The world is already an exceedingly difficult place. Yet, I continue to seem to think it makes sense for me to spend time thinking I can influence how Texas goes about thinking about legal ethics. There should probably be a DSM-V category for this behavior, but oh well I am doing it again. (It’s probably less delusional than thinking that anything I write about the attack on the rule of law by the Trump Administration [which we are also going to do again tomorrow] is going to make a difference in the world. But only incrementally.)
The Texas Bar has put out two proposed ethics opinions it is thinking about adopting. One of them is a good opinion and ought to be adopted. The other should be ditched.
The first examines questions about whether a lawyer can be required to agree to a non-disparagement clause as part of the client’s settlement of their case. The opinion correctly answers both questions it poses. First, that a lawyer generally cannot do so, and it is wrong for a lawyer on the other side of the matter to ask, because of Rule 5.6. Second, the opinion acknowledges that if all the clause requires the lawyer to do is comply with all of their existing ethical obligations under the rules as to any ability to advertise the details of the settlement in a way that could be construed as disparaging the other party, then the provision is ok. You can read the full proposed opinion here.
The cleaner way to address any of that would be to simply opine that lawyers should not be parties to the settlement agreements of their clients at all. But if Texas does not already have that kind of opinion on the books, then this is fine.
The second involves yet another example of how easy it currently is for jurisdictions to take rules of questionable justification to begin with and interpret them to prevent the delivery of legal services to consumers in a way consumers might prefer and can better afford.
That proposed opinion tackles the following question:
May in-house counsel for a for-profit company owned by nonlawyers provide legal services to customers of the company if the company gives the customers the option of retaining the in-house counsel and only charges the “actual cost” incurred by the company?
The opinion asserts the answer would be no, because that would amount to the company that the in-house lawyer works for performing the unauthorized practice of law. Now the core of this answer stems back to the ritualistic assertion by pretty much all state bar regulators that a corporation cannot engage in the practice of law. The problem with that blithe statement is that it only remains true as long as state bar regulators also ignore the fact that many, many of the largest (and some of the smaller) law firms throughout the country are organized as professional corporations. Pretty much any law firm you can find online with P.C. at the end of its name is going to be one of those. The current approach to the regulation of the practice of law has decided that’s okay since the entity only exists for the purpose of being a law firm. As a result the only change that has happened in the analysis of these kinds of issues is that rather than just saying a “corporation cannot engage in the practice of law,” states say, as Texas is proposing to do here, “a corporation (other than a professional corporation) cannot engage in the practice of law.
The opinion then goes on to twist itself into a pretzel to explain why Texas, like many other states, still found a way to say it was okay for lawyers employed in-house for insurance companies to be used to represent insureds of the company in litigation matters.
In the end, because it concludes that such an arrangement can only ever be okay if it is in the interest of the corporation for the lawyer to provide the representation to the client, the proposed arrangement is UPL. The opinion also goes out of its way to make clear that it is still okay for a nonprofit corporation to have their lawyers provide legal services to third parties if the services are in furtherance of the charitable mission of the nonprofit corporation.
Now the idea that the kind of arrangement that is more risky for a consumer of legal services would be if the in-house lawyer for the company was being provided to represent someone in something entirely unrelated to the company’s interest rather than in something in which the company has a stake is certainly a choice.
Texas shouldn’t issue the opinion simply because turning what the interests of consumers are, and what they should be protected from, on its head simply needs to stop.
However, the most absurd statement made in this proposed opinion is not found in the part using the UPL cudgel to prohibit an arrangement that might be desired by consumers of legal services. Instead, you can find it tucked away in the part where the opinion also says the arrangement “could” amount to the unlawful sharing of legal fees with a nonlawyer (the corporation).
The opinion writers can’t just simply accept the premise that the corporation would not charge its customers more than the corporation’s actual cost for the time of the attorneys. Instead, they assert that the corporation might benefit in other ways and that those other possible upsides for the company have to be factored in when determining if there is a really fee sharing going on. As part of those mental gymnastics, they offer the following:
Likewise, the Company described in this opinion might obtain an advantage over its competitors if it provides its customers the option of hiring the Company’s In-House Counsel at “actual cost.” The Company might profit by increased sales or by the ability to charge higher prices on its products and services. These benefits should be considered in determining whether the Company would receive more that its “actual cost” for offering its customers the option of employing the Company’s In-House Counsel.
The company might get more sales than its competitors by offering more things to customers that customers want to have, and the customers might benefit by paying less money to have representation from attorneys. And that’s why it can’t happen. So, so close to figuring something out they are…