Court Opinion

ID: 9718130
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:17:30.900552+00
Date Added: 2024-06-11T18:23:57.493980
License: Public Domain

CHASANOW, Judge.
In 1990, the Office of the Attorney General of Maryland began an investigation of known or suspected narcotics traffickers for violations of the state income tax laws. To establish the income of these individuals investigators use the “net worth” method of accounting whereby the State seeks to prove unreported income by documenting large expenditures of money. One such expenditure is for attorney’s fees.
Criminal Investigation No. 1/242Q focused on R.A. and D.B.1 In an effort to establish net worth and uncover assets purchased with suspected narcotics profits, the Grand Jury for Anne Arundel County issued a number of subpoenas duces tecum for records of expenditures of money by R.A. and D.B. One of these was directed to William H. Murphy, Jr. Mr. Murphy is an attorney who had represented R.A. when he pled guilty to a narcotics charge and had at the same time represented D.B. in a related forfeiture proceeding; he does not currently represent R.A. or D.B. The subpoena ordered Mr. Murphy to produce all of his records reflecting payment for legal services rendered to R.A. and D.B. Mr. Murphy filed a motion to quash the subpoena claiming that the information was confidential and privileged. The motion to quash was granted by Judge *4Bruce C. Williams of the Circuit Court for Anne Arundel County. Judge Williams recognized that generally the attorney-client privilege does not protect fee information, but he determined that the subpoena should be quashed because the Maryland Rules of Professional Conduct have “enlarged the general principle of confidentiality.” The State, on behalf of the Grand Jury, filed an appeal, and this Court granted certiorari prior to the case being heard by the Court of Special Appeals.
The lower court relied on Rule 1.6 of the Model Rules of Professional Conduct.2 These Rules were adopted by the House of Delegates of the American Bar Association on August 2, 1983, and with some modifications, by this Court of Appeals on January 1, 1987. The Rules provide ethical guidelines for lawyers. We do not agree with the trial judge that the Rules were intended to expand the attorney-client privilege. In fact under the heading “Scope,” the prefatory material to the Rules explicitly states: “Moreover, these Rules are not intended to govern or affect judicial application of either the attorney-client or work product privilege.” Id. at 489 (emphasis added).
*5The Comment to Rule 1.6 explains the relationship between the “rule of confidentiality” and the attorney-client privilege.
“The attorney-client privilege applies in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client. The rule of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law.” (Emphasis added).
Id. at 500. Thus, the rule of confidentiality is broader than the attorney-client privilege. Rule 1.6 applies to confidential communications between a client and an attorney in all situations except where the “evidence is sought from the lawyer through compulsion of law.” In the latter situation, only the attorney-client privilege, not the broader rule of confidentiality, protects against disclosure. See Geoffrey C. Hazard, An Historical Perspective on the Attorney-Client Privilege, 66 Cal.L.Rev. 1061 (1978). The Comment to Rule 1.6 further defines the obligations of an attorney when evidence is sought from the lawyer through compulsion of law.
“The attorney-client privilege is differently defined in various jurisdictions. If a lawyer is called as a witness to give testimony concerning a client, absent waiver by the client, Rule 1.6(a) requires the lawyer to invoke the privilege when it is applicable.” (Emphasis added).
Id. at 502. The Comment to Rule 1.6 states “[i]n addition to these provisions, a lawyer may be obligated or permitted by other provisions of the law to give information about a client.” Id. (Emphasis added). Finally, it is perhaps noteworthy that the rule of confidentiality has many exceptions; for example, attorneys are permitted to breach confidentiality by filing suit and testifying in order to collect unpaid fees. Rule 1.6(b)(3). For the reasons indicated, disclosure in the instant case is governed by the attorney-client privi*6lege3 rather than the Rules of Professional Conduct.
Murphy alleges in his motion to quash the subpoena duces tecum that “[i]t was explicitly agreed and understood” between the clients and him that all information about fees “would be personal, privileged, and confidential because of, among other things, the growing practice of prosecutors nationwide to use such information to establish violations of the narcotics laws, financial reporting laws, money laundering laws, and income tax laws____” It is reasonable to assume that some clients would want the fee arrangement with their attorney to be kept confidential; therefore, a fee arrangement should not be freely disclosed by an attorney. But whether a fee arrangement is protected from disclosure in “judicial proceedings” is a different matter, which is governed by the attorney-client privilege and not by the Rules of Professional Conduct. The subjective intent or wishes of the parties cannot create a privilege where none exists. Even though the clients wish the fee information to be kept confidential, this is but a threshold requirement, and we still must determine whether it is privileged. Our inquiry, therefore, is not whether the broader rules of confidentiality protect the fee information sought in the instant case, but whether the narrower attorney-client privilege protects the information.
