Legal Ethics Opinion 1491
Aiding Unauthorized Practice of Law: Employment of Suspended
Attorney by Real Estate Settlement Service Owned By Attorneys
From Whom Suspended Attorney Sublet Office Space
You have presented a hypothetical situation in which Law Firm A
is in the process of establishing a title company to perform real
estate closings. The company will be owned directly, or
indirectly through an entity owned directly, solely by
shareholders and associates in Law Firm A. The title company
plans to have a separate staff from Law Firm A, which will, when
requested, draft title documents for those who are using the
title company and prepare legal opinions. The relationship
between Law Firm A and the title company will be fully disclosed
to customers, who will be allowed full freedom to choose other
lawyers to perform such services.
Law firm A has entered into discussions with Lawyer B concerning
hiring Lawyer B to perform non-legal functions for the title
company. Lawyer B is currently the subject of a disciplinary
investigation by the Virginia State Bar. You indiate that,
should any of the charges be sustained, it is possible that
Lawyer B's license to practice law will be suspended or revoked.
The events which gave rise to the disciplinary investigation took
place approximately one year prior to the present facts.
You indicate that it is proposed that Lawyer B would perform
routine day-to-day functions for the title company, including
communications with sellers, buyers, and lenders, and would
solicit business for the title company. He would also conduct
actual closings, but would not produce title documents nor opine
upon their validity or effect. Lawyer B would be subject to
supervision by the president of the title company, also a
nonlawyer. Lawyer B would not provide legal advice to those
making use of the title company.
Lawyer B would be compensated solely from the revenues generated
by the title company and there would be no payments to Lawyer B
from Law Firm A or its shareholders and associateees of salary or
income. You advise that the shareholders of Law Firm A would
make capital contributions to the title company sufficient to
enable it to begin normal operations.
You indicate that Lawyer B currently owns a title company which
would be dissolved at or near the time of [any] suspension or
disbarment. No shareholder or associate of Law Firm A has any
interest in Lawyer B's title company, nor has Law Firm A
performed any legal work in connection with any closing conducted
by Lawyer B's title company.
Lawyer B has sublet space in a suite from Law Firm A for the past
year and one-half. The lease, which has been subject to review
and approval by the building owner pursuant to a clause in the
law firm's lease, calls for constant payments of rent without
regard to receipts by Lawyer B. You indicate that Law firm A has
also sublet space in its suite to three other lawyers during this
period.
You advise that Lawyer B has practiced as a sole practitioner
during the past year and one-half. His letterhead contains no
indication of any affiliations with Law Firm A or any other
lawyers; he has maintained his own staff, who are paid by him and
not subject to any control or supervision by Law Firm A; there
are signs outside the office suite for Law Firm A, Lawyer B, and
Lawyer B's title company; and Lawyer B retains his own telephone
number, which is not the same or related to that of law firm A.
You further advise that Lawyer B has maintained a completely
separate financial structure from Law Firm A. He has his own
checking and escrow accounts, over which Law Firm A has no
control and to which Law Firm A has no access. Similarly, Law
Firm A's financial structure is completely separate from Lawyer
B. Lawyer B and Law Firm A have not engaged in any joint
business ventures or shared fees.
During the past four years (the time since the founding of Law
Firm A), Lawyer B has referred approximately five clients to Law
Firm A for litigation services. These individuals have been
billed by Law Firm A at its customary rates. None of those fees
have been shared with Lawyer B, nor has any payment been made to
Lawyer B on account of the referrals.
During the same period of time, Law Firm A has referred
approximately five of its clients to Lawyer B or his title
company for real estate services. These individuals have been
billed by Lawyer B or his title company at their customary rates.
None of the payments have been shared with Law Firm A, nor has
any payment been made to Law Firm A on account of the L During
this period, Law Firm A has also performed a small amount of real
estate work and closings but has primarily maintained a
litigation practice.
