Neither attorney-client privilege nor the rules of professional conduct shield the identity of a lawyer’s third-party client

An Illinois Appellate Court recently held that Neither the attorney-client privilege nor the rules of professional conduct shield the identity of a lawyer’s third-party client. Thus, in a citation proceeding the lawyer must disclose the identity of the person who retained the lawyer to represent the debtors.

In Margules v. Beckstedt, 2019 IL App (1st) 190012 (June 4, 2019) the plaintiffs registered a judgment of $ 1.675 million against the debtors and then filed citations to discover assets on them. Unsatisfied with the responses to the citations, plaintiffs issued a third-party citation to discover assets against the debtors’ lawyer. Plaintiffs wanted to know about the source of payments for the lawyer’s representation. During the lawyer’s citation examination he explained that a third party, also his client, had asked him to represent the debtors. When pressed about the identity of the third-party client, he declined to answer, citing attorney-client privilege and the rules of professional conduct.

Plaintiffs moved to compel the attorney to reveal the identity of his third-party client. The trial court granted the motion and held the attorney in contempt, which the attorney appealed. On appeal, the lawyer restated his argument that the attorney-client privilege and the Illinois Rules of Professional Conduct forbid him from disclosing his client’s identity.

Generally, the attorney-client privilege does not protect a client’s identity. There are two exceptions: (i) where “the client will be prejudiced in ‘some substantial way’ if his identity were disclosed” and (ii) where protection would be in the public interest. Plaintiffs wanted to know whether the debtors paid the attorney for his legal services. The lawyer said they did not and that his third-party client asked him to represent the debtors.

The Court noted that revealing the third-party client’s identity will either confirm or disprove the truth of this explanation. In other words, it would provide “proof of the existence of the relationship” between the lawyer and the client and dispel any suspicion that the lawyer might have invented this third-party client in an attempt to shield the debtors’ assets from discovery. The lawyer did not show that the substantial prejudice and public interest exceptions to the general rule applied. The party asserting the privilege must allege more than what the lawyer alleged which is simply “[e]conomic pressures” or generalized “fears of possible annoyance or embarrassment.” The lawyer, as the party who bears the burden of establishing the privilege, must rely on facts and not his imagination. The lawyer’s generalizations furnish nothing of substance.

Moreover, the rules of professional conduct prohibiting a lawyer from revealing information relating to the representation of a client is subject to the exception that revealing the information is allowed in order “to comply with other law or a court order.” The exception alters the traditional recognition that a lawyer’s duty to retain client confidences offers broader protections than the evidentiary attorney-client privilege. Here, there is both “other law”—the evidentiary attorney-client privilege—and a “court order” interpreting it.

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