We must first note that we are dealing here with a request to disclose the amount of the fee paid by specified clients. We are not dealing with the situation where the lawyer is asked to disclose the names of, and/or the amounts paid by, all clients who paid fees in a particular manner (e.g., by cash) or who paid fees in excess of a specified amount.4
*7The overwhelming weight of authority holds that the attorney-client privilege is generally not violated by requiring disclosure of the payment of attorney’s fees and expenses. “Fee arrangements usually fall outside the scope of the privilege simply because such information ordinarily reveals no confidential professional communication between attorney and client, and not because such information may not be incriminating.” In re Osterhoudt, 722 F.2d 591, 593 (9th Cir.1983). See also In re Grand Jury Matter, 926 F.2d 348 (4th Cir.1991); In re Grand Jury Proceedings 88-9 (MIA), 899 F.2d 1039 (11th Cir.1990); In re Grand Jury Subpoena Served Upon Doe, 781 F.2d 238 (2d Cir.1985), cert, denied, 475 U.S. 1108, 106 S.Ct. 1515, 89 L.Ed.2d 914 (1986).
There are good reasons why fee arrangements should not generally be protected by the attorney-client privilege. Payment of a fee is a normal and expected incident of the relationship, and when a fee is negotiated, the attorney and client are to some extent involved in an arm’s-length commercial transaction. For the most part, fee arrangements are collateral to, not an integral part of, the fiduciary relationship. Disclosure of the fee should not chill the attorney-client relationship significantly more than the act of requiring payment of the fee.
Courts have articulated a few “exceptions” to the general rule that the attorney-client privilege does not prevent disclosure of client identity and/or fee information. Some of the “exceptions” are ill-defined and overlapping.
Many courts have articulated a “legal advice” exception, which would apply when “disclosure of the information would implicate the client in the very matter for which legal advice was sought in the first case.” In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365 (9th Cir.1982). See also In re Grand Jury Subpoenas (Anderson), 906 F.2d 1485, 1488-89 (10th Cir.1990); In re Sealed Case, 877 F.2d 976, 979-80 (D.C.Cir.1989). The seminal case on the legal advice exception is Baird v. Koerner, 279 F.2d 623 (9th Cir.1960). In Baird, the Inter*8nal Revenue Service (IRS) received a letter from an attorney stating that an enclosed check in the amount of $12,-706.85 was being tendered for additional taxes owed by undisclosed taxpayers. When the IRS subpoenaed the attorney in an effort to learn the identities of the delinquent taxpayers, the attorney refused to divulge any names, citing the attorney-client privilege. The Ninth Circuit, applying California law, upheld the privilege because disclosing the clients’ names would amount to an acknowledgment of guilt by the clients of the very matter for which legal advice was sought.
The legal advice exception is not applicable if legal representation is secured in furtherance of continuing illegal activity. In re Grand Jury Investigation No. 83-2-35, 723 F.2d 447, 452 (6th Cir.1983), cert, denied, 467 U.S. 1246, 104 S.Ct. 3524, 82 L.Ed.2d 831 (1984); In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), 695 F.2d at 365 n. 1; Matter of Walsh, 623 F.2d 489, 495 (7th Cir.),' cert, denied, 449 U.S. 994, 101 S.Ct. 531, 66 L.Ed.2d 291 (1980). Clearly the instant case does not fit within the “legal advice” exception. The criminal charges and forfeiture case for which Mr. Murphy was retained have been terminated. The requested information is for a separate tax fraud investigation. R.A. and D.B. are not being represented by Mr. Murphy in the tax fraud matters. Although both investigations may have resulted from the defendants’ illegal drug operation, counsel was obviously retained to represent R.A. and D.B. in court on the criminal charges and in the forfeiture but not to give legal advice on the operation of a drug business or to give tax advice.
A second perhaps overlapping exception has been called the “last link” exception. The courts that have applied it have generally done so where the client’s identity is sought. Courts have articulated this exception in various ways. The Fifth Circuit, in In re Grand Jury Proceedings (Pavlick), 680 F.2d 1026 (5th Cir. 1982) (en banc), has defined the last link exception as
*9“one that obtains when the disclosure of the client’s identity by his attorney would have supplied the last link in an existing chain of incriminating evidence likely to lead to the client’s indictment.”
