Time to choose: are you Illinois or New Jersey?

Blackhawks or Devils?

Bulls or Nets?

Barack Obama or Chris Christie?

Northwestern or Rutgers?

Kanye or Wu-Tang Clan?

Wilco or Bruce Springsteen?

Some of those are easy calls; some are harder decisions to make.  What they all have in common though is that one comes out of Illinois and the other comes out of New Jersey.

As to the future of legal ethics, we now face a similar decision that has to be made.  Are you down with what is coming out of Illinois or will you choose what New Jersey has to offer?

I’ll explain further.  Avid readers of this space will be well aware that I have devoted quite a few bits and bytes to discussions of the evolving market for legal services and the push/pull in place between companies that push the envelope of what lawyers can do under existing ethics rules and various ethics opinions that have been released explaining how lawyers can or cannot do business with such companies.  In order to avoid spamming this post with about 10-15 links to previous posts of mine, I’ll just say that if you are just getting here for the first time (welcome!), then look through the older posts for ones with the tag “Future of Legal Ethics” and you are sure to find one pretty quickly that discusses these topics.

Within the last couple of weeks, these have been the two developments that pretty nicely identify the choice that lawyers (and the legal profession) face.

First there is the Illinois development.  The Illinois ARDC — which is Illinois’s regulatory and disciplinary agency [Attorney Registration and Disciplinary Committee] — issued a more than 100-page report making the case for why the ethics rules need to be overhauled to permit lawyers to ethically participate in “lawyer-matching services” such as Avvo and other platforms but that, along with such changes, there need to be regulations adopted to impose certain requirements on such companies and platforms for lawyers to be able to participate.

In large part, much of what Illinois describes sounds a bit like a subtle variation on RPC 7.6 in Tennessee that I have written about in the past.  But it still also requires fundamental changes to other pieces of the ethics rules addressing financial arrangements between lawyers and those not licensed to practice law.

By way of juxtaposition, the New Jersey Supreme Court, asked to review a joint opinion issued by its legal ethics regulatory body, its advertising regulatory body, and its body focused on UPL aligned with other jurisdictions that have issued ethics opinions prohibiting lawyers from participating in programs like Avvo Legal Services, declined to review the opinion or otherwise disagree with its conclusions.

For my part, I think the choice is an easy one to make.

But, the most important thing for today (IMO) is for people to understand that there really is not a middle ground position here — you are going to have to make a choice and you are going to have to decide that you are either on board with the Illinois approach or the New Jersey approach to this topic.

Choose wisely.

A tale of two ethics opinions.

So, I’ve made something of a habit of writing about ethics opinions.  Bad ones and good ones.  Mostly bad ones though.

As the trite – almost hackish – title of this post telegraphs, today I want to compare and contrast two recently released ethics opinions that manage to demonstrate the good that can come from a well done ethics opinion on the kind of issue that cries out for guidance in the form of an ethics opinion and the harm that can come from the kind of ethics opinion that likely should not be issued at all.

First, the good – an opinion issued out of Texas (which Karen Rubin has already written some about) that tackles a thorny problem that can confront a lawyer who has been retained by an insurance company to represent one of the company’s insureds in a piece of litigation.

The particular question addressed in Texas Opinion 669 is this:

Under the Texas Disciplinary Rules of Professional Conduct, may a lawyer retained by an insurance company notify the insurance company that the insured client he was assigned to represent is not cooperating in the defense of the client’s lawsuit?

The answer the Texas opinion provides, as difficult as it might be for insurance defense lawyers to hear, is “no.”  And, that answer is the correct one in any jurisdiction where the way the “tripartite” relationship is structured is that the lawyer’s only client is the insured and the insurance company is merely someone who is permitted to pay the lawyer’s bills as long as the lawyer complies with the state’s version of Model Rules 1.8(f) and 5.4(c).

In Tennessee, for example, RPC 1.8(f) specifically states one of the requirements for permitting the lawyer to accept compensation or direction from someone other than the client as being that “information relating to representation of a client is protected as required by RPC 1.6.” (Interestingly, the Texas opinion makes no mention of, or reference to, any of those kinds of rules but simply uses only its confidentiality rule to justify its analysis.)

