Can a collection lawyer overstate a judgment amount and pressure third parties to advance the client's interests?

Plain-English summary

A lawyer for a finance company obtained a $1,228,000 judgment against a business and its owner (Husband); liquidation reduced the debt to about $350,000. The lawyer then served Citations to Discover Assets on banks dealing with partnerships in which the owner's Wife and children (but not Husband) held interests, each citation still reciting the original $1,228,000 as unsatisfied. After opposing counsel demanded a correction, the lawyer issued another citation in the original amount, called the banks to tell them not to renew loans and that renewal "would be illegal," and, after a deposition, told Husband the lawyer would involve Wife, the children, and Wife's partners and that Husband would "never be able to borrow again."

The Committee concluded the line between zealous advocacy and improper conduct was clearly crossed on the citations. Rule 4.1(a) bars a lawyer from making a statement of material fact to a third person the lawyer knows or should know is false; Rule 3.3(a) imposes the parallel duty toward a tribunal; and serving and then refusing to correct a citation overstating the unsatisfied judgment violated those rules and Rule 8.4(a)(4) (dishonesty, fraud, deceit, or misrepresentation). Rule 1.2(f)(1) was also violated because the inflated citation served to harass or maliciously injure. The Committee drew on Opinions 96-3 and 95-10, which applied Rules 4.1(a) and 8.4(a)(4) to a lawyer's duty to disclose a client's death and a material change to a document.

On the conduct toward nonparties, the Committee distinguished legitimate inquiry from harassment. Serving citations on the banks to investigate whether assets nominally owned by others could satisfy the judgment was permissible, supported by the later fraudulent-transfer claim litigated in Husband's bankruptcy. But statements that served no purpose other than to threaten or burden, the "never borrow again" threat and telling banks that renewing loans "would be illegal," appeared to violate Rules 1.2(f)(1) and 4.4 and may also have been untrue under Rule 4.1(a).

Currency note

This opinion was issued in 2002, before Illinois adopted its current Rules of Professional Conduct, effective January 1, 2010. The Illinois Rules cited here use the pre-2010 numbering (the 2010 Rules carry forward this conduct under Rules 3.1, 3.3(a), 4.4, and 8.4). The ISBA notes the opinion was affirmed by its Board of Governors in January 2010 as generally consistent with the 2010 Rules, though the specific standards referenced may differ. Verify against current rules before relying on any specific rule cited here.

In practice

Under the Illinois rules as they stood at the time, the opinion holds that overstating the unsatisfied amount of a judgment in a court-issued citation, and refusing to correct it on request, is a false statement of material fact violating Rules 4.1(a), 3.3(a), and 8.4(a)(4), and also serves to harass in violation of Rule 1.2(f)(1). It distinguishes permissible asset investigation (serving citations to test whether assets nominally held by nonparties can satisfy the judgment) from statements that have no substantial purpose other than to threaten or burden a third person, which the opinion identifies as the operative line under Rules 1.2(f)(1) and 4.4.

Common questions

Q: Can a lawyer serve a citation stating more than the amount actually owed?

A: No. The opinion concludes that stating a judgment amount the lawyer knows is overstated, and refusing to correct it, violates Rules 4.1(a) and 3.3(a) and amounts to dishonesty under Rule 8.4(a)(4).

Q: Is it improper to investigate assets held by the debtor's spouse or partnerships?

A: Not by itself. The Committee concluded the lawyer could serve citations on banks to test whether assets nominally owned by others could satisfy the judgment, an inquiry consistent with vigorously pursuing the client's interests.

Q: What makes statements to nonparties cross the line?

A: The opinion concludes that statements with no substantial purpose other than to threaten, harass, or burden a third person, such as telling the debtor he would "never be able to borrow again" or telling banks that lawful loan renewals "would be illegal," violate Rules 1.2(f)(1) and 4.4 and may be false under Rule 4.1(a).

Background and rules framework

The opinion applied Illinois Rule 4.1(a) (truthfulness to third persons), Rule 3.3(a) (candor to a tribunal), Rule 8.4(a)(4) (misconduct involving dishonesty), Rule 1.2(f)(1) (no action serving merely to harass or maliciously injure), and Rule 4.4 (respect for the rights of third persons), corresponding to ABA Model Rules 4.1, 3.3, 8.4, and 4.4.

Citations and references

Rules of Professional Conduct:

• Illinois Rules 1.2(f)(1), 3.3(a), 4.1(a), 4.4, 8.4(a)(4) (Model Rules 3.3, 4.1, 4.4, 8.4)

Other opinions cited:

• ISBA Opinion Nos. 96-3 and 95-10

See also

• ISBA Ethics Op. 13-05: Client's Submission of False Evidence to a Tribunal
• ISBA Ethics Op. 12-01: Presenting an NSF Check to the State's Attorney

Source

• Landing page: https://www.isba.org/ethics/opinions/0106