Id. at 1027. This exception would not protect the disclosure in the instant case because the clients’ identities are known and furnishing that information would not supply the “last link” leading to indictment. We should also note that the last link exception has been expressly rejected by at least one federal circuit. See, e.g., In re Grand Jury Investigation No. 83-2-35, 723 F.2d at 454. It also has been implicitly rejected in at least three other circuits. In re Grand Jury Subpoenas, 906 F.2d 1485, 1490 (10th Cir.1990), citing In re Shargel, 742 F.2d 61 (2d Cir.1984); United States v. Liebman, 742 F.2d 807, 810 n. 2 (3d Cir.1984); and In re Osterhoudt, 722 F.2d 591, 593 (9th Cir.1983).
The third exception, which seems to be articulated with increasing frequency, at least in federal courts, is the “communication” exception. This exception applies when “disclosure of the client’s identity or the existence of a fee arrangement would reveal information that is tantamount to a confidential professional communication.” See Tornay v. United States, 840 F.2d 1424, 1428 (9th Cir.1988). In United States v. Liebman, supra, the Internal Revenue Service sought to compel an attorney to reveal the names of all clients to whom the attorney had given advice regarding the deductibility of certain fees. The court upheld the privilege claim because revealing the names would be tantamount to disclosing a confidential communication. In United States v. Jeffers, the Seventh Circuit stated:
“The privilege may be recognized when so much of the actual communication has already been disclosed [not necessarily by the attorney, but by independent sources as well] that identification of the client [or of fees paid] amounts to disclosure of a confidential communication.” (Alteration in original).
532 F.2d 1101, 1115 (7th Cir.1976) (quoting NLRB v. Harvey, 349 F.2d 900, 905 (4th Cir.1965)), vacated in part on *10other grounds, 432 U.S. 137, 97 S.Ct. 2207, 53 L.Ed.2d 168 (1977). The communication exception analysis seems to be the “current favorite,” at least in federal courts as eight circuits now seem to utilize this approach. Steven Goode, Identity, Fees, and the Attorney-Client Privilege, 59 Geo. Wash.L.Rev. 307, at 326 & n. 138 (1991). Revealing the fee information in the instant case would not be barred by the communication exception to the general rule requiring disclosure of fee information. First, payment of a fee was a nonassertive act which was not intended to communicate information.5 Second, disclosure of the amount and method of payment of a fee in the instant case reveals nothing about the advice sought by the clients or given by the lawyer. The attorney-client privilege does not protect against disclosure of information that is damaging or even incriminating; it only prevents disclosure of confidential professional communications. In re Osterhoudt, 722 F.2d at 593.
We need not decide which, if any, of the identified “exceptions” we should adopt since disclosure in the instant case would not be protected by any of these “exceptions” to the general rule requiring disclosure.
An innovative approach was proposed in Professor Goode’s scholarly article, Identity, Fees, and the Attorney-Client Privilege. He advocates a cost-benefit analysis weighing the potential benefits of disclosure against any possible deterrent to seeking legal advice or impediments to attorney-client communication. Goode concludes that under a cost-benefit analysis, especially where, as in the instant case, the identity of the client is known, the balance of costs and benefits generally weighs heavily in favor of the disclosure of fee information. He states:
*11“As a policy matter, therefore, the case for ordinarily leaving fee arrangement information unprivileged is a strong one. The cost-benefit balance tips heavily in favor of disclosure. Requiring lawyers to disclose such information is not likely to deter many potential clients from seeking legal advice, regardless of whether they are already known to the prosecution. Some individuals who prefer to pay their legal bills in cash might be deterred, but this is a self-inflicted cost that easily can be avoided by using another form of payment. The benefits of disclosure are, however, ample. Requiring disclosure will make available to the government evidence that may be highly probative of various types of wrongdoing, including tax evasion, participation in a continuing criminal enterprise, or membership in a drug smuggling conspiracy. Only if prosecutors are allowed to seek fee arrangement information from a lawyer as a means of discovering who has been seeking legal advice from that lawyer will the costs of disclosure rise substantially.”
59 Geo.Wash.L.Rev. at 355.
The legal profession should be concerned with what Dean Charles McCormick characterized as “the prevailing flavor of chicanery and sharp practice pervading most of the attempts to suppress proof of professional employment____” Charles McCormick, Evidence, § 90 at 216 (E. Cleary 3d ed. 1984). We agree with Dean McCormick that the “rule of disclosure seems the approach most consonant with the preservation of the repute of the lawyer’s high calling.” Id. at 217.
