System, Best Practices

SCHOOLED IN ETHICS By: Alex B. Long

Williford Gragg Distinguished Professor of Law University of Tennessee College of Law

“DUDE, LIKE HYPOTHETICALLY, WOULD THAT BE, LIKE, AGAINST THE LAW?” THOUGHTS ON COUNSELING OR ASSISTING A CLIENT IN A CRIME OR FRAUD

Hypo: This summer, the Nashville District Attorney’s office announced that it will no longer prosecute individuals for possession of less than a half ounce of marijuana. A current client mentions this new policy to you and asks, “Hypothetically, does that mean if I wanted to sell some tasty buds to a friend that I can’t be arrested as long as I’m only carrying less than half an ounce at the time? What if I brought some other friends along and they were only carrying less than half an ounce – hypothetically, could I sell more that way without getting arrested?” You suspect the questions aren’t completely hypothetical. What should you tell your client?

Although the hypo involves the illegal sale of marijuana, the basic issue – providing advice to a client whom a lawyer suspects might be about to break the law – may arise in any number of situations. Real-life examples include lawyers who faced professional discipline, civil liability, or criminal prosecution after counseling clients who ultimately engaged in money laundering, real estate fraud, and even illegal arms sales.

In April, the ABA issued Formal Ethics Opinion 491 concerning an attorney’s obligations under Rule 1.2(d) to avoid knowingly counseling or assisting a client in a crime or fraud. (In June, the California Bar also issued an ethics opinion specifically on the subject of advising a client on state cannabis law when the proposed conduct would nonetheless violate federal law, hence the inspiration for the hypo at the beginning of this article.). The new ABA opinion provides useful guidance to lawyers who may find themselves advising clients who might use that advice in furtherance of a crime or fraud. The opinion also highlights an important distinction with the parallel Tennessee rule on the subject.

ABA Model Rule 1.2(d) provides that a lawyer “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.” (emphasis added). While the words “knows” in the rules is defined as actual knowledge of a fact, Formal Opinion 491 explains that Rule 1.2(d) may sometimes impose a duty to inquire on the part of a lawyer. The opinion explains that where the facts known to the lawyer “indicate a high probability that a client seeks to use the lawyer’s services for criminal or fraudulent activity, a lawyer’s conscious, deliberate failure to inquire amounts to knowing assistance of criminal or fraudulent conduct.” Thus, conscious avoidance of a fact or deliberate ignorance of the fact can equate to actual knowledge of the fact and subject the lawyer to professional discipline (as well as potential criminal or civil liability) where the lawyer “knows” the lawyer’s advice will further the client’s planned crime or fraud. The opinion concludes by providing a series of hypotheticals, each involving varying degrees of suspicious behavior on the part of a client that might necessitate further inquiry on the part of a lawyer. If the client refuses to answer the lawyer’s request for more information, the lawyer must decline the representation.

Closer to home, TRPC Rule 1.2(d) is actually broader on its face than the ABA Model Rule. Tennessee’s rule prohibits a lawyer from counseling a client to engage, or assisting a client, in conduct that the lawyer knows or reasonably should know is criminal or fraudulent. Thus, on its face, TRPC Rule 1.2(d) holds lawyers to a heightened standard of constructive knowledge when it comes to counseling or assisting clients when it comes to client crime or fraud. This heightened standard may also potentially impact the ethical duty to inquire further that is described in ABA Opinion 491. In the civil context, Tennessee caselaw already recognizes the concept of “inquiry notice,” which Tennessee courts have defined as “knowledge of facts and circumstances sufficiently pertinent in character to enable reasonably cautious and prudent persons to investigate and ascertain as to the ultimate facts.” Hughes v. New Life Development Corp., 387 S.E.2d 453, 483 (Tenn. 2012) Thus, sometimes the circumstances may be sufficient to put a lawyer on notice “of all the facts to which … inquiry will lead” when pursued “with reasonable diligence and good faith” when it comes to a client’s planned actions. Id. at 485. In such cases, a lawyer who fails to make the necessary inquiry is likely to have violated TRPC Rule 1.2(d).

In short, Tennessee law is generally consistent with and indeed broader than the standard articulated in ABA Formal Opinion 491 when it comes to assisting a client with respect to a crime or fraud. It is worth noting that under either rule, a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law. But where there the lawyer has solid grounds for suspecting that the lawyer’s advice will be used in furtherance of a crime or fraud, the lawyer must inquire further before providing advice.