If I discover another lawyer at my firm fraudulently billed a client, must I report it to the disciplinary authority?

Plain-English summary

The opinion addresses a lawyer's reporting obligations after discovering that another lawyer in the same firm has fraudulently billed a client. The committee begins with Rule 8.3(a), which requires reporting misconduct that raises a substantial question about a lawyer's honesty, trustworthiness, or fitness; fraudulent billing (as distinct from innocent error) meets that threshold, so it triggers the reporting duty. But Rule 8.3(c)(1) provides that the rule does not require disclosure of information protected by Rule 1.6, and under Rule 1.6(a) a lawyer may not reveal confidential information without the client's informed consent absent an applicable exception.

The committee works through whether reporting would reveal "confidential information." The fact that a colleague sent fraudulent bills is "information gained during or relating to the representation," so it is confidential if it is privileged, if disclosure would be embarrassing or detrimental to the client, or if the client asked that it be kept confidential. No exception applies: disclosure is not impliedly authorized to advance the client's interests under Rule 1.6(a)(2) (there is no apparent benefit to the client), and it is not "required" or "permitted" by Rule 8.3 for purposes of Rule 1.6(b)(6). The committee notes that even reporting without naming the client risks confidentiality, because a disciplinary authority could subpoena the firm for more, and could later use the information in ways the client did not want.

The committee concludes that the firm must inform the client of the fraudulent billing under Rule 1.4(a)(1)(iii), and must then explain the lawyer's ethical obligation to report, the risk that reporting could lead to further disclosure of confidential information, and that the lawyer will not report if the client objects or declines consent. Consistent with Rule 8.3 Comment [2] and ABA Formal Op. 04-433, the lawyer should encourage the client to consent where reporting would not substantially prejudice the client, but must give a realistic assessment. In the unusual case where the client is unavailable (for example, deceased or unreachable), the lawyer must analyze whether the information is confidential because it is embarrassing/detrimental or because the client previously requested confidentiality. (The committee notes that a separate rule, Rule 3.3(a)(1) with 3.3(b), can require correcting a false billing submission to a court even over Rule 1.6.)

In practice

Under this opinion, conduct in which a lawyer discovers a firm colleague's fraudulent billing triggers, under the rules as they stood at the time, a duty to inform the client (Rule 1.4(a)(1)(iii)) and a Rule 8.3(a) reporting duty that is capped by Rule 1.6 confidentiality. The opinion holds that the firm may not report the fraud to a disciplinary authority if reporting would disclose confidential information without the client's informed consent, that the lawyer should explain the reporting obligation and the confidentiality risk to the client and encourage consent where the client would not be substantially prejudiced, and that where the client is unavailable the lawyer must determine whether the information is confidential before deciding whether to report.

Common questions

Q: A partner overbilled our client. Do I have to report it to the disciplinary committee?

A: Not necessarily. The opinion holds the Rule 8.3 duty is limited by Rule 1.6: the firm must tell the client, but it may not report to a disciplinary authority if doing so would reveal confidential information without the client's informed consent.

Q: Can I report anonymously, without naming the client?

A: The opinion cautions that even unidentified disclosure can breach confidentiality, because a disciplinary authority could subpoena the firm for further information and the client could later be identified. The relevant question is whether the information would be embarrassing or detrimental if disclosed to anyone, not just to the disciplinary authority.

Q: Do I have to tell the client?

A: Yes. The opinion holds that the firm must inform the client that the fraudulent billing occurred under Rule 1.4(a)(1)(iii), and should explain the reporting obligation, the confidentiality risk, and that it will not report if the client objects.

Q: What if the client is dead or unreachable?

A: The opinion treats that as the unusual case: the lawyer must analyze whether the billing information is confidential (privileged, embarrassing/detrimental, or subject to a prior confidentiality request, including for former clients under Rule 1.9(c)) before deciding whether to report.

Background and rules framework

The opinion interprets New York Rule of Professional Conduct 8.3 (reporting professional misconduct; Model Rule 8.3), including the Rule 8.3(c)(1) confidentiality carve-out, together with Rule 1.6 (confidentiality; Model Rule 1.6), Rule 1.4 (communication; Model Rule 1.4), Rule 1.9(c) (duties to former clients; Model Rule 1.9), and Rule 3.3 (candor toward the tribunal; Model Rule 3.3). It treats its earlier Op. 1995-5 (under former DR 1-103(A)) as still applicable and cites ABA Formal Op. 04-433 and several out-of-state opinions for the same confidentiality limit on reporting.

Citations and references

Rules of Professional Conduct:

• Model Rule 8.3 / NY RPC 8.3 (reporting misconduct; 8.3(c)(1) confidentiality carve-out)
• Model Rule 1.6 / NY RPC 1.6 (confidentiality of information)
• Model Rule 1.4 / NY RPC 1.4(a)(1)(iii), 1.4(b) (communication)
• Model Rule 1.9 / NY RPC 1.9(c) (duties to former clients)
• Model Rule 3.3 / NY RPC 3.3(a)(1), 3.3(b) (candor; correcting false submissions)

Cases:

• Baker v. Dorfman, 2001 WL 55437 (S.D.N.Y. 2001), legal bills are not invariably privileged per se

Other opinions cited:

• ABA Formal Op. 04-433 (2004): duty to discuss the reporting obligation with the client
• NYCBA Formal Op. 1995-5 (1995): reporting a former partner's misconduct limited by confidentiality
• NYSBA Formal Op. 743 (2001): redacted disclosure that still risks identifying the client
• Michigan Op. RI-314 (1999): reporting not required where information is confidential

See also

• ABA Formal Op. 04-433: Reporting misconduct of a non-practicing lawyer
• ABA Formal Op. 03-431: Reporting an impaired lawyer outside the firm
• NYC Bar Ethics Op. 2020-4: Reporting unlawful discrimination in practice

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-2017-2-obligation-to-report-fraudulent-billing/
• Original PDF: http://documents.nycbar.org/files/Formal_Ethics_Opinion_2017-2_Fraudulent_Billing.pdf