Attorney receiving more than $10,000 for legal services, may, with ethical propriety, fill out and file I.R.S. form required under Section 6050I of the Code.
The inquiring attorney received fees from a client in the form of a cash payment in excess of $10,000.00. payment was made to the attorney for legal sevices rendered in conjunction with the defense to a charge that the client had conspired and attempted to evade federal income taxes. Section 6050I of the Internal Revenue Code (26 U.S.C. §60501) requires that all transactions in which more than $10,000.00 in cash is received in the course of trade or business must be reported to the I.R.S. The inquiring attorney is concerned that “disclosure of the $10,000.00 to the I.R.S. would, in attorney's opinion, violate his client’s right against self-incrimination, Fifth Amendment, U.S. Constitution, for reason that I.R.5. would know of monies in hand of client which were not reported on income tax returns.” The inquiring attorney is also of the opinion that disclosure would violate the attorney-client privilege.
Would an attorney, under the above-described circumstances, violate his ethical obligations to his client by filling out and filing the required I.R.S. form?
ETHICAL RULE INVOLVED
E.R. 1.6. Confidentiality of Information
The subject matter of this opinion was previously governed by Disciplinary Rule 4-101 of the former Code of Professional Responsibility, and has been discussed in our prior Opinions Nos. 121, 259, 286, 71-5, 71-11, 73-2, 73-25, 74-29, 81-22 and 85-4.
The problem facing the inquiring lawyer was succinctly stated in our Opinion No. 19-4 as follows:
The duty of an attorney to preserve the confidences of his client... is one of the fundamental principles underlying the relationship between an attorney and his client. Under certain circumstances, this role of the attorney appears to be in apparent conflict with another fundamental ethical obligation: The duty of a lawyer as an officer of the court, to uphold the integrity and competence of the legal profession and the system ofjustice.
Before proceeding with a discussion of the issue at hand, it is important to delineate exactly what it is we are considering and what we are not considering. This committee is permitted only to deal with ethical questions presented by the fact situation submitted by the inquiring attorney. Question of law presented thereby--such as whether, on the facts submitted, there exists an attorney-client evidentiary privilege at common law or under statute and the extent of the attorney's duties thereunder are outside the jurisdiction of this Committee. (See, our Opinions Nos. 121, 205, 71-5, 73-2, 74-29, 85-4 ).
Of course, this discussion is governed by the Rules of Professional Conduct which were adopted by the Supreme Court of Arizona on September 7, 1984, effective February 1, 1985. The Rules superseded the Code of Professional Responsibility which had previously been in effect since November 1, 1970. Although there are some significant differences in the provisions of the “Rules" vis-a-vis the “Code”, among them being the scope of confidential communications under ER 1.6, there are no material differences between the "Rules" and the “Code" relating to the issue under consideration, and, therefore, relevant opinions decided under the “Code" are given great weight.
Code provision DR 4-101 listed certain circumstances under which a lawyer was permitted to reveal confidential information that was otherwise not to be disclosed. Subsection (C)(2) thereof permitted an attorney to reveal "confidences or secrets when permitted under Disciplinary Rules or required by law or court order." That this provision is consistent with the intent of the present "Rules" is revealed by the following quotation from the Preamble thereto: “A lawyer should keep in confidence information relating to representation of a client except so far as disclosure is required or permittea by the Rules of Professional Conduct or other law.” (emphasis added) Similarly, the comment to ER 1.6 states: “A lawyer may not disclose such [confidential] information except as authorized or required by the Rules of Professional Conduct or other law.”- (emphasis added)
See also the Preamble to the Rules, “Scope”, “.... [T]hese rules are not intended to govern or affect judicial application of either the attorney-client or work product privilege.”
For the purpose of this Opinion we will presume that the disclosure of the information about which the inquiring attorney is concerned is required by law. (See 26 U.S.C. §6050I; see also 31 U.S.C. §§5311 et seq.) On this basis, it seems clear that there is no ethical impropriety barring the disclosure of the fee information. However, it must be emphasized that the terms of DR 4-101(C)(2) are permissive. As is made clear by the terms of the provision and the opinions. construing it, just because it is not ethically improper to reveal the information, the attorney is by no means ethically required to do so. And, as noted below, other legal considerations may intervene to limit such disclosure.
The comments of the American Bar Association Committee on Profestional Ethics in its Informal Opinion 1141 construing DR 4-101(C) (quoted by this Committee in its Opinion No.71-5 at p. 9), may provide the inquiring attorney with some insight into the nature of his obligations:
….[I]f the attorney is required by law to make a disclosure,... the ethics rules are drafted in such a way as to remove any ethical bar to disclosure or to reporting and the only relevant consideration would the application of legal rules. Included among these, of course, are the legal rules relative to the attorney-client privilege....
In the same vein, this committee in its Opinion No. 71-5, at pp. 12-13, stated:
"We are of the opinion that, if required to do so 'by law or court order,' the inquiring attorney may, with ethical propriety, divulge to the court ... the information... although such information appears clearly to be a 'secret' as defined in DR 4-101(A), and may be a 'confidence,' as there defined, (thus presenting a question of law). We emphasize that our ruling pertains only to the ethical aspects of the problem presented -- the resolution of questions of law involved in the problem being 'outside our jurisdiction -- and that the inquiring attorney, despite our ruling, would seem to be obligated to give careful consideration to his legal duty in the premises in the light of common law and statutory rules governing privileged communication between attorney and client and in the light of A.R.S. §32-263(5)." (emphasis in' original)
The comment to ER 1.6 addresses this issue as well. It states:
In addition to these provisions IER 2.2, 2.3, 3.3 and 4.1], a lawyer may be obligated or permitted by other provisions of law to give information about a client. Whether another provision of law supercedes ER 1.6 is a matter of interpretation beyond the scope of these rules, but a presumption should exist against such a supercession.
It should also be noted that, if the inquiring attorney decides that he is ethically obligated to disclose the information by filing the required I.R.S. form, "he would clearly be ethically obligated to inform his client of this development…" (See Opinion No. 71-5, p. 13)
An exception to the general rule prohibiting disclosure by an attorney of confidential information exists where disclosure is required by law. In such situations, the attorney may, within the bounds of ethical propriety, reveal the sought-after information. Whether or not the attorney is prohibited from disclosing the information by some other legal principle is an issue which cannot be decided by this committee. That question must ultimately be resolved by the attorney himself.
Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.
© State Bar of Arizona 1987
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