Issued July 3, 2013

QUESTION:

If an attorney accepts payment from a client, whether as part of a retainer or not, for court costs or fines, and thereafter pays the court clerk with their personal credit card, and writes a trust account check either to themselves, or to the credit card company, to pay the credit card bill, allowing them to accumulate benefits (e.g., airline miles, Amazon points, cash back points, etc. ), is this practice ethical, and if so, is notice of this to the client required?

RESPONSE:

The practice of utilizing credit cards that generate awards for their use, if done consistently with the standards imposed by Rule 1.7, is ethically allowable with certain conditions and caveats discussed below; whether disclosure and discussion with the client is required will depend upon whether the awards likely to be generated by the credit card use create a significant risk to the attorney’s ability to represent the client.

ASSUMPTIONS:

As the question is posed, it is limited to benefits provided through the use of a credit card and awards earned through the use thereof (e.g., frequent flyer miles based on the total amount of dollars spent per month on the card); and the Opinion will be limited to that issue. Other discounts or rebates that might be earned by an attorney in the course of making payments as part of a representation (such as volume discounts from office supply stores, or rebates from court reporters or other service providers), will not be addressed.

This Opinion further assumes that the credit card is used generally by the attorney for business matters involving the attorney’s clients in general.

DISCUSSION:

Two older ethics opinions, from the Massachusetts and Boston Bar Associations, have dealt specifically with frequent flyer miles.  Both opinions addressed the same hypothetical and came to slightly different conclusions.

Boston Bar Association Opinion 93-4 (1993) was based upon the following fact pattern:

The lawyer is enrolled in several frequent flyer programs with different airlines.  These programs provide the lawyer with free airline tickets or “class upgrades” … the lawyer seeks in every instance to obtain a flight at the lowest cost to the client.  Accordingly, the client is not incurring any additional cost through the lawyer’s claim to frequent flyer miles.  In most cases the benefit from any particular flight is only nominal.

The Boston Bar Opinion concluded that a lawyer was not required to disclose frequent flyer miles or account to his client for their use under these circumstances. The opinion also notes that the existence of frequent flyer credit card programs was generally known to the public and that therefore no disclosure was necessary. This observation is even more applicable today, when credit cards are aggressively marketed and it seems that most credit cards carry with them the promise of some reward or other for their use. The Boston Bar Opinion concludes that it would be difficult to properly credit each client for the miles earned, since the miles would accumulate over a long period of time and for many different clients, with the amount of miles to be gained for any one transaction being generally nominal in value. An additional difficulty, not directly addressed by the opinion, is what, exactly would be accounted for and to what end. The questions of whether the miles, assuming they could be accounted for by client, could be transferred to the client would depend upon whether such transfer was allowed, and whether the client had a frequent flyer account to transfer the miles into.

However, this opinion also stated that if the lawyer were to use his frequent flyer miles to purchase a ticket to travel on behalf of a particular client, he should disclose it to the client so that the client can decide if she wants to reimburse the lawyer for the use of those miles. The opinion also noted that in the event that the lawyer does a great deal of travel on behalf of a particular client, the lawyer should “either use the credit for the benefit of the client, if practical, or discuss the matter with the client.”

The Boston Bar Opinion supports the conclusion that absent unusual circumstances, the use of the credit card and accumulation of reward miles by the attorney is not prohibited, and need not be disclosed or discussed with the client. The other opinion, Massachusetts Bar Opinion 94-1, was based on a similar fact pattern:

An attorney is enrolled in several “frequent flyer” programs which provide him with free airline tickets when he has flown a specified number of miles on a particular airline.  The cost of the tickets giving rise to the frequent flyer benefit is billed to clients as a litigation expense. No additional expense to the clients is incurred in accruing the frequent flyer miles. The benefit accrued through the purchase of a single ticket is nominal, but the benefits may ultimately add up to something of substantial value.

Similarly to the Boston Bar Opinion, the Massachusetts Opinion stated that it would be “unethical for the lawyer to select a more expensive flight for the purpose of accumulating frequent flyer miles”, citing DR 5-107, which prohibited accepting anything of value related to the representation from anyone other than the client except with the consent of the client.

The Massachusetts Bar Opinion stated:

The variety of different situations which might give rise to an economic benefit for the lawyer make it impossible to formulate a hard and fast rule as to when the benefit must be disclosed to the client.  Consistent with the provisions of DR  2-106(B) and DR 5-107 (A)(2), the committee’s view is that, assuming that there is no additional cost to the client in procuring the service which carries with it a benefit, the requirement of disclosure to the client depends on two factors.

