UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 92-28
A) A major multi-national corporation has a contract with a legal service organization as a part of its cafeteria plan on benefits for employees. As part of this plan, the employee can contact the service organization and be given he name or names of affiliated attorneys. The Employee may then contact the attorney to provide services. The attorney has agreed to perform set services at reduced rates which are billed to the organization; any additional services requested or need by the employee are billed by the attorney directly to the employee. The employee has the right to use a different attorney if desired, and the attorney may accept or reject the employee as a client. There is no charge to the attorney to belong to the service organization.
B) A national money management membership group solicits South Carolina attorneys to become affiliated attorneys. The attorney fills out an application and sends it in. The client requests information from the group on estate planning. The service organization sends a questionnaire to the member. Once returned to the group the service organization sends the questionnaire to the attorney with a letter to the client, giving the attorney's name. The attorney is to contact the client, complete requested estate documents for a flat fee and return to the service organization for packaging and distribution to the client. The fee is paid to the attorney by the service organization. Promotional literature sent to the client by the service organization shows advertisement for these services to the client at a price different-$600.00 more expensive-than that paid to the attorney by the service organization.
Under SCACR 407, 7.2 (c) regarding a legal service organization, is either or both of these practices unethical? Also, it would seem that situation (B) may run afoul of Rule 7.3 of SCACR 407 in that the attorney is asked to contact the client. Does the fact that the client has requested assistance from the service organization negate the prohibition against direct contact with a prospective client?
Summary:
Fact situation A is permissible. Fact situation B is not.
Opinion:
Fact situation B is very similar to the situation discussed in Advisory Opinion 91-36 and violates several provisions of the Rules of Professional Conduct. Discussion of fact situation B first may be instructive in explaining why fact situation A is permissible.
Situation B raises concerns of unauthorized law practice, fee splitting, and improper solicitation. The involvement of the estate planning system at both the beginning and end of the relationship described in B raises an issue under Rule 5.5(b). The national money management membership group sends the initial questionnaire to the member. To the extent that the service organization is deciding what information is relevant and deciding what documents need to be prepared by the attorney, it would appear to be engaging in the unauthorized practice of law.
As stated in Ethics Advisory Opinion 91-36: To draft a will appropriate for an individual, a lawyer must obtain all relevant facts. The decision as to what facts are relevant is an important part of his legal work, as of course is the determination of the appropriate "type of will". Under the described arrangement neither of these functions is necessarily performed by a lawyer.
The scheme in fact situation B further violates Rule 5.4(c) in that the lawyer is permitting a person who recommends, employs and pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services. This further violates the similar provisions of Rule 1.8(f), in that the lawyer is accepting compensation for representing a client from one other than the client in a situation where there is interference with the lawyer's independent professional judgment and with the lawyer-client relationship.
The service organization in situation B appears to charge a single fee to the client and then submit a part of that fee to the lawyer. In that case, the lawyer in B is clearly splitting the legal fees with the service organization, in violation of rule 5.4(a).
Given the relationship of the lawyer to the service organization, the manner in which the lawyer-client relationship is created may be viewed as direct in-person solicitation under Rule 7.3.
Finally, if these ethical issues could be resolved, any lawyer involved in this enterprise should ensure that representations made by the company in advertising regarding legal services and their cost are not false or misleading and are not in conflict with Rule 7.3.
By comparison, fact situation A appears to violate none of these Rules. The client in A makes initial contact with the lawyer. A service organization may charge a fee to the employer for its services. There appears to be no improper splitting of legal fees, assuming that the cost to the employer is not based upon a formula in which the amount of the lawyer's fees is a factor. The lawyer is not charged to belong to the service organization. The service organization may not direct or regulate the lawyer's professional judgment in rendering such legal services.
The service organization in A makes only a referral and is not involved in procuring information from the client or directing the services of the attorney. Therefore, there is less concern in this situation than in the prior situation regarding the unauthorized practice of law.