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Powerpoint Chapter 2. The Basic Elements of Law Practice. Chapter 2 Overview. 2. The Basic Elements of Law Practice A. Unauthorized Practice B. Creating the Lawyer-Client Relationship C. Ending the Lawyer-Client Relation D. Competence
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Powerpoint Chapter 2 The Basic Elements of Law Practice
Chapter 2 Overview • 2. The Basic Elements of Law Practice • A. Unauthorized Practice • B. Creating the Lawyer-Client Relationship • C. Ending the Lawyer-Client Relation • D. Competence • E. Allocating Decision-Making Between Lawyer and Client
Basic Principles of Unauthorized Practice • Is the law prohibiting unauthorized practice found in the Rules? • Yes and No. • Rule 5.5 (governs unauthorized practice by lawyers) (Comment “[2] The definition of the practice of law is established by law and varies from one jurisdiction to another.” ) • Criminal and Civil Liability
How can lawyers engage in unauthorized practice of law? • Rule 5.5
What case provides the general rule for permissible nonlawyer practice? • Brumbaugh
What Rule explains the lawyer’s obligations in supervising nonlawyers? • Rule 5.3
What Rules govern ancillary businesses? • Rule 5.7 & Rule 1.8
What Rule determines whether lawyer not admitted to practice in a particular jurisdiction is engaged in unauthorized practice? • Rule 5.5
What Rule provides choice of law rules for multijurisdictional practice? • Rule 8.5
Question 2-1 What is the bar's rationale for restrictions on non-lawyer practice? • A. Protecting the legal profession from competition. • B. Protecting consumers from incompetent and unethical practitioners. • C. Preventing innovation in the delivery of legal services. • D. None of the above.
Rule 5.5 Comment 2 (“limiting the practice of law to members of the bar protects the public against rendition of legal services by unqualified persons”) • Brumbaugh (“not done to aid or protect the members of the legal profession,” “done to protect the public from being advised and represented in legal matters by unqualified persons over whom the judicial department can exercise little, if any, control in the matter of infractions of the code of conduct which, in the public interest, lawyers are bound to observe”)
What doctrine we discussed in Chapter 1 explains this answer? Why?
2-2 As a general rule, in most jurisdictions a non-lawyer may do the all of following except: • A. Sell legal forms. • B. Type in the blanks in legal forms for a customer. • C. Publish books advising people on how to complete legal forms. • D. Advise customers in person on how to complete legal forms. • E. No exceptions - a non-lawyer may perform all of the above. • Brumbaugh (facts and holding) • Dacey
Legal Software • Nolo.com • Nolo.com video • Nolo Estate Planning Video
2-3 Legal Software Inc. makes available to consumers a program that helps them fill out legal forms. Based on the answers, the program helps the consumer complete the appropriate form, suggesting specific provisions tailored to the consumer's needs and preferences. Has Legal Software Inc. engaged in unauthorized practice of law? • A. According to the traditional rule, no because software is the same as a book. • B. According to the traditional rule, no because the service is not personalized. • C. According to the traditional rule, yes because the service is personalized. • D. According to the traditional rule, yes, but the rule has changed to permit legal software. • Parsons Technology
2-4 An attorney is a senior partner at a law firm in which there are 50 lawyers. The firm pays each of its lawyers a fixed annual salary. In addition, at year's end, each lawyer receives a bonus from the profits of the firm in the proportion that the annual salary of each bears to the total of the fixed annual salaries of all lawyers. The attorney plans to introduce a new management plan under which the firm's non-lawyer office administrator would have general charge of all business matters but would not participate in any decisions involving legal judgment. The administrator would be paid a fixed annual salary and would be included as a participant in the firm's bonus plan on the same basis as the lawyers in the firm. This would usually yield a bonus of approximately one-fourth to one-third of the administrator's total annual compensation. The amount paid to the administrator will not exceed the compensation commonly paid to law office administrators within the local legal community. Is it proper for the attorney to institute such a plan? • A. Yes, because an employee of the firm may be compensated based on the profits of the firm. • B. No, because the administrator's bonus is computed on the same basis as those of the lawyers in the firm. • C. No, because the administrator's compensation is derived from the legal needs of the firm's lawyers. • D. No, because the administrator's compensation is derived from the legal needs of the firm's lawyers.