First, is the benefit of more than de minimis value and one which could be claimed by the client? If so, the client should be advised of the availability of the benefit.  For example, in those cases where the air travel in a given case is more than de minimis and a client could obtain frequent flyer miles by paying for the travel directly, the lawyer should discuss with the client whether he wishes to pay directly and thereby obtain the benefit for himself. Similarly, where travel for an individual client is of such magnitude that sufficient frequent
flyer miles are accumulated to purchase tickets which could be used for additional travel on that client’s behalf, the issue should be discussed with the client.

Second, is the benefit, while not available to the client, of such significant value as to have a potential to influence the attorney’s selection of the service provider? In that case, the existence of the benefit should be disclosed to the client. Disclosure will ensure that the client is able to inform himself as to the reasonableness of the expense.  It will also avoid any appearance that the attorney’s selection of the service provider was not based solely on the needs of the client, but was influenced by the availability of the benefit. [Emphases
supplied]

The Massachusetts Opinion also noted the existence of the Boston Bar Opinion, and the fact that a somewhat different result was reached by the Massachusetts Opinion, which counseled disclosure to insure that the client was fully informed.

Both the 1994 Massachusetts opinion and the 1993 Boston Opinion stress the fact that the lawyer must not make decisions based upon the personal benefit to the lawyer; by booking a “more expensive flight” in the case of the Massachusetts Opinion or failing to obtain the “lowest cost to the client” in the case of the Boston Opinion.

Both of these opinions predate the current Rules of Professional Conduct, which do not directly address the issue. However, both opinions caution against decisions that would affect the lawyer’s loyalty to his client. Loyalty is an essential element in the lawyer’s relationship to a client, and is impaired when a lawyer cannot consider, recommend or carry out an appropriate course of action for the client because of the lawyer’s other interests.

Rule 1.7(a) of the Rules of Professional conduct provides, in pertinent part:

[A] lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

***
(2) there is a significant risk that the representation … will be materially limited by the … personal interest of the lawyer.

However, Rule 1.7(b) provides that such representation may occur if

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

***
(4) each affected client gives informed consent, confirmed in writing.

Comment 10 to rule 1.7 states: “The lawyer’s own interests should not be permitted to have an adverse effect on representation of a client.”

Given the fact that award levels are intentionally set at relatively high levels by the credit card affiliates, it is unlikely that in the ordinary use of a credit card to pay expenses, the use for any one client would generate a meaningful benefit. For example the lowest award level for a coach ticket within the Continental United States currently offered by one major airline is 12,500 miles. Assuming that the attorney is using the credit card to pay filing fees or fines, it is unlikely that fees or fines for a single client will rise to this level. Assuming that the use of the credit card generates one mile of eligible air travel credit for each dollar spent, as most do, the average filing fee or fine will be de minimis, when compared to the level needed to achieve an award.

The question of whether a benefit that can be conferred upon the client must also be considered.  The myriad of awards programs, and the fact that their rules are subject to change, precludes anything approaching an exhaustive analysis of the question of transferability of the awards. Additionally, many of the rewards – such as upgraded seats on a flight, or upgraded hotel accommodations, have no value and no use other than the added convenience and comfort afforded to the attorney using the credit card. The fact that awards may also expire, be terminated by the credit card affiliate, or be subject to use restrictions, also argues against their being considered a “benefit” that can be conferred upon a client.

Thirdly, and most importantly, both Opinions assume that the use of the credit card by the lawyer imposes no additional burden upon the client. As a result, the transaction from the client’s perspective is the same. If no additional burden is placed upon the client, there is no detriment to the client.

But finally the inquiry must come back to whether the attorney’s ability to represent the client might be compromised by the attorney’s personal interest in obtaining the benefits associated with the credit card awards. As required by Rule 1.7, the attorney must insure that the representation will not be materially limited by the lawyer’s personal interests.

Conclusion

As the Boston Bar Opinion notes, “[t]he variety of different situations which might give rise to an economic benefit for the lawyer make it impossible to formulate a hard and fast rule as to when the benefit must be disclosed to the client.”

In some specific cases, such as a representation where extensive travel expenses are anticipated, disclosure to the client and discussion will insure that the client is fully informed and can make a decision as to whether to pay for the costs directly (possibly accruing the awards for themselves), or whether any accumulated travel awards would be used to reduce future travel expenses for the client. In other cases, the use of the credit card will be so incidental and the awards generated so de minimis that the existence of those benefits could have no impact that could materially affect the lawyer’s ability to represent the client, making disclosure and discussion unnecessary.

The practice of utilizing credit cards that generate awards for their use, if done consistently with the standards imposed by Rule 1.7, is ethically allowable with the stated conditions and caveats; whether disclosure and discussion with the client is required will depend upon whether the awards likely to be generated by the credit card use create a significant risk to the attorney’s ability to represent the client.