The unfortunate opinion comes out of Virginia.  Virginia, you might recall, recently made a great leap forward in streamlining its rules on attorney advertising by revising its rules to look very much like the proposal circulated by APRL.  After adoption of those revisions, which became effective on July 1, 2017, Virginia’s ethical restrictions on advertising were largely capable of being described as simply prohibiting false or misleading communications.

Unfortunately, with the issuance of Legal Ethics Opinion 1750, Virginia manages less than a year later to undermine much of its progress by simply re-issuing and updating a lengthy opinion it has released on multiple past occasions that attempts, in advance and not in response to evaluating any particular real advertisement, to provide “guidance” about what kinds of advertising practices should still be avoided because of the potential to be considered to be misleading.

Unlike the Texas opinion, which answered a real dilemma that lawyers can face and for which definitive guidance can be provided, the Virginia opinion is the kind of ethics opinion designed almost exclusively to chill commercial speech.  Even if the guidance it gave on all of the topics it unilaterally decided to address were correct, it would still be the type of opinion that ought not be issued.

Certainly, it says some things that are undoubtedly true and fun to read about ways that a lawyer could engage in truthful advertising that would still be a problem because it would be misleading by omission.  I’ve spoken at seminars before where I’ve tried to make this point by saying that a lawyer whose ad truthfully proclaimed “I’ve never lost a jury trial,” but fails to also mention, for context, that they’ve never actually been involved in a jury trial is going to be at risk under any fair set of ethics rules.  The Virginia opinion grabs a slightly different version of this rich vein by explaining that a lawyer truthfully crowing that “They secured a $1 million jury verdict in case,” but not mentioning that it came only after turning down a $2 million settlement offer before trial would have disseminated a misleading advertisement.

But, even that guidance is something that really ought not be opined about unless there were an actual lawyer seeking actual guidance about just that sort of advertisement.

So many other pieces of the opinion are even worse, however.   Cautions about using actors in ads, hand-wringing over “no recovery, no fee” statements, and subtle digs at the use of testimonials by actual clients in the opinion appear to be rolled back out for no real reason other than to undermine the progress on lawyer regulation of advertising that had appeared to be achieved by streamlining the rules themselves.

TIKD off my list.

Some day I’m going to get tired of having pun with TIKD titles, and you’ve probably already gotten tired of me doing it, but today is not that day for me.  I was looking to find something to be able to easily write about today before scrambling out of town for some speaking engagements and meetings and Roy Simon has come through for me again.  Roy kindly pointed me this morning to the latest development in the saga down in Florida over the traffic ticket app, TIKD, and its fight with the Florida Bar.

If you are not a Law360 subscriber, you can only read part of the story at this link.  Roy was kind enough to send me the full article, so I’ll summarize the key points of the development for you and then leave you with the only potentially relevant thought I can manage today.

The story explains that the Florida Supreme Court has issued a show cause order to TIKD to require it to respond to the Florida Bar’s petition over UPL allegations and to show cause why the Florida Supreme Court should not enter an order barring its services.

The article contains a very confident sounding quote from the owner of TIKD, likely more confident than he should be under the circumstances that reads as follows:

“What a stunning waste of time and resources,” Riley said. “For nearly a year we have been asking the bar to tell us what aspects of our business they find objectionable, so we could work to address
their concerns. Rather than having a conversation, they chose this route and now have filed a vague complaint, lacking any basis in case law.”

“Nonetheless, we’re glad the issue is out of the bar’s hands, and into a realm where actual facts matter. We remain confident Tikd and its affiliated lawyers are fully in compliance with Florida law,
and are hopeful we can finally resolve this and move on,” he added.

I remain skeptical that TIKD itself is truly engaged in the unauthorized practice of law, though I suspect the Florida Supreme Court may find otherwise.  I’m as confident as Mr. Riley sounds above that what they are is a referral service that violates the current version of the Florida Bar’s ethics rules and that lawyers doing business with TIKD simply cannot do so and comply with the current Florida rules.

I’ve written in the past about my thoughts in general about being open to taking hard looks at revising existing ethics rules that touch on these issues, but for now the rules say what they say.

What I’m puzzling over is this:  is there a way of describing what this traffic ticket app company does that is sufficiently analogous enough to what insurance companies do to justify its existence even under current ethics rules?

