Truthfulness Versus Candor

Disclosure to Avoid Client Fraud

A lawyer owes a client candor but owes everyone else only truthfulness, and Rule 4.1 of the Model Rules of Professional Conduct is where that gap is written down.¹ The rule applies to a lawyer acting “in the course of representing a client,” and it reaches only what the lawyer does “knowingly.”² Its two paragraphs make sense only when read against each other:

In the course of representing a client a lawyer shall not knowingly:

(a) make a false statement of material fact or law to a third person; or

(b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.³

Paragraph (a) governs what a lawyer says, and paragraph (b) governs one narrow kind of silence. The first paragraph sets the baseline; the second cuts a narrow exception out of it.

Truthful, Not Candid

Truthful and candid are different things. A speaker is truthful when nothing said is believed to be false, and candid only when the speaker also discloses what matters. A lawyer owes a client candor, an affirmative duty to keep the client fully informed and candidly counseled. A lawyer owes persons other than clients a duty to refrain from outright dishonesty and deliberate deception.⁴ The working result is that a lawyer ordinarily is not obliged to share information at all with a third person, yet if the lawyer speaks, the statement may be neither false nor deliberately misleading.⁵ The asymmetry follows the lawyer's role: the client is the person the lawyer represents, so the client alone is owed a full account, and everyone else is owed freedom from lies and from deliberately misleading impressions.

Truthfulness reaches past literal falsehood. A lawyer who chooses to speak must be sufficiently complete that the statement is not deliberately misleading, because, in the words of Comment 1 to Rule 4.1, “[m]isrepresentations can also occur by partially true but misleading statements or omissions that are the equivalent of affirmative false statements.”⁶ The duty extends only to “material” facts, meaning matters significant enough to induce reasonable reliance by the other person.⁷ In Virzi v. Grand Trunk Warehouse and Cold Storage Co., the court set out Rule 4.1 and quoted the ABA's comment on Rule 3.3 that “[t]here are circumstances where failure to make a disclosure is the equivalent of an affirmative misrepresentation,” while noting that the comment does not identify those circumstances.⁸ Paragraph (b), taken up next, marks out one situation in which silence is forbidden.

Two examples show where the line falls. A plaintiff's lawyer who has found no eyewitness to the event need not volunteer that fact, but may not tell the opposing side that an eyewitness has been found.⁹ Withholding can still taint an entire statement, though. A lawyer pressing a wrongful-discharge claim may not hide that the plaintiff has found new employment at a higher salary, because that fact would make any claim for continuing lost wages fraudulent.¹⁰

A misrepresentation also carries consequences outside the disciplinary rules. If a fraudulent or material misrepresentation induces the other party to settle, the settlement is voidable at that party's option, and the misrepresentation may lead to liability in tort.¹¹ The Model Rules then add their own prohibition on top of those civil remedies.

The Narrow Exception in Rule 4.1(b)

Paragraph (b) is the only part of Rule 4.1 that addresses a failure to disclose, and it addresses it narrowly. Silence becomes a violation only when disclosure is necessary to avoid assisting a client's criminal or fraudulent act.¹³ The trigger is the lawyer's assistance, not the other party's curiosity: an adversary who withholds helps no one commit a crime, while a lawyer whose documents carry the client's lie does.

Each clause of paragraph (b) does separate work:

“Knowingly” confines the duty to a lawyer who actually knows what is going on, so a lawyer who never learns of the client's wrongdoing cannot violate the rule.¹⁴
“A material fact” confines the duty to facts significant enough that the other person would reasonably rely on them.¹⁵
“When disclosure is necessary” demands disclosure only when it is needed to avoid assisting, not whenever it would help the other side.¹⁶
“Assisting a criminal or fraudulent act by a client” puts the wrongdoing in the client's conduct and the trigger in the lawyer's assistance, so the rule asks about assisting, not about reporting client misconduct generally.¹⁷
“Unless disclosure is prohibited by Rule 1.6” makes the duty yield to confidentiality. That yield is weaker than it looks, because new exceptions in Rule 1.6 have drained some, perhaps most, of the force from the confidentiality qualification.¹⁸

The plaintiff's lawyer who says nothing about the missing eyewitness sits on the other side of the line. Keeping quiet about a weak case helps no client commit a crime or fraud, so paragraph (b) never asks whether disclosure is necessary. In the closing example, the client's false representation is a fraud on the buyer, and the lawyer's documents are the vehicle for it. The same silent posture is therefore harmless in one setting and potentially forbidden in the other, and the difference lies in the client's conduct, not in how much the lawyer says.

Disclosure to Avoid Client Fraud