Formal Opinion No. 98—ethical Responsibilities of Lawyers Who Engage in Other Businesses, Adopted
| Publication year | 2015 |
| Pages | 17 |
| Citation | Vol. 44 No. 4 Pg. 17 |
In and Around the Bar
CBA Ethics Committee Formal Opinions
Introduction
In the increasingly complex and interrelated economy that lawyers face, it has become common for lawyers in private practice to engage in another business in addition to providing legal services in a firm or solo practice.
In this opinion, the CBA Ethics Committee (Committee) considers the ethical responsibilities of a lawyer engaged in private practice and in another business. The Committee specifically evaluates the ethical responsibilities owed by a lawyer who is engaged in a business that provides law-related services. In such a case, the lawyer generally is subject to the Rules of Professional Conduct (Colo. RPC or Rules) in their entirety, unless the lawyer takes reasonable measures to keep the law practice and the law-related business separate. This opinion does not address the ethical obligations of in-house lawyers engaged in another business.
Syllabus
The starting point for analyzing the ethical considerations applicable to a lawyer engaged in another business is to determine whether the other business is "law-related," which is a term of art. If the business is not law-related, such as operating a dry cleaning store or a family restaurant, then a lawyer still has ethical responsibilities, but they are limited to those that apply to all lawyers at all times, including particularly the prohibition against conduct involving dishonesty, fraud, deceit, or misrepresentation. Colo. RPC 5.7, cmts. [2], [11]. If, however, the lawyer's other business provides a law-related service, such as title insurance, accounting, or dispute mediation services, then the lawyer may have a number of additional ethical responsibilities. This opinion includes a diagram that demonstrates the analytical path for considering these additional ethical responsibilities.
A lawyer who practices law and is engaged in another business always has ethical responsibilities with respect to the legal services the lawyer provides. For example, the lawyer has a duty to maintain the confidentiality of client information and segregate that information from the lawyer's other business (Colo. RPC 1.6), and to avoid conflicts of interest if there is a significant risk that the lawyer's personal interests in the business will materially limit the lawyer's ability to represent a client (Colo. RPC 1.7(a)).
Rule 5.7 addresses the ethical responsibilities potentially applicable to a lawyer engaged in a law-related business. Generally stated, the Rules apply in their entirety to the lawyer's provision of law-related services unless the lawyer takes certain precautions. First, the lawyer must provide the law-related services in a way that readily distinguishes such law-related services from the lawyer's legal services. Colo. RPC 5.7(a)(1). Second, the lawyer must take "reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist." Colo. RPC 5.7(a)(2). These precautions are required whether the lawyer provides the law-related services directly or through a separate entity that the lawyer controls.
Utilizing the framework of Rule 5.7, this opinion discusses specific issues relating to a lawyer's provision of law-related services, including what services constitute law-related services and what reasonable measures a lawyer should take to avoid confusion about whether a lawyer-client relationship exists when a lawyer is providing law-related services. This opinion also discusses the potential applicability of Rule 5.7 in the context of lawyers who provide mediation, arbitration, or expert witness services.
Finally, this opinion examines the substantial ethical responsibilities applicable to the lawyer when he or she provides law-related services in circumstances that are not distinct from the lawyer's provision of legal services, or where the lawyer has not taken reasonable measures to assure that the recipient of the law-related business services knows that no client-lawyer relationship exists. Generally, most of the Rules apply to a lawyer in such a circumstance, including those relating to conflicts of interest (Colo. RPC 1.7, 1.8, 1.9, and 1.10); disclosure of confidential information (Colo. RPC 1.6); reasonable fees (Colo. RPC 1.5); sharing legal fees or forming a partnership with non lawyers (Colo. RPC 5.4(a) through (d)); and lawyer advertising, solicitation, and communication about legal services (Colo. RPC 7.1, 7.2, and 7.3). Although a lawyer's obligations necessarily will depend on the factual setting—whether the law-related services are being provided in a sufficiently distinct manner and whether the lawyer has taken reasonable measures to avoid confusion about whether a client-lawyer relationship exists—any lawyer engaged in a law-related business should take care to follow the strictures of Colo. RPC 5.7(a)(1) through (2).
Analysis
Analysis of Colo. RPC 5.7
Rule 5.7 provides:
(a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b), if the law-related services are provided:
(1) by the lawyer in circumstances that are not distinct from the lawyer's provision of legal services to clients; or
(2) in other circumstances by an entity controlled by the lawyer individually or with others if the lawyer fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.
(b) The term "law-related services" denotes services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a non lawyer.
Rule 5.7 determines whether the Rules in their entirety will apply to a lawyer when someone receives law-related services from the lawyer or from an entity controlled by the lawyer. If the services provided by the lawyer (or an entity controlled by the lawyer) are not law-related, and are the only services provided, then the only Rules that govern the lawyer's conduct are those that apply to lawyers regardless of whether they are providing legal services to a client. These include, for example, Colo. RPC 8.4(c), which prohibits conduct involving fraud, dishonesty, deceit, or misrepresentation. E.g., People v. Rlshel, 50 P.3d 938 (Colo. PDJ July 8, 2002) (lawyer's dishonest handling of pool of funds used for Colorado Rockies season tickets, unrelated to the provision of legal services, violated Rules 8.4(b) (prohibiting "criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects"), 8.4(c) (prohibiting conduct involving dishonesty, fraud, deceit, or misrepresentation), and 1.15(b) (requiring lawyers to deliver and account for funds and property)). A lawyer may be subject to discipline for engaging in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d), for purely private conduct. E.g., In re Foster, 253 P.3d 1244 (Colo. 2011) (lawyer's reassertion of argument that judge was biased against lawyer in lawyer's sixth appeal in his own divorce case). See Attorney Grievance Comm'n v. Link, 844 A.2d 1197, 1211-12 (Md. 2004) ("Only when such purely private conduct is criminal or so egregious as to make the harm, or potential harm, flowing from it patent will that conduct be considered as prejudicing, or being prejudicial to, the administration of justice.").
If the services provided by the lawyer or an entity he or she controls are law-related, the Rules will not apply in their entirety to the lawyer's provision of the law-related services if the lawyer takes (a) steps to distinguish the law-related services from the lawyer's legal services, and (b) "reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist." Colo. RPC 5.7(a).[1]
The diagram below is a useful visual guide to the analytical framework of Rule 5.7.
(IMAGE OMITTED.)
1. Are the business services "law-related"?
Rule 5.7(b) defines "law-related services" as "services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a non...
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