A lawyer is retained by a non-profit organization to prepare an opinion letter for a potential grant funder. The funder requires an independent legal assessment of the organization's financial stability and programmatic compliance. During the evaluation, the lawyer discovers significant discrepancies in the organization's financial records that were not disclosed to the funder and could jeopardize the grant. The lawyer's duty in this situation is to:
- AAdvise the client to correct the discrepancies before the opinion letter is finalized and submitted.
- BReport the discrepancies directly to the grant funder.
- CWithdraw from the representation if the client refuses to allow disclosure or correction of the discrepancies.
- DDisclose the discrepancies in the opinion letter, even if it harms the client's chances of receiving the grant.
Show answer & explanationAnswer & explanation
Correct answer: D. Disclose the discrepancies in the opinion letter, even if it harms the client's chances of receiving the grant.
When a lawyer acts as an evaluator for a third party, the lawyer has a duty to provide an honest and candid assessment. If the evaluation is to be presented to a third party, the lawyer must disclose material facts to that third party, even if it is adverse to the client's interests, unless the client explicitly restricts communication or the evaluation is privileged. Here, the funder requires an 'independent legal assessment,' implying a duty of candor to the funder.
Why the other options are wrong
- A. While advising correction is good practice, the immediate duty as an evaluator preparing a report for a third party is to ensure the report is accurate and complete, reflecting the current state of affairs.
- B. While the information must be disclosed, the primary vehicle for disclosure is the opinion letter itself, which is the product of the evaluation.
- C. Withdrawal might be an option if the client insists on a fraudulent report, but the direct duty is to provide an accurate evaluation to the third party, which may include disclosing the discrepancies.
Lawyer as Evaluator: Duty to Third Party
When a lawyer provides an evaluation for the benefit of a third party, the lawyer owes a duty of candor and accuracy to that third party, and generally must disclose material adverse facts unless the client has explicitly limited the scope or disclosure is prohibited.
- Evaluation is for a third party's benefit.
- Duty of candor to the third party.
- Disclosure of material facts is generally required.
Memory trick: Evaluators Explicitly Expose Essential Evidence.