holding that no attorney-client relationship had been shown to exist between attorneys and third parties who had paid for the representation of certain of the attorneys' clientsSummary of this case from G-I Holdings, Inc. v. Baron Budd
Argued June 5, 1980
Decided July 8, 1980
Appeal from the Appellate Division of the Supreme Court in the Fourth Judicial Department, WILLIAM J. BURKE, J.
Joseph E. Fahey for appellants. Richard A. Hennessy, Jr., District Attorney (John A. Cirando and Gail N. Uebelhoer of counsel), respondent pro se.
This case involves an ongoing Grand Jury investigation of prostitution in Onondaga County. During the course of this investigation, several women testified before the Grand Jury concerning their involvement in prostitution between 1975 and the present. Petitioners Richard D. Priest and George M. Raus are attorneys who had represented some of these witnesses on various occasions during this time period. The Grand Jury seeks to obtain information regarding the nature of the fee arrangements between petitioners, their former clients and any third party who may have retained them to appear for the prostitutes. The issue on this appeal is whether petitioners properly refused to answer the questions posed by the Grand Jury upon the ground that such questions seek to inquire into matters protected by the attorney-client privilege.
On January 18, 1980, petitioners were served with Grand Jury subpoenas duces tecum which required them to provide the Grand Jury with "any and all records of amounts billed and payments made for services rendered to [various prior clients] including fee arrangements and retainer agreements from January 1975 to present." On January 22, 1980, Onondaga County Court issued an order to show cause why such subpoenas should not be declared void and ordered a hearing. At the hearing, petitioners contended that the fee arrangements between petitioners and their former clients were privileged and that they should not be compelled to disclose such information. The court, however, refused to quash the subpoenas and ordered petitioners to appear before the Grand Jury.
On January 28, 1980, petitioners testified before the Grand Jury that although they had represented certain named individuals, they kept no written records of fees charged or payments made on behalf of these clients. They further testified that they had no set fee which they required for an appearance and that when they were paid at all they were usually paid in cash. Petitioners were then asked whether any third party had ever made payments on behalf of the named clients. Raus testified that a third party might possibly have made such payments, but he refused to disclose the identity of any such party. Priest refused to discuss the subject of third-party payments altogether.
Faced with petitioners' refusal to testify further, the Grand Jury formulated several specific questions regarding third-party payments and requested that the Onondaga County Court order petitioners to appear and respond to the inquiry. By order dated February 5, 1980, the court required petitioners to appear before the Grand Jury and to answer the following questions:
"1. What written or oral agreement [was made] regarding fees existing between Mr. Priest and Mr. Raus and the named clients or between Mr. Priest or Mr. Raus and any third party on behalf of the named clients, and who were the third parties.
"2. Were payments for legal services on behalf of the named clients made by any third parties or by the clients themselves which are not identified in any records of Mr. Priest or Mr. Raus, [and] who were the third parties."
Thereafter, the court issued judicial subpoenas to effectuate its order.
On February 11, 1980, petitioners moved to quash these judicial subpoenas, arguing that the testimony sought to be adduced was protected by the attorney-client privilege and that the constitutional rights of the third-party payor would be infringed if petitioners were required to respond. Oral argument was heard on petitioners' application on February 15, 1980; and on February 26, 1980, County Court quashed its own subpoenas.
On appeal, the Appellate Division unanimously reversed the County Court's order and denied petitioners' motion. The court found that there was insufficient evidence in the record to support petitioners' claim that an attorney-client relationship existed between themselves and the unnamed third party which they sought to protect and noted that even if such a relationship had been demonstrated, the payment of legal fees on behalf of another is not a confidential communication within the scope of the attorney-client privilege. There should be an affirmance.
This case presents a unique factual pattern not heretofore examined by this court. At first blush, the questions posed by the Grand Jury appear to be an inquiry solely into the fee arrangements between attorneys Priest and Raus and various clients accused of prostitution-related offenses. Normally, the question whether the attorney-client privilege should prevent disclosure of such fee arrangements, including payments, if any, made by a third party, would entail an examination of the scope of the privilege as it applies to the attorneys and the parties they represented. In this case, however, petitioners allege that the third-party benefactor of the criminal defendants which they represented was also their client. Thus, the case actually presents three distinct questions, to wit: (1) whether the fee arrangements may be shielded from disclosure on the strength of the privilege surrounding the attorney-client relationship between petitioners and the women they represented; (2) whether such disclosure is barred by the privilege which surrounds the attorney-client relationship arising out of any prior representation of the third party; and (3) whether a separate attorney-client relationship was created between the attorneys and their clients' benefactor upon the payment of legal fees which is itself deserving of the protection of the attorney-client privilege. Although the factual situation presenting these questions is novel, we believe that each may be answered by applying the analysis traditionally used to test the scope of the privilege.
