Task Force on Corporate Responsibility: Should the American Bar Association adopt new ethics rules?

Georgetown Journal of Legal Ethics, The, Summer 2003 by Kroetsch, Nicole, Petrich, Samantha

In order to address these concerns, the Task Force noted that lawyers have been held responsible to third parties under Model Rule 1.2(d) despite the holding of cases like Schatz.87 The Task Force Report points out that the ABA has "long advised that lawyers providing transactional opinions that may be relied upon by third parties cannot blindly accept the facts posited by the client" at least to some extent.88 As an example of the limitations on advising clients in matters that may be criminal or fraudulent, the Task Force provided an example of a formal opinion from the IRS on a tax matter and points out that lawyers are already subject to restrictions on the kind of advice they can provide to their clients.89

D. TRUTHFULNESS IN STATEMENTS TO OTHERS

Model Rule 4.1 states that 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 when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Model Rule 1.6."90 The Ethics 2000 revisions to comments to Model Rule 4.1 clarify that a lawyer may violate Model Rule 4.1 by remaining silent when such failures to speak up constitute "omissions that are the equivalent of affirmative false statements."91 The purpose in making this change was to clarify the vague former reference to "failure to act."92 This particular rule has special significance for the corporate attorney who may merely remain complacent when confronted with a director or officer of a corporation who may be engaging in suspicious activity.93

Like Model Rule 1.2(d), Model Rule 4.1 forces the attorney to ascertain exactly what it means to know that a statement is false.94 The rule outlines that lawyers are only responsible for knowingly making false statements; once an attorney determines that a statement is false, however, he must not affirm any untruthful statement.95 This obligation is "unqualified and applies on all occasions," trumping even a responsibility to keep a corporate confidence.96 This obligation extends beyond statements that the attorney might personally make; it also prevents a lawyer from assisting others in their efforts to submit false statements.97

Despite the recent modifications to Comment 1 of Model Rule 4.1 making it impermissible for attorneys to make "omissions that are the equivalent of affirmative false statements,"98 obligations regarding disclosures of suspected corporate misconduct are still less clear than the prohibition against stating false information.99 The reference in this rule to the confidentiality requirements of Model Rule 1.6 clarifies that the disclosure obligation of Model Rule 4.1 is subordinate to the client confidentiality obligations.100 When the interests of client confidentiality and full disclosure to an unrelated party conflict, client confidentiality trumps concerns over full disclosure.101

III. PROPOSED CHANGES

A. MODEL RULE 1.6

The Task Force has proposed that Model Rule 1.6 be amended to (i) extend permissible disclosure to conduct that has resulted or reasonably will result in substantial injury to the financial interests or property of another; and (ii) require disclosure in order to prevent felonies or other serious crimes, including violations of federal securities laws.102 The first of the proposed changes to Model Rule 1.6 is very similar to the rejected Ethics 2000 proposed amendments.103 The second notably important change makes disclosure in those circumstances mandatory rather than permissive. In effect, the second proposal would change the present discretionary authority granted to lawyers to a mandatory affirmative duty.104 As such, the main focus of the comments regarding the Task Force's proposed changes to Model Rule 1.6 center around this language.