LEO: Confidences and Secrets: Duty to Reveal  LE Op. 1289

 

Confidences and Secrets: Duty to Reveal Mutual Mistake Upon

Which Personal Injury Settlement Was Negotiated.

 

October 23, 1989

 

You have asked the Committee to opine as to whether an attorney is

required to reveal a mutual mistake, made by both the plaintiff's attorney

in a personal injury case and by the insurance company representing the

defendant, when a settlement, negotiated on behalf of the personal injury

client, has been reached based upon a bill which was later determined to

have been not actually incurred by the client but by an individual with

the same name as the client and provided in error by the treating

hospital. You have further asked whether the attorney has a higher duty to

the client who becomes aware of the settlement and of the mutual mistake

and who wishes to consummate the settlement.

 

The appropriate and controlling rules relative to the issue you have

raised are DR:4-101(B), which prohibits a lawyer from knowingly

revealing a confidence or secret of his client, and from knowingly using

his client's confidence or secret to the disadvantage of the client or for

the advantage of himself or a third person unless the client consents

after full disclosure; and DR:4-101(C)(1) and (3), which permits a

lawyer to reveal a client's confidences or secrets either with the

client's consent or when the lawyer has information which clearly

establishes that his client has, in the course of the representation,

perpetrated upon a third party a fraud related to the subject matter of

the representation.

 

The Committee has previously opined that when, in preparing a decree for

the court's entry on a matter, an attorney had inadvertently provided for

the release of the entire claim instead of the more narrow aspect of the

claim on which the court had actually ruled, the attorney was not later

precluded from asserting a defense of res judicata when the opposing party

brought an action based on the assumption that only the more narrow aspect

of the claim had been released. LE Op. 561 found that where there had

been no intentional misrepresentation or misstatement, there was no

impropriety in later acting on the actual, rather than the intended,

provisions of the decree, unless the client is willing for the lawyer to

waive the affirmative defense. The opinion further states, however, that

should the adversary later raise the issue of the inadvertent nature of

the provisions, the lawyer would need to concede the factual circumstances

leading to the broad decree.

 

Based upon the facts you have provided, the Committee is of the view that

the mutual mistake of fact does not constitute any form of fraud

perpetrated on the insurance company. Therefore, it is the opinion of

Committee that the lawyer's duty is to his client, with the result that

information regarding the mistake is a secret of the client which can only

be revealed with his or her consent and only after a full disclosure to

the client of the possible consequences of any such revelation. However,

based upon the Committee's earlier opinion cited above, should the

insurance company later raise the issue of the mutual mistake, the lawyer

would need to concede the factual circumstances. Such a concession would

not rest on any secret or confidence of the client and thus it would not

be necessary to obtain the client's consent to the lawyer's forthright

acknowledgment of the facts. Furthermore, the Committee is of the opinion

that it is incumbent upon the lawyer to advise the client that the

insurance company may later claim that the settlement sum was based in

part upon the mutual mistaken assumption that the large bill was in fact

attributable to the client. The Committee believes that the lawyer should

inform the client of the possibility of a potential claim by the insurance

company against the client as a result of this unjust enrichment.

 

Committee Opinion October 23, 1989