45 Pages Posted: 14 Apr 2014 Last revised: 3 Jun 2014
Date Written: April 13, 2014
Confidentiality rules enjoy a sacrosanct place in the ethical codes for lawyers. The conventional wisdom is that strict confidentiality rules are necessary to foster client-lawyer communication, thereby providing lawyers with information they need for effective representation. Yet this premise is demonstrably false – clients withhold information or lie to their lawyers, despite the rules. Using analytical tools from economics, including the Coase Theorem, this Article goes beyond previous piecemeal criticisms of the rules to analyze the social costs – and oversold benefits – of the ethical rules that compel lawyers to conceal client secrets, and finds that the rules do more harm than good. The social costs imposed by confidentiality rules are significant – direct externalities, lemons effects, and increased transaction costs. Perhaps most disturbingly, the rules facilitate wrongful convictions of innocent third parties, and allow physical injuries to occur unchecked. The current rules also undermine public trust in the legal system and diminish transparency and cooperation in society. In relation to the other ethical rules, confidentiality rules strain against rules designed to foster candor, fairness, and integrity. At the same time, the purported benefits of the rules merely duplicate the protections of clients provided by existing evidentiary doctrines and privileges, rules addressing conflicts of interest, and well-functioning market mechanisms. The Article provides specific normative proposals for revising or repealing the rules, and offers suggestions for lawyers to facilitate more disclosure in practice. We conclude by challenging other writers to answer the foregoing arguments with objective evidence (not mere anecdote), and to justify the rules in the face of these obvious externalities and social costs.
Keywords: confidentiality, ethics, professionalism, Model Rules, privilege, transparency, transaction costs, secrecy, Coasean, Coase Theorem, externalities, lemons, lawyers, legal practice, client
JEL Classification: D23, L14, H23, D6, D62, J4, J44, L8, L84, M14, K4, K41, K42, L49, K1, K20, K19, K23, K29, K39
Suggested Citation: Suggested Citation