Is it Ethically Proper for a Lawyer to Sign an NDA?

      Many lawyers have encountered and probably been asked to advise their clients on nondisclosure agreements (“NDAs”). However, lawyers are increasingly facing situations in which their clients are asking them to sign NDAs. […]

Lawyers may be surprised by requests for NDAs reasoning that an NDA is unnecessary because lawyers are already subject to the ethical duty of confidential, under SCRPC 1.6 and to the attorney-client privilege. Why, then, would a client ask for an NDA from a lawyer? In our experience, three types of clients might seek NDAs.  Some clients, particularly entrepreneurs with start-ups (or foreign clients), may be unfamiliar with the obligations of confidentiality that lawyers have because of the ethics rules. For such clients, NDAs are routine when dealing with business partners or consultants and to them there is no reason to treat lawyers differently.  Even among clients with general familiarity with the “attorney-client privilege,” few of them will be knowledgeable about the relationship between the privilege and the ethical duty and the exceptions to these doctrines. Lawyers may be able to persuade such clients that it is unnecessary for the lawyer to sign an NDA because ethical obligations and legal restrictions already protect the client’s interest in confidentiality. However, some clients may be unpersuaded, particularly when they learn that the ethical duty and the attorney-client privilege are subject to exceptions, and they may feel “safer” if the lawyer signs an NDA. 

A second type of client is involved in a large transaction with multiple consultants and perhaps multiple jurisdictions including foreign countries.  For non-lawyer professionals the client uses standard form NDAs. The client has an interest in uniformity and efficiency in dealing with both nonlegal and legal professionals and asks that all sign NDAs.

Finally, some clients may be planning transactions that have risks of illegality – for example, clients planning on entering the cannabis or gambling industries. These clients may be aware of confidentiality obligations applicable to lawyers, but may also be aware that these obligations may be vary somewhat in different jurisdictions; in addition, these clients may want greater confidentiality protections than the attorney-client privilege or the ethical duty provide. […]

Are there any ethical problems with a lawyer signing an NDA? 

The answer, of course, depends somewhat on the terms of the NDA and the rules of ethics applicable to the lawyer.  Signing an NDA ... would present a number of ethical problems. First, the NDA contains exceptions for “public” and “generally known” information. Ironically, the NDA may actually narrow the information received by the lawyer that is subject to the duty of confidentiality. The duty of confidentiality applies to any information “relating” to the representation of the client regardless of how obtained. Further, the ethics rules do not recognize a duty of confidentiality for “generally known” or “public” information. See ABA Formal Op. #479 (“generally known” exception only applies to former clients and is narrower than information that is public). Of course, a lawyer should avoid this issue by treating the NDA as supplemental to the lawyer’s duty of confidentiality, and in my opinion it would be improper for the lawyer to treat the NDA as a “waiver” or “informed consent” to use or reveal information that is generally known or publicly available.   Second, an NDA may provide an exception when disclosure of confidential information is required by law or court order. From an ethics perspective this provision presents several problems: 

·      As an initial matter, it is not clear that ethics rules should be treated as rules of law. See Scope of the Rules, ?7 (Rules are designed to provide guidance to lawyers and a structure for disciplinary regulation but not as a basis of civil liability).  

·      Even if they are, some ethics rules require lawyers to disclose confidential information even if the disclosure would involve confidential information. See Model Rule of Professional Conduct 3.3(a)(3) and 3.3(c) (requiring a lawyer to reveal confidential information to remedy false testimony offered by the lawyer, the lawyer’s client, or a witness called by the lawyer); 4.1 (requiring a lawyer to disclose information when necessary to avoid assisting a criminal or fraudulent act by the client unless the disclosure would be prohibited by Rule 1.6). 

·      Rule 1.6(b) provides a number of situations in which lawyers have discretion to reveal confidential information; many NDAs would seem to prohibit lawyers from exercising their discretion to reveal information when permitted under Rule 1.6(b). Indeed, limiting such discretionary disclosures may be a reason why some clients may want lawyers to sign NDAs. 

·      As a general matter, lawyers are free to disclose confidential client information to other lawyers and nonlawyers in the firm without the need for client consent. See SCRPC 1.6, cmt. 5 (“Lawyers in a firm may, in the course of the firm’s practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be confined to specified lawyers.”). Signing of an NDA could create cumbersome requirements for a firm if the NDA imposes a “need to know” limitation on disclosure to other lawyers and employees in the firm and even more so if the NDA requires written agreement by any firm member or employee to abide by the NDA.

Finally, NDAs may pose file retention problems for lawyers. The NDA provides that the disclosing party (the client) may require return or destruction of any confidential information given to the lawyer. It is generally recognized that, subject to certain exceptions and qualifications, lawyers have an obligation to deliver the lawyer’s file to the client; however, it is also generally recognized that lawyers may retain at their own expense a copy of file materials. Suppose the client asks for return or destruction of material given to the lawyer under the NDA; the lawyer agrees but insists on keeping a copy, to which the client objects based on the NDA. Cf. Hansen v. Dollar Tree Stores, Inc., 2012 U.S. Dist. LEXIS 68685 (N.D. Cal. 2012) (finding that terms of a protective order requiring return of documents within 30 days after conclusion of action trumped lawyer’s record keeping obligations under the California ethics rules).   Read more in Nathan M. Crystal & Francesca Giannoni-Crystal, Is it Ethically Proper for a Lawyer to Sign an NDA?, 16 South Carolina Lawyer (May 2019), available at https://mydigitalpublication.com/publication/?i=587519&p=&pn=#{"issue_id":587519,"page":4}