC 1.6, RPC 3.3 and RPC 3.4. Those portions relevant to our discussion follow:
    RPC 1.6 Confidentiality of Information
        (b) A lawyer shall reveal ... information to the proper authorities ... to the extent the lawyer reasonably believes necessary, to prevent the client
        (1) from committing a ... fraudulent act that the lawyer reasonably believes is likely to result ... in substantial injury to the financial interest ... of another;
        (2) from committing a ... fraudulent act that the lawyer reasonably believes is likely to perpetrate a fraud upon a tribunal.
        (c) A lawyer may reveal ... information to the extent the lawyer reasonably believes necessary:
        (1) to rectify the consequences of a client's ... fraudulent act in the furtherance of which the lawyer's services had been used; ... (Emphasis supplied).

    RPC 3.3 Candor Toward the Tribunal

        (a) A lawyer shall not knowingly:
        (1) make a false statement of material fact or law
    to a tribunal;
        (2) fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting [a] ... fraudulent act by the client ;... (emphasis supplied).


    RPC 3.4 Fairness to Opposing Party and Counsel

        A lawyer shall not...
        (b) falsify evidence, counsel or assist a witness to testify falsely....

    Additionally, Evid. R. 26(2)(a), by its specific terms, excludes from the privilege communications received which would aid in a crime or fraud.
    A collation of these codifications undeniably requires that a balancing must be done between competing interests and policies can be reached regarding the exercise of the privilege.See footnote 2 2 Matter of Nackson, supra, 114 N.J. at 539. In some cases, that balancing will be delicate and only a thin line will separate the exercise of the privilege as opposed to its exclusion. In Fellerman v. Bradley, 99 N.J. 493 (1985), the Supreme Court held that an attorney could not withhold the address of his client received in confidence in connection with an enforcement order where the client thereby intended not to pay the fee of a court ordered expert. In that case the Court pointed out that there were other situations where the privilege would shield the information; e.g. where a spouse may fear reprisals to herself or harm to a child. Id. at 506.
    In Matter of Nackson, supra, 114 N.J. 527, the Court held that an attorney could withhold from a grand jury the location of his client who was a fugitive where the client had consulted about a fugitive warrant. The Court, in balancing competing interests, gave great weight to the right to counsel in criminal proceedings. U.S. Const., Amend. VI; N.J. Const. (1947) Art. I, par. 10. In State v. Pavin, 202 N.J. Super. 255, 263 (App. Div. 1985), the Court said, "...[w]e see absolutely no public policy interest which would be advanced by granting privileged status to a purported lie which (client) told to (insurance adjuster) for the sole purpose of obtaining coverage under his mother's insurance policy." In Opinion 586, 117 N.J.L.J. 533 (1986), this Committee held that counsel would be required to disclose a fraud perpetrated by a husband on counsel's former client (wife), where he obtained information of that fraud from a present client in a transaction between that client and husband even though it might adversely affect the transaction to the detriment of the present client.See footnote 3 3
    The crime or fraud exception to the privilege found in Evid. R. 26(2)(a) and in the cases and opinions referred to above has been held to be a recognition that the enforcement of the attorney-client privilege does not outweigh an effort to unduly interfere with or frustrate the basic search for truth and fairness, and the proper dispensation of justice. Fellerman v. Bradley, supra. 99 N.J. 493. Fraud in this context is not defined by criminal law or tort concepts. It is to be liberally construed. Ibid.
    We now address the application of the guidelines set out above.
    The response to the first question and, indeed, each of the other queries depends completely, or in some measure, on the resolution of whether the attorney-client privilege shields the communication of the misrepresentation of the address of the client and the garaging of the vehicle at the time the application for insurance was made. (The assumption is made that it was a material fact which would have resulted in the policy not having been issued or, if issued, would have resulted in a void or voidable policy having been issued).See footnote 4 4
    Here, the communication between attorney and client related to past fraudulent conduct. The communication was made in the course of the attorney-client privilege. It is privileged. If we were dealing with a non-judicial situation the information could not and should not be revealed. The premise in this case is that no issue between litigants exists regarding the address of the client at the time of the writing of the insurance policy. The act was in the past and the lawyer did not participate.See footnote 5 5 The attorney could not, at this level, reveal the fact of the misrepresentation to the insurance company. To hold otherwise would result in a dilution of a fundamental purpose of the rule which is to encourage a full and complete communication between lawyer and client.