The attorney-client privilege is necessary in order to assure that clients are not impeded in seeking legal advice or in confiding in their lawyers. The privilege, however, is not absolute; it does not restrict disclosure of every aspect of what occurs between the attorney and the client. In addition, the burden of establishing a privilege rests on the party asserting the privilege. In re Grand Jury Investigation No. 83-2-35, 723 F.2d at 454; Charles McCormick, Evidence, § 88 at 209. We hold that the attor*12ney-client privilege does not prevent disclosure of the fee arrangements in the instant case.
In his brief and argument, Mr. Murphy also alleges a violation of his clients’ Fifth and Sixth Amendment rights. These issues were not raised in the court below and, therefore, ordinarily would not be addressed by this Court. Even if they had been properly preserved for review, we fail to see any basis for Murphy’s Fifth and Sixth Amendment claims on behalf of his clients. The former clients are not being compelled to incriminate themselves, and no confidential constitutionally protected documents prepared by the clients are being sought. Cf, Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). The investigators are seeking information about cash expenditures; the nature of the expenditures are irrelevant. Whether money was spent for a car, a house, or a lawyer is not germane; it is the fact money was spent, not the purpose for which it was spent, that is the center of the inquiry. A car purchaser being investigated for tax fraud certainly could not contend that the amount and terms of his payment to a car dealer are not disclosable by the dealer because of the purchaser’s Fifth Amendment privilege.
Murphy’s Sixth Amendment constitutional claims on behalf of his former clients are inapplicable in the instant case. R.A. and D.B. are former clients of Murphy who are under investigation. The Sixth Amendment right to counsel does not attach during the investigation stage of a prosecution. McNeil v. Wisconsin, — U.S. -, 111 S.Ct. 2204, 115 L.Ed.2d 158 (1991). The Sixth Amendment, if applicable at all, would be violated only if furnishing the information would create an actual conflict between a client and the attorney who is representing that client. “Only a showing of actual conflict [between attorney and client], rather than mere speculative assertions, may overcome the concrete ‘obligation of every person to appear and give his evidence before the grand jury.’ ” In re Grand Jury Subpoena for Reyes-Requena, 913 F.2d 1118, 1130 (5th *13Cir.1990), cert, denied, — U.S.-, 111 S.Ct. 1581, 113 L.Ed.2d 646 (1991) (quoting United States v. Dionisio, 410 U.S. 1, 9-10, 93 S.Ct. 764, 769, 35 L.Ed.2d 67, 77 (1973)). The Fourth Circuit has recently reiterated that the Sixth Amendment right to counsel is not violated by requiring an attorney to disclose fee information that might place the attorney in a position of acting as a witness against a client unless disclosure would also create an actual conflict between attorney and client that would require disqualifying the attorney from representing his/her client. In re Grand Jury Matter, 926 F.2d 348, 351 (4th Cir.1991).
In the instant case, compelling Mr. Murphy to disclose information about fees paid by two former clients does not violate either the attorney-client privilege or the clients’ Fifth or Sixth Amendment rights.
JUDGMENT OF THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY REVERSED. CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY THE APPELLEE.

. The identities of the targets of the investigation are withheld pursuant to Maryland Rule 8-123(c).

. Rule 1.6 provides:
"(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraph (b).
(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary:
(1) to prevent the client from committing a criminal or fraudulent act that the lawyer believes is likely to result in death or substantial bodily harm or in substantial injury to the financial interests or property of another;
(2) to rectify the consequences of a client's criminal or fraudulent act in the furtherance of which the lawyer’s services were used;
(3) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, or to establish a defense to a criminal charge, civil claim, or disciplinary complaint against the lawyer based upon conduct in which the client was involved or to respond to allegations in any proceedings concerning the lawyer’s representation of the client.
(4) to comply with these Rules, a court order or other law.”

. The attorney-client privilege is a common law privilege now set forth in Maryland Code (1974, 1989 Repl.Vol.), Courts & Judicial Proceedings Article, § 9-108.

. See, e.g., 26 U.S.C. § 60501 (1988) which requires that lawyers, as well as other trades, businesses, professions, etc., disclose the names of everyone who paid "cash" fees in excess of $10,000.

. See 5 Lynn McLain, Maryland Evidence, § 503.6 at 489 (1987), “Nonassertive acts which the attorney observes or commits, which are not intended to communicate information, generally are held to be unprotected."