The Lawyer Must be the Boss • Rule 5.5 Comment (“This Rule does not prohibit a lawyer from employing the services of paraprofessionals and delegating functions to them, so long as the lawyer supervises the delegated work and retains responsibility for their work. See Rule 5.3.) • Rule 5.3: With respect to a nonlawyer employed or retained by or associated with a lawyer: • (a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person's conduct is compatible with the professional obligations of the lawyer; • (b) a lawyer having direct supervisory authority over the nonlawyershall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer; and • (c) a lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if: • (1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or • (2) the lawyer is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.
Rule 5.4: • (a) A lawyer or law firm shall not share legal fees with a nonlawyer (with exceptions) (b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law. • (d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if: • (1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration; • (2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation ; or • (3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.
Exceptions to Rule 5.4(a) • (a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that: • (1) an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate or to one or more specified persons; • (2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price; • (3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement; and • (4) a lawyer may share court-awarded legal fees with a nonprofit organization that employed, retained or recommended employment of the lawyer in the matter.
2-5An attorney is a member of the bar and a salaried employee of a bank's trust department. As part of his duties, he prepares a monthly newsletter concerning wills, trusts, estates, and taxes that the bank sends to all of its customers. The newsletter contains a recommendation to the customer to review his or her will in light of the information contained and, if the customer has any questions to bring the will to the bank, where the attorney will review the customer's will and answer the customer's legal questions. The bank provides that attorney's services to its customers for no charge. Is the attorney subject to discipline for the foregoing? • A. Yes, because by sending out the newsletter the attorney is giving legal advice to persons who are not his clients. • B. Yes, because the attorney is assisting the bank in the unauthorized practice of law. • C. No, because no charge is made for the attorney's advice. • D. No, because the attorney is a member of the bar.
1. Can a Corporation practice law? • Review UPL: Who can practice law? • 2. Does a lawyer face discipline for helping a Corporation practice law? • Rule 5.5 (a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.
2-6 A business attorney entered into a partnership with a certified public accountant. The partnership provided legal and other assistance to clients in connection with business and tax planning, tax filings, and other personal and corporate business matters. The accountant performed only work that she was authorized to perform as a certified public accountant. The attorney made reasonable efforts to ensure that the accountant did not interfere with the attorney's compliance with his professional obligations as a lawyer. Is the attorney subject to discipline? • A. Yes, because some of the activities of the partnership consisted of the practice of law. • B. Yes, because lawyers may not form partnerships with nonlawyers. • C. No, because the accountant performed only work that she was authorized to perform as a certified public accountant. • D. No, because the attorney made reasonable efforts to ensure that the accountant did not interfere with the attorney's compliance with his professional obligations as a lawyer.
Rule 5.4 • (b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law. • (d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if: • (1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration; • (2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation ; or • (3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.
Do the Rules permit multidisciplinary practice? • Only if the lawyer is the boss. See Rule 5.4. • Compare U.K.: Alternative Business Structures
Why are public interest legal organizations permitted to be corporations and to include nonlawyers on their boards? • Rule 5.4 (d) • d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if: • (1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration; • (2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation ; or • (3) a nonlawyer has the right to direct or control the professional judgment of a lawyer. • Rule 5.4 (a) • (a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that: • (4) a lawyer may share court-awarded legal fees with a nonprofit organization that employed, retained or recommended employment of the lawyer in the matter.
Why could in-house counsel potentially be a problem under Rule 5.4? • The Rationale for Rule 5.4 • Rule 5.4 (a) and (c) • Why are in-house counsel permitted?
2-7 Joan Lawyer has a leading real estate practice in Small County. She is also part owner of Small County Title. She suggests to her clients who purchase real estate that they consider purchasing their title insurance from Small County Title. Joan discloses that she owns the company and recommends that her clients consider the rates and policies of competing title insurance companies. She explains that the services provided by Small County Title are not legal services and that the legal ethics rules do not apply to the purchase of title insurance. Joan suggests that clients feel free to consult another lawyer as to whether they should purchase title insurance from a company their real estate lawyer owns. The rates and policies that Small County Title offers are comparable to those of its competitors. Which of the following is true: • A. Joan is not subject to discipline if the clients give informed consent in writing. • B. Joan is not subject to discipline because she informs clients of the opportunity to consult independent counsel. • C. Joan is not subject to discipline because the rates and policies of Small County Title are comparable to those of its competitors. • D. Joan is subject to discipline unless she complies with all three requirements listed above.
