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Meyerhofer v. Empire Fire & Marine Ins. Co. - 497 F.2d 1190 (2d Cir. 1974)

Rule:

Model Code of Professional Responsibility EC 4-4 states that the attorney-client privilege is more limited than the ethical obligation of a lawyer to guard the confidences and secrets of his client. The ethical precept, unlike the evidentiary privilege, exists without regard to the nature or source of information or the fact that others share the knowledge. A lawyer should endeavor to act in a manner which preserves the evidentiary privilege.

Facts:

On May 31, 1972, Empire Fire and Marine Insurance Company made a public offering of 500,000 shares of its stock, pursuant to a registration statement filed with the Securities and Exchange Commission (SEC) on March 28, 1972. The stock was offered at $16 a share. Empire’s attorney on the issue was the firm of Sitomer, Sitomer & Porges. Stuart Charles Goldberg was an attorney in the firm and had done some work on the issue. Plaintiffs were purchasers of the company’s stock, who incurred relevant losses. In 1973, plaintiffs, represented by the firm of Bernson, Hoeniger, Freitag & Abbey (the Benson firm), on behalf of themselves and all other purchasers of Empire common stock, brought the present action alleging that the registration statement and the prospectus under which the Empire had been issued were materially false and misleading. Goldberg, one of the named defendants in the complaint and the former attorney of Empire who made the public offering, gave plaintiffs’ counsel a copy of the January 26th affidavit which he had authored, showing that the company omitted the existence of a finder’s fee in its report. Goldberg was subsequently dropped as a defendant. Thereafter, the remaining defendants moved pursuant to Canons 4 and 9 of the Code of Professional Responsibility, the Disciplinary Rules and Ethical Considerations applicable thereto, and the supervisory power of the court for the order of disqualification of the Benson firm and Goldberg. The district court ordered that the Benson firm and Goldberg be barred from acting as counsel or participating with counsel for plaintiffs in the present or any future action against Empire involving the transactions in question, and from disclosing confidential information to others. In dismissing the complaint without prejudice, the district court held that Goldberg had obtained confidential information from his client Empire which, in breach of relevant ethical canons, he revealed to plaintiffs’ attorneys in their suit against Empire.

Issue:

Under the circumstances of the case at hand, was there a violation of Code of Professional Responsibility on the part of Goldberg and the Benson firm?

Answer:

No.

Conclusion:

The court found no violations of the Model Code of Professional Responsibility Canons 4 and 9 when Goldberg, a former attorney for the law firm that made the public offering for defendant met with plaintiffs' counsel to clear his name. The court held that Goldberg had the right to defend himself against the accusations of wrongful conduct, and the professional responsibility rules allowed the attorney to reveal confidences or secrets necessary to defend himself. As such, Goldberg had a right to make an appropriate disclosure with respect to his role in the public offering in light of the seriousness of the crime charged and had the right to present his version of the facts with suitable evidence. However, the court affirmed the district court's order enjoining the former attorney from acting as a party or as an attorney for a party in any action arising from the alleged facts, and from disclosing material information except on discovery or at trial.

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