In a transactional matter, when does a Colorado lawyer have a duty to inquire further if the lawyer suspects the client's purpose may be criminal or fraudulent?

Plain-English summary

Opinion 142 answers a question Colo. RPC 1.2(d) leaves open: a lawyer may not counsel or assist a client in conduct the lawyer "knows is criminal or fraudulent," but what if the lawyer only suspects, without actually knowing, that a transactional client has an illicit purpose? The Committee, responding to ABA Formal Op. 491, concludes that Colorado lawyers should assume "knowledge" under the Rules includes willful blindness, so the duty under Rule 1.2(d) "encompasses a duty not to act with willful blindness." The opinion is expressly limited to transactional (non-litigation) matters and does not decide whether a lawyer must later withdraw or disclose.

The analysis turns on the meaning of "know." Rule 1.0(f) defines "knows" as "actual knowledge of the fact in question," which "may be inferred from circumstances," and Rule 1.0(j) separately defines "reasonably should know." Because Rule 1.2(d) uses "knows," not "reasonably should know," the opinion concludes the rule is triggered by actual knowledge, not by what a lawyer should have known, and that Comment 13's "reasonably should know" language applies only to the separate duty to consult with a client about limitations on the representation. The Committee then explains that actual knowledge includes willful blindness, defined from Global-Tech Appliances v. SEB S.A. as subjectively believing there is a high probability a fact exists and taking deliberate action to avoid learning it. It supports that reading with Rule 1.0(f)'s "inferred from circumstances" language and with Colorado decisions (Rader, Waters) holding that a lawyer who "deliberately closed his eyes to facts he had a duty to see" acts knowingly. The opinion is careful that willful blindness is a form of actual knowledge, not recklessness, and that recklessness is insufficient for a rule, like 1.2(d), whose text requires knowledge (Colo. RPC 1.0 Comment 7A).

On the operative duty, the opinion concludes a lawyer who neither knows nor is willfully blind has no duty to inquire, but a lawyer who actually knows facts that are obvious indicators of a client's criminal or fraudulent intent has a duty to confirm or dispel that knowledge, and a lawyer who intentionally fails to do so is willfully blind and charged with knowledge under Rule 1.2(d). The opinion notes a failure to inquire that crosses into assisting crime or fraud can expose the lawyer to discipline under Rule 8.4(a), (b), (c), and (h) and to civil or criminal liability. It parts ways with ABA Op. 491 on one point: it declines to extend the duty to every situation where a lawyer merely "should know," because Colorado's Rule 1.2(d) requires actual knowledge (including willful blindness). Two illustrations close the opinion: a lawyer who learned of a client's contingent liabilities in a first loan application must inquire before submitting financial documents omitting them to a second bank, and a lawyer aware of a suspicious below-market intercompany asset sale must inquire about the price unless the client gives a plausible explanation.

In practice

The opinion holds that the trigger for a Colorado lawyer's duty to inquire in a transactional matter is actual knowledge of obvious indicators of a client's criminal or fraudulent intent, and that "actual knowledge" includes willful blindness as defined in Global-Tech. It concludes a lawyer with mere suspicion short of knowledge, or who only "reasonably should know," has no mandatory duty to inquire under Rule 1.2(d), though the opinion notes inquiring further is not prohibited and can prevent a violation. Where the duty is triggered, the lawyer must confirm or dispel the knowledge, and a deliberate failure to do so is treated as knowledge. The opinion frames due-diligence steps drawn from ABA Op. 463 (verifying client and beneficial-owner identity, understanding the client's objectives) as ways to satisfy the duty once triggered, and it expressly leaves the related duties under Rules 1.1, 1.3, 1.4, 1.13, 3.3, 8.4, and 1.16(a) for another day.

Common questions

Q: Does a Colorado lawyer have to investigate every transactional client for fraud?

A: No. The opinion concludes a lawyer should "start by trusting the client" and has a duty to inquire only when the lawyer actually knows facts that are obvious indicators of an intent to use the lawyer for a crime or fraud; mere suspicion or what the lawyer "reasonably should know" does not trigger a mandatory duty under Rule 1.2(d).

