After months of intense work, under the burden of a top-secret clearance, a cryptanalyst¹ breaks an encryption. However, based on the maximum of "the need-to-know," he is not allowed to read any intercepted secret enemy messages that his "key" now works to decipher.

This may seem severe, but the need-to-know covert maximum serves to limit the consequences of a clearance violation. We as appraisers need to understand that confidentiality is an equally important maximum for our profession.

        When Can You?

We have a pledge of confidentiality to our clients. Appraisers are taught that they cannot breach confidentiality except in three situations. (1) If you are provided permission by your client, you are not bound by confidentiality. This is not an uninhibited capability. For example, you may have permission to discuss their appraisal with a prospective buyer. However, you cannot discuss their valuation with anyone beyond the designated person or entity. And even if the appraisal was rendered for obtaining insurance, you cannot breach confidentiality by speaking with the insurance agent without the client's permission. (2) If you are subpoenaed to produce records you must comply with the court order. Firstly, contact your client and inform them that you have been ordered to produce confidential records. Do not expose any more records than requested. A policeman requesting confidential records is not an exception - request a court order. Again, you cannot discuss or reveal anything other than what the subpoena entails. (3) If a client files a complaint with the appraiser's valuation society, perhaps for an ethical violation, the appraiser can submit confidential records as part of the defense. Although not specifically stated in appraisal courses, books, etc., if the appraiser is sued over the appraisal, he or she can submit that appraisal's confidential records as part of their defense.

I have retained a copy of this report and the original notes from which it was prepared. The records are confidential, and I will not permit access to them by anyone without your authorization, except (1) if legally compelled to do so, (2) if involved in a duly authorized investigative professional peer review committee, or (3) if requested by a lawful beneficiary.²

        I Swear . . .

Do not agree to a deposition in your office. Arrange for it to be held elsewhere, such in the opposing attorney's office. During court testimony you can be asked for anything in your possession. However, in a deposition in your office, the opposing attorney may take a fishing trip through your library, etc. Appraisals not involved in the litigation may be fair game. Rather than listen to attorneys argue the legal issues of record snooping, just avoid the risk and do not be deposed in your office.

        Larceny GPS

If you have a file cabinet that contains copies of your appraisal notes, valuations, etc., it must be safeguarded. A proper alarm system, locks, etc. are a "must-have" for your office. Keep hard drives with electronic confidential client files locked up or in a safe. A laptop, if confidential files are stowed in it, also must be protected. If a burglar were to steal your files, they would have a road map to all your clients' jewelry!

        Morse Code

A suggestion for protecting confidential records in your custody is to utilize a client code. For example, if your client's name is Samuel Morse,³ use the first three letters of his surname, two digits for the month, two digits for the year, and the first letter of his first name - resulting in a client code of MOR0222S. Write it on a small piece of paper to be the first photograph taken before the items. Six solitaire half carat diamond rings from six clients in a row and you will know which ring belongs to which client. If the photos are somehow taken by an unscrupulous character, they will not know who the owners are since they are coded.

Instead of writing a name on the worksheet containing your gemological hierographic notes, add the code and make your notes unusable by a potential thief.⁴ When you are ready to dispose of the notes, you can merely toss them since they have no link to the owner; only having to shred papers with names on them.⁵

The month and year portion of the client code becomes handy when it is time to destroy the files.⁶

        Careful What You Say

Confidentiality extends to your market resources. If you are seeking retail, then avoid adding wholesale and markups into the working notes or valuation. Ask your resource for the retail. The notes, if exposed in courtroom testimony are not protected from outsiders' reviews. A dealer's confidential business information concerning prices, etc., is now public record.

Although not dead center as an appraisal issue, you can see from the following citation how easy it would be to twist the law to work for a revealing of trade secrets.

"Under Texas law, a claim of trade secret misappropriation requires a plaintiff to show (a) that a trade secret existed; (b) that the trade secret was acquired through a breach of confidential relationship or discovered by improper means; and (c) use of the trade secret without authorization from the plaintiff."

"At trial, [name redacted] presented sufficient evidence that [name redacted] had acquired [name redacted]'s trade secrets through a breach of confidential relationship or discovered the trade secrets through improper means. 'Improper means of acquiring another's trade secrets include theft, fraud, unauthorized interception of communications, inducement of or knowing participation in a breach of confidence, and other means either wrongful in themselves or wrongful under the circumstances of the case.'"

"The existence of a confidentiality agreement between two parties can establish that a confidential relationship existed between those parties."⁷

You may be asked in a litigation involving pearls, for all appraisals that you have rendered that include pearls. This is the opposition checking if you do all pearls the same way or did you do the appraisal for litigation differently.⁸ The appraisals will have confidential client information that can be exposed in the litigation proceedings. You may not have a choice but to surrender the reports. But you can explain to the retaining attorney that you are bound to a standard of confidentiality. The attorney will make the case to the opposition or to the judge to not expose the client's information (name and addresses) since it is not needed for the opposition's research.

Want to know who is doing the appraisals for estate tax liability in your county? Go to the local government office that handles probates. Ask to see the probate file for a specific deceased person.⁹ You can read the entire file including any appraisals. You will see the appraisers, their reports, affiliations - basically everything you need to see to size up your competition.

        Who is the Client?

Confidentiality is linked to a client. As an appraiser, the client-appraiser relationship must be crystal clear. If you render an appraisal for a trust, who is the client? If you render the report for a trustee, then you will have a problem if the trustee is replaced. Instead, make the trust your client. That way, if the trustee is replaced, you can continue to appraise for the trust. Remember, a trust is a special form of contract. Although the beneficiaries to the trust have not signed the agreement, they have rights as if they did. And don't forget that there is a trustor.¹⁰

Yhis becomes more complicated in litigation. Is the law firm or the litigant your client? It is preferred to make the law firm (or lawyer) your client. It not only strengthens the attorney client privilege, but also in a criminal case, if the defendant is imprisoned, how will you get paid?

        Mother May I?

In some appraisal assignments, you may want to secure permission in advance to discuss confidential information which specifically names entity or representatives. This is the case with certain U.S. Customs reports.¹¹

Another problem arises whenever a client decides to transfer ownership of an item to someone else and the new owner wants the report's client name changed to theirs. You have an appraiser-client relationship and now need to end it to start a new one. If your client says, "I want to give this to my daughter for her birthday but for now I will insure it," have them agree in advance that you can end the appraiser-client relationship and start a new one. This includes the confidential aspects of the assignment, and in essence supersedes the original appraiser-client relationship.

        War Stories

Appraisers who are involved as expert witnesses must understand and respect the attorney-client privilege. There are discussions between a client and their attorney that are privileged. The opposition cannot request such privileged discussions, notes, etc. Your work or what you may hear may be considered privileged. Do not mix privileged notes in with your regular working notes, reports, etc.

Many appraisers cannot resist the temptation to tell war stories. Avoid war stories. During litigation, if discovered by the opposition, what may have been privileged will be requested. In turn, the retaining attorney will be unhappy that you revealed his or her strategies. After the trial, war stories are also a no-no. Maintain a professional stance no matter how tempted you are to brag.

        On Golden Pond

Professional gemologist-appraisers have a public responsibility as custodians of confidential information to protect and handle these records properly. Think before you act. As you have discovered, confidentiality extends beyond the three basic procedures taught. Like dropping a stone in a pond, expect waves to extend and affect shores other than the one in front of you.

Written by Bill Hoefer