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Aug. 21 — A client whose legal bills are being footed by one of his counsel's other clients is entitled to have his attorneys tell him the identity of that other client—and he must then disclose that information to his litigation opponents, a federal trial court held Aug. 12.
The ethics rule on accepting fee payments from third parties creates an enforceable duty requiring an attorney to disclose the payer's identity to the client because the arrangement is impermissible unless the client has given his informed consent, Magistrate Judge Terence P. Kemp of the U.S. District Court for the Southern District of Ohio decided.
Moreover, the attorney-client privilege doesn't block the client from being required to reveal this information to his opponent, Kemp said. Client identity is protected only in unusual situations, and this case isn't one of them, he said.
The court required Zeiger Tiges Little & Lindsmith LLP to tell its client Gregory Felsoci the identity of another Zeiger client that is paying Felsoci's legal costs in litigation over Libertarian Party candidate Charlie Earl's eligibility to be listed on the ballot as a candidate for governor of Ohio.
Felsoci lodged a successful protest to Earl's candidate petition signatures, which kept Earl off the primary ballot.
Now the Libertarian Party of Ohio and other plaintiffs are challenging the Ohio Secretary of State's decision to uphold the protest, and they made a discovery request to force Felsoci to identify who is paying his attorneys' fees—a fact he said he didn't know.
Siding with the plaintiffs, Kemp directed Felsoci to produce a document showing the name of the law firm's unidentified client who is funding his representation.
Documents in the firm's possession that reveal the payer's identity are in Felsoci's “control” for purposes of a federal discovery rule that allows a party to demand production of documents within another party's possession or control, Kemp decided.
The court grounded its holding on Rule 1.8(f) of the Ohio Rules of Professional Conduct which, like ABA Model Rule 1.8(f), prohibits a lawyer from accepting compensation for representing a client from someone else unless the client gives informed consent.
While acknowledging that not every ethics rule creates an enforceable legal duty, Kemp decided that Rule 1.8(f) entitles Felsoci to be informed of the payer's identity.
The court said that where one client is paying for work done for the benefit of another client, at least some details of the arrangement must be disclosed if the arrangement is to be ethically proper. The payer's motivation and nature of his interest in the issue would have to be communicated, Kemp said, for the lawyer to provide an adequate explanation of the risks of the fee arrangement.
Felsoci's counsel is legally obligated to give him information he needs to provide informed consent to the payment arrangement, and the firm cannot withhold that information by citing its duty of confidentiality to the other client without creating an impermissible conflict of interest, the court stated.
The court also decided that the attorney-client privilege will not be violated by ordering Felsoci to disclose the identity of the payer to his litigation opponents once he obtains that information.
“In almost every situation where one person pays the legal fees of another, the fact of that arrangement is fair game for disclosure and no privilege to withhold that fact exists,” Kemp stated.
Kemp noted that typically the identity of a client is not protected by the attorney-client privilege. An exception to this general rule exists, he said, when disclosure of the client's identity would be tantamount to revealing an otherwise protected confidential communication.
But that exception applies only when there was a prior disclosure of a confidential communication which, if the client were identified, would then be tied to that client, Kemp said. No such communication was described here, he said.
The Libertarian Party of Ohio was represented by Mark R. Brown, Columbus, Ohio, and Kafantaris Law Offices. Felsoci was represented by Zeiger Tiges Little & Lindsmith LLP.
Copyright 2014, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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