Counseling Clients and Illegal Activity Under Rule 1.2
On July 10, 2021, the Colorado Bar Association Ethics Committee released a new opinion regarding Colorado Rule of Professional Conduct 1.2(d), analyzing a lawyer’s duty to inquire about a client’s illegal activity. Under 1.2(d), which sets a similar standard to Model Rule 1.2(d), lawyers “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent[.]”
Colorado’s opinion “addresses the basis for and the scope of the duty to inquire,” holding that “a lawyer who does not know or is not willfully blind to the fact that the client seeks the lawyer’s assistance in criminal or fraudulent conduct does not have a duty to inquire.” Noting that the opinion’s analysis is limited to solely transactional, non-litigation matters, the Colorado Ethics Committee also clarifies that Rule 1.2 comment [13] does not expand the actual knowledge standard in Rule 1.2.
Comment 13 states, “If a lawyer comes to know or reasonably should know that a client expects assistance not permitted by” the Colo. RPC or other law, “the lawyer must consult with the client regarding the limitations on the lawyer’s conduct.” The July opinion explains, “Comment [13] does not expand Rule 1.2(d) by imposing a duty of inquiry based solely on matters a lawyer reasonably should know” rather the Comment refers to a situation in which the lawyer is discussing the limitations of the representation rather than the fundamental 1.2 knowledge standard for engaging in the representation.
The Committee clarifies its definition of “knowledge” as used in Rule 1.2(d) to include “willful blindness,” and cites to Global-Tech Appliances, Inc. v. SEB S.A. to define same: a lawyer is willfully blind when she (1) subjectively believes that there is a high probability that a fact exists; and (2) takes deliberate actions to avoid learning that fact.” See Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 769 (2011). Notwithstanding, the Committee noted that recklessness “does not amount to ‘willful blindness’ in this context.”
Thus, the Colorado Committee’s opinion departs from the stricter guidance provided by ABA Ethics Advisory Opinion 491, published in April 2020, which likewise comments on attorneys’ obligations under Model Rule 1.2(d). According to Formal Opinion 491, which also confines its analysis to transactional matters, a lawyer’s duty to inquire about illegal activity extends to all situations where lawyers should know of the client’s improper use of a lawyer’s service.
As discussed above, Colorado’s opinion notes that regardless of a “should know” standard in comment 13 in connection with the limitations of representation, Colorado’s 1.2 standard is actual knowledge. Nonetheless the distinction between “should know” and “willful blindness” (which is unacceptable in both opinions) may be not always be a bright line. Both opinions offer hypothetical situations that may prove helpful in distinguishing between the two standards.
Bottom line: Under the ABA’s guidance, if a lawyer “should know” that a client is or may be using the lawyer’s services to further a crime or fraud then the lawyer commits a violation of Model Rule 1.2. However, the Colorado’s Ethics Committee advises that a lawyer’s inquiry as to whether requested legal services can be performed without abetting criminal or fraudulent conduct must be based on actual knowledge derived from “the facts before him and readily available to him.” This inquiry, according to the Colorado Ethics Committee, “appropriately ensures that a lawyer’s services are not misused for criminal or fraudulent ends.”
The distinction between these two opinions is another reminder to stay abreast of the Rules, advisory opinions, and caselaw in the states in which you are licensed to practice.
