[textbook]Traversing the Ethical Minefield Problems, Law, and Professional Responsibility by Susan R. Martyn (z-lib.org)(1) (1)

restructuring a transaction or investigating a different nonfrivolous claim or defense in
litigation. In some cases, external law that governs the lawyer’s task calls for knowledge by
requiring “due diligence” on the part of the lawyer; that is, a competent investigation into
the facts surrounding the transaction. Failure to meet these obligations or to explore
alternatives for clients could result in discipline as well as civil and criminal liability. 29
Assessing whether conduct is questionable also requires lawyers to be aware of the
problems of “hindsight bias,” a cognitive distortion that causes us to believe that the
occurrence of a past event (like fraud) must have meant the event could (and should) have
been identified in advance. 30 Lawyers should anticipate that hindsight bias is especially
likely to occur in situations where lawyers have some warning of wrongdoing and then
encourage a client to push the law to its limits. 31 Discovery of a client’s ongoing or
contemplated crime or fraud may mean that a lawyer loses a client’s business, but it also
affords the lawyer an opportunity to extricate herself from the client’s misconduct before it
results in massive liability or an expensive defense.
Responding to Client Fraud
The Duty to Withdraw When the lawyer learns of the client’s intent to begin or continue
the wrongful conduct after the representation has commenced, withdrawal from the
representation is mandated by Model Rule 1.16(a), because continuing to represent the
client in the matter will result in a violation of Model Rule 1.2(d). If the lawyer does not
“know” but only “reasonably believes” that the client persists in a course of action that is
criminal or fraudulent, then the lawyer may, but is not required, to withdraw under Model
Rule 1.16(b)(2).
Disclosure Model Rules 1.6(b), 1.13, 3.3, and 4.1 raise the question of whether the lawyer
also may or must disclose some or all of the facts to avoid or remedy the client’s fraud.
With respect to frauds on tribunals, Model Rule 3.3(b) makes clear that even if the lawyer
gains the court’s permission to withdraw, the lawyer also must disclose if necessary to avoid
assisting the client’s criminal or fraudulent act. Outside of tribunals, Model Rule 4.1(b)
requires disclosure for the same reason, but only if the facts fall within one of the
confidentiality exceptions in Model Rule 1.6(b)(2) or (3). When this occurs, disclosure
becomes mandatory unless withdrawal is sufficient to prevent assisting the client crime or
fraud.
Outside of court, disclosure of client information ordinarily will not be necessary,
because a lawyer’s withdrawal from a matter will be sufficient to prevent assisting a client
crime or fraud. 32 One situation, however, is “especially delicate.” 33 When lawyers engage in
advising clients engaged in a course of conduct and discover fraud during the course of the
representation, withdrawal may not be enough to prevent assisting. This is especially true in
situations like “The Opinion Letter,” where third parties continue to rely on previously
produced lawyer work product. In this circumstance, the lawyer must disclose, but only to
the extent reasonably necessary to prevent assisting. Model Rule comments suggest a so-
211