## Facts

- Empire Fire and Marine Insurance Company made a public offering of common stock under a registration statement and prospectus prepared with assistance from its securities counsel, Sitomer, Sitomer & Porges.
- Stuart Charles Goldberg, an associate at the Sitomer firm, worked on the offering and became concerned that the offering materials omitted material information.
- Goldberg resigned and submitted a sworn affidavit to the SEC describing the alleged nondisclosures and related conduct surrounding preparation of the offering materials.
- Purchasers Dietrich Meyerhofer and Herbert Federman bought Empire stock at the offering price; after a sharp decline in price, they filed a putative class action alleging material misstatements and omissions in violation of federal securities laws and related state law.
- Plaintiffs were represented by Bernson, Hoeniger, Freitag & Abbey (the Bernson firm); Goldberg was initially named as a defendant.
- After learning he had been sued, Goldberg met with the Bernson firm to show he had not participated in wrongdoing and provided a copy of an affidavit similar to the one he had given the SEC.
- The Bernson firm then removed Goldberg as a defendant and amended the complaint to add more specific factual allegations without changing the core legal theory.
- Defendants moved to disqualify the Bernson firm, arguing it had obtained and used privileged or confidential information through Goldberg and seeking restrictions on further disclosure.

## Issues

1. Whether a lawyer accused of wrongdoing may disclose otherwise confidential client information to the extent reasonably necessary to defend against the accusation.
2. Whether plaintiffs’ counsel must be disqualified for receiving and using a former corporate counsel’s affidavit containing confidential information when revising pleadings and litigation strategy.
3. Whether the named plaintiffs should be disqualified as class representatives and enjoined from disclosure based on alleged taint from the information received.

## Decision

- The Second Circuit recognized a limited self-defense exception permitting an attorney to disclose confidential or privileged information to the extent reasonably necessary to defend against charges of wrongful conduct.
- The court held Goldberg’s disclosures were justified for self-protection after he was named as a defendant and sought to demonstrate nonparticipation in the alleged securities fraud.
- The court concluded the district court’s remedies were overly broad and substantially limited the disqualification and injunction provisions on appeal, directing narrower relief on remand.
- The court declined to extend the requested remedies to disqualify the named plaintiffs as class representatives or broadly restrain them from disclosure.

## Legal Principles

- A lawyer may reveal confidential or privileged information without client consent when, and only to the extent, reasonably necessary to defend against accusations of the lawyer’s wrongful conduct.
- Disqualification is not automatic upon an adversary’s receipt of information from a former corporate or firm lawyer; the remedy must be tailored to actual prejudice, conflict, or misuse.
- Courts may consider whether the challenged use of information materially altered the case or unfairly disadvantaged the opposing party when deciding disqualification and injunctive relief.
- Restrictions on disclosure should be no broader than necessary to protect legitimate confidentiality interests while permitting an accused lawyer to defend against personal liability and reputational harm.

## Conclusion

The Second Circuit held that an attorney sued for alleged participation in client wrongdoing may disclose limited confidential information for self-defense and that sweeping disqualification and disclosure injunctions must be narrowed to match demonstrated misuse or prejudice, while rejecting efforts to disqualify the named plaintiffs as class representatives on that basis.


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