At some level, isn’t what this company is offering in the equivalent of ticket insurance without a deductible?  They select the lawyer to represent you, they pay the lawyer to represent you, and if a “judgment” goes down against you for which you are liable – a fine for violation of the traffic laws — they pay it.

If we let insurance companies do something very much like that, then what’s the difference here?

Change is hard. Even where it appears to be wanted.

I have been meaning to do this and am long overdue in getting to it, but you might recall back in the summer of 2017 when I wrote pretty extensively about the contents of the Oregon Futures Task Force Report, and its positive proposed changes to the ethics rules.  If you don’t, you can read those posts here and here.

In November 2017, the chair of the Legal Ethics Committee in Oregon who also was a member of the Futures Task Force was kind enough to drop me a line and update on how those proposed rules revisions were progressing.

Initially the Board of Governors of the Oregon State Bar approved the proposed revisions to RPC 5.4, 7.2, and 7.3 for discussion and voting by its House of Delegates.

After the process in the House of Delegates, in which there was quite a significant amount of debate and discussion as I am told, the proposed revisions to RPC 5.4 and 7.2 were referred back to the Board of Governors to a study committee, but the proposed revision to RPC 7.3 was passed and has been submitted to the Oregon Supreme Court so it can decide whether to adopt it or not.

While in my prior postings I discussed the RPC 5.4 proposed revision at some length, I did not provide any real detail of the RPC 7.3 change Oregon was considering beyond the fact that it would involve allowing in-person or real-time electronic solicitation, with limited exceptions.  For the record, this is what the Oregon Supreme Court now has in front of it for consideration:

RULE 7.3 SOLICITATION OF CLIENTS
A lawyer shall not solicit professional employment by any means if:

(a) the lawyer knows or reasonably should know that the physical, emotional or mental state of the person who is the target of the solicitation is such that the person could not exercise reasonable judgment in employing a lawyer;
(b) the [person who is the] target of the solicitation has made known to the lawyer a desire not to be solicited by the lawyer; or
(c) the solicitation involves coercion, duress or harassment.

Now, you know what I know on this topic.

 

So what does 2018 hold in store for us?

It’s a new year and, of course, for many that means a time of reflection and goal-setting and much talk of how the new year will be different from the prior year.

I will spare you much of that because you can find that all over the Internet.  I am prompted to post today (in addition to just wanting to get back on the horse after the holiday break) because there has been some news today of note that tends to demonstrate that 2018 is likely going to be a lot like 2017 in terms of what matters and must be discussed.

Today, The Florida Bar and a marketplace technology company, Legal.io, announced a partnership in order to modernize The Florida Bar’s Florida Lawyer Referral Service.  You can read the announcement here.

There are a multitude of reasons why this step in Florida could matter greatly — particularly if it is successful — because other bar associations might follow suit (if such endeavors are not already in the works).  The key seems to be whether any action like this is too late to gain traction with consumers who are already turning to other, similar for-profit endeavors.  I have little doubt that lawyers will be more comfortable with such arrangements because of the safety involved with not having to worry about ethics issues of fee sharing or improper payments for referrals if they can work through bar referral programs.  Florida is an interesting place for this to happen at this moment in time as well because one might expect this development could be raised in the TIKD antitrust litigation, for example, as more fodder for arguments of claimed collusive behavior in the marketplace for legal services by the bar.

And, along those lines (but sort of flipped 180 degrees), there was another development late last year that I haven’t mentioned but that will likely be significant for lawyers in 2018.  It is this lawsuit filed on the other coast against LegalZoom and a number of state bar associations (as well as the USPTO) that seeks $60 million in antitrust damages.  You can read a nice story about this suit filed in California federal court – and what the Plaintiff in it is really trying to accomplish — here.

In short, although the suit alleges that LegalZoom is engaged in unauthorized practice and competes in a way that is unfair to lawyers, and alleges that the USPTO, the California bar, the Texas bar, and the Arizona bar are somehow turning a blind-eye to the conduct to allow it to continue, the Plaintiff, an IP lawyer and entrepreneur named Raj V. Abhyanker, admits that what he’s really looking for is a court ruling that tells him that he, and other lawyers, can use the same business model as LegalZoom without fear of ethical ramifications.

So, you know, stay tuned.

Something TIKD this way comes.

