Ethics Opinions

Opinion No. 80-11

November 1980

Summary: A Massachusetts professional corporation organized to practice law may advertise its services to the public at large. It may enter into relationships with other attorneys to whom referrals may be made and with whom fees may be divided as long as the division of fees is made with disclosure to and consent of the client. The committee declines to give its opinion concerning the substantive legal issues arising from the possible application of those provisions of the General Laws regarding the creation and operation of legal service plans.
While the formation of a Chapter 156B business corporation to provide marketing services to the professional corporation does not raise ethical considerations per se, the nature and structure of the relationship between the two corporations creates a potential for violations of the Disciplinary Rules regarding the division of fees with non-lawyers as well as the entry into a partnership between a lawyer and a non-lawyer. It also raises the possibility of a violation of the Disciplinary Rules with respect to lawyers employed by the 156B corporation assisting a non-lawyer in the unauthorized practice of law.

Facts: Two Massachusetts attorneys propose to form a professional corporation under G.L. c.156A for the practice of law. The corporation will solicit clients through the use of advertising in various forms of broadcast and print media. They hope to have the corporation enlist the services of 50 lawyers in eastern Massachusetts who will agree to handle cases for the firm on an "of counsel" basis, which will require them to provide free consultations to clients up to six times each year. If further services are required, they will be performed by agreement between the client and the "of counsel" attorney. Fees will vary among attorneys. Each "of counsel" attorney shall be entitled to the first $250 of each fee and to 75 percent of the balance of the fee, the remaining 25 percent to go to the firm. The client is to be informed of this division of fees. Each "of counsel" attorney will also be required to contribute an allocable share of advertising expenses to the firm. Each client will be charged an annual retainer of from $25 to $35, the lower fee being generally for groups and the higher one for members of the public at large. All client inquiries will be channeled through the main office of the firm where a case control system will be in effect. Written follow-up reports will be required of attorneys to whom cases are referred, which will be reviewed by the firm's administrative lawyers.
There is also a proposal to organize a Massachusetts business corporation under G.L. c.156B to perform marketing services, including follow-up to client inquiries prompted by advertising, as well as inquiries concerning group representation. This corporation will be owned by non-lawyers, will employ both lawyers and non-lawyers, and will be paid by the professional corporation on the basis of its peformance rather than on a fee-for-service or time-expended basis. There is no indication of how performance is to be measured.
Discussion: The use of advertising does not raise ethical questions, per se, although attention is called to DR 2-101 and its express prohibition of "any form of public communication containing a deceptive statement or claim."
Referrals among lawyers associated on the basis suggested by the inquiry also would not seem to create any ethical issues. The committee expresses no opinion about the effect of G.L. c.176H, which regulates the creation and operation of legal service plans. Whether the proposed plan falls within the ambit of this legislation and, if so, whether it complies with the provisions thereof are issues of substantive law with which this committee does not deal.
The division of fees among lawyers as proposed, with full disclosure to and consent by the client, would seem to be sanctioned by DR 2-107. It should be pointed out, however, that DR 3-102 prohibits, with very limited exceptions, a division of legal fees with a non-lawyer. The proposal seems to suggest a method of compensation for the 156B marketing corporation which is based on the amount of fees generated by that corporation's activities. Some modification of this arrangement may be appropriate in order to avoid running afoul of the fee-division prohibitions of DR 3-102.
Further, the nature of the arrangement between the professional corporation and the marketing corporation should be scrutinized carefully to be certain that it does not violate DR 3-103's prohibition against the formation of partnerships between lawyers and non-lawyers. Whether the role of the "administrative" lawyers employed by the marketing corporation raises a question of the unauthorized practice of law by the marketing corporation under DR 3-101(A) is beyond the jurisdiction of this committee. Since the issue of what constitutes the formation of a partnership involves a matter of substantive law, the committee declines to advise the inquiring attorney with respect to the manner in which the relationship between the two corporations should be structured.

Permission to publish granted by the Board of Delegates on November 18, 1980. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.