Offering law-related services?

If a law firm is considering offering law-related services, firm management faces important decisions regarding whether such services should be performed through a separate legal entity and whether they should be subject to the rules of professional conduct.?

ABA Model Rule 5.7 applies to “law-related services,” which are defined as services reasonably related to the practice of law and that would not constitute the unauthorized practice of law when performed by a nonlawyer.??Id. 5.7(b).??The rule provides two standards for determining if the Rules of Professional Conduct apply to the provision of law-related services.??First, if the services are “not distinct” from the provision of legal services, then the Rules of Professional Conduct (“RPC”) apply, for example, if the lawyer provides the services through the lawyer’s law firm, either personally or through law firm employees.??Rule 5.7(a)(1).??Second, if the lawyer provides the law-related services through a separate entity, the services are still subject to the RPC unless the lawyer “fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.”???Rule 5.7(a)(2).

????????????There are advantages and disadvantages associated with both choices.??If the services are provided through a separate legal entity, typically an LLC, nonlawyers could have an ownership interest in the entity.??If the non-legal services are performed through a law firm, in most jurisdictions, nonlawyers could not have ownership or management positions in the law firm; the District of Columbia is a notable exception. Thus, if a law firm wants a nonlawyer to have an ownership or management interest, DC excepted, it must organize a separate legal entity in which the nonlawyer has an ownership interest, and it must comply with the requirements of Rule 5.7(a)(2) “to take reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.”???The use of the separate legal entity has another advantage in addition to allowing nonlawyer ownership; the entity can avoid application of the conflict-of-interest rules that would otherwise apply to lawyers.

????????????????On the other hand, the use of a separate legal entity has disadvantages. If the entity is not subject to the RPC there is no attorney-client relationship and the ethical duty of confidentiality under Rule 1.6 and the evidentiary attorney-client privilege would not apply.??If a client has confidentiality concerns with regard to law-related services, the separate legal entity is not likely a desirable choice.??Of course, law firms could be flexible and offer clients options tailored to their specific needs.??For example, if the client is concerned about confidentiality, the nonlegal services should be offered by the law firm under the supervision of a lawyer.??On the other hand, if the client wants to retain a specific nonlawyer provider of law-related services and that provider is only available through an entity in which the provider has an ownership interest, then the services could be offered in that structure.?

???????????A recent disciplinary decision by the Massachusetts Board of Bar Overseers illustrates a number of points about a lawyer’s ethical obligations in connection with providing law-related services.?Bar Counsel v. Gosselin,?BBO #567155 (Oct. 12, 2022) and lawyers should take note of them.

See my next Ethics Watch in the SC Lawyer for more information.

Nathan M Crystal