So, about a week ago, the Florida Bar and The Ticket Clinic (a Florida law firm that somehow can manage to keep the lights on by specializing in representing people regarding traffic tickets) were sued in federal district court by something called TIKD.  TIKD is, at heart, an app for your smart phone.

The lawsuit alleges that the bar and the law firm have combined to damage TIKD in its business endeavors in violation of antitrust law and other unfair competition law.  Others have already written a bit about this development, but I still cannot resist chiming in because, though the litigation will likely end up amounting to nothing truly impactful, the underlying substance (or lack thereof) of the area of law being battled over with potentially such high stakes for the profession could easily be made into the stuff of a dark fantasy novel.

While others have written about this new federal court lawsuit where TIKD is the plaintiff, and there is some decent media coverage of it at The Washington Post and in some Florida news outlets, I want to just flag for your attention the existence of another lawsuit in Florida involving TIKD, but that was brought against TIKD seven months earlier in state court by one of the defendants in the TIKD suit, The Ticket Clinic.

You can read that full lawsuit at this link.  The gist of it though is also one for unfair competition.  The law firm, Gold & Associates d/b/a as The Ticket Clinic sued TIKD and its two owners claiming TIKD engages in false and deceptive advertising and is itself engaged in the unauthorized practice of law.  You can judge for yourself, but those particular claims to me seem dubious at best.  TIKD seems to do exactly what it advertises it will do and hires lawyers rather than tries to practice law.  But in the midst of those questionable claims, the suit still finds the nub of a true problem: unfair competition for lawyers trying to compete with (rather than work with) TIKD.

While it is the suit TIKD has filed pursuing the Florida Bar and The Ticket Clinic for antitrust violations that is currently getting all the media attention — folks who want to be “disruptors” in the legal industry are certainly using it as an opportunity to attack the entire concept of the regulation of the practice of law — the lawsuit filed by The Ticket Clinic as plaintiff forces a reader to think about the flip side of that problem by pointing out that what TIKD is doing to market its service, and convince people to use it, is making guarantees and promises that lawyers are prohibited from making under the ethics rules.

Specifically, paragraph 12 of the complaint points out a number of aspects of the TIKD business model that allow for unfair competition, which includes TIKD:

b) making guarantees to pay financial penalties imposed by courts and/or the “full cost of their ticket”;

[snip]

g) promising to “cover the full cost of your ticket no matter the price – even if the cost is higher than what you paid us;”

Paragraph 28 of the complaint further drives the point home:

In promising to pay a fine if they lose at no additional cost, TIKD, RILEY and BERTHOLD make a promise that a lawyer or law firm cannot possibly make, and they essentially “rob Peter (those persons whose cases are dismissed with no fine or court cost after
paying TIKD 75-80% of the fine stated in the citation) to pay Paul (those persons who are directed to pay the fine in full or greater, with costs)” which is a “house of cards” that will eventually fall, leaving clients with no remedy.

The story in The Washington Post also helpfully reinforces that these are important aspects of what makes TIKD a desirable service for which to pay:

TIKD, which launched in February, works this way in Florida: A driver who gets a traffic ticket can contact the company on a cellphone and be offered a one-time charge below the amount of the ticket. TIKD connects the driver with an independent attorney for no additional costs or fees, and the attorney handles the case without the driver having to appear in court.

If the ticket is not dismissed, TIKD pays any fines, and if the driver gets points on his or her license, TIKD will fully refund the one-time charge.

It is undeniably correct that the ethics rules would never let a lawyer make the same arrangements with a client.  It also seems pretty clear that without the ability to make those financial guarantees the app would lose pretty much all of its luster.  Thus, regardless of what you may think about the merits of any claim that The Florida Bar and The Ticket Clinic are engaged in some coordinated effort to hurt TIKD, it appears undeniably correct that there is a fundamentally unfair competitive advantage to being able to make the kind of financial guarantees that the app is making and which any lawyer would have to risk their license to match.

A reckoning in the legal industry is going to have to take place at some point relatively soon, but part of that reckoning absolutely has to be a level playing field in the area of providing legal services.  Either the same rules and restrictions will have to apply to all those operating in the space or those rules ought to apply to no one operating in the space.

