The Florida Bar
PROFESSIONAL ETHICS OF THE FLORIDA BAR
December 15, 1964
December 15, 1964
It would be improper for a law firm to draft necessary instruments and present a pension and profit-sharing plan to the Internal Revenue Service under an arrangement whereby the law firm, though employed by a bank, will be required to represent the interests of the corporate client before the Internal Revenue Service.
Canons: 6, 27, 35
Chairman Smith stated the opinion of the committee:
Our opinion is sought in connection with the following factual situation.
The trust department of a bank has entered into an arrangement with an insurance company which has agents located throughout the state. The agents are engaged in selling pension and profit-sharing plans to corporate employers. The plan is standardized as much as possible, and the bank will act as investment and administrative trustee under the plans which are sold. A portion of the contributions made to the plans will be used to purchase life insurance, sold by the agents mentioned, which will cover employees who are covered by the plans.
The bank wishes to retain a law firm to perform certain legal services. Thus, a member of The Florida Bar is asked to draft the instruments necessary in each instance for adoption and implementation of a plan. Included would be the pension plan, a trust agreement, a form of minutes to be used by the corporate employer in adopting the plan, and a form of announcement to be used to apprise employees of the plan. He is also asked to present the plan, after its formal adoption, to the Internal Revenue Service for the purpose of qualifying it and determining that the trust shall have tax-exempt status. In order to do this, the lawyer would require a power of attorney from the corporate employer. The bank has a vital interest in assuring that the proposed plan is properly drafted and presented to the Internal Revenue Service. It wishes to employ his firm in order to assure that the necessary legal work will be expedited.
The lawyer's compensation for services rendered would be paid by the bank. The charges, however, would be passed on by the bank to the corporate employer as part of the bank's initial cost incurred in adoption of the plan. It would be made clear to the corporate employer that the lawyer is representing the bank. The corporate employer would be invited to retain its own attorney to assist in and review the work done by the lawyer's firm.
It is the unanimous opinion of the Committee that the proposed arrangement involves ethical improprieties which should be avoided.
Canon 6 is involved. That Canon deals with conflicts of interest. Herein, the firm, though acting initially for the bank, will be required to represent the interests of the corporate employer before the Internal Revenue Service. It will also draft instruments which the corporate employer must use and adopt in order to effectuate a plan. Although it is not necessarily unethical to represent conflicting interests, it is the opinion of this Committee that such representation should be avoided wherever possible, particularly where there is possibility of substantial conflict and where the attorney has a basic allegiance to, and receives his employment and compensation from, only one of the parties whose interest is involved.
In this instance, objectionable aspects of the arrangement could be eliminated by arrangement for the corporate employer to employ its own attorney to prepare or review all instruments which the bank requires and to represent it before the Internal Revenue Service. The Committee believes this would be the better practice. The bank can make arrangements with the employer which will resolve absorption of the legal costs. The costs of the lawyer's services to the bank can be passed on by the bank as a charge of the trusteeship, if the bank chooses to do so. The bank can arrange to reimburse the corporate employer for reasonable attorney's fees incurred by the employer, if the bank wishes to do so.
A majority of the Committee was principally concerned in this case with the problem of conflicting interests. Two members of the Committee, however, also suggest that Canons 27 and 35 may also be involved. In their opinion, the present arrangement could also lead, in effect, to the insurance agents channelling legal employment to a law firm, contrary to the spirit of Canon 27, and to practicing law for another through an intermediary, contrary to Canon 35. It is believed the Committee's suggestion that separate counsel be employed by the corporate employer would tend to obviate these objections also.