If a law firm pledges its accounts receivable to a bank, can it give the bank its clients' names and the amounts each client owes?

Plain-English summary

A law firm obtained a bank loan and secured it with a security interest in the firm's accounts receivable. The bank then asked the firm to provide the names of the firm's clients and the amounts those clients owed. The question was whether the Disciplinary Rules prohibited disclosing the client names and the amounts owed.

The Committee answered that such disclosures are prohibited by Rule 1.05 (confidentiality of information). It explained that Rule 1.05 expands the scope of confidentiality beyond its predecessor, Texas Code DR 4-101, so that information that previously received scant protection may now be confidential. The former rule's "secrets and confidences" framework tended to tie confidentiality to the evidentiary privilege, which was unduly limited. The Committee emphasized that a lawyer's obligation of confidentiality springs not so much from the attorney-client evidentiary privilege as from the law of agency: an attorney acts as a fiduciary, and an agent generally may not disclose or use information obtained during the agency relationship, a protection broader than the privilege.

The Committee explained that Rule 1.05(a) recognizes this broader protection by defining "confidential information" to include both "privileged information" and "unprivileged client information," which together comprise the entire spectrum of client information, and both are confidential. The rule bars knowingly revealing a client's or former client's confidential information to anyone outside the client, the client's representatives, and the lawyer's firm. Applying the rule, the firm could not disclose the requested information. The Committee noted the result was similar to Opinion 464, which barred giving a collection agency the names of indebted, delinquent clients and the amounts they owed. It concluded that, absent a client's informed consent, the firm may not reveal either its clients' names or the amounts they owe.

Currency note

This opinion was issued in 1991, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. Subsequent rule amendments or 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, deadline, or requirement mentioned here.

Common questions

Q: Can a firm give its lender the names of clients whose receivables secure the loan?

A: The Committee concluded no, absent the clients' informed consent. Client names are confidential information under Rule 1.05.

Q: Are the amounts clients owe also confidential?

A: Yes. The Committee concluded both the client names and the amounts owed are confidential under Rule 1.05 and may not be disclosed without consent.

Q: Why does confidentiality reach client names, not just privileged communications?

A: Per the opinion, Rule 1.05 protects both privileged and unprivileged client information and rests on the law of agency, under which a fiduciary may not disclose information gained during the relationship, a protection broader than the evidentiary privilege.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.05 (confidentiality of information; ABA Model Rule 1.6), focusing on Rule 1.05(a)'s definition of confidential information as including both privileged information and unprivileged client information. It grounds the duty in fiduciary and agency principles (citing the Restatement (Second) of Agency and commentary) rather than solely in the attorney-client evidentiary privilege.

Citations and references

Rules of Professional Conduct:

• MR 1.6 (confidentiality of information)
• Texas Disciplinary Rule 1.05 (including 1.05(a))

Other opinions cited:

• Tex. Ethics Op. 464 (1989): a lawyer may not give a collection agency the names of indebted, delinquent clients and the amounts they owe

See also

• TX Ethics Op. 495: Disclosing Confidential Client Information to a Collection Agency
• TX Ethics Op. 481: Financing Client Legal Fees Through a Third-Party Finance Corporation
• TX Ethics Op. 484: Using a Lawyer's Letterhead for a Creditor's Collection Letters

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-479/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_479.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative. A section symbol in a citation appeared in the source as an unreadable encoded character; it has been rendered as "Section."

QUESTION PRESENTED

A law firm has obtained a loan from a bank. The firm has secured the loan by providing a security interest in the firm's accounts receivable. The bank has subsequently requested that the law firm provide the names of the firm's clients as well as the amounts which those clients owe. Whether the Texas Disciplinary Rules of Professional Conduct prohibit the disclosure of: (I) the names of the firm's clients, and (ii) the amounts owed by each client.

