Opinion #180. Lawyer as Salaried Employee of Private Non-Profit Corporation

Issued by the Professional Ethics Commission

Date Issued: November 14, 2002

Question

The Commission has been asked whether it would be a violation of the Maine Bar Rules for a lawyer to represent bankruptcy clients as a salaried employee of a private, non-profit corporation (which is not a law firm), whose business it is to provide credit counseling services and arrange debt repayment plans for these clients. Under the proposed arrangement, the corporation’s credit counselors would refer clients that they consider appropriate candidates for bankruptcy to the corporation’s staff attorney. These selected clients would pay fees to the corporation in exchange for bankruptcy legal services provided by the staff attorney. These fees would be held in an IOLTA account until “earned,” at which time they would be transferred to the corporation’s general account. The corporation, its officers and directors (who are not lawyers), together with its staff attorney, would all be covered by a legal malpractice liability insurance policy paid for by the corporation. The corporation is funded in part by creditors of its credit-counseling clients.

Opinion

The Commission is of the opinion that this arrangement would violate the Bar Rules. First, Bar Rule 3.2(a)(2) provides that “a lawyer shall not aid any person, association or corporation in the unauthorized practice of law.” Here, the corporation, which is not a law firm, would be paid fees to provide its clients with legal services. The corporation effectively acknowledges as much in undertaking to acquire legal malpractice liability insurance to protect itself, its officers and directors, who are not lawyers. The Commission believes that this proposed arrangement would result in the lawyer supporting the corporation in the unauthorized practice of law.

To the same effect, Bar Rule 3.12(a) provides that, subject to exceptions not relevant here, “a lawyer or law firm shall not share legal fees with a non-lawyer.” Here, the corporation, which is not a law firm, would be paid fees by its clients in exchange for which legal representation would be provided by its salaried lawyer. Applying this Bar Rule to these facts, the Commission believes that there is little, if any, substantive difference between a lawyer sharing fees with a non-lawyer and, as here, a lawyer being paid a salary by a non-lawyer in order to provide legal representation to fee-paying clients of the non-lawyer.

The Commission further believes that the proposed arrangement would very likely result in a violation of Bar Rule 3.12(b). This Rule, in pertinent part, prohibits a lawyer from being employed by a non-lawyer who directs or regulates the lawyer’s professional judgment in rendering legal services to another person.[1] Whatever measures the corporation may put in place to minimize its control over its staff lawyer, the nature of the employer-employee relationship in this factual setting would make it very difficult, if not impossible, to practicably avoid violation of this rule.

Finally, the Commission makes note of the further difficulties that this arrangement would likely create for the lawyer in complying with conflict of interest rules. The pertinent portion of Maine Bar Rule 3.4(b)(1) provides that a conflict of interest occurs “if there is a substantial risk that the lawyer’s representation of one client would be materially and adversely affected by the lawyer’s duties to…a third person …” The prospect of a conflict of interest looms large in the work undertaken by the lawyer in this situation, since the lawyer owes a duty to represent the interests of the bankruptcy clients and simultaneously owes a duty to uphold the potentially different interests of the corporation that is the employer.

The Commission has received and reviewed letters and other written materials supplementing the opinion request. Some of these materials suggest approaches that the corporation and its lawyer would take in order to minimize the effects of the deviations from the Bar Rules noted here, while some offer what may be legitimate public policy reasons supporting different conclusions. However, these materials do not persuade the Commission that the type of practice contemplated here is permitted under the Bar Rules as written.

In sum, the Commission is of the opinion that the Bar Rules would be violated if the lawyer undertakes legal representation of the corporation’s clients in this factual setting.


Footnote

[1] In pertinent part, Bar Rule 3.12(b) reads as follows: “A person who recommends, employs or pays a lawyer to render legal services for another shall not be permitted by the lawyer to direct or regulate the lawyer’s professional judgment in rendering such legal services unless direction or regulation occurs in the course of supervision by another lawyer who participates in the attorney-client relationship with the supervised lawyer.”


Enduring Ethics Opinion