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Ethics Opinions from the Bar Association of San Francisco

OPINION 1977-2

An attorney must withdraw from the representation of a client who discloses hidden community assets to him, but who refuses to disclose these assets to the court in a domestic relations matter.

QUESTION:

What is the attorney's ethical responsibility under the California Rules Of Professional Conduct with respect to a client's refusal to disclose existence of community assets in a domestic relations matter?

OPINION:

In most cases the client's refusal to disclose the existence of community assets constitutes fraud. However, since the client usually discloses this information in confidence, the attorney is under conflicting duties to maintain the confidentiality of his client's communication and, on the other hand not to suppress the fraud or maintain his deliberate silence. Therefore, the attorney should withdraw from his representation of the client, and his failure to withdraw is a proper subject for disciplinary proceedings.

DISCUSSION:

The situation with which this question is concerned occurs in a dissolution of marriage proceeding when the client knows of community assets, which are unknown to his spouse, and the client refuses to disclose the existence of such assets, despite the urging of his attorney to do so. Because the client informs his attorney of such intentions, the communication presumably comes within the attorney-client privilege.

Setting aside the attorney's role for the moment, it should be noted that the client's conduct is certainly fraudulent. The concealment of community assets in a property settlement agreement (on the basis of which the court has approved a division of community assets in rendering a final decree of dissolution) has been held to constitute a "deception upon the court," regardless of any oral side agreements between the parties. In re Marriage of Elkins 28 Cal.App.3d 899, 903, 105 Cal.Rptr. 59 (1973). Likewise, the client's unilateral refusal to disclose such community assets in his financial statement or in sworn testimony would be fraudulent, although the latter falls short of perjury. 1 With respect to the client's concealment of the community assets from his spouse in negotiating a property settlement agreement, the California courts have frequently held that such conduct constitutes a fraud on the spouse. Such fraud may permit the defrauded spouse to set aside a property settlement agreement. See, e.g., Boeseke v. Boeseke 10 Cal.3d 844, 849-850, 112 Cal.Rptr. 401, 519 P.2d 161 (1974).

However, this rule is now suspect. 2 Regardless of where the fraud exists, at some point in the proceedings the client's intentions to conceal the unknown community assets will manifest itself as a fraud upon the court.

The crux of the matter addressed herein concerns the attorney's ethical responsibilities on an indirect (and sometimes a direct) participant in his client's fraudulent conduct.

Within the same section of the Business and Professions Code, the dilemma facing the attorney is partially depicted. Under section 6068(a) of the Business and Professions Code, it is the attorney's duty:

"To employ for the purposes of maintaining the causes confided to him such means only as are consistent with truth."

Whereas, subsection (e) of the same code section states that it is also the duty of an attorney:

"To maintain inviolate the confidence, and at every peril to himself to preserve the secrets, of his client."

The problem presents itself somewhat differently depending on the stage of the proceeding, and, therefore, the question will be treated within the following contexts.

1. Attorney Negotiations

As the attorney proceeds with his client's dissolution proceeding it becomes more difficult for the attorney to conduct negotiations without being in violation of his professional duties. At any stage of the proceeding whether it is before any verified representation of community assets have been made or at the trial stage, the attorney, by not disclosing the concealed community assets, would be conducting negotiations in violation of section 6068(a) of the Business and Professions Code, set forth above. In later stages of the proceeding, the attorney's participation in the concealment through negotiations as well as through preparation of certain documents, will result in further violations such as the attorney's duty not to suppress any evidence which his client has an obligation to produce, more particularly discussed in part 2 below.

Furthermore, mere representations of an attorney to opposing counsel which conceal a material fact, have been held to be proper subject for disciplinary action. In Coviello v. State Bar 45 Cal.2d 57, 286 P.2d 357 (1955), an attorney involved in two related dissolution of marriage proceedings was disciplined because he misled opposing counsel by not disclosing a material fact. The California Supreme Court found that Coviello, the attorney, had directed his secretary to supply another's signature to several grant deeds and, as a result, the authenticity of the deeds was in question. The fact that Coviello supplied the signatures was not the Court's main concern; however, the Court found that his "deliberate silence" in dealing with opposing counsel "falls short of the honesty and integrity required of an attorney at law in the performance of his professional duties." 45 Cal.2d at 65-66. Arguably, under Coviello, if an attorney, in negotiating with opposing counsel, misrepresents material facts by deliberate silence, then he is subject to discipline.

The ABA Code of Professional Responsibility (hereinafter referred to as the "ABA Code") is much more explicit about the attorneys' professional responsibilities in conducting such negotiations (while concealing community assets). Under DR 1-102(a)(4), an attorney shall not:

"Engage in conduct involving dishonesty, fraud, deceit or misrepresentation."

