Can a law firm that pledged its accounts receivable to secure a bank loan give the bank its clients' names and addresses?

Plain-English summary

A law firm obtained a bank loan secured by its accounts receivable. The security agreement required the firm to report to the bank, on request, account balances and "the names and addresses of all account debtors" plus aging reports. The firm asked about the ethics of delivering its client list to the bank with the requested information.

The Committee began with MRPC 1.6 and MRPC 1.8(b), which bar a lawyer from revealing or using a client's confidence or secret without consent after consultation. It acknowledged the general evidentiary rule that a client's identity, absent special circumstances, is not protected by the attorney-client privilege, citing court decisions and treatise authority. But it concluded the ethical confidentiality duty is broader than the evidentiary privilege: under MRPC 1.6's definition, the disclosure of a client's identity in a non-judicial setting is controlled by the "secret" definition, which reaches information whose disclosure would be embarrassing or likely detrimental to the client.

Drawing on opinions from Alabama, Kentucky, the ABA (Informal Op. 1287), and Michigan's own CI-88, the Committee concluded that client names and addresses can be secrets whose disclosure may embarrass or harm the client. It therefore concluded the firm may not give the bank the names and addresses of account debtors unless the client has consented under MRPC 1.6(b)(3), but the firm may provide the bank with account balances, the nature and extent of those balances, and aging-receivable payment reports without identifying the clients.

Currency note

This opinion was issued in 1991 and interprets the Michigan Rules of Professional Conduct as they then stood. MRPC 1.6 and 1.8 have since been amended, and later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a law firm pledge its receivables and then send the bank its client list?

A: Not the names and addresses. The opinion concluded the firm may not disclose client names and addresses to the lender without the client's consent under MRPC 1.6(b)(3).

Q: What can the firm share with the lender?

A: The opinion concluded the firm may provide the bank with account balances, the nature and extent of those balances, and aging-receivable payment reports, so long as it does not identify the clients by name and address.

Q: Isn't a client's identity generally not privileged?

A: The opinion acknowledged client identity is generally not protected by the evidentiary attorney-client privilege, but concluded the ethical duty under MRPC 1.6 is broader and can protect a client's identity as a "secret" outside a judicial setting.

Background and rules framework

The opinion interpreted MRPC 1.6 / Model Rule 1.6 (confidentiality, including its definitions of "confidence" and "secret") and MRPC 1.8(b) / Model Rule 1.8 (using information relating to the representation to the client's disadvantage without consent). It distinguished the evidentiary attorney-client privilege from the broader ethical confidentiality duty, locating the protection for client identity in the "secret" definition.

Citations and references

Rules of Professional Conduct:

• MR 1.6 / MRPC 1.6 (confidentiality; "confidence" and "secret")
• MR 1.8 / MRPC 1.8(b) (using client information to the client's disadvantage)

Cases:

• In re Grand Jury (Markowitz), 603 F2d 469 (CA3 1979), client identity generally not privileged
• Stolowitz v. Stolowitz, 106 Misc 2d 853; 435 NYS2d 882 (1980), exceptions where identity would reveal confidences

Other opinions cited:

• ABA Informal Op. 1287; Alabama Op. 89-111; Kentucky Op. E-253; CI-88

See also

• DC Ethics Op. 214: Client Name on IRS Form 8300
• KBA Ethics Op. E-253: Revealing Client Names and Credit
• Mich Ethics Op. RI-54: Reporting Cash Fees to IRS

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=947&Type=6

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

RI-77

March 14, 1991

SYLLABUS

A law firm may not submit client names and addresses to the law firm's bank lender unless the client consents after consultation.

References: MRPC 1.6, 1.8(b); CI-88; ABA i1287.

TEXT

A law firm has established a credit loan from a major area bank. An agreement securing the debt gives the bank a security interest in the law firm's accounts receivable. A provision of that security agreement reads as follows:

"Debtor shall (i) evidence to Bank, in such form and at such intervals as Bank may request, the account balances and the nature and extent of those Accounts Receivable in which Debtor has rights, the names and addresses of all account debtors and reports with respect to the payments on an aging Accounts Receivable . . . ."

The law firm now inquires as to the ethical considerations of delivering the client lists to the bank with the information requested in the security agreement.

MRPC 1.6 states:

"(a) 'Confidence' refers to information protected by the client-lawyer privilege under applicable law, and 'secret' refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.

"(b) Except when permitted under paragraph (c), a lawyer shall not knowingly:

"(1) reveal a confidence or secret of a client;

"(2) use a confidence or secret of a client to the disadvantage of the client; or

"(3) use a confidence or secret of a client for the advantage of the lawyer or of a third person, unless the client consents after full disclosure.