What’s the first question in analyzing conduct regarding ancillary businesses? • Are the services “law-related”? • Rule 5.7(a): A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b)” • How do you answer that question? • Rule 5.7 (b): (b) The term "law-related services" denotes services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer. • Comment [9] A broad range of economic and other interests of clients may be served by lawyers' engaging in the delivery of law-related services. Examples of law-related services include providing title insurance, financial planning, accounting, trust services, real estate counseling, legislative lobbying, economic analysis, social work, psychological counseling, tax preparation, and patent, medical or environmental consulting.
If the ancillary services are law related, what is the next question? • Is the lawyer “subject to the Rules of Professional Conduct with respect to the provision of law-related services?” • Why does this matter? • How do we answer this question? • Rule 5.7 (a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b), if the law-related services are provided: • (1) by the lawyer in circumstances that are not distinct from the lawyer's provision of legal services to clients; or • (2) in other circumstances by an entity controlled by the lawyer individually or with others if 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.
If the lawyer complies with the letter of Rule 5.7, what further question must be answered? • Comment [5] When a client-lawyer relationship exists with a person who is referred by a lawyer to a separate law-related service entity controlled by the lawyer, individually or with others, the lawyer must comply with Rule 1.8(a). • Rule 1.8(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless: • (1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client; • (2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and • (3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
Who has the burden of persuasion under Rule 5.7? • Comment [7] The burden is upon the lawyer to show that the lawyer has taken reasonable measures under the circumstances to communicate the desired understanding. For instance, a sophisticated user of law-related services, such as a publicly held corporation, may require a lesser explanation than someone unaccustomed to making distinctions between legal services and law-related services, such as an individual seeking tax advice from a lawyer-accountant or investigative services in connection with a lawsuit.
2-8Giant Manufacturer wants to buy widgets from Small Producer. Both Giant and Small are headquartered in California. Small's outside counsel, John Lawyer, admitted to practice in New York, travels to California from his New York office to negotiate the deal on Small's behalf. After extensive negotiations, Giant agrees to pay Small $10 million for the widgets. John bills Small $500 thousand for legal fees. Small believes the fee is far too high and refuses to pay. It retains a California lawyer and decides to argue that it does not have to pay anything to John Lawyer because he was engaged in unauthorized practice of law. Small's argument: • A. will fail because John is admitted to practice in New York. • B. will fail because this was not a litigation matter. • C. will fail because the legal services market is national and not restricted to a particular state. • D. will succeed because John is not admitted to practice in California.
Birbrower • Later statutory amendment • arbitration
Result under Rules? • Rule 5.5 (c) A lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services on a temporary basis in this jurisdiction that: • (1) are undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter; • (4) are not within paragraphs (c)(2) or (c)(3) and arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice.
2-9 Joan Jones is an associate at Franklin & Ignatius. She is admitted to the New York Bar. The firm sends her to the State of Sirius to appear in court in a case where the firm has been admitted pro hac vice. Has she committed UPL? • Yes • No
Rule 5.5 • (a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so. • (b) A lawyer who is not admitted to practice in this jurisdiction shall not: • (1) except as authorized by these Rules or other law, establish an office or other systematic and continuous presence in this jurisdiction for the practice of law; or • (2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in this jurisdiction. • (c) A lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services on a temporary basis in this jurisdiction that: • (2) are in or reasonably related to a pending or potential proceeding before a tribunal in this or another jurisdiction, if the lawyer, or a person the lawyer is assisting, is authorized by law or order to appear in such proceeding or reasonably expects to be so authorized; • What does pro hac vice mean? • The Free Dictionary: • Latin for "this time only," the phrase refers to the application of an out-of-state lawyer to appear in court for a particular trial, even though he/she is not licensed to practice in the state where the trial is being held. The application is usually granted, but sometimes the court requires association with a local attorney.
