Is an of-counsel lawyer treated as part of the same firm for fee-splitting and conflict-of-interest purposes?

Plain-English summary

A firm wants to bring on a tax lawyer "of counsel" as an independent contractor, paid his billed hours less a twenty percent share kept by the firm (after client expenses). His name, of-counsel status, and rate appear in engagement letters; the firm uses him only on certain matters with client consent, the client engages the firm rather than getting a referral, the firm collects all fees, and he keeps a separate practice.

The opinion describes the of-counsel designation, drawing on ABA Formal Opinion 90-357, as requiring a close, regular, personal relationship that is more than a forwarder or receiver of business, more than an occasional consultant, and more than a one-case arrangement. The Illinois rules do not specifically address the designation, but under Rule 7.1 the use of any professional designation must not be false or misleading. On these facts the committee concludes the of-counsel label is appropriate and not misleading because the relationship is continuing, regular, and collaborative.

On fee division, the opinion concludes that given the close nature of the relationship, the of-counsel lawyer and the firm should be viewed as being in the same firm, so the Rule 1.5(e) restrictions on dividing fees with lawyers outside the firm do not apply; the parties may disclose the fee arrangement to the client but are not required to meet 1.5(e). The fee must still satisfy Rule 1.5 generally (no illegal or unreasonable fee). The opinion notes this tracks the prevailing view in other states (citing Ohio, Texas, and Virginia opinions). On conflicts, it concludes that because the lawyers are treated as in the same firm for fee purposes, they are also in the same firm for conflicts, so one lawyer's disqualification is imputed to the other under Rule 1.10.

In practice

Under this opinion, a firm using a genuine of-counsel lawyer (a close, regular, continuing relationship, not a mere referral channel) may compensate that lawyer without complying with Rule 1.5(e), because the opinion treats the two as the same firm; the fee must still be reasonable under Rule 1.5. The opinion holds the corollary that the of-counsel lawyer's conflicts are imputed to the firm and the firm's to the of-counsel lawyer under Rule 1.10. The committee also holds that, under Rule 7.1, the of-counsel designation may be used only where the relationship actually fits that description, so it is not false or misleading.

Common questions

Q: Does Rule 1.5(e) govern how I pay an of-counsel lawyer?

A: No. The opinion concludes a true of-counsel lawyer is in the same firm, so the 1.5(e) limits on dividing fees with outside lawyers do not apply, though the fee must still be reasonable under Rule 1.5.

Q: Are an of-counsel lawyer's conflicts imputed to the firm?

A: Yes. Because the opinion treats the of-counsel lawyer as in the same firm for fees, it concludes conflicts are imputed under Rule 1.10 in both directions.

Q: When can a lawyer use the "of counsel" label?

A: The opinion says the designation requires a close, regular, continuing relationship that is more than a forwarder of business or an occasional consultant, and under Rule 7.1 it must not be false or misleading.

Background and rules framework

The opinion interprets Illinois Rule of Professional Conduct 1.5(e) (division of fees between lawyers not in the same firm) and the general fee-reasonableness requirement of Rule 1.5, Rule 1.10 (imputation of conflicts within a firm), Rule 1.7 (conflicts of interest), and Rule 7.1 (false or misleading communications about a lawyer's services, as applied to the of-counsel designation). These correspond to Model Rules 1.5, 1.10, 1.7, and 7.1.

Citations and references

Rules:

• Illinois RPC 1.5, 1.5(e) (MR 1.5): fee reasonableness and division of fees outside the firm
• Illinois RPC 1.10 (MR 1.10): imputation of conflicts of interest
• Illinois RPC 1.7 (MR 1.7): conflicts of interest
• Illinois RPC 7.1 (MR 7.1): communications about a lawyer's services

Other opinions cited:

• ABA Formal Opinion 90-357 (1990): the of-counsel relationship
• ISBA Opinions 776, 817, 840: of-counsel and fee questions
• Ohio State Bar Op. 2008-1; Texas State Bar Op. 450; Virginia State Bar Ops. 442 and 1735: of-counsel fee division

See also

• ISBA Ethics Op. 24-02: Use of the Terms Senior Counsel, Special Counsel, and Counsel
• ISBA Ethics Op. 12-11: Fee Sharing Between a Discharged Lawyer and Successor Lawyer
• ISBA Ethics Op. 15-04: Sharing Court-Awarded Fees With a Nonprofit Referral Source

Source

• Landing page: https://www.isba.org/ethics/opinions/1604