The notion that the reckoning could be ushered along more quickly because of a fight over an area of legal representation that most firms have first-year associates handle for free as a perk for clients (i.e. getting speeding tickets dismissed) and involves a firm run by a lawyer who has been embroiled in litigation over a nearly $20,000 tab at a strip club and whose firm is being investigated for taking money to falsify traffic school certificates is just absurd enough to fit in with the rest of the fundamental absurdity that plagues 2017.

An open letter to Avvo

Dear Mark or Josh or Dan (or others at Avvo):

I am a lawyer of little relative influence but I know you are likely familiar with me because I have, time and time again here on my small platform written about the travails your business model is enduring as state after state issues ethics opinions warning lawyers who do business with you that they are acting unethically.  (And Josh has been kind enough to post comments here from time to time as well.)

It, of course, has happened again with the latest Virginia ethics opinion that has just been put out.  I won’t belabor anyone reading this with the breakdown of that opinion other than to say that it hits on many of the same problems that have been hit on by other states over the last couple of years (and a couple that come up less frequently as well).  I also know that you were actively engaged in trying to convince the powers-that-be in Virginia to not issue that opinion.  I’ve even read Dan’s oral remarks published online.

I also won’t do as I normally do and break down the analysis offered in this latest ethics opinion other than to say that this one – yet again – is correct in its interpretation and application of Virginia’s rules.  (At least it is correct as to the big, universally applicable rules impacting your current business model related to fee-sharing, payments for referrals, and the like.)  Of course it is.  These opinions keep coming out because the existing rules are pretty clear about the problems and why lawyers are prohibited from participating.

I’m also writing this as an open letter to urge Avvo – if it really is interested at heart in doing the things for the profession and consumers that it says it is interested in doing – to change its focus from trying to fight the issuance of ethics opinions in states or to then engage in criticism of those opinions as somehow incorrect or “part of the problem.”  Instead, your time and money should be shifted — if those are your real goals — to pursuing efforts to have the rules that currently prohibit lawyers from being involved with your business model changed.

You are fighting a losing battle in trying to change the outcomes of ethics opinions.  You could, however, be fighting a winning battle if you made active efforts to file petitions with the appropriate bodies in various states to propose revisions to the ethics rules that would permit participation with your service and other companies doing similar things.

For example, just about anyone who wants to in my state could file a Petition with the Tennessee Supreme Court and propose changes to the ethics rules which here are housed in Supreme Court Rule 8.  There are pretty similar processes in many jurisdictions.  (I would have thought y’all might have worked this notion out by now given how differently you’ve watched things appear to go in North Carolina where you’ve been participating in efforts to change the rules rather than efforts to try to get someone to issue an opinion that would pretend the rules don’ say what they say.)

I can’t guarantee how successful you would be in obtaining satisfactory rule revisions in jurisdictions but I’d bet a shiny quarter or two that your batting average will be greatly improved upon how you are doing in terms of favorable ethics opinions versus unfavorable ethics opinions.

I reckon that this open letter will likely have the same effect of most open letters written by human beings, but . . . at least I’ll still feel better for having said it.

Perfect timing.

(Edited – Dec. 8, 2017 to fix very embarrassing mistakes as to the company name of Atrium.)

On the heels of my posting earlier this week about my failure to understand how the Atrium law firm backed by the Atrium tech company is something that complies with California’s ethics rules (much less ethics rules in other states besides D.C. that are based on the Model Rules should it attempt to expand as it plans), news comes now at the end of the week that one of the Big 4 accounting firms is launching its first law firm in the United States.

As this ABA Journal story explains, PwC is opening ILC Legal but, importantly for my discussion purposes, it is doing so in D.C.  As noted when I discussed the Atrium deal, D.C. is currently the only U.S. jurisdiction that permits the kind of non-lawyer ownership in a law firm that is prohibited everywhere else in the country.  Now, interestingly, the PwC spokesperson quoted in the story indicates that isn’t the reason D.C. was picked.  There may be many more details in the AmLaw story referenced by the ABA Journal but I am not a subscriber to that publication so I can’t get to it to read.  Not sure what details could be in there though that would change the fact that I’m skeptical that any structural separation PwC may have come up with for this law firm will comport with any ethics rules other than D.C.’s at this moment in time.

