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 94-34
A lawyer has been asked to participate as a member in a business exchange group. As a member the lawyer would provide legal services to other members at normal rates but instead of receiving cash the lawyer would receive credit for the amount of the fees which credit can be used for the purchase of goods and service from other members of the exchange. The lawyer would receive credit for the full amount of the attorney's fee but when purchasing goods and services from other members he/she would be required to pay a 10% commission to the exchange.
Question:
Is the proposed commission arrangement in violation of the Rules of Professional Conduct?
Summary:
The proposed commission arrangement would be a clear violation of the prohibition against sharing legal fees with a nonlawyer (Rule 5.4) and the prohibition against paying a non- lawyer a commission for channeling work to a lawyer (Rule 7.2 (c)).
Opinion:
Rule 5.4 prohibits a lawyer from sharing fees with a nonlawyer except in very limited circumstances, none of which apply in this situation.
It is disingenuous in the proposed business exchange relationship to suggest that because the lawyer receives credit for the full attorney's fees that there is no sharing of the fee with a nonlawyer. In the first place the credit that the lawyer receives is subject to the payment of a 10% commission to a nonlawyer when it is used for the purchase of goods and services from other members with the result that the lawyer does not in fact receive the full amount of the fee. Moreover, the member who retains the services of the lawyer is paying 10% more for the legal services than the lawyer receives and the 10% surcharge is being paid directly to a non-lawyer. The mere fact that the 10% commission does not go through the lawyer's hands and is paid directly to the non-lawyer does not affect the substance of the transaction. In such a situation the lawyer is in fact paying a non-lawyer a 10% commission for channeling work to him, a practice that is prohibited by Rule 7.2(c). While Rule 7.2(c) allows a lawyer to pay the usual charges of a not-for-profit lawyer referral service it in no way countenances the payment of a 10% commission in the proposed business exchange relationship.