The attorney-client privilege is, in this State, a creature of statute. (CPLR 4503, subd [a].) It exists to ensure that one seeking legal advice will be able to confide fully and freely in his attorney, secure in the knowledge that his confidences will not later be exposed to public view to his embarrassment or legal detriment. (See, e.g., Matter of Jacqueline F., 47 N.Y.2d 215, 218; Hurlburt v Hurlburt, 128 N.Y. 420, 424; see, also, 8 Wigmore, Evidence [McNaughton rev, 1961], § 2291 [hereinafter Wigmore]; Richardson, Evidence [10th ed], § 410.) The privilege, however, is not limitless. It has long been recognized that "the attorney-client privilege constitutes an `obstacle' to the truth-finding process, the invocation of which should be cautiously observed to ensure that its application is consistent with its purpose." (Matter of Jacqueline F., 47 N.Y.2d 215, 219, supra; see, also, Matter of Horowitz, 482 F.2d 72, 81-82; Matter of Field, 408 F. Supp. 1169, 1173; 5 Weinstein-Korn-Miller, N Y Civ Prac, par 4503.19, p 45-148; 8 Wigmore, § 2291, p 554.)
"(a) Confidential communication privileged; non-judicial proceedings. Unless the client waives the privilege, an attorney or his employee, or any person who obtains without the knowledge of the client evidence of a confidential communication made between the attorney or his employee and the client in the course of professional employment, shall not disclose, or be allowed to disclose such communication, nor shall the client be compelled to disclose such communication, in any action, disciplinary trial or hearing, or administrative action, proceeding or hearing conducted by or on behalf of any state, municipal or local governmental agency or by the legislature or any committee or body thereof. Evidence of any such communication obtained by any such person, and evidence resulting therefrom, shall not be disclosed by any state, municipal or local governmental agency or by the legislature or any committee or body thereof. The relationship of an attorney and client shall exist between a professional service corporation organized under article fifteen of the business corporation law to practice as an attorney and counselor-at-law and the clients to whom it renders legal services."
Defining the limits of the privilege is, of course, not an easy task. Although several enlightening general statements of the scope of privilege appear in the cases and the treatises (see, e.g., United States v United Shoe Mach. Corp., 89 F. Supp. 357, 358-359; United States v Stern, 511 F.2d 1364, 1367; 8 Wigmore, § 2292), no clear rule of general application can be simply articulated. Indeed, as we have often observed, "`much ought to depend on the circumstances of each case'." (See Matter of Jacqueline F., 47 N.Y.2d 215, 222, supra; and Matter of Kaplan [Blumenfeld], 8 N.Y.2d 214, 219, quoting 8 Wigmore [5th ed], § 2313, p 609.) However, there are some general principles relevant to this case by which our analysis may be guided.
First, it is beyond dispute that no attorney-client privilege arises unless an attorney-client relationship has been established. Such a relationship arises only when one contacts an attorney in his capacity as such for the purpose of obtaining legal advice or services. (CPLR 4503, subd [a]; see, e.g., People v Belge, 59 A.D.2d 307, 309; United States v United Shoe Mach. Corp., 89 F. Supp. 357, 358-359, supra; 8 Wigmore, § 2292.) Second, not all communications to an attorney are privileged. In order to make a valid claim of privilege, it must be shown that the information sought to be protected from disclosure was a "confidential communication" made to the attorney for the purpose of obtaining legal advice or services. (Matter of Jacqueline F., 47 N.Y.2d 215, 219, supra; People ex rel. Vogelstein v Warden of County Jail of County of N.Y., 150 Misc. 714, 717-718; 8 Wigmore, § 2292.) Third, the burden of proving each element of the privilege rests upon the party asserting it. (Matter of Gavin, 39 A.D.2d 626, 628; Matter of Grand Jury Empanelled Feb. 14, 1978, 603 F.2d 469, 474.) Finally, even where the technical requirements of the privilege are satisfied, it may, nonetheless, yield in a proper case, where strong public policy requires disclosure. (Matter of Jacqueline F., 47 N.Y.2d 215, supra; People ex rel. Vogelstein v Warden of County Jail of County of N.Y., 150 Misc. 714, supra.) Applying these principles to the case before us, we conclude that no claim of privilege can be made herein.
