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.