Can a title or finance company collect 'settlement fees' for legal work its in-house counsel performs at real estate closings, instead of attorney's fees?

Plain-English summary

A closing and settlement agent that was a wholly owned subsidiary within a finance/title company structure asked whether its staff attorney could represent the company at residential real estate loan closings without the company being seen to profit from the practice of law. The inquiry relied on the use of an "Acknowledgement of Attorney's Representation" form and argued that, because both entities fell under the same corporate umbrella, the attorney acted as "in-house" counsel performing "ministerial" functions, so the company could charge a "settlement fee" rather than an "attorney's fee."

The Disciplinary Commission rejected that analysis. It pointed back to its earlier opinion RO-94-01, which held that when a company charges for the preparation of legal documents used at a real estate closing, two problems arise: the company engages in the unauthorized practice of law, because in-house counsel are employees of the corporation and it is the entity charging and collecting for legal work traditionally handled by private lawyers, and the lawyers doing the work are splitting legal fees with an entity not organized for the practice of law, in violation of Rule 5.4(a).

The opinion concluded that characterizing the in-house counsel's work as merely "ministerial" was incorrect: an attorney providing legal services as enumerated in Ala. Code § 34-3-6 is engaging in the practice of law, and it does not matter that the attorney acts at the direction of an employer. The Commission stated that one cannot escape Rule 5.4(a) by calling fees charged for legal work in a financial real estate transaction "settlement fees" rather than "attorney's fees," and that the "Acknowledgement" form added nothing to the analysis.

Currency note

This opinion was issued in 1995, before the 2002 Ethics 2000 revisions to the ABA Model Rules of Professional Conduct and Alabama's subsequent amendments to its Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a title or finance company charge for legal work done by its in-house counsel at closings?

A: No. The opinion concluded that the company collecting fees for legal work its in-house counsel performs splits legal fees with a nonlawyer entity in violation of Rule 5.4(a).

Q: Does calling the charge a "settlement fee" instead of an "attorney's fee" cure the problem?

A: No. The opinion concluded that renaming the charge does not let the company escape Rule 5.4(a) where it is charging for legal work in the real estate transaction.

Q: Is in-house counsel's closing work just a "ministerial" function?

A: No. The opinion concluded that an attorney providing the legal services enumerated in Ala. Code § 34-3-6 is practicing law, and it does not matter that the attorney acts at an employer's direction.

Background and rules framework

The opinion interprets Rule 5.4(a) of the Alabama Rules of Professional Conduct (Model Rule 5.4, professional independence of a lawyer; prohibition on sharing legal fees with a nonlawyer), read together with the unauthorized-practice concerns and the statutory definition of the practice of law in Ala. Code § 34-3-6. It applies and extends the Commission's prior opinion RO-94-01 to a finance/title company structure.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / Ala. R. Prof. C. 5.4(a) (sharing legal fees with a nonlawyer)

Statutes:

• Ala. Code § 34-3-6 (acts constituting the practice of law)

Other opinions cited:

• Alabama RO-94-01 (corporation charging for legal work; unauthorized practice and fee-splitting)

See also

• AL Ethics Op. 1994-01: In-House Counsel for a Banking Company Conducting Real Estate Closings
• AL Ethics Op. 1993-20: Rule 5.4 and Fee-Splitting With a Non-Lawyer
• ABA Ethics Op. 464: Fee Division With a Lawyer Who Shares With Nonlawyers

Source

• Landing page: https://www.alabar.org/office-of-general-counsel/formal-opinions/1995-02/
• Original PDF: https://www.alabar.org/assets/2019/02/1995-02-1.pdf

Original opinion text

Full opinion text unavailable from the official source; see the linked source above for the complete text.