"(c) A lawyer may reveal:

"(1) confidences or secrets with the consent of the client or clients affected, but only after full disclosure to them;

"(2) confidences or secrets when permitted or required by these rules, or when required by law or by court order;

"(3) confidences and secrets to the extent reasonably necessary to rectify the consequences of a client's illegal or fraudulent act in the furtherance of which the lawyer's services have been used;

"(4) the intention of a client to commit a crime and the information necessary to prevent the crime; and

"(5) confidences or secrets necessary to establish or collect a fee, or to defend the lawyer or the lawyer's employees or associates against an accusation of wrongful conduct.

"(d) A lawyer shall exercise reasonable care to prevent employees, associates, and others whose services are utilized by the lawyer from disclosing or using confidences or secrets of a client, except that a lawyer may reveal the information allowed by paragraph (c) through an employee."

MRPC 1.8(b) also forbids a lawyer from using information relating to representation of a client to the disadvantage of the client unless the client consents after consultation, except as permitted or required by Rule 1.6 or Rule 3.3.

As a general rule, courts recognize that a client's identity absent extenuating circumstances does not fall within the protection of the lawyer-client privilege for evidentiary purposes. ABA/BNA Lawyers' Manual on Professional Conduct, Volume 1, No 19, p. 435 (1984); In Grand Jury Empaneled February 14, 1978 (Markowitz), 603 F2d 469 (CA 3 1979). In Stolowitz v. Stolowitz, 106 Misc 2d 853, 435 NYS 2d 882 (1980), in which a wife demanded names and addresses of her husband's law firm clients for her divorce case, the court stated:

"It has generally been held that inasmuch as a client's identity is not relevant to advice proffered by an attorney, such communication is not privileged. However, in certain circumstances an attorney cannot be compelled to reveal a client's identity where the latter is not a party to the pending litigation. [Citations omitted.]" 435 NYS2d 882, 885 (1980).

The "unusual" or "certain" circumstances that the courts refer to as exceptions to the general rule holding that identity of a client is not privileged have to do with whether the information itself may be prejudicial or harmful to the client.

"There is a general rule, according to the American Bar Foundation, Annotated Code of Professional Responsibility (1979), that the Attorney-client privilege does not extend to disclosure of the client's identity. The former Michigan Code of Professional Responsibility DR 7-106(B)(2) begged the question stating that when a lawyer appears before a tribunal, '[u]nless privileged or irrelevant, the identities of the clients he represents and of the persons who employed him' must be disclosed. Some courts have held that this general rule does not apply when such a disclosure would be the equivalent of revealing confidential information disclosing the client's motive for seeking legal assistance, or suggesting the client's guilt in a case. [Citations omitted]." Dubin and Schwartz, Michigan Rules of Professional Conduct and Disciplinary Procedures, Institute for Continuing Legal Education, Ann Arbor, 1989, p I-60.

The ethical considerations involved in disclosure of a confidence or secret are broader in scope than the evidentiary lawyer-client privilege. As defined in MRPC 1.6, the disclosure of the identity of the client may be a "confidence" protected by the lawyer-client privilege in some circumstances. However, the disclosure of the identity of a client in a non-judicial setting is more broadly controlled by the MRPC 1.6 definition of "secret." The comment to MRPC 1.6 states in part:

"The principle of confidentiality is given effect in two related bodies of law, the client-lawyer privilege . . . in the law of evidence and the rule of confidentiality established in professional ethics . . . . The rule of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law. The confidentiality rule applies to confidences and secrets as defined in the rule. A lawyer may not disclose such information except as authorized or required by the Rules of Professional Conduct or other law . . . ."

MRPC 1.6 prohibits even the disclosure of a client's identity if the disclosure would be "embarrassing" or would "be likely to be detrimental" to the client. Examples of embarrassing and/or detrimental effects are found in informal ethics opinions from other jurisdictions. Alabama Op 89-111, ". . . A lawyer may not furnish the name of a client to a funding agency so that the agency can ascertain the extent to which it is serving its target group . . . ."

Kentucky Op E-253, ". . . A lawyer may reveal the names and addresses of clients when the information is in the public record as a result of the lawyer's representation of the client, circumstances of the representation make it obvious the client does not expect confidentiality, or the client has consented in writing"; ABA i1287, names, addresses and telephone numbers of clients of a legal services office are secrets within the meaning of ABA Model Code of Professional Responsibility DR 4-101(a), ". . . since it might be an embarrassment to the client for any number of reasons to have it revealed that he was a client of the Legal Services Offices." In accord, CI-88, it is unethical to disclose addresses of clients to persons endeavoring to enforce civil claims against the client.

Therefore, a lawyer may not give the bank the names and addresses of all account debtors unless the client has consented pursuant to MRPC 1.6(b)(3). The lawyer, however, may provide the bank account balances, the nature and extent of those account balances and reports with respect to the payments on aging accounts receivable without identifying names and addresses of clients.