67 Pages Posted: 26 Apr 2016
Date Written: April 25, 2016
This Article challenges the prevailing wisdom that ethics rules forbid lawyers from blowing the whistle on a client’s illegal conduct. While a lawyer is not free to disclose confidential information in every jurisdiction for every legal violation, the ethics rules in all jurisdictions permit disclosure of confidential information pertaining to a client’s illegal activities under certain conditions. Proving the lie of the prevailing wisdom, this Article examines a high profile case in the state of New York that ruled a lawyer whistleblower violated the state’s ethics rules by revealing confidential information to stop his employer-client from engaging in a tax fraud of epic proportions. The Article argues that the court undertook a deficient analysis of New York ethics rules pertaining to permissive disclosure of confidential client information. Even if the whistleblower had violated his ethical obligations, the New York False Claims Act (the statute under which he brought his action) expressly protects disclosure of confidential employer information made in furtherance of the statute. In addition to New York’s statutory shield, federal courts across the country have developed a public policy exception safeguarding whistleblowers for disclosing confidential information that detects and exposes an employer’s illegal conduct.
While challenging the previously unchallenged criticism of lawyer whistleblowers, this Article acknowledges the intrinsic appeal of that position. The idea of a lawyer revealing a client’s transgressions — particularly for monetary awards paid under various federal and state whistleblower programs — seems unsavory and a threat to the attorney-client relationship. Nonetheless, lawyers have always had the discretion to disclose confidential information to prevent a client from committing a crime or fraud. And although the addition of financial incentives complicates the analysis, modern ethics rules extend to lawyers considerable discretion in revealing confidential client information, even if disclosure makes a lawyer eligible for financial awards.
Keywords: Legal ethics, legal profession, whistleblowers, False Claims Act, SEC Whistleblower Program, Dodd-Frank, IRS Whistleblower Program, securities fraud, tax fraud, retaliation, anti-retaliation, corporate governance
Suggested Citation: Suggested Citation
Ventry, Dennis J., Stitches for Snitches: Lawyers as Whistleblowers (April 25, 2016). UC Davis Law Review, Forthcoming (2017); UC Davis Legal Studies Research Paper No. 493. Available at SSRN: https://ssrn.com/abstract=2770045