The Florida Bar
(May 15, 1994)
(May 15, 1994)
HEADNOTE: Neither the Rules Regulating The Florida Bar nor Professional Ethics Committee opinions contemplate joint venture arrangements between law firms. It would be improper for members of two different law firms to form a third firm for the sole purpose of evading Rule 4- 1.5(f)(4)(D), which imposes limitations on the division of contingent fees in personal injury-type cases.
RPC: 4-1.5(f)(4)(D), 4-7.1, 4-7.7, 4-8.4(a)
Opinions: 76-7; ABA Informal Opinions 1253, 83-1499
Misc.: Handbook on Lawyer Advertising and Solicitation, Florida Bar Standing Committee on Advertising; Rule 4, Florida Bar Procedures for Ruling on Questions of Ethics
A member of The Florida Bar has requested an advisory ethics opinion. The operative facts as presented by the inquiring attorney are as follows.
We respectfully request a response to the following question:
May two distinct law firms join together as a joint venture for the specific limited purpose of providing limited legal services to their joint clientele, i.e. personal injury and wrongful death matters?
Both law firms are separate and distinct and maintain their separate legal offices. Each provides general civil litigation, including personal injury and wrongful death matters to their respective clientele. However, the firms have a good working relationship and wish to join for the specific purpose of providing combined legal services in the specialty of personal injury and wrongful death matters, but otherwise remain separate and distinct. The joint venture intends to conduct the personal injury and wrongful death practice at offices both in West Palm Beach and in Fort Lauderdale. The joint venture will be known as [S and G], a joint venture consisting of [the two P.A.s].
Initially it must be noted that neither the Rules Regulating The Florida Bar nor opinions issued by the Professional Ethics Committee of The Florida Bar contemplate joint venture arrangements between law firms. This does not mean, however, that an attorney is ethically precluded from practicing simultaneously in two bona fide law firms. See Florida Ethics Opinion 76-7; ABA Informal Opinions 83-1499 and 1253. Nevertheless, there are particular circumstances under which ethical problems could arise as a result of an attorney's membership in two firms.
For example, the Supreme Court of Florida has mandated that, in personal injury-type cases (including medical malpractice cases) handled on a contingent fee basis, attorneys in different firms must obtain court approval if they wish to share the fees in a proportion other than 25%-75% (i.e., no more than 25% to the "secondary" firm and no less than 75% to the "primary" firm). Rule 4-1.5(f)(4)(D), Rules Regulating The Florida Bar. Under this rule, attorneys in two different firms may co- counsel a medical malpractice case and share the fee on, for example, a 50%-50% basis only with the court's approval. It would be improper for members of two different law firms to form a third firm for the sole purpose of evading this fee- division rule. See Rule 4-8.4(a).
Another example of how an attorney's membership in two firms might be ethically improper under some circumstances is the "parallel law firm" situation. In essence, this arrangement is used in order to hide the true nature of the firm and its members. The Florida Bar's Standing Committee on Advertising has concluded that such intentionally misleading conduct violates Rules 4-7.1 and 4-7.7. In its Handbook on Lawyer Advertising and Solicitation, the Standing Committee on Advertising addressed the ethical considerations involved in a hypothetical firm arrangement by using the following example:
The law firm of "Smith & Brown" creates a professional association solely for the purpose of handling personal injury matters. "The Personal Injury Firm" would be wholly owned by "Smith & Brown" or the shareholders of "Smith & Brown." The personal injury practice would have its own letterhead, and pleadings would be signed in the name of the new entity. Business cards would contain the attorney's name and the new entity's name when the attorney is handling a personal injury matter. Separate books and records would be kept for the personal injury practice. "Smith & Brown" would agree to provide the new entity with employees, facilities, and equipment and in return the new entity would pay "Smith & Brown" a fee based on the amount of profit earned by the new entity. The new entity would be a "parallel firm" to "Smith & Brown." The committee believes that the creation of a "parallel firm" appears contrary to 4-7.7 because it is deceptive and misleading contrary to 4-7.1. Clients and prosp ective clients should know the full extent of the nature of a firm's practice. Such considerations are matters that play a significant role when a prospective client decides which firm to hire. For example, an insurance company may not wish to retain a firm that represents personal injury plaintiffs, or vice versa.
A third example of potential impropriety could arise if a misleading trade name is used by the proposed new firm. Use of a trade name such as "Medical Malpractice Law Center" could be misleading, and thus violative of Rule 4-7.1 and 4-7.7, if it falsely suggests to the public that members of the trade name firm limit their practice to medical malpractice cases. Prospective clients could then reasonably infer that the trade name firm's members possess special skills and qualifications in the area of medical malpractice that may not be possessed by attorneys who have chosen not to limit their practice to one area of the law, or that clients will be dealing with a firm whose members concentrate their efforts totally in one area of the law, when in reality those attorneys handle not only medical malpractice but other types of cases as well.
In view of the considerations discussed above, it can be concluded that it will be ethically permissible for the inquiring attorney's firm to participate in the proposed arrangement provided the new specialty firm actually is organized and operated as a separate, bona fide law firm in compliance with the attorney advertising rules and not for the sole purpose of evading the 25%-75% fee-division rule.
(Although advertising issues have been mentioned in this opinion for illustrative purposes, specific questions requiring interpretation or application of the advertising rules, Rules 4-7.1 through 4-7.7 of the Rules Regulating The Florida Bar, should be directed to the Bar's Standing Committee on Advertising. See Rule 4, Florida Bar Procedures for Ruling on Questions of Ethics.)