Although petitioners do not press this point, we note that they may not assert a privilege based upon their representation of the prostitutes who testified before the Grand Jury. The fee arrangements between attorney and client do not ordinarily constitute a confidential communication and, thus, are not privileged in the usual case. (United States v Pape, 144 F.2d 778, 782, cert den 323 U.S. 752; see, also, Matter of Michaelson, 511 F.2d 882, 888, cert den 421 U.S. 978; Matter of Semel, 411 F.2d 195, 197, cert den 396 U.S. 905; Colton v United States, 306 F.2d 633, 637-638, cert den 371 U.S. 951.) A communication concerning the fee to be paid has no direct relevance to the legal advice to be given. It is a collateral matter which, unlike communications which relate to the subject matter of the attorney's professional employment, is not privileged.
There is no need to address the situation in which the identity of the client or the terms of the retainer agreement were imparted to the attorney as an express pledge of nondisclosure. (Banco Frances e Brasileiro S.A. v Doe, 36 N.Y.2d 592, 599.)
Nor does the payment of legal fees by a third person, in and of itself, create an attorney-client relationship between the attorney and his client's benefactor sufficient to sustain a claim of privilege. (United States v Pape, 144 F.2d 778, supra; Matter of Richardson, 31 N.J. 391.) While such an arrangement may well be intended to be confidential, it is not, under ordinary circumstances, undertaken for the purpose of obtaining legal advice for the third party and, therefore, no attorney-client relationship arises between the third party and the attorney on the mere payment of attorney fees on behalf of another. The name of the person retaining an attorney for another and the amount of the retainer paid are quite simply not the confidences which the privilege was intended to protect. Rather, "the statements of the client for the purpose of seeking advice from his counsel were the disclosures which were to be kept secret." (People ex rel. Vogelstein v Warden of County Jail of County of N Y, 150 Misc. 714, 717-718, supra.)
We note that our finding that no attorney-client relationship sufficient to support a privilege exists in this case should not be read as indicating that no conflict of interest can arise upon third-party payment of legal fees. Indeed, the payment of legal fees may, in a proper case, create a conflict of interest even though it does not form the basis of a claim of privilege.
Furthermore, no claim of privilege necessarily arises out of petitioners' characterization of the third party as a client. As noted earlier, the burden of proving the existence of the privilege is upon the party asserting it. (Matter of Gavin, 39 A.D.2d 626, 628, supra; 5 Weinstein-Korn-Miller, N Y Civ Prac, par 4503.22; see, also, United States v Stern, 511 F.2d 1364, 1367, supra; Matter of Bonanno, 344 F.2d 830, 833.) The mere statement that the third party was a "client" does not satisfy this burden. (Matter of Bonanno, 344 F.2d 830, 833, supra; see, also, Colton v United States, 306 F.2d 633, 636-637, supra.) If such an unembellished statement, without more, could seal forever the lips of an attorney, it is difficult to conceive of a situation in which an attorney could be compelled, over his objection, to testify as to any transactions with anyone, for he could too easily refuse to answer on the strength of his own unsupported allegation that such person was a client. Thus, independent facts beyond the attorney's statements must be shown in order to demonstrate the existence of an underlying attorney-client relationship upon which a claim of privilege could be based. There are no such facts here.
Moreover, even if we were to accept petitioners' assertion that the third party who paid his clients' fees had at one time also been a "client", this fact alone would not be determinative. As we have indicated, no attorney-client relationship arises out of the payment of another's attorney's fees. The fortuitous circumstance that the attorney had on occasion represented the payor on other matters is of no consequence, since such representation has no relation to the confidential communication which is claimed to be privileged.
Since we conclude that no attorney-client relationship between petitioners and the third party has been demonstrated, we need not address the further question of whether public policy considerations might require disclosure had such a relationship been shown to exist. (Cf. Matter of Jacqueline F., 47 N.Y.2d 215, supra; People ex rel. Vogelstein v Warden of County Jail of County of N.Y., 150 Misc. 714, supra.)
We have examined petitioners' remaining contentions, including their constitutional claims, and find them to be devoid of merit.
Accordingly, the order of the Appellate Division should be affirmed, with costs.
To set this case in its proper perspective, it is essential to point out that the Grand Jury's target was the subject of prostitution in Onondaga County generally; in other words, the promoters of that illegal activity, whether working singly or in conspiracy, were the most likely candidates for indictment. Obviously, the payment of attorney's fees on behalf of one or more prostitutes might be construed as an indication that the benefactor was involved in wrongdoing. This kind of incrimination is precisely what the petitioning attorneys sought to avoid.