In my Atrium post, I asked readers to envision whether if a bank were doing what the tech company was doing, anyone would have any qualms at all about saying that it didn’t appear to comply in any way with the pertinent ethics rules.  I could just have easily used an accounting firm as an example instead of a bank.

So, bottom line for this Friday is, whatever your reaction might be to the PwC news (assuming it is one of concern), you ought to have the same – and even stronger — reaction to the Atrium situation.  Atrium isn’t even starting in D.C. where it could arguably be compliant.

(And, thanks to David Carr – a California ethics attorney – for the comment he posted to my earlier story with some further thoughts about the situation in California for Atrium.  Boiled down though, those thoughts seem to me to indicate that Atrium’s approach doesn’t comply with California’s rules as I suspected and that their only hope is that their own clients won’t complain about them and, apparently, that if anyone else does it won’t gain any traction with regulators.)

 

Things I don’t understand… Atrium LLP

You may, by now, have read an article or two about the launch of a “technology-focused law firm” by the name of Atrium LLP.  Its headquarters are in California.  Having now read several articles about it – and how it has come to be and how it will operate – I simply don’t understand it.

I get what a technology-focused law firm might be, of course.  What I don’t get is how in the world any of the lawyers involved with the venture can think that they can do this and comply with the ethics rules.

I kept reading more and more about it to figure out what I was missing that would not cause this arrangement to be a violation of the rules prohibiting sharing of fees with nonlawyers and prohibiting investment by non-lawyers in law firms.  I could still be missing the explanation, but I haven’t found it yet.

Here – through a series of snippets – is the situation as it has been reported.

Let’s start with information from an ABA Journal article as a base:

With $10.5 million, serial entrepreneur Justin Kan is about to take on Big Law….Atrium LLP will compliment, but is separate from, Atrium Legal Technology Services, also operated by Kan. Atrium LTS will develop the technologies and processes that automate repetitive tasks and manage the firm’s operations….While Kan is not an attorney, the firm’s founding partners are. Augie Rakow is a former partner at Orrick, Herrington & Sutcliffe, while Bebe Chueh is an attorney and founded AttorneyFee.com, which sold to LegalZoom in 2014. The other co-founder and Atrium LTS chief technology officer, Chris Smoak, is a serial entrepreneur and software engineer. Kan is the founder of live-streaming sites Justin.tv and Twitch.tv, selling the latter to Amazon for nearly $1 billion in 2014.

[snip]

While separate entities, the financial relationship between Atrium LTS and Atrium LLP is inextricable. Atrium LTS provided the firm a loan to cover all startup costs, and Atrium attorneys are being paid through options in Atrium LTS or a salary for advising the technology company.

[snip]

In June, Atrium LTS closed a Series A funding round worth $10.5 million, which was led by General Catalyst, a venture capital firm focused on early stage investments.

Let’s sprinkle in a few more salient details from Bob Ambrogi’s interview and post with affiliated folks at his Law Sites blog:

What is launching today is a law firm, Atrium LLP, that is separate and apart from Kan’s technology company Atrium LTS, but that is symbiotically connected to it. Atrium’s lawyers will focus exclusively on practicing law, while Atrium LTS (the LTS is for Legal Technology Services) will handle all operations for the firm, even including marketing, and develop and operate software to streamline the firm’s workflows.

[snip]

Atrium LTS is paying all the start-up costs for the law firm, structured as a loan. Atrium attorneys receive stock or options in Atrium LTS and some receive salaries from Atrium LTS for serving as advisors.

Now, a bit more from the Atrium website itself:

To solve this, Augie teamed up with successful lawyer-turned-entrepreneur Bebe Chueh to found Atrium, a technology-first law firm. They partnered with Justin and Chris Smoak to also create Legal Technology Services, a legal technology company with a world-class engineering team to build tools for that firm.

Strikingly absent from anything I have been able to find and read about the rollout of Atrium is how it isn’t just outright flouting California’s ethics rules that prohibit non-lawyer ownership in law firms and that prohibit people who aren’t lawyers from being partners in a law firms.  Although California does not yet have rules tracking the Model Rules in many areas (so they don’t for example have all of the provisions of ABA Model Rule 5.4), it does have Rule 1-310 that pretty much tracks Model Rule 5.4(b).

