Can a lawyer hired and paid by a bank draft and submit a corporate client's pension plan to the IRS when the lawyer must represent the corporation's interests?

Plain-English summary

A bank's trust department had an arrangement with an insurance company whose agents sold standardized pension and profit-sharing plans to corporate employers. The bank would act as investment and administrative trustee, part of the contributions would buy life insurance sold by the same agents, and the bank wanted to retain a law firm to draft the plan documents (pension plan, trust agreement, corporate minutes, employee announcement) and present each plan to the IRS for qualification. The lawyer would need a power of attorney from the corporate employer. The bank would pay the lawyer and pass the charge on to the corporate employer; it would be made clear that the lawyer represented the bank, and the corporate employer would be invited to retain its own attorney to review the work.

The committee unanimously found the proposed arrangement involved ethical improprieties that should be avoided. Its principal concern was conflict of interest under Canon 6: the firm, though acting initially for the bank, would be required to represent the corporate employer's interests before the IRS and would draft instruments the corporate employer had to adopt. The committee said representing conflicting interests should be avoided wherever possible, particularly where there is a possibility of substantial conflict and where the lawyer's basic allegiance, employment, and compensation come from only one of the parties. It explained that the objectionable aspects could be eliminated if the corporate employer employed its own attorney to prepare or review the instruments and to represent it before the IRS, with the bank free to absorb or reimburse the costs. Two members added that the arrangement could also implicate Canons 27 and 35, by channeling legal employment through the insurance agents and by practicing law for another through an intermediary; separate counsel for the employer would address those concerns as well.

Currency note

This opinion was issued in 1964, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. The opinion applied former Canons 6, 27, and 35 of the Canons of Professional Ethics; conflicts of interest are now governed by Rule 4-1.7 and the lawyer's professional independence (including practice through lay intermediaries) by Rule 4-5.4 of the Rules Regulating The Florida Bar (Model Rules 1.7 and 5.4). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Why was the arrangement improper?

A: Conflict of interest. The firm, though employed and paid by the bank, would have to represent the corporate employer's interests before the IRS and draft documents the employer had to adopt, with allegiance to only one paying party.

Q: How could the parties fix it?

A: The committee said the corporate employer should employ its own attorney to prepare or review the instruments and represent it before the IRS; the bank could arrange to absorb or reimburse those costs.

Q: What additional concern did some members raise?

A: Two members noted Canons 27 and 35: the setup could channel legal work through the insurance agents and amount to practicing law for another through an intermediary. Separate counsel for the employer would help address that too.

Background and rules framework

The opinion turned on former Canon 6 (conflicting interests), with two members also pointing to Canons 27 (solicitation/channeling of employment) and 35 (practicing through a lay intermediary). Conflicts of interest are now governed by Rule 4-1.7, and the lawyer's professional independence, including the bar on lay intermediaries directing the lawyer's work, by Rule 4-5.4 of the Rules Regulating The Florida Bar (Model Rules 1.7 and 5.4).

Citations and references

Rules of Professional Conduct:

• Canon 6 [Canons of Professional Ethics; conflicting interests; see current Rule 4-1.7]
• Canons 27, 35 [solicitation/channeling of employment; practicing through a lay intermediary; see current Rule 4-5.4]

See also

• FL Bar Ethics Op. 64-74: Representing a Bank While Paid by a Solicited Client
• FL Bar Ethics Op. 65-4: Partnership With a Non-Lawyer for Agency Practice

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-64-71/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-64-71.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 64-71
December 15, 1964
Advisory ethics opinions are not binding.
It would be improper for a law firm to draft necessary instruments and present a pension and profit-sharing plan to the Internal Revenue Service under an arrangement whereby the law firm, though employed by a bank, will be required to represent the interests of the corporate client before the Internal Revenue Service.
Canons: 6, 27, 35
Chairman Smith stated the opinion of the committee:
Our opinion is sought in connection with the following factual situation.
The trust department of a bank has entered into an arrangement with an insurance company which has agents located throughout the state. The agents are engaged in selling pension and profit-sharing plans to corporate employers. The plan is standardized as much as possible, and the bank will act as investment and administrative trustee under the plans which are sold. A portion of the contributions made to the plans will be used to purchase life insurance, sold by the agents mentioned, which will cover employees who are covered by the plans.
The bank wishes to retain a law firm to perform certain legal services. Thus, a member of The Florida Bar is asked to draft the instruments necessary in each instance for adoption and implementation of a plan. Included would be the pension plan, a trust agreement, a form of minutes to be used by the corporate employer in adopting the plan, and a form of announcement to be used to apprise employees of the plan. He is also asked to present the plan, after its formal adoption, to the Internal Revenue Service for the purpose of qualifying it and determining that the trust shall have tax-exempt status. In order to do this, the lawyer would require a power of attorney from the corporate employer. The bank has a vital interest in assuring that the proposed plan is properly drafted and presented to the Internal Revenue Service. It wishes to employ his firm in order to assure that the necessary legal work will be expedited.
The lawyer's compensation for services rendered would be paid by the bank. The charges, however, would be passed on by the bank to the corporate employer as part of the bank's initial cost incurred in adoption of the plan. It would be made clear to the corporate employer that the lawyer is representing the bank. The corporate employer would be invited to retain its own attorney to assist in and review the work done by the lawyer's firm.
It is the unanimous opinion of the Committee that the proposed arrangement involves ethical improprieties which should be avoided.
Canon 6 is involved. That Canon deals with conflicts of interest. Herein, the firm, though acting initially for the bank, will be required to represent the interests of the corporate employer before the Internal Revenue Service. It will also draft instruments which the corporate employer must use and adopt in order to effectuate a plan. Although it is not necessarily unethical to represent conflicting interests, it is the opinion of this Committee that such representation should be avoided wherever possible, particularly where there is possibility of substantial conflict and where the attorney has a basic allegiance to, and receives his employment and compensation from, only one of the parties whose interest is involved.
In this instance, objectionable aspects of the arrangement could be eliminated by arrangement for the corporate employer to employ its own attorney to prepare or review all instruments which the bank requires and to represent it before the Internal Revenue Service. The Committee believes this would be the better practice. The bank can make arrangements with the employer which will resolve absorption of the legal costs. The costs of the lawyer's services to the bank can be passed on by the bank as a charge of the trusteeship, if the bank chooses to do so. The bank can arrange to reimburse the corporate employer for reasonable attorney's fees incurred by the employer, if the bank wishes to do so.
A majority of the Committee was principally concerned in this case with the problem of conflicting interests. Two members of the Committee, however, also suggest that Canons 27 and 35 may also be involved. In their opinion, the present arrangement could also lead, in effect, to the insurance agents channeling legal employment to a law firm, contrary to the spirit of Canon 27, and to practicing law for another through an intermediary, contrary to Canon 35. It is believed the Committee's suggestion that separate counsel be employed by the corporate employer would tend to obviate these objections also.