In addition, DR 7-102(A)(7) of the ABA Code states that an attorney, in his representation of a client, shall not:

"Counsel or assist his client in conduct that the lawyer knows to be illegal or fraudulent."

Although the ABA Code is not binding on California attorneys, it is a proper point of reference under the general language of the California Rules of Professional Conduct (hereinafter referred to as the "State Bar Rules"), Rule 1 -100:

" . . . The prohibition of certain conduct in these rules is not to be interpreted as an approval of conduct not specifically mentioned."

2. Attorney Participation in Client's Verified Declarations

For purposes of this discussion, we shall assume that the attorney helped the client prepare his financial statement and his answers to interrogatories, both of which were verified under oath, by the client, the latter of which was signed by the attorney. Furthermore, in both documents, the client has maintained his concealment of his community assets, even though requested to reveal all community assets.

Under these circumstances, the attorney is specifically guided by State Bar Rule 7-107(a): which states that an attorney shall not:

"Suppress any evidence that he or his client has a legal obligation to reveal or produce."

In the preparation of such documents, the attorney would be "Suppressing . . . evidence that his client has a legal obligation to reveal." Furthermore, under the guidelines set forth in Coviello , the attorney would be subject to disciplinary action for his "deliberate silence" while preparing his client's verified documents. Finally, such conduct, especially with respect to the answers to interrogatories signed by the attorney, would violate the ABA Code's DR 1-102(A)(4) and DR 7-102(A)(7), set forth above.

3. Client's Testimony Under Oath

The attorney's participation in his client's concealment is less direct in representing his client at his client's deposition or while his client gives trial testimony--probably less of an involvement than in preparing client's verified declarations and certainly less of an involvement than in negotiating with opposing counsel. However, State Bar Rule 7-105(l), (set forth above) is still applicable. The attorney must necessarily avoid any active use of his client's testimony so that his representation of the client employs "Such means only as are consistent with the truth." In contrast, DR 7-102(A)(7) of the ABA Code is more explicit. This rule specifically prohibits the attorney from even assisting his client in his conduct, which would seemingly include representing the client while the client gives fraudulent testimony.

4. Attorney's Duty to Client

In all of the above contexts the attorney would still be bound by Section 6068(e) of the Business and Professions Code not to violate his client's confidence. Obviously, the attorney faces a conflict of duties.

In the context of attorney negotiations and preparation of the client's verified declarations, the conflict is readily apparent.

The attorney's participation in suppressing the disclosure of the concealed community assets or his revelation of the client's confidential disclosures would both subject the attorney to disciplinary action. As a result, under State Bar Rule 2-111(b)(2), it is mandatory for the attorney to withdraw, because:

"He knows or should know that his continued employment will result in violation of these Rules of Professional Conduct or of the State Bar Act."

With respect to the attorney's participation in the third context (Client's Testimony Under Oath), the attorney could avoid active participation in his client's fraud, but this might very well debilitate the attorney's representation of the client. In this situation, the attorney would at least be guided by State Bar Rule 2-111(C)(d) which permits the attorney to withdraw where his client:

"By other conduct renders it unreasonably difficult for the member of the State Bar to carry out his employment effectively."

Assuming that the client's fraudulent representations and testimony must necessarily be used by the attorney in order to produce an advantageous result, it would be impractical for the attorney to continue to represent the client without its use, and therefore, permissive withdrawal must be considered by the attorney.

Finally, an attorney faced with this delicate situation, where the conflict is not so apparent, can be guided by the ABA Code's ethical consideration, EC 7-26:

"The law and disciplinary Rules prohibit the use of fraudulent, false, or perjured testimony or evidence. A lawyer who knowingly participates in introduction of such testimony or evidence is subject to discipline. A lawyer should, however, present any admissible evidence his client desires to have presented unless he knows, or from facts within his knowledge should know, that such testimony or evidence is false, fraudulent, or perjured."

CONCLUSION:

Where the client refuses to disclose community assets (which he is required to reveal) and thereby commits fraud, the attorney is under conflicting duties to maintain the confidentiality of his client's communication and, on the other hand, not to suppress the fraud or maintain his deliberate silence. Therefore, in most circumstances under California law, the attorney's withdrawal from his presentation of the client is mandatory.

All opinions of the Committee are subject to the following disclaimer:
Opinions rendered by the Ethics Committee are an uncompensated service of The Bar Association of San Francisco. Opinions are advisory only, and no liability whatsoever is assumed by the Committee or The Bar Association of San Francisco in rendering such opinions, and the opinions are relied upon at the risk of the user thereof. Opinions of the Committee are not binding in any manner upon the State Bar of California, the Board of Governors, any disciplinary committee, The Bar Association of San Francisco, or the individual members of the Ethics Committee.

In using these opinions you should be aware that subsequent judicial opinions and revised rules of professional conduct may have dealt with the areas covered by these ethics opinions.

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