Different Roles of the Lawyer · 4-10% of the exam
18.1.2Evaluation for use by third parties (Rule 2.3)
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- Rule 2.3 — Evaluation for Use by Third Parties
A lawyer preparing an opinion for a lender, buyer, or regulator still owes baseline duties to the client. Is providing the evaluation compatible with other aspects of the lawyer's relationship with the client? That threshold question comes first. Where the lawyer knows or reasonably should know the evaluation is likely to affect the client's interests materially and adversely, informed consent is a separate, additional gate.
Why
An evaluation written for a lender, a buyer, or a regulator is read by someone who is not the lawyer's client and who will act on it. The client's own interests can point away from the truthful version of it. Rule 2.3 stops the lawyer from being pulled between the two without the client knowing.
Plain English
You may provide an evaluation of a matter affecting a client for a third party's use where you reasonably believe doing so is compatible with other aspects of your relationship with the client — a lawyer defending the client against fraud charges normally cannot evaluate the same or a related transaction for someone else (cmt [3]). The rule reaches an evaluation, not an investigation of a person you do not act for; the question is whether you are retained by the person whose affairs are being examined (cmt [2]).
Where you know or reasonably should know the evaluation is likely to materially and adversely affect the client's interests, you may not provide it without the client's informed consent — consent given after you have adequately informed the client of the important possible effects on the client's interests, including what the evaluation will reveal (cmt [5]). Limits on the evaluation that are material to it should be described in the report, and in no circumstances may you knowingly state a material fact or law falsely in one (cmt [4]). What you learn stays protected by Rule 1.6, except disclosure authorized in connection with the report itself, which the assignment may imply.
Rule
Rule 2.3 — Evaluation for Use by Third Parties
A lawyer may provide an evaluation of a matter affecting a client for the use of a third party if the lawyer reasonably believes making the evaluation is compatible with other aspects of the lawyer's relationship with the client. For example, a lawyer acting as advocate in defending the client against charges of fraud normally cannot perform an evaluation for others concerning the same or a related transaction (cmt [3]).
Classic uses: title opinions for prospective purchasers; loan-eligibility opinions for lenders — both at the client's request.
- What is not an evaluation (cmt [2])
an investigation of a person with whom the lawyer has no client-lawyer relationship — an investigation into a person's affairs by a government lawyer, or by special counsel employed by the government, is not an evaluation under this rule. The question is whether the lawyer is retained by the person whose affairs are being examined.
When the lawyer knows or reasonably should know the evaluation is likely to materially and adversely affect the client's interests, the lawyer shall not provide it unless the client gives informed consent — consent given after the client has been adequately informed of the important possible effects on the client's interests, including what the evaluation will reveal (cmt [5]).
Information gathered during the evaluation is protected by Rule 1.6 — except disclosure authorized in connection with the evaluation report itself; that authorization may be implied by the nature of the assignment.
- Limits and candor (cmt [4])
limitations on the evaluation that are material to it should be described in the report, and in no circumstances may the lawyer knowingly make a false statement of material fact or law in providing an evaluation — see Rule 4.1, later in this chapter.
Rule 2.3 does not decide whether the lawyer owes a legal duty to the third person who reads the evaluation; cmt [3] puts that legal question beyond the rule's scope. Civil exposure to a non-client third party can still follow from a negligently prepared evaluation under other law (the duty test is in Chapter 12).
Example 1
Ex. 1
The client company is seeking a revolving credit facility. Its CFO asks outside counsel Farid to prepare a standard loan-eligibility opinion addressed to the lender, whose senior officer is Gina. As Farid reviews the company's records, he discovers a covenant default on a separate existing loan. Gina's bank doesn't know about that default. Learning of it would likely cause the bank to reject the facility or sharply reprice it. Sending a clean opinion without disclosing the default would mean the bank relies on a materially incomplete document. Before Farid sends anything to Gina, he must stop, inform the client company of what he found, and obtain the company's informed consent. The honest evaluation will materially and adversely affect the client's interests. That adverse-impact finding triggers the separate consent requirement. It applies even if Farid reasonably believed the assignment was compatible with his duties at the outset. Ask whose interests are on the line here — the client's, not the bank's — that's what the consent requirement turns on.
Trap
Questions · 2
Q 01ch18-e03
Question 1 of 2 · Rule 2.3
Attorney represented Client, the owner of a riverside warehouse, in a sale. At Client's request Attorney prepared a title opinion addressed to Buyer, who would rely on it in deciding whether to close. Attorney reasonably believed that writing the opinion sat comfortably alongside the rest of the work he did for Client. While searching the records Attorney found an unreleased easement running through the loading yard that had never been disclosed to anyone. An accurate opinion would describe the easement, and Buyer would then cut the price or walk away. Attorney was about to send the opinion out. Must Attorney obtain Client's informed consent before providing the opinion to Buyer?
Keys 1 to 4 choose.