Formal Advisory Opinion No. 07-1
Ethics & Discipline / Advisory Opinions / Formal Advisory Opinions / Formal Advisory Opinion No. 07-1
STATE BAR OF GEORGIA
ISSUED BY THE FORMAL ADVISORY OPINION BOARD
PURSUANT TO RULE 4-403 ON SEPTEMBER 5, 2007
FORMAL ADVISORY OPINION NO. 07-1
May a lawyer ethically disclose information concerning the financial relationship between the lawyer and his client to a third party in an effort to collect a fee from the client?
A lawyer may ethically disclose information concerning the financial relationship between himself and his client in direct efforts to collect a fee, such as bringing suit or using a collection agency. Otherwise, a lawyer may not report the failure of a client to pay the lawyer's bill to third parties, including major credit reporting services, in an effort to collect a fee.
This issue is governed primarily by Rule 1.6 of the Georgia Rules of Professional Conduct. Rule 1.6 provides, in pertinent part:
(a) A lawyer shall maintain in confidence all information gained in the professional relationship with a client, including information which the client has requested to be held inviolate or the disclosure of which would be embarrassing or would likely be detrimental to the client, unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, or are required by these rules or other law, or by order of the Court.
Comment 5 to Rule 1.6 provides further guidance:
Rule 1.6: Confidentiality of Information applies not merely to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source. A lawyer may not disclose such information except as authorized or required by the Rules of Professional Conduct or other law.
Former Standard 28 limited confidentiality to "confidences and secrets of a client." However, Rule 1.6 expands the obligations by requiring a lawyer to "maintain in confidence all information gained in the professional relationship" including the client's secrets and confidences.
An attorney's ethical duty to maintain confidentiality of client information is distinguishable from the attorney-client evidentiary privilege of O.C.G.A. §§24-9-21, 24-9-24 and 24-9-25. Tenet Healthcare Corp. v. Louisiana Forum Corp., 273 Ga. 206, 209-10 (2000). Thus, Rule 1.6 applies not only to matters governed by the attorney-client privilege, but also to non-privileged information arising from the course of representation. Information concerning the financial relationship between the lawyer and client, including the amount of fees that the lawyer contends the client owes, may not be disclosed, except as permitted by the Georgia Rules of Professional Conduct, other law, order of the court or if the client consents.
Rule 1.6 authorizes disclosure in the following circumstances:
(b)(1) A lawyer may reveal information covered by paragraph (a) which the lawyer reasonably believes necessary:
. . .
(iii) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil action against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client.
The comments to Rule 1.6 clarify that such disclosures should be made only in limited circumstances. While Comment 17 to Rule 1.6 provides that a lawyer entitled to a fee is permitted to prove the services rendered in an action to collect that fee, it cautions that a lawyer must make every effort practicable to avoid unnecessary disclosure of information related to a representation, to limit disclosure to those having the need to know it, and to obtain protective orders or make other arrangements minimizing the risk of disclosure. Further caution is found in Comment 12, which provides that "[i]n any case, a disclosure adverse to the client's interest should be no greater than a lawyer reasonably believes necessary to the purpose."
In Georgia, it is ethically permissible for a lawyer to retain a collection agency as a measure of last resort in order to collect a fee that has been properly earned. Advisory Opinion No. 49 issued by the State Disciplinary Board. Advisory Opinion 49, however, only applies to a referral to a "reputable collection agency". Advisory Opinion 49 further states that a lawyer should exercise the option of revealing confidences and secrets necessary to establish or collect a fee with considerable caution. Thus, while use of a reputable collection agency to collect a fee is ethically proper, disclosures to other third parties may not be ethically permissible. Formal Advisory Opinion 95-1 provides that limitations exist on a lawyer's efforts to collect a fee from his client even through a fee collection program.
Other jurisdictions that have considered similar issues have distinguished between direct efforts to collect an unpaid fee, such as bringing suit or using a collection agency, from indirect methods in which information is disclosed to third parties in an effort to collect unpaid fees. In these cases, the direct methods have generally been found to be ethical, while more indirect methods, such as reporting non-paying clients to credit bureaus, have been found to be unethical. South Carolina Bar Advisory Opinion 94-11 concluded that a lawyer may ethically use a collection agency to collect past due accounts for legal services rendered but cannot report past due accounts to a credit bureau. The Opinion advises against reporting non-paying clients to credit bureaus because (1) it is not necessary for establishing the lawyer's claim for compensation, (2) it risks disclosure of confidential information, and (3) it smacks of punishment in trying to lower the client's credit rating. S.C. Ethics Op. 94-11 (1994). See also South Dakota Ethics Op. 95-3 (1995) and Mass. Ethics Op. 00-3 (2000)
The Alaska Bar Association reached a similar conclusion when it determined that "an attorney who lists a client with a credit agency has revealed confidential information about the client for a purpose not permitted by ARPC 1.6 (b) (2) since such a referral is at most an indirect attempt to pressure the client to pay the fee." Alaska Ethics Op. No. 2000-3 (2000). The Alaska Bar Ethics Opinion is based on the notion that listing an unpaid fee with a credit bureau is likely to create pressure on the client to pay the unpaid fee more from an in terrorem effect of a bad credit rating than from any merit to the claim.
The State Bar of Montana Ethics Committee concluded that an attorney may not report and disclose unpaid fees to a credit bureau because such reporting "is not necessary to collect a fee because a delinquent fee can be collected without it." Mont. Ethics Op. 001027 (2000). The Montana Opinion further concluded, "The effect of a negative report is primarily punitive [and] it risks disclosure of confidential information about the former client which the lawyer is not permitted to reveal under Rule 1.6." See also New York State Ethics Opinion 684 (1996) (reporting client's delinquent account to credit bureau does not qualify as an action "to establish or collect the lawyer's fee" within the meaning of the exception to the prohibition on disclosure of client information). But see Florida Ethics Opinion 90-2 (1991) (it is ethically permissible for an attorney to report a delinquent former client to a credit reporting service, provided that confidential information unrelated to the collection of the debt was not disclosed and the debt was not in dispute).
While recognizing that in collecting a fee a lawyer may use collection agencies or retain counsel, the Restatement (Third) of the Law Governing Lawyers concludes that a lawyer may not disclose or threaten to disclose information to non-clients not involved in the suit in order to coerce the client into settling and may not use or threaten tactics, such as personal harassment or asserting frivolous claims, in an effort to collect fees. Restatement (Third) of the Law Governing Lawyers § 41, comment d (2000). The Restatement has determined that collection methods must preserve the client's right to contest the lawyer's position on the merits. Id. The direct methods that have been found to be ethical in other jurisdictions, such as bringing suit or using a collection agency, allow the client to contest the lawyer's position on the merits. Indirect efforts, such as reporting a client to a credit bureau or disclosing client financial information to other creditors of a client or to individuals or entities with whom the client may do business, are in the nature of personal harassment and are not ethically permissible. Accordingly, a lawyer may not disclose information concerning the financial relationship between himself and his client to third parties, other than through direct efforts to collect a fee, such as bringing suit or using a collection agency.
The second publication of this opinion appeared in the August 2007 issue of the Georgia Bar Journal, which was mailed to the members of the State Bar of Georgia on or about August 7, 2007. The opinion was filed with the Supreme Court of Georgia on August15, 2007. No review was requested within the 20-day review period, and the Supreme Court of Georgia has not ordered review on its own motion. In accordance with Rule 4-403(d), this opinion is binding only on the State Bar of Georgia and the person who requested the opinion, and not on the Supreme Court of Georgia, which shall treat the opinion as persuasive authority only.
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