PEC supports opinion that would allow Florida lawyers to passively invest in out-of-state firms that include nonlawyers
The Bar’s Professional Ethics Committee voted unanimously to support Proposed Advisory Opinion 23-1 allowing a Florida attorney to be a passive investor in an alternative business structure (ABS) in another state that allows non-lawyer ownership of law firms during its meeting at the Bar’s Annual Convention on June 23.
The opinion, now in its final form, heads to the Board Review Committee on Professional Ethics for review.
At the same meeting, the PEC approved a staff opinion holding nonlawyers may not hold the title of “chief executive officer” at a law firm, even if their role is divorced from the practice side of the business.
While alternative business structures are prohibited in Florida, under current Arizona law they are legal — so long as the investors are not involved in providing legal services.
In March of 2022, Bar staff initially declined to issue an opinion based on a lack of Florida precedent in this area. The inquirers, however, requested the PEC review the denial.
Last October, the PEC voted 26-9 to direct committee staff to work on a draft opinion. The committee was scheduled to hear the draft at the Bar’s Winter Meeting in January; however, the attorney representing the inquirers, Richard Greenberg of Tallahassee, requested more time to present additional information supporting his position.
At convention, Greenberg provided an alternative draft using ABA’s Formal Ethics Opinion 499 as a precedent.
Published in September 2021, that opinion states that, even if a lawyer is admitted to practice law in a jurisdiction that does not authorize non-lawyer ownership of law firms, a lawyer may passively invest in an ABS in another jurisdiction so long as the relevant jurisdiction permits those entities.
In the proposed advisory opinion, the committee found the Florida attorney’s participation as a passive investor in an ABS permissible so long as it met certain criteria.
The proposed opinion states the ABS cannot have any presence in Florida nor can it provide Florida legal services, the ABS must comply with all requirements of the jurisdiction that permits it, the Florida investor cannot have a managerial role or be involved in the daily operations of the ABS, and the Florida attorney may not have access to any confidential information regarding the ABS.
Greenberg said his client and the ABS will comply with ABA Formal Opinion 499, and the ABS will practice law solely in Arizona.
In other action, the PEC held Rule 4-8.6(c) prohibits law firms from identifying a nonlawyer as its “chief executive officer.”
Under consideration was Florida Bar Staff Opinion 43517, regarding whether a law firm may ethically identify a nonlawyer as its “Chief Executive Officer” when the nonlawyer will not perform a policy-making function, supervise the practice of law, be paid a salary and bonuses unconnected to the law firm’s profits, and report directly to the firm’s managing partner.
The staff opinion concluded that Bar rules prohibit a nonlawyer from having the CEO title regardless of these limitations. The motion to approve the staff opinion passed 14-4.