STATEMENT OF FACTS

A law firm has obtained a loan from a bank. The firm has secured the loan by providing a security interest in the firm's accounts receivable. The bank has subsequently requested that the law firm provide the names of the firm's clients as well as the amounts which those clients owe.

ANSWER
Yes, such disclosures are prohibited by Texas DR 1.05 "Confidentiality of Information."

Texas Disciplinary Rule 1.05 addresses the confidentiality of lawyer-client communications. As did its predecessor rule, Texas Code DR 4-101, DR 1.05 seeks to protect the free flow of information between attorney and client. In contrast to the former rule, however, DR 1.05 provides increased protection by expanding the scope of confidentiality. See generally C. Wolfram, Modern Legal Ethics 298 (1986) (in which the author describes the scope of the protections provided by the existing and former ABA codes. Texas' existing and former rules draw upon these ABA codes). As a result, information which previously may have received scant protection may now fall squarely under DR 1.05's cloak of confidentiality.

This expansion of the zone of confidentiality reflects the American Bar Association's increasing concern that the former Model Code DR 4-101 did not adequately reflect the fiduciary duties which a lawyer owes to his client. See Schuwerk & Sutton, A Guide to the Texas Disciplinary Rules of Professional Conduct, 27A Hous.L.Rev. 1, 81 (1990). Admittedly, DR 4-101 addressed "confidentiality" generally. It did so, however, in a fashion which tended to suggest an examination of the attorney-client privilege to determine the scope of that confidentiality. The former rule's use of "secrets and confidences" terminology recognized that "confidences" were to receive full protection under the attorney-client privilege. The rule's protection of "secrets" was less emphatic, however, due to the potential for disclosure where the secret would not be embarrassing or detrimental to the client. Such a framework was unduly limited inasmuch as it failed to emphasize that confidentiality arises from a source much broader than any mere evidentiary privilege.

Consider that a lawyer's obligation of confidentiality springs not so much from the attorney-client evidentiary privilege as it does from the Law of Agency. See Schuwerk at 80; See Also ABA/BNA Lawyer's Manual on Professional Conduct 55:302 (1986). An attorney acts in his or her capacity as fiduciary and, in so doing, submits himself or herself to the strictures of relevant Agency law. As a general rule, an agent may not disclose or use information relating to the principal where such information is obtained during the course of the agent's employment. See Restatement (Second) of Agency Section 395 (1957); Schuwerk at 80. Information gained during the agency relationship is not defined in terms of its available protection under evidentiary privileges. Thus the protections afforded under Agency law exceed those which arise solely from an attorney-client privilege.

The new DR 1.05(a) recognizes this greater protection. The rule provides that "confidential" information includes both "privileged information" as well as "unprivileged client information." Privileged information is that information enjoying protection under the attorney-client evidentiary privilege. "unprivileged client information" is everything else. Taken together, privileged and unprivileged information comprise the entire spectrum of client information.

Disciplinary Rule 1.05(a) explicitly provides that both types of information are confidential in nature. The Rule states in pertinent part that ". . . a lawyer shall not knowingly: (1) Reveal confidential information of a client or a former client to: (i) a person that the client has instructed is not to receive the information; or (ii) anyone else, other than the client, the client's representatives or the members, associates, or employees of the lawyer's law firm." Application of the Rule prohibits the law firm from disclosing the requested information.

The result is similar to the one reached in Ethics Opinion 464 (52 Tex.B.J. 1200 (1989)). That opinion examined a similar fact pattern in which an attorney sought to provide a collection agency with the names of the attorney's indebted, delinquent clients. DR 1.05 prohibited the release of the information because to have allowed as much would have been to divulge the same confidential information, i.e., names of clients and the amounts they owed.

Absent a client's informed consent, the law firm may not reveal either the names of its clients or the amounts which those clients owe.

CONCLUSION

Absent a client's informed consent, the law firm may not reveal either the names of its clients or the amounts which those clients owe.

Tex. Comm. On Professional Ethics, Op. 479 (1991)