Ezel / Ethics Opinions / NYC-BAR
NYC-BAR July 18, 2018

Does a New York lawyer have a duty to investigate when asked to help with a transaction the lawyer suspects may be a crime or fraud?

Short answer: The Rules do not expressly require investigation, but the opinion concludes a duty to inquire is implicit in some circumstances, arising from the Rule 1.1 competence duty and the Rule 1.2(d) bar on knowingly assisting crime or fraud. The inquiry must respect Rule 1.6 confidentiality, and the lawyer must not assist conduct found to be illegal or fraudulent.

Apply this to your situation

This page answers the general question as of 2018. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2018
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The opinion addresses a lawyer who is asked to assist with a transaction and has doubts about its lawfulness, without knowing for certain that it involves a crime or fraud. It observes that the Rules prohibit knowingly assisting a client's crime or fraud but do not explicitly address what to do when the lawyer merely suspects wrongdoing, and do not explicitly require investigation.

The opinion concludes that a duty to inquire is nonetheless implicit in some circumstances, on two grounds. First, to render competent representation under Rule 1.1, a lawyer in some circumstances must inquire into a suspicious transaction in order to give the client reasonable and candid advice about whether to proceed and the consequences of doing so. Second, the duty to avoid knowingly assisting wrongful conduct under Rule 1.2(d) carries an implicit obligation to inquire: the opinion reasons that a lawyer has the requisite knowledge when the lawyer is aware of serious questions about a transaction's legality and renders assistance without considering readily available facts that would have confirmed the wrongfulness.

The opinion conditions the inquiry on the confidentiality duty of Rule 1.6, which governs what the lawyer may disclose to third parties during the inquiry, and on the duty to keep the client informed. It concludes that if the lawyer determines the client is or will be engaged in a crime or fraud, the lawyer must not assist or further assist it, and may take remedial measures to the extent the confidentiality rule's exceptions permit.

In practice

Under this opinion, as the New York rules stood at the time, suspicion can trigger a duty to look further rather than a license to proceed blindly. The opinion holds that, in some circumstances, the Rule 1.1 competence duty and the Rule 1.2(d) bar on knowingly assisting wrongdoing together require the lawyer to take reasonably available measures to ascertain whether a suspicious transaction is illegal or fraudulent, to conduct that inquiry consistent with Rule 1.6, and to decline to assist conduct the lawyer concludes is illegal or fraudulent.

Common questions

Q: If I suspect a deal might be fraudulent, can I just proceed because I do not "know" it is?

A: Not necessarily. The opinion concludes that a lawyer who is aware of serious questions about a transaction's legality and assists without considering readily available facts that would confirm wrongdoing may be deemed to have the requisite knowledge under Rule 1.2(d), so an inquiry is implicit in some circumstances.

Q: Where does the duty to inquire come from if no rule states it expressly?

A: From the competence and no-assistance duties. The opinion grounds the implicit inquiry duty in Rule 1.1 (competent, candid advice about whether to proceed) and Rule 1.2(d) (not knowingly assisting crime or fraud).

Q: How does confidentiality limit the inquiry?

A: It governs third-party disclosures. The opinion concludes the inquiry must be consistent with Rule 1.6, which controls what the lawyer may disclose to third parties while inquiring, alongside the duty to keep the client informed.

Q: What if the inquiry confirms the conduct is illegal?

A: The lawyer must not assist it. The opinion concludes that if the lawyer determines the client's conduct is illegal or fraudulent, the lawyer must not further assist, and may take remedial measures to the extent the confidentiality exceptions permit.

Background and rules framework

The opinion interprets New York Rule of Professional Conduct 1.1 (competence) and Rule 1.2(d) (a lawyer shall not counsel or assist a client in conduct the lawyer knows is illegal or fraudulent), read together with Rule 1.6 (confidentiality), Rule 2.1 (a lawyer's exercise of independent professional judgment and candid advice), Rule 1.16 (withdrawal), and Rule 8.4 (misconduct). The Model Rule analogues are Model Rules 1.1, 1.2(d), 1.6, and 2.1.

Citations and references

Rules of Professional Conduct:

  • NY RPC 1.1 (competence)
  • NY RPC 1.2(d) (not knowingly assisting crime or fraud)
  • NY RPC 1.6 (confidentiality); NY RPC 2.1 (candid advice)
  • NY RPC 1.16 (withdrawal); NY RPC 8.4 (misconduct)
  • MR 1.1, MR 1.2, MR 1.6, MR 2.1 (Model Rule analogues)

See also

Source

Get today's answer for your situation

You just read a 2018 opinion on this question. Ezel checks the current New York Rules of Professional Conduct and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the rules it relies on.