Wednesday, January 22, 2025
No Duty To Report Client Fraud
The Ethics Advisory Panel of the Rhode Island Supreme Court opines on an attorney's ethical obligations when learning of client fraud in a matter where the attorney did not represent the client
The inquiring attorney represented a client with a potential Social Security Disability (“SSDI”) claim pursuant to a referral from the client’s workers’ compensation attorney. During the representation, the inquiring attorney filed an application for SSDI benefits on the client’s behalf in February 2024. The application was denied in April 2024, at which time the inquiring attorney requested reconsideration of the denial. The request for reconsideration was denied in August 2024. On September 9, 2024, the inquiring attorney filed a request for hearing, which remains pending.
The inquiring attorney reports that during this time his or her client was receiving workers’ compensation benefits. The inquiring attorney did not represent the client in the workers’ compensation matter. On November 14, 2024, the inquiring attorney learned that the client had settled the workers’ compensation matter pursuant to a settlement agreement signed in October 2024 in which the client affirmed that he or she had not applied for SSDI benefits and did not intend to become Medicare eligible within the next thirty (30) months. In response, the inquiring attorney terminated his or her representation of the client on November 15, 2024, and has not communicated with the client since.
Is there a duty to report?
The Panel’s inquiry now turns to whether Rule 3.3 imposes such a duty of disclosure on the inquiring attorney here. By its plain language, Rule 3.3 “governs the conduct of a lawyer who is representing a client in the proceedings of a tribunal” or who is “representing a client in an ancillary proceeding conducted pursuant to the tribunal’s adjudicative authority, such as a deposition.” Rule 3.3, Comment [1]. Thus, the existence of a proceeding is a condition precedent for the applicability of Rule 3.3. This requirement attaches even in cases where “[a] lawyer . . . knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding . . . .” Rule 3.3(b). In this case, the inquiring attorney asks whether he or she must report the false attestation the client made in the affidavit settling his or her workers’ compensation matter; however, the inquiring attorney does not now, and never did, represent the client in that case. Accordingly, the duty of candor under Rule 3.3 does not attach here.
This conclusion is supported by the Panel’s past precedents. In Rhode Island Supreme Court Ethics Advisory Panel Op. 94-19, the inquiring attorney was retained by an insurance company to file suit to suspend workers’ compensation payments to a recipient who was allegedly operating a home business. The inquiring attorney confirmed the allegation following an investigation. The inquiring attorney also learned, however, that his or her law firm provided legal services to the recipient’s home business. On this basis, the inquiring attorney sought to withdraw from both matters. He or she asked the Panel whether he or she was nonetheless obligated to inform the Workers’ Compensation Court of the fraud.
As an initial matter, the Panel agreed with the inquiring attorney’s decision to withdraw from both matters due to the evident conflict of interest. With regard to the question of the inquiring attorney’s duty of candor, the Panel determined that the inquiring attorney was under no such obligation because he or she did not represent the recipient before the Workers’ Compensation Court. The Panel noted, however, that “[t]he attorney’s obligation would be different if the attorney were representing the recipient in the Workers’ Compensation proceeding.”
(Mike Frisch)
https://lawprofessors.typepad.com/legal_profession/2025/01/no-duty-to-report-client-fraud.html