Criminal Investigation No. 1/242Q, In re

• Citation: 326 Md. 1,602 A.2d 1220
• Decision Date: 01 September 1991
• Docket Number: No. 72,72
• Parties: In re CRIMINAL INVESTIGATION NO. 1/242Q. ,
• Court: Court of Appeals of Maryland

Page 1

326 Md. 1

602 A.2d 1220

In re CRIMINAL INVESTIGATION NO. 1/242Q.

No. 72, Sept. Term, 1991.

Court of Appeals of Maryland.

March 13, 1992.

Motion for Reconsideration Denied April 23, 1992.

Karen J. Kruger, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., both on brief), Baltimore, for appellant.

William B. Moffitt (M. Christina Gutierrez, Moffitt, Zwerling & Kemler, P.C., all on brief), Alexandria, Va., for appellee.

Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI and ROBERT M. BELL, JJ.

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 Bruce 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).

The 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 privilege ³ 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 The 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 internal 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...