Can An Attorney Blow The Whistle On His Client?

This month’s issue of California Lawyer magazine includes this long piece discussing the case of Dimitrious P. Biller, a former in-house attorney.  In 2011, an arbitrator ordered Mr. Biller to pay his former employer $2.6 million in damages and $100,000 in punitive damages.   According to the arbitrator, Hon. Gary L. Taylor (Ret.), Mr. Biller “did the professionally unthinkable: he betrayed the confidences of his client.”  The arbitration award was confirmed by the trial court and upheld by the Ninth Circuit Court of Appeals, 668 F.3d 655 (9th Cir. 2012).

According to the Ninth Circuit, Mr. Biller had argued that the crime/fraud exception to the attorney client privilege found in Section 956 of the Evidence Code relieved him of his ethical duties of confidentiality.  This argument ignores the fact that in California, an attorney’s obligations with respect to client confidences is not governed exclusively by the Evidence Code provisions.  This is an issue that the Corporations Committee of the Business Law Section of the California State Bar tackled in 2004 in this article published by the Pepperdine Law Review: Conflicting Currents: The Obligation to Maintain Inviolate Client Confidences and the New SEC Attorney Conduct Rules, 32 Pepp. L. Rev. 89 (2004).  As explained in that article, California provides three independent sources for an attorney’s duty of confidentiality – the California Evidence Code, Rule 3-600 of the California Ruless of Conduct, and Section 6068(e) of the California Business & Professions Code.  As explained in the article, there are important differences betweeen the evidentiary privilege and the statutory obligation to maintain a client’s secrets.  These differences, moreover, “militate against any attempt to graft the statutory exceptions applicable to one onto the other.” 

The article was written in response to the Securities and Exchange Commission’s adoption of new rules governing the conduct of attorneys appearing and practices before it.  Those rules require attorneys to report “up-the-ladder” within an organization purport to immunize reporting to the SEC in certain circumstances.  The article concludes with the following caution:

Notwithstanding the SEC’s invitation that attorneys disclose client confidences to the SEC, prudence dictates that an attorney subject to Business and Professions Code Section 6068(e) involved with a client engaged in unlawful practices follow the Rules of Professional Conduct 3-600 and 3-700 unless and until the validity of the SEC’s permissive disclosure rule is resolved by an appellate court in the SEC’s favor.

The drafting committee for the article included, James E. Fotenos, Steven K. Hazen, James R. WaltherNancy H. Wojtas, and myself.