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MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 1989-44
Communication with and/or Attorney Adversary
Your letter consists of four pages describing a very complex and detailed factual summary of various transactions, which I will not attempt to summarize in this Opinion. However, the Committee will attempt to present the issue in such a way as to be responsive to your inquiry as well as to be of some guidance to others facing similar problems. The issue which you raise is basically as follows: what duty of disclosure, if any, does a lawyer have in negotiating a transaction when the other party's counsel has drafted contracts which fail to set forth all of the terms which you believe have been agreed to, and where the omission results in favor of your client? It is assumed in the foregoing question, based on the facts set forth in your letter, that neither you nor your client in any way induced the other lawyer and his client to omit the material terms, and, indeed, throughout the negotiations, you and your client conducted yourselves in a way which implicitly should have caused the other lawyer to include the material terms. Finally, the foregoing question assumes, based on the facts set forth in your letter, that your client has instructed you not to disclose the omission to the other attorney.
The Committee believes that the answer to the foregoing question is governed by Rule 4.1 of the Maryland Rules of Professional Conduct, which provides as follows:
Rule 4.1 Truthfulness in Statements to others
(a) In the course of representing a client a lawyer shall not knowingly:
(1) make a false statement of material fact or law to a third person; or
(2) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.
(b) The duties stated in this Rule apply even if compliance requires disclosure of information otherwise protected by Rule 1.6.
Based on the facts set forth in your letter, the Committee is of the opinion that you are under no obligation to reveal to the other counsel his omission of a material term in the transaction. Based on the facts set forth in your letter, it does not appear that you or your client have made any false statement of material fact or law to the other side at any time during the negotiations, and, furthermore, the omission in no way is attributable to a fraudulent act committed by you or your client. To the contrary, it appears that the omission was made by the other counsel either negligently or, conceivably, because they do not believe that the terms were part of the transaction. In either case, Rule 4.1(a), based on these facts, does not require you to bring the omission to the other side's attention.
We must point out that if the omission had been because of a false statement made by you or your client or because of a false statement made by you or your client or as a result of a fraudulent act by your client, then Rule 4.1(b) would have required you to brine, this omission to the attention of the other side notwithstanding the confidentiality requirements set forth in Rule 1.6. However, as stated above, Rule 4.1(a) does not require disclosure based on the facts set forth in your letter. Accordingly, the confidentiality requirements of Rule 1.6 govern your conduct in this situation. In your letter you state that your client has specifically instructed you not to bring the omission to the attention of the other lawyer or his client. Rule 1.6 obligates you to obey this instruction in your letter.
Another Rule implicated by your inquiry is Rule 1.4(b), which requires a lawyer to explain matters to the client to an extent reasonably necessary to permit the client to make informed decisions. In the context of your inquiry, the Committee believes that you should explain to your client, if you have not already done so, what legal action might be commenced by the other party
to reform the contracts, the likelihood of success of such an action, the expense of defending such an action, and any other matters which may impact on your client's decision as to whether to bring the omission to the attention of the other party or his counsel. If, after such a consultation, your client still instructs you not to reveal the omission, you are bound to adhere to this instruction pursuant to Rule 1.6.
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