State Bar of Arizona Ethics Opinions

92-04: Confidentiality; Accounts Receivable
3/1992

Law firm may not furnish to a bank a list of its accounts receivable identifying the names of the clients and the amount each client owes, except to the extent the clients consent after consultation.



FACTS

A law firm’s bank, as part of its line of credit and other financial arrangements with the firm, requests that the firm furnish it with a list of its accounts receivable, identifying the name of the person or company owing the account, the account balance, and the age of the account. The accounts receivable are all owed by clients of the firm.

 

QUESTION

May a law firm or lawyer, with ethical propriety, furnish the requested information to a bank or other financial institution?

 

ETHICAL RULES INVOLVED

E.R. 1.6.         Confidentiality of Information

E.R. 1.8.         Conflict of Interest: Prohibited Transactions

 

OPINION

This issue was the subject of an earlier opinion of this committee: Opinion No. 164A (March 10, 1965). At that time, a lawyer's conduct was governed in part by Canon 37 of the Canons of Professional Ethics entitled "Confidences of a Client", which provided in relevant part that:

“It is the duty of a lawyer to preserve his client’s confidences."

That opinion determined that Hit is ethically proper for a law firm to furnish to the bank, as a justification for a loan, a copy of the monthly ‘Accounts Receivable’ Summary, which sets forth the names of the clients and the amounts of fees which are then due and owing by the respective clients." Id. at 2.

The basis for our earlier opinion was that the information as to the terms of employment, along with the nature and extent of services rendered, may properly be given, since that information was not acquired by the attorney in confidence. The opinion also made reference to "the very practical problems of law office economics and management."

The present Rules of Professional Conduct were adopted by the Supreme Court of Arizona on September 7, 1984, effective February 1, 1985.

E.R. 1.6, entitled "Confidentiality of Information, H provides in relevant part that:

“(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraphs (b), (c) and (d) or ER 3.3 (a) (2).”

E.R. 1.8, entitled "Conflict of Interest: Prohibited Transactions," provides in relevant part that:

"(b) A lawyer shall not use information relating to representation of a client to the disadvantage of the client unless the client consents after consultation."

Both of the relevant present Ethical Rules are more expansive than former Canon 37, which was restricted to "client confidences." The present Ethical Rules extend confidentiality to all "information relating to representation of a client," whatever its source, not merely to matters communicated in confidence by the client.

We believe that a law firm’s list of accounts receivable which identifies the name of the person or company owing the account, the account balance, and the age of the account constitutes "information relating to representation" and, as such, may not ethically be disclosed without the consent of each client after consultation.

The term "consultation" is defined as "communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question." (Rules of Professional Conduct, Preamble-Terminology)

There are undoubtedly a variety of circumstances in which a client would not knowingly permit the disclosure of his, her or its identity and the account balance with the law firm to a bank or other financial institution. This is a matter that must be the subject of "consent[ ] after consultation" before such information may ethically be used for the purpose of serving the law firm’s financial interests.

 

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 proceedings.

©State Bar of Arizona 1992




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