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Malpractice Suit Waives Attorney Client Confidences

Heartbreak Cabaret Corp. v. Cruz & Toledo Restaurant Corp., 699 F.Supp. 1066 (S.D.N.Y. 1988)

Underlying Action: Purchase of Real Property

Student Contributor: Candice L. Deaner

Facts: Attorney represented a corporation in negotiations for a nightclub. In the course of negotiations, the attorney also began to represent defendants who were the owner’s of the lease where the club was intended to be. The venture between the parties quickly became bitter and resulted in litigation. Soon after, the corporation brought suit against the attorney for breach of fiduciary duty; however, when the corporation brought this claim against the attorney, they immediately moved to disqualify any testimony that attorney may proffer in his own defense, using the protection of the attorney client privilege.

Issue: Whether an attorney may be excused from the duty of confidentiality when using the communications to defend against a legal malpractice claim

Ruling: The District Court used the following factors to dismiss the corporation’s claim:
1) Disciplinary Rule 4-101(c) provides:

“A lawyer may reveal … Confidences or secrets necessary … to defend himself or his employees or associates against an accusation of wrongful conduct.”

2) The court reasoned that “as a matter of common sense, when a former client sues his former attorney, the client places the attorney in a position where previously confidential communications must be revealed to trial counsel defending the attorney in the suit.” The court held that this is necessary to provide an attorney a reasonable opportunity to defend against such a professional criticism.

Lesson: An attorney defending against a claim of legal malpractice is relieved of  the duty of confidentiality for the purposes of defending himself. This exclusion does not render an attorney immune from his duty to his former client with regard to disclosures to third parties. In such an instance, the attorney may still barred from disclosing client confidences to a third party.

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Posted in: Duties: Confidentiality, New York