A lawyer for a seller learns just before closing that hazardous waste is buried on the property and the buyer has not been told. Must the lawyer disclose, and can quitting avoid the duty?

Plain-English summary

Opinion E-88-10 addressed a lawyer representing a seller in a commercial real estate transaction who, shortly before closing, learns from the client that hazardous wastes are buried beneath the land being sold, a fact not disclosed to the purchaser. The opinion answered four questions: the lawyer's disclosure obligations to the purchaser, whether the lawyer must advise the client in advance of any intended disclosure, whether terminating the representation avoids the disclosure obligation, and the lawyer's obligations if knowledge of the wastes is acquired after the representation ends.

On the first question, the committee concluded that whether the lawyer must inform the buyer or withdraw if the client objects largely depends on whether disclosure is necessary to prevent the client from committing a criminal or fraudulent act likely to result in death, substantial bodily harm, or substantial injury to the financial interest or property of another under SCR 20:1.6(b). It quoted the "Terminology" definition that fraud denotes conduct with a purpose to deceive, not mere negligent misrepresentation or failure to apprise, and the general rule (citing In re Estate of Lecic) that silence is not misrepresentation unless there is a duty to disclose, while stating that whether a legal duty to disclose exists on these facts was not within the committee's jurisdiction. Assuming hypothetically that nondisclosure would be criminal or fraudulent, the committee concluded the lawyer may not continue representing the client unless disclosure is made (citing SCR 20:1.2(d), 20:1.6(c)(1), 20:1.16(a)(1) and (b)(1), 20:4.1(b), and 20:8.4(c)), and that if a duty to disclose exists but the client refuses, the lawyer must make the disclosure to the buyer to the extent reasonably necessary under SCR 20:1.6(b) and 20:4.1(b).

On the remaining questions, the committee concluded that the lawyer must consult with the client before making any disclosure, including about options for rectifying the situation (citing SCR 20:1.2(d) and (e), 20:1.4(b), 20:1.6(a), 20:1.7(b), 20:1.16(b)(1), and 20:2.1); that withdrawal would not relieve the lawyer of a disclosure duty reasonably believed necessary to prevent the client's criminal or fraudulent act under SCR 20:1.6(b); and that if knowledge were acquired after termination, the lawyer would have a mandatory duty under SCR 20:1.6(b) if the law treats the situation as a continuing criminal or fraudulent act, and in any event, because of the lawyer's substantial involvement, may disclose to rectify the consequences of a client's fraud in which the lawyer's services had been used under SCR 20:1.6(c)(1). The committee added a caveat that ABA Model Rule 1.6 differs significantly from Wisconsin's SCR 20:1.6, so lawyers outside Wisconsin must evaluate the opinion accordingly.

Currency note

This opinion was issued in 1988, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update). The confidentiality and disclosure rule SCR 20:1.6 (which the opinion itself notes then differed significantly from the ABA Model Rule), along with SCR 20:1.2, 20:1.16, and 20:4.1, were later revised. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Must a lawyer tell the buyer about hazardous waste the seller-client is hiding?

A: Per the opinion, only if nondisclosure would be criminal or fraudulent, a legal question the committee said was outside its jurisdiction; if it would be, SCR 20:1.6(b) requires the lawyer to disclose to the buyer.

Q: Can the lawyer just withdraw and avoid the problem?

A: No. The committee concluded that withdrawal does not relieve the lawyer of a disclosure duty reasonably believed necessary under SCR 20:1.6(b) to prevent the client's criminal or fraudulent act.

Q: Must the lawyer warn the client before disclosing?

A: Yes. The committee concluded the lawyer must first consult with the client, including about options for rectifying the situation, before making any disclosure to the buyer.

Background and rules framework

The opinion interpreted SCR 20:1.6 / Model Rule 1.6 (confidentiality; the then-Wisconsin disclosure provisions in subsections (b) and (c)) together with SCR 20:1.2(d) / Model Rule 1.2 (limits on assisting crime or fraud), SCR 20:4.1 / Model Rule 4.1 (truthfulness to others), SCR 20:1.16 / Model Rule 1.16 (declining or terminating representation), and SCR 20:8.4(c) / Model Rule 8.4 (dishonesty), in the context of a client's undisclosed fraud in a real estate sale.

Citations and references

Rules of Professional Conduct:

• Wis. SCR 20:1.6 / Model Rule 1.6 (confidentiality; disclosure to prevent client fraud)
• Wis. SCR 20:1.2(d) / Model Rule 1.2; SCR 20:4.1(b) / Model Rule 4.1
• Wis. SCR 20:1.16 / Model Rule 1.16 (withdrawal); SCR 20:8.4(c) / Model Rule 8.4

Cases:

• In re Estate of Lecic, 104 Wis. 2d 592, 312 N.W.2d 773 (1981), silence and duty to disclose

See also

• WI Ethics Op. E-89-9: Discretion to Disclose
• WI Ethics Op. E-88-11: Reporting a Client's Child Abuse
• WI Ethics Op. E-89-11: Confidences of a Deceased Client

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-88-10.pdf