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June 15, 2014
Ethics opinions address credit services and disputed monies

By Gary Blankenship
Senior Editor

Attorneys can report unpaid bills by clients to a proposed for-profit credit service for lawyers only if the amounts are undisputed and the attorneys are no longer representing those clients.

Also, attorneys must continue to hold in trust disputed monies when the lawyer has a legal duty to third parties with claims on those funds.

The Bar Board of Governors ratified the actions taken by the Professional Ethics Committee on those two issues at the board’s recent St. Augustine meeting.

The first issue involved a proposed credit reporting service to be operated by lawyers where subscribing members would report clients’ payment histories.

Board Review Committee on Professional Ethics Committee Chair Carl Schwait said the attorneys proposing the credit service attended the BRCPE meeting and said the payment information would be on a website available only to subscribers to the service, would contain only the name of the business clients and the principals of those companies, and whether their legal bills were unpaid after 30, 60, and 90 days. There would also be a notation whether the clients were disputing all or part of the fees if the attorney knew of the dispute at the time of the report or the client(s) later reported the fee was in dispute. The BRCPE voted 5-3 to recommend that the Board of Governors withdraw the staff opinion and direct staff to issue a new opinion concluding that the conduct is permissible under the parameters set forth in both the written request and the additional information provided by the inquirers at the BRCPE meeting.

The backers also said the clients, at the time they hired the attorneys, would provide written authorization after full disclosure that unpaid fees would be reported.

That was different from the PEC’s recommendation that only fees that were acknowledged by the client to be in dispute could be reported, and then only if that client were no longer represented by the reporting attorney.

Board members expressed reservations about the conflict of interest for attorneys reporting unpaid fees, whether disputed or not, of existing clients.

Board member Bill Davis said he was concerned that clients, at the start of representation, were being asked to sign an irrevocable waiver that would allow the attorney to disclose fee information — which is otherwise confidential — while continuing the representation. He said he preferred the PEC version.

Added board member Gary Lesser: “I don’t see how this is a conflict that can be waived.”

“This proposal is asking lawyers involved in a current attorney-client relationship to allow lawyers to report those clients in an ongoing relationship for unpaid bills. I think that’s too intrusive, and it’s unfair to the public,” board member Steve Echsner said.

He added while proponents said it would be used only for business clients, there was no definition of who is or isn’t a business client.

But board member Dennis Kainen said state and federal laws govern credit reporting and protect consumers, and the service would be valuable to business clients, who could use a favorable payment history to negotiate lower retainer fees. He also argued the proposed confidentiality waiver was adequate protection.

“It’s not a privilege issue; it’s a confidentiality issue. So, from that viewpoint, you can waive confidentiality,” he said. “People waive confidentiality all the time.”

The board initially voted 17-20 to reject the BRCPE’s recommendation to withdraw the staff opinion, and then by voice vote, with several dissents, approved the PEC’s staff opinion, which said that attorneys could only report matters to the service that involved both past clients and where the amounts owed were not in dispute.

The second ethics issue came from an attorney who asked if he could disburse disputed funds in his trust account to the client after 30 days, if there was no resolution between the client and third parties who made claims on the funds.

The staff opinion forwarded by PEC said that the attorney could not disburse disputed funds to the client if under law the lawyer also owed a duty to the third parties. Schwait said the BRCPE recommended approving that opinion without any changes.

In response to a question, Bar Ethics Counsel Elizabeth Tarbert said there could be several situations not mentioned in Bar rules, such as a court order, a valid statutory lien, or when the lawyer has given a letter of protection, where a lawyer owes a duty to a third party.

The board unanimously approved the BRCPE recommendation.

[Revised: 01-20-2017]