Feb. 17, 2016 – Six months after a civil litigation trial ends – but not in the client’s favor – the lawyer is still not paid. Is it ethical for the lawyer to report the client’s unpaid debt to a credit bureau?
Lawyer represented Client in civil litigation on an hourly fee basis. Trial did not go well and Client was a contentious and difficult client who did not pay fee invoices on a timely basis and owes Lawyer a substantial sum.
Now that case is over, Lawyer has sent several reminders of the fees owed and has received no response from Client for six months. Lawyer has considered suing Client for unpaid fees but decided not to after consulting with Lawyer’s malpractice insurance carrier. While Lawyer is resigned to the fees going unpaid, Lawyer would like to report Client’s unpaid debt to the credit bureaus.
Is Lawyer’s proposal ethical?
SCR 20:1.6 protects all information relating to the representation of current or former clients. Lawyers are, however, permitted to disclose information relating to the representation of a client to the extent reasonably necessary to establish a claim in a controversy with a client.
SCR 20:1.6(c)(4) directly addresses the situation and states as follows:
(c) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:
(4) 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 claim 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;
ABA Comment  further explains:
A lawyer entitled to a fee is permitted by paragraph (b)(5) to prove the services rendered in an action to collect it. This aspect of the Rule expresses the principle that the beneficiary of a fiduciary relationship may not exploit it to the detriment of the fiduciary.
Thus, it is clear that a lawyer may disclose information to the extent reasonably necessary to prove that their fees were earned and reasonable in an action to collect those fees.
Tim Pierce is ethics counsel with the State Bar of Wisconsin. Reach him by email or through the Ethics Hotline at (608) 229-2017 or (800) 254-9154.
It is important to note that a lawyer’s disclosures under SCR 20:1.6(c)(4) must only be to the extent reasonably necessary to achieve the permissible goal under the exception. So the question becomes whether reporting to the credit bureaus is reasonably necessary to collect the lawyer’s fees.
Montana Ethics Opinion 001027 (2000) takes the position that such disclosures are not reasonably necessary:
Also, a lawyer may reveal only such client confidences and secrets as are necessary to establish or collect fees or as required by the Court. The lawyer must take care to dis-close no more information about the client and the client's legal affairs than is reasonably necessary for the agency to collect the debt. That said, a lawyer should not report non-paying clients to credit bureaus.
Reporting to a credit agency is not necessary to collect a fee because a delinquent fee can be collected without it.
The effect of a negative report is primarily punitive. Finally, it risks disclosure of confidential information about the former client which the lawyer is not permitted to reveal under Rule 1.6.
In Case You Missed It: Read Past Ethical Dilemmas
Ethical Dilemmas appears monthly in InsideTrack. Check out these topics from past issues:
“When Is a Comprehensive Release of Claims Ethical?,” InsideTrack, Jan. 20, 2016
Is it ethical to ask a client to sign a comprehensive release of claims as a means of “putting it all behind you” after the client has refused to pay fees owed and has accused the lawyer of malpractice?
“Potential Client Needs to Subpoena Documents from Firm’s Existing Client for Unrelated Matter - Is There a Conflict?,” InsideTrack, Nov. 18, 2015
When clients ask for representation, not every potential conflict can be foreseen. Clients of other lawyers in your firm may pose a potential conflict, even if matters are unrelated. That’s especially true when subpoenas are involved, as this ethical dilemma explains.
This is consistent with the position of many other ethics opinions; see Alaska Ethics Op. 86-3 (1986); Maryland Ethics Op. 04-20 (2004); Nassau County (N.Y.) Ethics Op. 90-25 (1990); New Hampshire Ethics Op. 1987-8/8 (1988); New Mexico Ethics Op. 1988-7 (1988); New York State Ethics Op. 684 (1996); South Dakota Ethics Op. 95-3 (1995).
Have an Ethical Dilemma?
Ethical dilemmas affect every lawyer’s practice. This series of questions and answers appears each month in InsideTrack. The answers, offered by the State Bar’s ethics counsel Timothy Pierce and assistant ethics counsel Aviva Kaiser, are intended to provide guidance only and are not legal authority. Each situation will depend on the facts and circumstances involved.
As a State Bar member, you have access to informal guidance in resolving questions regarding Wisconsin’s Rules of Professional Conduct for Attorneys. To informally discuss an ethics issue, contact Pierce or Kaiser. They can be reached at (608) 229-2017 or (800) 254-9154, Monday through Friday, 9 a.m. to 4 p.m.