Concept

Applying the Two Steps

Rule 4.1(b): Failure to disclose a material fact to avoid assisting a client's crime or fraud

Applying the Two Steps

Rule 4.1(b) forbids a lawyer to knowingly fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a client's criminal or fraudulent act, unless disclosure is prohibited by Rule 1.6.¹ That sentence holds a duty and a limit, and an exam answer takes them in that order and keeps them apart. The duty comes first because a limit has nothing to limit until a duty exists, so a candidate who opens with confidentiality may spend the whole answer on a prohibition no one needed to test. Confidentiality comes second because it alone can excuse a duty already established, so a candidate who stops after the first step may announce mandatory disclosure where Rule 1.6 still forbids it. The two errors point in opposite directions, and running both steps in sequence guards against each.

Exam Analysis Steps

The duty has several conditions, and all of them must be met, so the first step runs best as a series of gates. Each gate must be passed before the next one matters.

Decide whether the lawyer has discovered the client's crime or fraud. A lawyer who never discovers it cannot act to avoid assisting it.²
Decide whether the client has drawn the lawyer's services into the scheme, so that the lawyer would be “assisting” by staying silent after discovery.³
Decide whether the withheld fact is material, meaning significant enough to induce reasonable reliance by the other person.⁴
Decide whether disclosure is necessary, which requires that the lawyer learn of the misconduct while the wrong can still be prevented and that her failure to take preventive measures would amount to assistance.⁵

The involvement gate separates a lawyer who has a duty from a lawyer who merely knows something. Rule 4.1(b) applies when the client has appropriated the lawyer's services to advance the crime or fraud, and it is implicated only if the lawyer has become involved, presumably unwittingly, in a way that makes her silence after discovery an act of assistance.⁶ A lawyer who stays in the background as an adviser, or who is retained after the fraud only to defend the client against the charges, has put nothing of her own into the scheme. Paragraph (b) gives her nothing to disclose, and Rule 1.6 never comes into play. A lawyer whose letters or documents carried the fraud stands elsewhere, because silence after she discovers it would let her own work go on deceiving the third person.

Hypothetical Illustration

A lawyer sent a client's collateral schedules to a bank in a series of cover letters. He later learns that the schedules were falsified on purpose, and he withdraws, yet the bank keeps lending on the strength of his letters. At step one he passes every gate: he knows of the fraud, his own letters carried it, the collateral figures matter to a lender, and his withdrawal alone leaves the bank deceived, so silence would assist the client. Step two asks whether Rule 1.6 prohibits disclosure. The exceptions added to Rule 1.6 have drained much of the force from that limit, so if his jurisdiction has adopted one covering a client's use of a lawyer's services in a fraud that injures the bank financially, nothing prohibits him from speaking, and Rule 4.1(b) requires him to disclose what is necessary.

The second step asks whether Rule 1.6, as adopted in the controlling jurisdiction, prohibits the disclosure that step one would require. The qualification is real, since the duty in paragraph (b) is lifted when revelation would violate the duty of confidentiality under Rule 1.6. But the exceptions added to Rule 1.6 have drained some, perhaps most, of the force from that qualification.⁷ Paragraph (b) is mandatory unless Rule 1.6 prohibits disclosure, so an exception that permits the disclosure leaves nothing for the qualification to do, and the duty from step one survives. Because this step turns on the text of Rule 1.6, a fact pattern that names a jurisdiction calls for that jurisdiction's version.

When Rule 1.6 does prohibit disclosure, it excuses silence and nothing more. A lawyer ordinarily need not share information with a third person at all, but one who chooses to speak must not mislead, because misrepresentations include “partially true but misleading statements or omissions that are the equivalent of affirmative false statements.”⁸ Confidentiality never licenses a half-truth.

The two steps answer only the ethics question, and federal immigration practice shows how much exposure lies outside it. In United States v. Maniego, the Second Circuit affirmed the conviction of a lawyer whom a jury found had knowingly prepared immigration documents based on fraudulent marriages, and in United States v. Zalman the Sixth Circuit affirmed the conviction of a lawyer who failed to disclose a fraudulent marriage.⁹ Both prosecutions rest on federal criminal statutes rather than on Rule 4.1(b). Immigration regulations add a duty of their own: an attorney who makes a material representation that she later discovers to be false must take “appropriate remedial measures,” and in Matter of Shah the Board of Immigration Appeals disciplined an attorney who failed to correct information in a Labor Condition Application he later learned to be false.¹⁰

When the two steps leave the lawyer uncertain, the next move is advice, not a leap. Rule 1.6(b)(4) expressly authorizes a lawyer to reveal confidential information to secure another lawyer's advice about compliance with the rules, which includes advice on the permissions and obligations that govern disclosure; the authorization was implicit under past practice and is now explicit.¹¹ Disclosing a client confidence without the client's consent and against the client's interests is a momentous step, so except in emergencies a lawyer is well advised to seek the counsel of other well-regarded lawyers first.¹²

Applying the Two Steps

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