    The second question presents more difficult considerations. The facts posited make it clear that the address of the client at the time of the filing of the complaint, answering of interrogatories, taking of depositions or trial probably is irrelevant, although it might have some tendency to alert a vigilant adversary or to confirm other proofs relating to the prior address. However, counsel is not obliged to provide proofs to his adversary, unless required by other rules. Therefore, he would not violate any ethical prescription by omitting a reference to an address in the complaint or answers to interrogatories.
    The complaint is a lawyer's product bearing the lawyer's signature. That signature "...constitutes a certificate by him that he has read the pleading...; that to the best of his knowledge, information and belief there is good ground to support it...." R. 1:4-8. Interrogatories are certified to by a party. Testimony at depositions and in trial is that of the witness. The question posed, at its core, is whether an attorney, knowing that a past "fraud" may have occurred, may participate in preventing an adversary or third party from uncovering that fraud by assisting in the client's asserting false and fictitious information relating to facts not directly material to the narrow issues presented in the litigation.
    RPC 3.3 which governs a lawyers obligation to a "tribunal" proscribes a lawyer form knowingly representing the falsity of a material fact or failing to disclose a material fact. RPC 3.4 which expresses precepts of fairness between counsel does not contain the word "material" but countenances against providing false evidence. No definition is given in the Rules as to what is or is not "material" or what, and when, a fact is "evidence". Is materiality as used broad enough to cover all matters which might reasonably be relevant if known or is it limited to the narrow issues of the case as it is circumscribed by the parties as of the point in time that the exercise or non-exercise of the privilege is to be decided? Is "evidence" to be defined based upon its materiality as of that same point in time? These questions, on the surface, are simply answered since our sense tell us that "complete" candor should be the watchword. However, these, like many questions, are difficult because they impact upon the sanctity of the attorney-client privilege. On the one hand, a lawyer is an officer of the court and is required to deal fairly and candidly with the court and his adversaries. On the other hand, he owes his client zealous representation and undivided loyalty. He is not a policeman, yet in certain circumstances he must inform, even to the disadvantage of his client. See RPC 1.6(b) and (c).
    We have considered all of the conflicting obligations of the attorney. We hold that an attorney must not set down a false or fictitious address unless he makes clear, either in the complaint or elsewhere, that it is not a true address. While the privilege may require an attorney to remain silent in word or other expression, it would be violative of every basic precept to permit him to certify the existence of a fact which he knows to be untrue. Therefore, the attorney here may not set down a false address in the complaint.
    As alluded to above, information given in interrogatories is that given by the client. Testimony at depositions or trial is that of the client. We believe that distinction under the facts presented to us here creates a different obligation on the attorney. The balancing, when done, leads to the conclusion that the attorney-client privilege prevails over a fact or a piece of evidence not material to the issues presented in the case. Thus, the attorney should confidentially remonstrate with the client and attempt to convince him not to assert a false address. If he insists, the attorney must observe the privilege. However, he should in no way participate in eliciting the false address by direct examination or otherwise.
    If, however, the question being responded to is directed to the specific issue of residence at the time of the application for insurance, counsel, if he cannot convince his client to testify truthfully, must withdraw from the case. He cannot permit his adversary or the court to be misled. To do otherwise would impede the search for truth in the tribunal where truth is being sought. Thus, neither he nor any other member of his firm may continue in the case.
    The last issue presented is whether a member of a firm who learns of the violation of the RPC's by another member of the firm must inform the ethics committee thereof. Of course, the answer depends upon all of the circumstances. The guide is to be found in RPC 8.3(a):
        A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority. (Emphasis supplied).

* * *

Footnote: 1 1    The inquiry framed the issues in a retrospective sense. We have framed them somewhat differently from that of inquirer.
Footnote: 2 2    Of course, many factual situations will clearly call for the exercise or exclusion of the privilege.
Footnote: 3 3    The holding should be read as limited to the narrow facts contained in that opinion.
Footnote: 4 4    We make that assumption because if not so the inquiry would probably be moot.
Footnote: 5 5    RPC 1.6, therefore, does not apply. Also, Evid R. 26(2)(a) does not apply at this level because the communication is not being used contrary to the prohibition in the Rule.

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