Ethics Opinion 225
Prepaid Legal Services
A law firm does not violate any Rule of Professional Conduct by participating in a prepaid legal services program under which a third-party (1) pays the law firm a fee for providing legal advice to individual subscribers and (2) markets the service to potential subscribers, if the individual subscribers consent to payment of the law firm's fees by the third-party after consultation.
The usual rules governing the attorney-client relationship are fully applicable to the firm's relationship with its clients, the individual subscribers, including, for example, the duty to represent the interests of its clients diligently and zealously, without interference from any third-party, to protect client confidences and secrets, and to avoid conflicting representations that will hamper adequate representation of the client. In addition, the interposition of the third-party marketing agent for the service does not relieve the law firm of its responsibilities under Rule 7.1 to avoid any false or misleading statements about the services offered under the program.
Applicable Rules
- Rule 1.3 (Diligence and Zeal)
- Rule 1.6 (Client Confidences and Secrets)
- Rule 1.7 (Conflicts of Interest)
- Rule 1.8(e) (Payment of Legal Fees by a Third Party)
- Rule 5.4(e) (Interference with Independent Professional Judgment)
- Rule 5.5 (Unauthorized Practice of Law)
- Rule 7.1 (Communications Concerning a Lawyer's Services)
Inquiry
Company A, which publishes a bi-monthly newsletter concerning legal and tax developments that affect churches and clergy and presents continuing education seminars for church leaders, proposes to offer a new service under which subscribers to the new service will obtain general legal advice about federal tax issues concerning matters such as (1) withholding, reporting, and depositing federal income and social security taxes, (2) the exclusion of a minister's housing allowance under § 107 of the Internal Revenue Code, and (3) the deduction of contributions to a church under § 170 of the Code. A relatively small annual fee of approximately $100 would entitle the subscriber to make unlimited inquiries through the service.
Company A will market the service to potential subscribers and keep records of the subscribers, but will not be involved in the provision of legal advice. Each subscriber will sign a contract specifying the nature of the services available; the types of services that are not available; the relationships among Company A, the law firm, and the subscriber; disclosing that the law firm's fee will be paid by Company A; prohibiting Company A from interfering with the attorney-client relationship between the law firm and the subscriber; and seeking the subscriber's consent to payment of the law firm's fee by Company A.
Specifically, we are advised that the subscriber agreement will include the following paragraph:
Lawyer-client relationship. [Company A] and the [subscriber] agree that any legal services provided to the [subscriber] under this Agreement will be provided by one or more licensed attorneys who are paid a fee by, but are not employees of [Company A], and who are familiar with the topics concerning which [Company A's publications] are available. Accordingly, the [subscriber] and [Company A] agree that:
(a) When services are obtained by the [subscriber], an attorney-client relationship will exist between the [subscriber] and the attorney or attorneys providing the services;
(b) [Company A] will not interfere in any manner with the attorneys' independence of professional judgment or with the lawyer-client relationship described in paragraph (a);
(c) Confidences and secrets disclosed by the [subscriber] to any attorney providing the services to the [subscriber] will not be disclosed by the attorney to [Company A] or any other person without the [subscriber's] prior consent;
(d) [Company A] and any of its principals, partners, or employees shall not be liable for any claim for damages, penalties, or interest in any way on the provision of erroneous information or advice under this Agreement; and
(e) Having read and understood the foregoing paragraphs (a)-(d), the [subscriber] consents to the payment of a fee for the services by [Company A] to the attorney or attorneys who provide the services under this Agreement.
After the subscriber contract is accepted by Company A, the subscriber will be given a telephone number and account number to use in obtaining services under the agreement.
The inquirer, a law firm in the District of Columbia, proposes to contract with Company A to make one or more of its experienced tax lawyers available to answer subscriber questions. The basis for the firm's fee has not yet been established. Individual subscribers would not pay the law firm directly for any services rendered under the contract, but Company A and the law firm recognize that the firm would be providing legal advice to individual calling subscribers and that the firm's client in each instance would be the subscriber and not Company A.
For services outside the scope of the contract, the subscriber would be advised to hire individual counsel. The subscriber would be free to retain the law firm on a "fee-for-service basis" or hire other counsel.
Discussion
Nothing in the Rules of Professional Responsibility purports to limit or discourage the use of innovative ways of providing basic legal services.1 As the Committee explained in construing the Code, "there is nothing improper per se about the formation of a prepaid legal services plan. Innovative approaches and fresh ideas in this area may result in the availability of necessary low-cost legal services to individuals who could not previously afford to employ an attorney. This wider availability is a goal to which the profession is, and should be, committed. The committee encourages the development of new approaches to the provision of legal services, so long as those approaches conform to the general and accepted norms of ethical conduct designed to protect the public and the profession." Opinion No. 91 (1980).
Rule 1.8
Since Company A will pay the law firm's fee for services under the contract, Rule 1.8 (e) requires that the client (i.e., the individual subscriber) "consent[] after consultation."2 The heart of the proposal is that for a relatively small fee paid to Company A, subscribers will be entitled to limited, general legal advice concerning certain types of federal tax issues. As described above, the agreement between Company A and subscribers to the service explains that the law firm's fees for services under the contract will be paid by Company A, explains the nature of the relationship that will exist between the subscriber and the law firm, provides assurance that Company A will not interfere with the attorney-client relationship between the subscriber and the firm, and requires that the subscribers consent to the payment of fees by Company A. In this context, we believe the requirements of Rule 1.8(e) are satisfied by these provisions.