Q: What does "knowledge" mean under Rule 1.2(d)?

A: Actual knowledge, including willful blindness. The opinion adopts the Global-Tech formulation: a lawyer is willfully blind when she subjectively believes there is a high probability a fact exists and takes deliberate steps to avoid learning it. That is treated as a form of actual knowledge, not as recklessness.

Q: Can a lawyer avoid the rule by deliberately not asking questions?

A: No. The opinion concludes a lawyer who intentionally fails to inquire when she has knowledge of obvious indicators is willfully blind and "chargeable with knowledge" under Rule 1.2(d); a lawyer "cannot escape responsibility by avoiding inquiry."

Q: Is recklessness enough to violate Rule 1.2(d)?

A: No. The opinion explains that although a reckless state of mind usually satisfies "knowing" for disciplinary purposes, recklessness is insufficient where a rule's text specifically requires knowledge, as Rule 1.2(d) does; willful blindness, by contrast, qualifies because it is a form of actual knowledge.

Q: How does this differ from ABA Formal Op. 491?

A: The opinion agrees a duty to inquire exists but is narrower. It declines to follow ABA Op. 491's view that the duty extends to every situation where a lawyer merely "should know" of improper use, because Colorado's Rule 1.2(d) requires actual knowledge (including willful blindness), not constructive knowledge.

Background and rules framework

The opinion interprets Colo. RPC 1.2(d) (a lawyer shall not counsel or assist conduct the lawyer knows is criminal or fraudulent), read with the knowledge definitions in Rule 1.0(f) and (j) and Comments 9, 13, and 14 to Rule 1.2, and the scienter discussion in Comment 7A to Rule 1.0. It situates the duty against Rule 1.4(a)(5) (consulting about limits on the representation) and the misconduct provisions of Rule 8.4(a)-(c) and (h), and it flags, without deciding, related duties under Rules 1.1, 1.3, 1.13, 3.3, and 1.16(a). It draws heavily on ABA Formal Op. 491 and Op. 463 and on federal and state willful-blindness authority.

Citations and references

Rules of Professional Conduct:

• Colo. RPC 1.2(d) / Model Rule 1.2(d) (no counseling or assisting crime or fraud; Comments 9, 13, 14)
• Colo. RPC 1.0(f) and 1.0(j) / Model Rule 1.0 (definitions of "knows" and "reasonably should know"; Comment 7A)
• Colo. RPC 1.4(a)(5) / Model Rule 1.4 (consulting about limits on the representation)
• Colo. RPC 8.4(a)-(c), (h) / Model Rule 8.4 (misconduct); Colo. RPC 1.13, 1.16(a) (noted, not decided)

Statutes:

• Corporate Transparency Act (Pub. L. 116-283, 2021), beneficial-ownership reporting; C.R.S. § 18-1-603 (complicitor liability)

Cases:

• Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011), willful-blindness standard
• People v. Rader, 822 P.2d 950 (Colo. 1992); Waters v. District Court, 935 P.2d 981 (Colo. 1997), deliberately closing one's eyes equals knowledge

Other opinions cited:

• ABA Formal Op. 491 (2020): duty to inquire under Rule 1.2(d) in non-litigation settings
• ABA Formal Op. 463 (2013): client due diligence, money laundering, and terrorist financing
• ABA Informal Op. 1470 (1981); N.Y.C. Formal Op. 2018-4 (2018); Georgia Formal Advisory Op. 05-10 (2006)

See also

• ABA Formal Op. 491: Avoiding Counseling or Assisting Crime or Fraud
• ABA Formal Op. 513: Duty to Inquire Into Each Representation
• ABA Formal Op. 463: Client Due Diligence and Money Laundering

Source

• Landing page: https://www.cobar.org/ethicsopinions
• Original PDF: https://www.cobar.org/Portals/COBAR/Repository/CBA/72621/Duty to Inquire Opinion - FINAL EDITED VERSION (002).pdf