The Florida Bar

July 15, 1995

An attorney's proposed involvement with a corporation that represents clients in securities arbitration matters would be unethical due to problems concerning conflicts of interest, solicitation, fee-splitting, and assisting the unauthorized practice of law.

Note: Nonlawyers retained for compensation to represent investors in securities arbitrations are engaged in the unauthorized practice of law. See The Florida Bar re: Advisory Opinion - Nonlawyer Representation in Securities Arbitration 696 So.2d 1178 (Fla. 1997).

RPC: 4-1.2, 4-1.4, 4-1.5(a), 4-1.7(b), 4-5.4(a), 4-5.4(b), 4-5.5, 4-7.1 through 4-7.8, 4-7.4(a), 4-8.4(a)

Opinions: 61-1, 66-44, 67-14, 67-15, 70-18

Cases: The Florida Bar re: Advisory Opinion - Nonlawyer Preparation of Living Trusts, 613 So. 2d 426 (Fla. 1992)

A member of the Florida Bar requests an advisory opinion about an affiliation with a nonlawyer company to handle securities arbitrations.

The inquiring attorney wishes to enter into a relationship with a lay company that represents clients in securities arbitration. The company will obtain clients and pay the inquirer to represent the clients in negotiation and arbitration (if necessary). The company will pay the inquirer in the form of a retainer and a percentage of the company's contingent fee. The company would also provide the attorney with information regarding the client's claim and a prepared "Statement of Claim" for the inquirer to file. The company also pays for expert witness and audit services for the client, and, in some cases, costs of arbitration.

The inquirer wishes to know if it would be proper to enter into this relationship.

The inquirer's proposal raises numerous issues regarding the Rules of Professional Conduct. First, the attorney-client relationship must be a direct one. See Florida Ethics Opinions 61-1, 67-14, and 67-15. An attorney must have direct communication with the clients and take direction from the clients. See Rules 4-1.4 and 4-1.2, Rules of Professional Conduct. The role of the nonattorney in gathering information and preparing statements of claim in the inquirer's proposal may be a barrier to that direct relationship.

The proposal also raises the question of prohibited solicitation. An attorney may not solicit business through direct contact with a potential client, and he may not allow another to solicit legal business on his behalf. See Rules 4-7.4(a) and 4-8.4(a), Rules of Professional Conduct. The nonattorney may be soliciting business for the inquirer through direct contact with potential clients in the inquirer's proposal. Rule 4-1.5(a) provides that "[a]n attorney shall not enter into an agreement for, charge, or collect ... a fee generated by employment that was obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar." Any advertising of the company would have to follow the Rules of Professional Conduct regarding attorney advertising (Rules 4-7.1 through 4-7.8, Rules of Professional Conduct).

The business arrangement also appears to interfere with the client's right to choose his own attorney, since it appears that the nonattorney will actually determine who will represent the client in negotiation and at the arbitration. See Florida Ethics Opinions 66-44 [withdrawn] and 70-18. The proposal also implicates rules prohibiting assisting the unauthorized practice of law and splitting fees with nonattorneys. See Rules 4-5.4(a) and (b) and Rule 4-5.5, Rules of Professional Conduct.

The inquirer should also consider whether he may have some personal conflict in representing the clients given his relationship with the company. See Rule 4-1.7(b), Rules of Professional Conduct. In a similar arrangement regarding living trust preparation, the Florida Supreme Court stated "If the lawyer is employed by the corporation selling the living trust rather than by the client, then the lawyer's duty of loyalty to the client could be compromised." The Florida Bar re: Advisory Opinion - Nonlawyer Preparation of Living Trusts, 613 So. 2d 426 (Fla. 1992). The Court went on to say, "In light of this duty of loyalty to the client, a lawyer who assembles, reviews, executes, and funds a living trust document should be an independent counsel paid by the client and representing the client's interests alone." Id.

In short, it would be improper for the inquirer to enter into this proposed arrangement in light of the considerations discussed above.

[Revised: 08-24-2011]