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All Bar Conference Issues 1999

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Introduction
Rule 5.7: Responsibilities regarding law-related services
All Bar Delegates respond to ancillary business questions


Introduction

An All Bar Conference was held on February 19, 1999 to discuss whether the current rules governing ancillary businesses should be amended to provide for full disclosure of the ancillary business arrangement and when the full protection of the attorney-client relationship will apply in ancillary businesses.

Bar Leaders from throughout the state will be called upon to attend and advise The Florida Bar's Ancillary Business Committee as to whether they feel current rules governing ancillary businesses should be amended to provide for full disclosure of the ancillary business arrangement and when the full protections of the attorney-client relationship will apply in ancillary businesses. (See Rule 5.7 below.)

Panel presentations are scheduled for the morning with speaker Ward Bower of Alman Weil, Inc. opening the Conference. Delegates will have the opportunity to voice opinions and vote in the afternoon.

For additional information contact Elizabeth Tarbert, staff liaison to the Ancillary Business Committee, at (850) 561-5780.



Rule 5.7: Responsibilities regarding law-related services

Law Firms and Associations

(a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b), if the law-related services are provided:

[1] by the lawyer in circumstances that are not distinct from the lawyer's provision of legal services to clients; or

[2] by a separate entity controlled by the lawyer individually or with others if the lawyer fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services of the separate entity are not legal services and that the protections of the client-lawyer relationship do not exist.

(b) The term "law-related services" denotes services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.

COMMENT

[1] When a lawyer performs law-related services or controls an organization that does so, there exists the potential for ethical problems. Principal among these is the possibility that the person for whom the law-related services are performed fails to understand that the services may not carry with them the protections normally afforded as part of the client-lawyer relationship. The recipient of the law-related services may expect, for example, that the protection of client confidences, prohibitions against representation of persons with conflicting interests, and obligations of a lawyer to maintain professional independence apply to the provision of law-related services when that may not be the case.

[2] Rule 5.7 applies to the provision of law-related services by a lawyer even when the lawyer does not provide any services to the person for whom the law-related services are performed. The Rule identifies the circumstances in which all of the Rules of Professional Conduct apply to the provision of services. Even when those circumstances do not exist, however, the conduct of a lawyer involved in the provision of law-related services is subject to those rules that apply generally to lawyer conduct, regardless of whether the conduct involves the provision of legal services. See, e.g. Rule 8.4

[3] When law-related services are provided by a lawyer under circumstances that are not distinct from the lawyer's provision of legal services to clients, the lawyer in providing the law-related services must adhere to the requirements of the Rules of Professional Conduct as provided in Rule 5.7 (a)(1).

[4] Law-related services also may be provided through an entity that is distinct from that through which the lawyer provides legal services. If the lawyer individually or with others has control of such an entity's operations, the Rule requires the lawyer to take reasonable measures to assure that each person using the services of the entity knows that the services provided by the entity are not legal services and that the Rules of Professional Conduct that relate to the client-lawyer relationship do not apply. A lawyer's control of an entity extends to the ability to direct its operation. Whether a lawyer has such control will depend upon the circumstances of the particular case.

[5] When a client-lawyer relationship exists with a person who is referred by a lawyer to a separate law-related service entity controlled by the lawyer, individually or with others, the lawyer must comply with Rule 1.8(a).

[6] In taking the reasonable measures referred to in paragraph (a)(2) to assure that a person using law-related services understands the practical effect or significance of the inapplicability of the Rules of Professional Conduct, the lawyer should communicate to the person receiving the law-related services, in a manner sufficient to assure that the person understands the significance of the fact, that the relationship of the person to the business entity will not be a client-lawyer relationship. The communication should be made before entering into an agreement for provision of or providing law-related services, and preferably should be in writing.

[7] The burden is upon the lawyer to show that the lawyer has taken reasonable measures under the circumstances to communicate the desired understanding. For instance, a sophisticated user of law-related services, such as a services, such as a publicly held corporation, may require a lesser explanation than someone unaccustomed to making distinctions between legal services and law-related services, such as an individual seeking tax advice from a lawyer-accountant or investigative services in connection with a lawsuit.

[8] Regardless of the sophistication of potential recipients of law-related services, a lawyer should take special care to keep separate the provision of law-related and legal services in order to minimize the risk that the recipient will assume that the law-related services are legal services. The risk of such confusion is especially acute when the lawyer renders both types of services with respect to the same matter. Under some circumstances the legal and law-related services may be so closely entwined that they cannot be distinguished from each other, and the requirement of disclosure and consultation imposed by paragraph (a)(2) of the Rule cannot be met. In such a case a lawyer will be responsible for assuring that both the lawyer's conduct and, to the extent required by Rule 5.3, that of non-lawyer employees in the distinct entity which the lawyer controls complies in all respects with the Rules of Professional Conduct.