Finally, you indicate that Law firm A has also represented Lawyer
B on several matters over the past four years but that there is
no other relationship between Law Firm A and Lawyer B and that no
other relationship has existed in the past.
You have raised several questions related to the propriety of Law
Firm A's potential employment of Lawyer B.
The appropriate and controlling Disciplinary Rules related to
your inquiry are Disciplinary Rule 3-101(B) which mandates that a
lawyer, law firm, or professional corporation shall not employ in
any capacity a lawyer whose license has been suspended or revoked
for professional misconduct, during such period of suspension or
revocation, if the disciplined lawyer was associated with such
lawyer, law firm or professional corporation at any time on or
after the date of the acts which resulted in suspension or
revocation; and Disciplinary Rule 3-101(C) which provides that a
lawyer, law firm or professional corporation employing a lawyer
as a consultant, law clerk or legal assistant when that lawyer's
license is suspended or revoked for professional misconduct shall
not represent any client represented by the disciplined lawyer or
by any lawyer with whom the disciplined lawyer practiced on or
after the date of the acts which resulted in suspension or
revocation.
The committee responds to your inquiries relative to the facts
you have presented as follows:
1. As to whether Law Firm A is "associated" with Lawyer B
under DR 3-101(B), the committee is of the opinion that
the sporadic referrals, together with the sublease
arrangement, do not represent an "association".
Throughout the Code of Professional Responsibility, the
term "associate" is used either in the context of
"associates" in a law office or as to lawyers from two
different firms "associating" and dividing fees on a
case. See, e.g., ECs 2-14, 2-24. Since the
relationship between Law Firm A and Lawyer B in the facts you present is neither of the
above, the committee opines that the firm and the
lawyer are not deemed "associated" under DR 3-101(B).
2. Since the committee finds that Law Firm A and Lawyer B
are not now "associated", the committee opines that the
firm would not be in violation of DR 3-101(B) if the
proposed title company hires Lawyer B after he has been
disbarred or suspended.
3. You indicate that Lawyer B would be paid for the
provision of non-legal services solely from revenues
generated by the title company and not by Law Firm A.
Thus, the committee opines that Law Firm A and Lawyer B
would not be "associated" under DR 3-101(B) if the
proposed title company were to hire Lawyer B before his
disbarment or suspension. The committee also opines
that the variation you present on your inquiry, i.e.,
voluntary resignation by Lawyer B while disciplinary
proceedings were continuing and before being hired by
the proposed title company, is immaterial to the
conclusion reached.
4. Since the committee finds that Law Firm A and Lawyer B
would not be "associated" under the scenario described
in inquiry #3, the committee opines that the firm would
not be in violation of DR 3-101(B) at the time of, or
subsequent to, Lawyer B's disbarment or suspension if
the proposed title company were to hire Lawyer B before
such discipline.
5. You have asked the committee to assume that Lawyer B
has been suspended or disbarred. Under those
circumstances, the committee opines that, since there
was no association between Law Firm A and Lawyer B
prior to Lawyer B's suspension or disbarment, there
would be no impropriety under DR 3-101(C) if Law Firm A
performed legal work for any former client of Lawyer B
while Lawyer B is an employee of the proposed title
company.
6. Again, it is assumed that Lawyer B has been disbarred
or suspended. Additionally, the committee points out
that, since the proposed title company is a lay entity
not engaged in the practice of law, no attorney-client
relationships arise between the proposed title company
and those for whom it performs real estate closings.
Thus, the committee believes that Law Firm A would not
be in violation of DR 3-101(C) if the proposed title
company performed closings for any former client of
Lawyer B while lawyer B was serving in the capacity of
an employee of the title company.
7. The committee opines that parties to closings conducted
by Lawyer B's title company, i.e., buyers, sellers, and
lenders, would not be considered "clients" of Lawyer B.
Not addressed by your request, but of concern to the committee,
is the requirement of DR 3-l04(E) directing Lawyer B to disclose
his nonlawyer status in communicating with parties to closings.
Committee Opinion
October 20, 1992
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