Scope, Candor, and Liability

Scope, Candor, and Liability

A lender that closes a loan on the strength of a title opinion cannot audit the lawyer's search. It sees only the letter, so whatever the letter leaves out is invisible to the one person who will be hurt by the gap. Rule 2.3(a) does not address that problem. It permits a lawyer to give an evaluation for someone other than the client when the lawyer reasonably believes that doing so is compatible with the rest of the client relationship,¹ and that threshold test decides only whether the lawyer may write the letter. What the letter must say is a separate question, and this unit takes it up.

The first drafting decision is how much the evaluation will cover. Rule 1.2(c) lets a lawyer and client limit the scope of a representation when the limitation is reasonable under the circumstances and the client gives informed consent.² An evaluation engagement may therefore cover less than every question a recipient might ask. A title opinion can rest on a search of county land records alone, and a corporate opinion can address authority to sell without addressing taxes. The recipient, though, never agreed to those limits and is likely to assume the letter covers what such letters ordinarily cover. A limit that lives in the engagement but not in the letter leaves the recipient with a false picture of what was checked. The letter should therefore carry its own limits: it should name the sources the lawyer relied on, identify the issues the opinion excludes, and say what it does and does not cover. A letter written that way cannot mislead about its own reach, because the reader can see what the conclusions rest on and look elsewhere for the rest.

Both letters rest on the same kind of search. What separates them is whether the letter tells the truth about what the search found and what it left unexamined. A disclosed exclusion of zoning narrows what the letter promises, and the lender can weigh that gap in deciding whether to lend. The disclosure cannot excuse silence about a lien the lawyer actually found, because a limit on scope narrows the promise and leaves the lawyer's knowledge where it was.

Candor in an evaluation has two parts: what the letter says and what it leaves out. The first is the easier. The second reaches the case in which every sentence is literally true and the letter as a whole still leaves a false impression, as when a letter lists every document reviewed and never mentions the one document that would change the conclusion. That letter misleads as effectively as a misstatement would. A lawyer who knows such a fact therefore has two courses: report it, or decline to give the evaluation. The client's consent supplies no third. Informed consent under Rule 2.3(b) answers whether an evaluation adverse to the client may be given at all; it does not answer what the letter must tell the person who reads it.

The lawyer should choose between those courses before drafting, and the law of confidentiality shows why. The core of attorney-client confidentiality remains robust in the United States, and its exceptions are narrow departures from that core.³ A business client who comes to learn the limits of the law, and who is prepared to conform to them, need not fear that the lawyer will breach the wall of confidentiality. The evaluator role tests that arrangement, because the lawyer now speaks to a stranger about the client's affairs. A lawyer who decides at the outset whether she can report what the investigation finds, or must decline, avoids discovering halfway through the letter that she can say neither the whole truth nor nothing.

SEC v. Fehn shows the exposure on the securities side. The lawyer there was representing a client in an SEC investigation of earlier disclosure violations while also advising the same client on its continuing disclosure obligations. The court found that, by failing to make the company's Form 10-Qs comply with the disclosure requirements, the lawyer "substantially assist[ed]" the primary violations.⁴ It called the combination of roles a dilemma and noted that Rule 2.3 makes a special provision for a lawyer whom a client asks to evaluate its internal information for an outside party, such as a government agency.⁵ The court did not decide whether the two roles were compatible. Fehn is therefore a cautionary illustration and not a Rule 2.3 holding, and Form 10-Qs are periodic reports, not evaluation letters. What carries over is narrow. A lawyer who knowingly helps produce a document that lacks information the law requires cannot count on the client's reluctance to disclose as a shield.

Disclosed limits, complete reporting of what the investigation found, and a refusal to help with documents known to be deficient all serve the reader. They also keep the lawyer out of the position Fehn's lawyer occupied. The same letter that persuades a lender to close may be the document by which the lawyer's own conduct is later judged, so the safest letter says only what the investigation supports, states its limits, and omits nothing material.