Opinion #175. Lawyer Acting as Solo Practitioner and "of Counsel" to Another Law Firm

Issued by the Professional Ethics Commission

Date Issued: April 12, 2001

FACTS

Law Firm A has entered into an agreement with Lawyer B pursuant to which Lawyer B will become “of counsel” to the law firm. Lawyer B will be listed as “of counsel” on the firm’s letterhead, its website and marketing materials. The lawyer will regularly perform legal services as a lawyer in Law Firm A on behalf of certain clients of the law firm. The lawyer will also solicit work from potential new clients for Law Firm A as a lawyer for Law Firm A. The lawyer may or may not personally perform work for such new clients of the firm, depending on the nature of the legal services to be provided. Lawyer B’s compensation will be (1) a percentage of the fees received by Law Firm A from legal services the lawyer personally performs for Law Firm A clients, and (2) a percentage of the fees received by Law Firm A from clients the lawyer has developed for the firm, either alone or in conjunction with other lawyers at Law Firm A, but either way in the lawyer’s “of counsel” capacity.

In addition to practicing law in an of counsel relationship with Law Firm A, Lawyer B will also maintain an independent practice in separate offices from that of Law Firm A. The legal and clerical staff of Lawyer B’s independent practice will be separate from that of Law Firm A.

QUESTION

Does Lawyer B’s development of clients for or referral of clients to Law Firm A in an “of counsel” capacity for Law Firm A, and Lawyer B’s receipt of a portion of the legal fees generated by such development or referral, constitute a division of fees for legal services that requires client consent under Maine Bar Rule 3.3(d)?

ANALYSIS AND ANSWER

For the reasons set forth herein, we conclude that such referral or development of clients is not a division of fees requiring client consent under Rule 3.3(d).

Rule 3.3(d) provides, in relevant part:

(d) Fee Division. A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of the lawyer’s law firm or office; unless:

(1) The client, after full disclosure, consents to employment of the other lawyer and to the terms for the division of fees; and

(2) The total fee of the lawyers does not exceed reasonable compensation for all legal services they rendered to the client.

The threshold issue presented by the facts is whether Lawyer B’s status as “of counsel” falls within the meaning of the phrase “partner in or associate of the lawyer’s law firm.”

Bar Rule 3.3(d) was closely modeled on DR 2-107 of the ABA Model Code of Professional Responsibility (1969). See Maine Bar Rules Reporter’s Notes, Maine Manual on Professional Responsibility, pp. 3-31 (2000). Neither the Maine Bar Rules nor the Model Code define the term “of counsel.” However, the ABA Committee on Ethics and Professional Responsibility has, through a series of Informal Opinions, noted that “of counsel” status can cover a number of relationships between a lawyer and a firm including (1) the lawyer who practices part-time with a law firm, (2) the semi-retired partner who remains associated with the firm and is available for selective matters, (3) the probationary partner-to-be who is expected to become a partner shortly and (4) the lawyer with a status between that of a partner or associate who has “tenure” but lacks the expectation of promotion to full partner status.

Annotated Code of Professional Responsibility, pp. 58-60 (1979). More recently the ABA Ethics Committee has formally defined the “core characteristic” of “of counsel” as:

a “close, regular personal relationship;” but a relationship which is neither that of a partner (or its equivalent, a principal of a professional corporation), with the shared liability and/or managerial responsibility implied by that term; nor, on the other hand, the status ordinarily conveyed by the term “associate,” which is to say a junior non-partner lawyer, regularly employed by the firm.