Rule 5.5
In Opinion No. 182 we considered a very different sort of proposal under which lawyers who were both employees of a consulting firm and partners in a law firm provided legal services to law firm clients who had no relationship with the consulting firm. The clients paid the law firm at its standard rates, and the law firm proposed to compensate the consulting firm for the time spent by the lawyers employed by the consulting firm in serving the law firm's clients. In that context, we explained:
[W]hen a lay organization sells, loans or rents the time of lawyers to be engaged in the practice of law on behalf of clients unrelated to the lay organization at rates that are expected to return a profit to that organization, the lay organization is engaged in the unauthorized "business" of practicing law. Likewise, a law firm that would assist or participate in such a procedure would violate DR 3-101(A) by aiding in the unauthorized practice of the law.
The critical facts in Opinion No. 182 were that (1) employees of a lay consulting firm (2) were to provide legal services to a law firm's clients, (3) for which the law firm was to pay a fee to the consulting firm. Opinion No. 94 is similar in that it involved a proposal to have lawyers employed in the general counsel's office of a trade association provide legal services to another association for a fee to be paid to the lawyers' employer. We approved the Opinion No. 94 proposal. In disapproving the proposal in Opinion No. 182, however, we distinguished the result in Opinion No. 94 on the ground that the entity to whom the in-house lawyer was to provide legal services was a related trade association.
In contrast to both of the proposals considered in Opinion Nos. 182 and 94, the attorneys who will provide legal services to Company A's subscribers are not employees of Company A. No employee of Company A will participate in providing legal services to anyone. Thus, compensation received by Company A is attributable solely to its efforts in establishing, marketing, and administering the service, and not to providing legal services. In these circumstances, Company A cannot be said to be engaged in the practice of law through the activities of any of its employees.
Rule 7.1
Company A (and not the law firm) will solicit potential subscribers for the service. Nonetheless, Rule 7.1 governing communications concerning a lawyer's services is fully applicable.3 Legal advice is the service being offered to potential subscribers. Interposition of a marketing agent does not diminish the lawyer's obligation to avoid false or misleading statements about his services. Accordingly, the law firm must satisfy itself that statements by Company A concerning the service are not false or misleading within the meaning of Rule 7.1. In particular, it is essential that both the limited nature of the services being offered and the possibility of additional expense be described clearly to avoid misleading potential subscribers as to what is being purchased. Cf. Opinion No. 91 (1980).
Other Rules
As the parties recognize, the individual subscriber and not Company A will be the law firm's client. The lawyer's obligations to individual subscribers will include all of a lawyer's usual duties to his client including, for example, the duty (1) to maintain confidences and secrets, Rule 1.6, (2) to exercise independent professional judgment on behalf of the individual subscriber without interference from Company A or anyone else, Rules 1.8 (e) and 5.4(c), and (3) to decline any representation that may conflict with the duty of loyalty or zealous representation of the individual subscriber, Rule 1.7. Accordingly, subject to the foregoing, we find nothing in the Rules of Professional Conduct that precludes a law firm's participation in offering the proposed service.
Inquiry No. 91-6-21
January 1992
1. The Committee considered several prepaid legal services proposals under the Code of Professional Responsibility. Opinion No. 170 (1986); Opinion No. 155 (1985); Opinion No. 91 (1980); Opinion No. 30 (1977).
2. Rule 1.8(e) provides that "A lawyer shall not accept compensation for representing a client from one other than the client unless: (1) the client consents after consultation; (2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; and information relating to representation of a client is protected as required by Rule 1.6."
For purposes of the Rules, "'consent' denotes a client's uncoerced assent to a proposed course of action, following consultation with the lawyer regarding the matter in question." Terminology [2]. Similarly, "'consult' or 'consultation' denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question." Terminology [3].
3. Rule 7.1 is, in pertinent part, as follows:
(a) A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it: (1) Contains a material misrepresentation of fact of law, or omits a fact necessary to make the statement considered as a whole not materially misleading; or
(2) Contains an assertion about the lawyer or the lawyer's services that cannot be substantiated.
(b) A lawyer shall not seek by in-person contact, or through an intermediary, employment (or employment of a partner or associate) by a nonlawyer who has not sought the lawyer's advice regarding employment of a lawyer, if:
(1) The solicitation involves use of a statement or claim that is false or misleading, within the meaning of paragraph (a);
(2) The solicitation involves the use of undue influence;
(3) The potential client is apparently in a physical or mental condition which would make it unlikely that the potential client could exercise reasonable, considered judgment as to the selection of a lawyer;
(4) The solicitation involves use of an intermediary and the lawyer knows or could reasonably ascertain that such conduct violates the intermediary's contractual or other legal obligations; or
(5) The solicitation involves the use of an intermediary and the lawyer has not taken all reasonable steps to ensure that the potential client is informed of (a) the consideration, if any, paid or to be paid by the lawyer to the intermediary, and (b) the effect, if any, of the payment to the intermediary on the total fee to be charged.
(c) A lawyer shall not knowingly assist an organization that furnishes or pays for legal services to others to promote the use of the lawyer's services or those of the lawyer's partner or associate, or any other lawyer affiliated with the lawyer or the lawyer's firm, as a private practitioner, if the promotional activity involves the use of coercion, duress, compulsion, intimidation, threats, or vexatious or harassing conduct."
