Over the last couple of years, as a result of my involvement with APRL, I’ve had the opportunity to work with a group of smart lawyers to seek to advance reform with respect to the status of Model Rule 5.5 and, more recently, am involved similarly in trying to start the process of reform for Model Rule 5.4.
Rules reform, particularly at the level of the ABA is a damnably slow process. It can happen in states faster when states want to break new ground. But one thing that states can do pretty rapidly is crank out very poor ethics opinions to make life more difficult for the lawyers in their own states and, simultaneously, provide ready examples for why reform of the rules is necessary.
Two “M” states have done that so far this year on each of the two topics where I’m involved in trying to bring about reform.
The first is Missouri. Missouri has a long history of churning out poor and unhelpful ethics advisory opinions. In addition to often reaching the incorrect conclusion, they have the added element of being short and stated in conclusory, rather than persuasive or explanatory fashion. Such is the case again with a brutally bad “opinion” on Missouri’s Rule 5.5 issued earlier this year. You could read the entirety of the opinion in 30 seconds at this link: 2024-03 | Office of Legal Ethics Counsel & Advisory Committee of the Supreme Court of Missouri (mo-legal-ethics.org)
It bucks the growing trend nationally of states recognizing that they have no legitimate regulatory interest in preventing lawyers licensed in other states from moving to their state to work remotely on matters for clients in their state of licensure. It, for example, reaches an entirely opposite conclusion on the same question addressed by the ABA in Formal Ethics Op. 495.
I’d spend some length of time arguing with the analysis of the Missouri opinion, but it really doesn’t contain any analysis so … I’ll just say that I disagree strongly with the “vibes” they’re putting out. In all seriousness, if the Missouri folks had attempted to provide analysis to support the conclusion, then they would have been forced to try to sustain an unsustainable position — the notion that Missouri has any public policy interest or need for regulating the physical presence of someone who isn’t representing, or even trying to represent, Missouri residents.
Moving on to Maryland, which issued an opinion this year saying that a lawyer cannot hire someone as an independent contractor to help with marketing efforts and compensate that person based on a percentage or portions of the firm’s overall net income or revenue. It will take much longer for you to go read the Maryland opinion, but you can do so at this link: ETHICS DOCKET NO. 2024-01 | Maryland State Bar Association (msba.org)
Now, unlike the Missouri opinion, the Maryland opinion does not necessarily get the answer to the question wrong under its existing rule but, while it does provide an extended analysis of its reasoning, I think the reasoning only goes to show that even if it is a “correct” answer under the rule [and there is some argument that a different conclusion could be reached], it is an entirely silly and unhelpful place to draw a line of prohibition.
There is no consumer protection-based justification for claiming that a lawyer should not be able to hire a marketing professional to help bring in business and include in the compensation for that person a percentage of the firm’s overall revenue or profits. Even if one assumes that the prohibitions on direct fee-sharing with non-lawyers are justifiable (which I happen to think they are not), categorically prohibiting an arrangement that doesn’t involve a direct share of the fees that come in the door is a step beyond. The inquirer asked about a percentage that would be tied to overall “net” revenue or income, not gross.
Here in Tennessee, while we do not yet have a definitive ethics opinion reaching a result different from the Missouri result, we do at least have rules in place to avoid the Maryland outcome. In late 2022, Tennessee adopted revisions to our advertising rules largely consistent with recent ABA Model Rule revisions. As a result, our RPC 7.3(f) now permits lawyers to “compensate” someone “for the purpose of recommending or securing the services of the lawyer or the lawyer’s firm” if that someone is an employee of the lawyers’ firm. Our revised comment elaborates on this permission: “A lawyer may compensate employees, agents, and vendors who are engaged to provide marketing or client development services, such as publicists, public relations personnel, business development staff, and website designers, as long as the employees, agents, and vendors do not direct or regulate the lawyer’s professional judgment.”
This should be read to mean that a lawyer in Tennessee can compensate those people in a manner even if it arguably involves the direct sharing of fees, but it certainly means that the kind of arrangement inquired about in Maryland would be ethical here in Tennessee.