Rule 1-310 Forming a partnership With a Non-Lawyer

A member shall not form a partnership with a person who is not a lawyer if any of the activities of that partnership consist of the practice of law.

Discussion:

Rule 1-310 is not intended to govern members’ activities which cannot be considered to constitute the practice of law. It is intended solely to preclude a member from being involved in the practice of law with a person who is not a lawyer.

It also has a rule that imposes other restrictions on sharing fees with nonlawyers, Rule 1-320

Now, I noticed from one of the articles the idea that Atrium LTS (the tech company) is only “loaning” the start up costs to Atrium.  I mean there are lots of places where that concept seems vulnerable to analysis, but throw in the point that the way the attorneys for the Atrium law firm are getting paid is either stock or stock options in Atrium the tech company or salaries paid by Atrium the tech company for being advisors to the tech company and … just … come on. That really doesn’t pass any laugh test.  Does it?

So, really, what am I missing about this?  Assume the things being done by Atrium the tech company as part of launching Atrium the law firm were being done by an actual bank, wouldn’t everyone immediately recognize that the lawyers involved were violating the ethics rules?

Don’t get me wrong, I’m a huge believer in the benefits of moving away from the billable hour and innovation in the delivery of legal services and embracing technology, but the Atrium model sounds very much like something that can only be done in California (or just about any other U.S. jurisdiction besides D.C.) if, first, the ethics rules are revised to permit it.

Is this just an effort by an entity with lots of resources to do it and dare someone to stop them?

On second thought, “this” is the least discussed ethics rule.

Many moons ago (look at me and my topical thinly-veiled 8/21/17 Eclipse reference), I wrote a post about Model Rule 2.1 being perhaps the least discussed ethics rule and why maybe it shouldn’t be.  But, a recent news item about a relatively humdrum topic, a relatively large multi-state law firm (Husch Blackwell) announcing that it has named a new CEO who is not lawyer, got me thinking about another ethics rule that much more likely is, hands-down, the least discussed ethics rule.  That rule is Model Rule 5.4(b)(2).  Unlike Rule 2.1 though, Rule 5.4(b)(2) is deservedly never made the subject of discussion because if it were paid attention to, then one of two things would be true.  Either it is an essentially meaningless rule or it’s a rule that tens (if not hundreds) of thousands of lawyers throughout the U.S. violated by showing up to work today.

You probably might have some trouble thinking what the rule in question says so I’ll help you out.  It’s this one:

(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:

(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.

We have this same language in Tennessee in our RPC 5.4(d)(2) and, odds are, you do too in whatever state where you happen to be reading this.  Now, if your law firm is organized as a corporation, then no worries under any circumstances because the “other than a corporation” language at the end there makes it clear that a corporation can have a nonlawyer in an officer position.

If you practice law in a firm that is organized as a professional limited liability company, or a limited liability partnership (for the record, Husch Blackwell happens to be an LLP) or some such similar entity, and you have someone – not a lawyer – in a position like a Chief Marketing Officer, or a Chief Financial Officer, or a Chief Operating Officer, or a CEO, then … well the existence of this rule is unfortunate, unless it can be said that none of those entities qualifies as a “form of association.”

If they don’t qualify, then what exactly is the purpose of this rule?  Why should only lawyers practicing in an “association of attorneys,” but not organized in one of these other formal business entity forms be prohibited from having a nonlawyer be an officer?

If such limited liability entities do qualify as associations under the rule, then what exactly is the reason for still having this rule on the books anywhere?  Particularly given that 5.4(d)(3) already effectively prohibits the actual harm by prohibiting practicing even in a firm that is a corporation if “a nonlawyer has the right to direct or control the professional judgment of a lawyer.”

There are a significant number of firms these days that have someone who isn’t a lawyer serving in one of those roles managerial roles as an officer, and I’m certainly not aware of any instances of any bar regulator seeking discipline against lawyers practicing with those firms on that basis.  (For what it is worth the ABA’s Annotated Model Rules of Professional Conduct that I have handy [Sixth Edition] declares that “Rule 5.4(d) prohibits a lawyer from practicing in any for-profit entity in which a nonlawyer has an ownership interest, a position of responsibility, or a right to direct the lawyer’s professional judgment.”)

So, like I said, probably for the best that this is the least discussed rule.