Q: Dear Ethics Lawyer, Our client was sued for breach of contract, and discovery requests were served with the complaint. I was subsequently engaged for the matter, immediately reviewed relevant documents and determined that a constituent of the client had fraudulently entered the contract knowing it could not be performed. He did this on his way out the door in order to boost the sales figures upon which bonuses would be based. May we settle the case immediately for the full amount requested, or even confess judgment on the contract claim, in order not to reveal the fraud reflected in the internal documents that would otherwise have to be disclosed?
A: Yes. Under these circumstances, the Model Rules contain no affirmative obligation for the lawyer to reveal to the opposing party or court information concerning a completed fraud discovered under the umbrella of privilege and Rule 1.6, not previously involving the lawyer’s services. Indeed, under Rule 1.6(a), the lawyer would require the client’s consent to make a disclosure, subject to certain exceptions relating to permissive disclosure found in Rule 1.6(b)(2) and (3). In that regard, the lawyer should counsel the client on the adverse effect in the litigation (or otherwise) of discovery of an unmitigated or uncorrected fraud in the event the matter cannot be immediately settled. Of course, the lawyer may not participate in any obstruction of access to or falsification of evidence, and should make no misleading statements (affirmative or by omission) about the underlying facts in attempting to settle the matter. See Rule 3.4.