Beyond that, it is also crucial to note that the name of the only "third party" the District Attorney appears to have had reason to connect to the petitioners was already known to the authorities. More so, the petitioners conceded in open court that they knew this individual and asserted, without contradiction, that they had represented him up until his arrest several months earlier on charges intimately related to the Grand Jury's investigation.
What more they could do to carry the burden of proving the existence of an attorney-client relationship is hard to see. The attorneys are officers of the court, and the prosecution does not question their bona fides. Moreover, the relationship between attorney and client most often is one-to-one, and there might be no other nonconfidential evidence of its existence short of haling the client into court and seeking a waiver of immunity.
In view of these circumstances, it is apparent that the interrogation of the attorneys was not for the purpose of uncovering previously unknown leads, but in order to get them to produce hard evidence against their former client that would support an indictment. To condone this strategem is to tolerate a completely unjustified abuse of the principle of safeguarding the confidentiality of communications between attorney and client.
It would be superfluous at this late date to retrace the many, varied and time-honored sources of the attorney-client privilege (see, generally, 8 Wigmore, Evidence [McNaughton rev, 1961], §§ 2290, 2291). Suffice it to note that it finds expression in statute (CPLR 4503) and ethical code (Code of Professional Responsibility, EC 4-1) and is strongly rooted in the constitutional right to counsel (US Const, 6th Amdt; N Y Const, art I, § 6). We need look no further than the sweeping nature of our series of recent rulings in right to counsel cases for a reflection of the central role the right plays in securing justice under law (see People v Arthur, 22 N.Y.2d 325; People v Hobson, 39 N.Y.2d 479; People v Settles, 46 N.Y.2d 154; People v Maerling, 46 N.Y.2d 289; People v Garofolo, 46 N.Y.2d 592; People v Rogers, 48 N.Y.2d 167; People v Cunningham, 49 N.Y.2d 203; People v Marrero, 50 N.Y.2d 56.) The adversarial nature of our legal system puts a premium on free and unconstrained access to legal advice and, in so doing, re-emphasizes how essential it is that we do not slacken in our support for the strong public policy favoring confidentiality of attorney-client communications.
To deny the privilege here drastically undermines its efficacy as a means of promoting consultation with counsel and informed participation in the legal process. In balancing the prosecution's need for the information against the importance of the privilege, the scale clearly tips in favor of confidentiality. Foremost is the recognition that the third party's payment of counsel fees is no less a communication intended to be kept secret than would be his verbal admission to counsel that he was a promoter of prostitution (cf. United States v Pape, 144 F.2d 778, 783 [LEARNED HAND, J., dissenting]). The client's failure to make an express request that the information not be disclosed does not make it any less confidential. And, even cases holding the identity of the payor of a fee and the amount thereof not protected by the privilege acknowledge that confidentiality nonetheless prevails when the facts may be seen as some acknowledgment of guilt by the client as to the very matter for which legal advice was sought in the first place (see Matter of Michaelson, 511 F.2d 882, 888; Colton v United States, 306 F.2d 633, 637; see, also, Matter of Grand Jury Proceedings [Lawson], 600 F.2d 215, 218; Matter of Grand Jury Proceedings [Jones], 517 F.2d 666, 672; 97 CJS, Witnesses, § 283, subd e, p 803).
Moreover, the prosecution is not entitled to pierce the privilege simply because it is an easier means of obtaining information diligent investigation would nonetheless turn up. This is especially true where the confidential representation could provide a vital link in the chain leading to conviction (see Baird v Koerner, 279 F.2d 623; see, also, Matter of Kaplan [Blumenfeld], 8 N.Y.2d 214). There is little doubt here that this identifying information was precisely the goal of the District Attorney in seeking to pry into matters as to which he already had significant independent evidence. "That [the privilege's] enforcement at times may frustrate the administration of justice will not suffice alone to allow for its breach; indeed, its very purpose may be to keep secure the imparting of information which the State would, if known to it, use to its advantage" (Matter of Jacqueline F., 47 N.Y.2d 215, 226 [my dissent]).
Because I am unable to agree that the prosecution's need for this information outweighs the interest of attorney and client in preserving a confidentiality reasonable in scope (see Matter of Michaelson, 511 F.2d 882, 894, supra [Merrill, J., dissenting]), I would reverse the order from which this appeal is taken.
Chief Judge COOKE and Judges GABRIELLI, JONES, WACHTLER and MEYER Concur with Judge JASEN; Judge FUCHSBERG dissents and votes to reverse in a separate opinion.