Can a lawyer report a client's bill-payment history to a credit-bureau-style database that other law firms can see?

Plain-English summary

The inquirer proposed a subscription database, akin to a credit reporting system, in which subscribing law firms would report and review the payment histories of their commercial clients to predict a prospective client's timeliness in paying fees. Reports would use categories like prompt, late, disputed, and non-payment (not the dollar amounts), the client would be notified of an adverse report and could flag a dispute, and a negative history would be reported only after the engagement ended. Before accepting an engagement, a subscriber would obtain the client's informed written consent and a limited confidentiality waiver (¶¶ 1-6).

The committee held that a client's payment status is "confidential information" under Rule 1.6, seeing no practical difference between this database and a credit bureau, and relying on N.Y. State 684 (1996) (¶¶ 7-11). It then rejected the fee-collection exception in Rule 1.6(b)(5): as in N.Y. State 684, reporting payment status is not "reasonably necessary" to collect a fee, since the fee can be collected without it and the report works mainly through its in terrorem effect on the client's credit (¶¶ 12-15).

That left consent. The committee held the lawyer may disclose with the client's informed consent under Rule 1.6(a) and Rule 1.0(j), which requires communicating adequate information and explaining the material risks and reasonably available alternatives, factoring in the client's sophistication and right to consult independent counsel; the committee declined to bless any particular consent form (¶¶ 16-19). Because this is an advance consent, the committee drew on the conflict-waiver guidance in Rule 1.7 Comments [21]-[22] and N.Y. City 1997-2, cautioning that not all commercial clients are sophisticated, that consent must be voluntary (coercion exists if the lawyer conditions the engagement on it), and that the client may revoke consent at any time (¶¶ 20-24).

In practice

Under the New York rules as they stood at the time of the opinion, the committee treated client payment status as confidential information, equated the proposed database with a credit bureau, and held that only client consent (not the fee-collection exception) can authorize the disclosure. The opinion sets several conditions on that consent: it must be informed, with the lawyer explaining that the payment history will be visible to subscribers and may be used to decide whether to take an engagement or to set its financial terms; it must account for the client's sophistication, since not all commercial clients are experienced; and it must be voluntary, which the committee said is absent if the lawyer refuses the engagement unless the client consents. The committee framed this as an advance consent analogous to a conflict waiver and held it is revocable at any time. The committee expressly declined to approve any specific consent form and placed the burden on the lawyer to show consent was informed.

Common questions

Q: Is a client's bill-payment history confidential?

A: Yes. The committee concluded a client's payment status is confidential information under Rule 1.6, finding no practical difference between the proposed database and a credit bureau (¶¶ 10-11).

Q: Does the fee-collection exception let a lawyer report the client to the database?

A: No. The committee concluded reporting payment status is not "reasonably necessary" to collect a fee under Rule 1.6(b)(5), because the fee can be collected without it (¶¶ 13-15).

Q: What makes the client's consent valid?

A: It must be informed (explaining that subscribers will see the history and may use it to decide whether to take the engagement or set its terms) and voluntary; the committee said conditioning the engagement on consent makes it coerced (¶¶ 19-20).

Q: Can the client take back consent later?

A: Yes. The committee concluded that, like consent to a conflict, advance consent to disclose confidential information may be revoked at any time (¶ 23).

Background and rules framework

The opinion interprets New York Rule 1.6 (confidentiality, including the fee-collection exception in 1.6(b)(5)), Rule 1.9(c) (former-client confidentiality), Rule 1.0(j) (informed consent), and draws on Rule 1.7's advance-waiver guidance, corresponding to ABA Model Rules 1.6, 1.9, 1.0, and 1.7. The analysis turns on whether payment status is confidential (it is), whether an exception applies (only consent), and what makes an advance consent informed and voluntary.

Citations and references

Rules of Professional Conduct:

• MR 1.6 / NY RPC 1.6(a), (b) (confidentiality; fee-collection exception)
• MR 1.9 / NY RPC 1.9(c) (former-client confidentiality)
• MR 1.0 / NY RPC 1.0(j) (informed consent)
• MR 1.7 / NY RPC 1.7 (advance-waiver guidance, by analogy)

Other opinions cited:

• N.Y. State 684 (1996): a client's unpaid-account status is a confidential secret; reporting to a credit bureau is barred
• N.Y. City 1997-2: advance consent to disclosure may be obtained if given on full disclosure and voluntarily
• N.Y. State 903 (2012): a client who consented to a conflict may revoke the consent

See also

• NY State Bar Op. 1059: Disclosing minor clients' case information to grant organizations
• NY State Bar Op. 1070: Confidentiality and file access among joint clients

Source

• Landing page: https://nysba.org/ethics-opinion-1061/