Must a lawyer reveal that a bankrupt client concealed assets from the trustee after the lawyer learned of it and withdrew?

Plain-English summary

The committee addressed a lawyer who, after a bankruptcy petition was filed and while proceedings were pending, was told by his client, the bankrupt, that he had concealed assets that should have been turned over to the trustee. The client refused to make full disclosure and the lawyer withdrew from the representation. The committee was asked whether the lawyer must now disclose the existence of the concealed assets, and answered the question in the negative.

The committee located the relevant provisions in Canon 4 (preserving the confidences and secrets of a client) and Canon 7 (representing a client within the bounds of the law). It explained that one of the central problems the Code's draftsmen faced was reconciling these countervailing considerations: the Code had forbidden disclosure in some circumstances, permitted it at the lawyer's discretion in others, and required disclosure to prevent the perpetration of a fraud committed in the course of the representation (comparing DR 4-101(B) and (C) with DR 7-102(B)(1)).

The committee then noted that on November 6, 1976, the Association amended DR 7-102(B)(1) to provide that disclosure would not be required when the information is protected as a confidence or secret. That amendment eliminated the only provision that might otherwise have mandated disclosure on these facts. Because no provision of the Code any longer required disclosure of a client's confidences or secrets, the committee held the lawyer need not reveal the concealed assets.

Currency note

This opinion was issued in 1976, and turns on the version of DR 7-102(B)(1) as amended that November; it predates New York's replacement of the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (confidentiality is now governed by Rule 1.6 and candor to a tribunal by Rule 3.3). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Did the lawyer have to tell the bankruptcy trustee about the hidden assets?

A: Under this opinion, no. The committee held that after the November 1976 amendment to DR 7-102(B)(1), no Code provision required disclosure of information protected as a client confidence or secret.

Q: What changed to remove the disclosure duty?

A: The committee explained that the amended DR 7-102(B)(1) added an exception so that disclosure is not required when the information is protected as a confidence or secret, eliminating the only provision that had mandated disclosure.

Q: Did the lawyer's withdrawal matter to the result?

A: The opinion recounts that the lawyer had already withdrawn after the client refused to make full disclosure, and rests the no-disclosure holding on the amended rule rather than on the withdrawal.

Background and rules framework

The opinion applies Canon 4 with DR 4-101(B) and (C) (preserving confidences and secrets, with limited permissive exceptions) against Canon 7 and the then-amended DR 7-102(B)(1) (disclosure of fraud, now excepting protected confidences). The current Model Rule analogues are Rule 1.6 (confidentiality of information) and Rule 3.3 (candor toward the tribunal, including the duty to remedy fraud in some circumstances).

Citations and references

Rules of Professional Conduct:

• MR 1.6 (confidentiality of information)
• MR 3.3 (candor toward the tribunal)
• NY Canon 4, Canon 7; DR 4-101(B), DR 4-101(C), DR 7-102(B)(1)

See also

• NY State Bar Op. 466: Proceeds of crime and client confidences
• NY State Bar Op. 486: Disclosing a client's intent to commit suicide
• NY State Bar Op. 485: Legal Aid lawyer disclosing confidences

Source

• Landing page: https://nysba.org/opinion-454/