2.10 Did Joan Jones violate UPL when she entered Sirius to investigate and prepare the case before the firm was admitted pro hac vice? • Yes • No • Rule 5.5 (c)(2): [the legal services provided on a temporary basis] are in or reasonably related to a pending or potential proceeding before a tribunal in this or another jurisdiction, if the lawyer, or a person the lawyer is assisting, is authorized by law or order to appear in such proceeding or reasonably expects to be so authorized;
2-11 Would she have violated UPL if the firm had brought an arbitration on behalf of its client and not a court case? • Yes • No • Rule 5.5 (c)(3): [the legal services provided on a temporary basis] are in or reasonably related to a pending or potential arbitration, mediation, or other alternative dispute resolution proceeding in this or another jurisdiction, if the services arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission;
2-12 Does Joan violate UPL if she transfers full-time to F&I's Sirius office and works under the supervision of a Sirius admitted attorney? • Yes • No • Rule 5.5 (c)(1) [the legal services] are undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter; • What term in Rule 5.5 (c) makes her conduct a violation? • “on a temporary basis”
What other temporary legal services may be provided under Rule 5.5? • (4) are not within paragraphs (c)(2) or (c)(3) and arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice.
2-13 Does Joan commit UPL if she leaves F&I to become in-house counsel at Monolith, Inc., located in Sirius? • Yes • No • Rule 5.5 (d): A lawyer admitted in another United States jurisdiction or in a foreign jurisdiction, and not disbarred or suspended from practice in any jurisdiction or the equivalent thereof, may provide legal services through an office or other systematic and continuous presence in this jurisdiction that : • (1) are provided to the lawyer’s employer or its organizational affiliates; are not services for which the forum requires pro hac vice admission; . . . . or • (2) are services that the lawyer is authorized by federal or other law or rule to provide in this jurisdiction.
Does Rule 5.5 apply to foreign lawyers? • Rule 5.5 (d) A lawyer admitted in another United States jurisdiction or in a foreign jurisdiction, and not disbarred or suspended from practice in any jurisdiction or the equivalent thereof, may provide legal services through an office or other systematic and continuous presence in this jurisdiction that : • (1) are provided to the lawyer’s employer or its organizational affiliates; are not services for which the forum requires pro hac vice admission; and, when performed by a foreign lawyer and requires advice on the law of this or another jurisdiction or of the United States, such advice shall be based upon the advice of a lawyer who is duly licensed and authorized by the jurisdiction to provide such advice; or • (2) are services that the lawyer is authorized by federal or other law or rule to provide in this jurisdiction. • (e) For purposes of paragraph (d), the foreign lawyer must be a member in good standing of a recognized legal profession in a foreign jurisdiction, the members of which are admitted to practice as lawyers or counselors at law or the equivalent, and are subject to effective regulation and discipline by a duly constituted professional body or a public authority.
2-14 Joan rejoins F&I as a partner in its New York office. As a corporate partner, she is in charge of representing ABC, Inc., based in New Jersey, in its takeover of DEF, Inc., based in New York. Her team includes Jim, a NY lawyer coordinating the NJ litigation, and Jane, a corporate associate admitted in NY and NJ. They discover ABC has made a fraudulent statement relevant to the litigation. NJ requires disclosure. NY does not. The F&I lawyers do not disclose. Which of the following is true? • A. If the predominant effect is in NJ, all face discipline absent contrary reasonable belief. • B. Only Jane faces discipline because she is a NJ lawyer. • C. Only Jim faces discipline because he is litigating the matter in NJ. • D. None face discipline because NY does not require disclosure.
When you provide legal services outside the jurisdiction you are admitted, to what disciplinary authorities are you subject? Rule 8.5 (a) Disciplinary Authority. A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer's conduct occurs. A lawyer not admitted in this jurisdiction is also subject to the disciplinary authority of this jurisdiction if the lawyer provides or offers to provide any legal services in this jurisdiction. A lawyer may be subject to the disciplinary authority of both this jurisdiction and another jurisdiction for the same conduct.
The Rules of which jurisdiction govern your conduct? • (b) Choice of Law. In any exercise of the disciplinary authority of this jurisdiction, the rules of professional conduct to be applied shall be as follows: • (1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and • (2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. • [Safe Harbor:] A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.