[9] A broad range of economic and other interests of clients may be served by lawyers engaging in the delivery of law-related services. Examples of law-related services include providing title insurance, financial planning, accounting, trust services, real estate counseling, legislative lobbying, economic analysis social work, psychological counseling, tax return preparation, and patent, medical or environmental consulting.

[10] When a lawyer is obliged to accord the recipients of such services the protections of those Rules that apply to the client-lawyer relationship, the lawyer must take special care to heed the proscriptions of the Rules addressing conflict of interest Rules 1.7 through 1.11, especially Rules 1.7(b) and 1.8(a), (b) and (f), and to scrupulously adhere to the requirements of Rule 1.6 relating to disclosure of confidential information. The promotion of the law-related services must also in all respects comply with Rules 7.1 through 7.3, dealing with advertising and solicitation. In that regard, lawyers should take special care to identify the obligations that may be imposed as a result of a jurisdiction's decisional law.

[11] When the full protections of all of the Rules of Professional Conduct do not apply to the provision of law-related services, principles of law external to the Rules, for example, the law of principal and agent, govern the legal duties owed to those receiving the services. Those other legal principles may establish a different degree of protection for the recipient with respect to confidentiality of information, conflicts of interest and permissible business relationships with clients. See also Rule 8.4 (Misconduct).


All Bar Delegates respond to ancillary business questions

By Gary Blankenship --Associate Editor

The Florida Bar News - March 15, 1999

Shown below are All-Bar Conference delegates’ responses to questions dealing with lawyers’ ancillary business practices. The results were tabulated electronically at the conclusion of the all-day symposium February 19 in Tampa.

1. Should a lawyer in a firm owned or supervised by nonlawyers render legal advice or services to clients?
Yes: 48 percent. No: 52 percent.

2. Should a lawyer invest in a business outside the law firm that provides services to clients of the lawyer or the lawyer’s firm?
Yes: 87 percent. No: 13 percent.

3. Should a lawyer, after full disclosure, refer a client to a business in which the lawyer or members of the lawyer’s firm have an ownership interest?
Yes: 91 percent. No: 9 percent.

4. Are current Florida Bar rules sufficient to deal with the conduct of lawyers who engage in ancillary businesses?
Yes: 34 percent. No: 66 percent.

5. Should the Florida Bar adopt a specific rule that deals directly with ancillary businesses of lawyers?
Yes: 63 percent. No: 37 percent.

6. A law firm has an ownership interest in a totally separate business which provides consulting services. The consulting service is operated by nonlawyers and only nonlawyers provide the non-legal consulting services through the outside business. Customers who call the ancillary business to talk about consulting services are greeted with the name of the ancillary business and no mention is made at that time of the law firm’s ownership interest.

a. Should the consulting business be obligated to do a conflicts check with respect to clients of the law firm prior to speaking with customers?
Yes: 29 percent. No: 71 percent.

b. If a customer indicates she has a legal problem in her initial consultation with the consulting service, should the consultant mention that the law firm could handle the matter?
Yes: 80 percent. No: 20 percent.

c. Should the lawyers of the law firm solicit customers for the consulting firm even if the client does not mention needing advice on the type of matter that the consulting firm handles?
Yes: 33 percent. No: 67 percent.

d. Should the consulting firm’s business be conducted at the same location as law firm if there is a clear delineation between the law firm and the consulting firm?
Yes: 80 percent. No: 20 percent.

7. A law firm has an ownership interest in a totally separate business which provides consulting services. The consulting service is operated by nonlawyers and lawyers, and both nonlawyers and lawyers provide the non-legal consulting services through the outside business. Customers who call the ancillary business to talk about consulting services are greeted with the name of the ancillary business and no mention is made at that time of the law firm’s ownership interest.

a. Should the consulting business do a conflicts check with respect to clients of the law firm prior to speaking with customers?
Yes: 52 percent. No: 48 percent.

b. If a customer indicates he or she has a legal problem in his or her initial consultation with the consulting service, should the consultant mention that the law firm could handle the matter?
Yes: 82 percent. No: 18 percent.

c. If a client of the law firm is discussing legal representation with a member of the law firm and mentions that the client is interested in advice on a type of matter which the consulting service handles, can the law firm after full disclosure of its ownership interest, solicit the client for the consulting business?
Yes: 92 percent. No: 8 percent.

d. Should the consulting firm’s business be conducted at a location other than where the law firm is located?
Yes: 38 percent. No: 62 percent.

e. Before accepting a person for consulting services, should the consulting firm do a conflicts check to confirm whether the customer is a client of the law firm?
Yes: 46 percent. No: 54 percent.

f. Should the information provided by persons using the consulting services be considered privileged:
  • i. if the client speaks with a nonlawyer consultant? Yes: 9 percent. No: 91 percent.
  • ii. if the client speaks with a lawyer consultant? Yes: 38 percent. No: 62 percent.
g. Should the consulting firm disclose that a law firm has an ownership interest in it?

Yes: 38 percent. No: 62 percent

[Revised: 01-04-2013]