ABA Formal Opinion 90-357 at 3 (1990). The opinion notes that, although daily contact is not required, “frequent and continuing contact,” defined as more than “merely an availability for occasional consultations,” is. Id. At 4-5. The opinion also states that it is not ethically permissible to use the term “of counsel” to designate (1) a relationship involving only an individual case, (2) a relationship of forwarder or receiver of legal business, (3) a relationship involving only occasional collaborative efforts among otherwise unrelated lawyers or firms, or (4) the relationship of an outside consultant. Further, the nature of the compensation arrangement has no bearing on whether designation as “of counsel” is appropriate. Id. at 4. Although this definition was adopted by the ABA Committee under the earlier Model Code, we believe it is equally applicable to the question before us, given that DR 2-107 of the Model Code was the source of Bar Rule 3.3(d).

Although Bar Rule 3.3(d) and DR 2-107 from which it was derived use the terms “partner” [1] and “associate” but not the term “of counsel,” we believe it is reasonable to read the words “partner” and “associate” as used in Rule 3.3(d) as intending to encompass a broad range of continuous economic arrangements between a lawyer and a firm including that of an “of counsel” relationship. The apparent purpose of Rule 3.3(d) was to place limitations on the extent to which a lawyer may share fees with another lawyer or law firm with whom the referring lawyer has no continuous business and professional association. When there is no such relationship, the referring lawyer is required to obtain the client’s consent to the fee division. When there is such a continuous relationship, such as where a partner generates a client who is served by another member of the same firm, there is no fee division within the meaning of the rule and no requirement for client consent. Viewed in light of this purpose, we can see no distinction between a lawyer who is classified as a partner or associate and a lawyer who is classified as “of counsel” as defined above. Just as a partner or associate can work on a part-time basis, so also can the lawyer who is “of counsel.” Similarly, the compensation arrangements for a partner and associate can be as variable as those of an “of counsel” lawyer. Although, as ABA Opinion 90-357 makes clear, an “of counsel” relationship is not the same as a partner or associate, for purposes of Rule 3.3(d) there is no functional difference. Thus, we conclude, that, just as a partner and associate are not covered by the fee division rule, so also Lawyer B who is “of counsel” is not deemed to be dividing a fee when he or she does work for or brings a client to Law Firm A.

We hasten to add that it is essential that the “of counsel” relationship must be established in good faith, must meet the definition in ABA Opinion 90-357, and may not be used as a sham device to avoid compliance with Rule 3.3(d). Whether or not such arrangement is bona fide is dependent on the facts in each case. As described in the facts as provided by the inquiring lawyer in this case, the relationship between Law Firm A and Lawyer B meets the definition adopted by us. We also advise that our opinion that the fee division rule does not apply to Lawyer B and Law Firm A is limited to the work that Lawyer B does for Law Firm A and the work Law Firm A does for the clients he or she brings into Law Firm A in an "of counsel" capacity. If Lawyer B should refer to Law Firm A a client who originated in his or her independent practice, then the fee division rule would apply.

The facts as presented also warrant additional comment. Since Lawyer B will be maintaining a legal practice independent of Law Firm A, Lawyer B will presumably make engagements with clients either through Law Firm A (doing the work personally or having the work done by another lawyer at Law Firm A) or separately through his or her separate independent practice. Either practice is permissible. However, in order to avoid misleading clients, and thereby possibly violating Bar Rule 3.2(f)(3), Lawyer B must clearly define the terms of the engagement with the client making it clear whether the engagement is with Lawyer B alone or with Law Firm A.

Finally, because of Lawyer B’s dual practice status, it is incumbent upon both Lawyer B and Law Firm A to carefully apply the conflict of interest rules. Among other things, because of the relationship between Lawyer B and Law Firm A, it is important to note that disqualifications of either one due to conflicts will be imputed to the other by virtue of Bar Rule 3.4(b)(3)(i).


Footnote

[1] The term partner is defined in Rule 3.14(b) as “a member of a group, however designated, that exercises ultimate authority over the activities of a legal entity or contractual association through which legal services are provided by lawyers.” Thus the term “partner” encompasses “shareholders” in professional corporations and “members” of limited liability professional companies.


Enduring Ethics Opinion

Enduring Ethics Opinion #175 [August 2013]