Be careful with categorical statements such as, “this is securities fraud”

This week one of my students turned in a homework assignment saying that a certain proposed action by a hypothetical client “is securities fraud.” I com­ment­ed to the student that you usually don’t want to be so categorical, because:

• if it were to turn out that the actions in question didn’t constitute securities fraud, then you might have to try to walk back your statement — this would be embarrassing, and worse, it could affect your long-term credibility with the client, the partner, opposing counsel, etc.; *
• if you were saying this to a client about the client’s proposed actions, then your own words might be quoted against the client someday, for example in a court brief or a deposition or a jury argument — “ladies and gentlemen, her own lawyer said it was securities fraud” — and that might be difficult or impossible to walk away from.

In making cautionary statements of this nature, it’s often better to leave room to argue to the con­trary, for example, as follows — if you were to do this, then:

• it might be found to be securities fraud;
• it could be argued to be securities fraud;
• it might be characterized as securities fraud.

This language conveys the same warning, with less risk that the lawyer will be seen as implicitly endorsing the finding of securities fraud.

* As a general rule of thumb, in the eyes of a client, a partner, etc., it’s usually far worse to say something that turns out not to be so, than it is simply to say, “I don’t know the answer but can find out.”