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LACBA

Can a property management firm recoup the cost of a law office it provides free to a lawyer by charging its client partnerships per hour the lawyer works for them, without it being unlawful fee splitting with a non-lawyer?

Short answer: The committee concluded that recouping the firm's office costs from the clients, apportioned by the lawyer's hours, is not by itself prohibited fee splitting under former Rule 1-320 as long as the charges are solely reimbursement and not a disguised surcharge on the lawyer's time, and the lawyer's concurrent representation of the firm and its clients is permissible only if their interests do not conflict.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.
View original ethics opinion (PDF)

LACBA Ethics Opinion 461: Recouping Office Costs Versus Fee Splitting

Short answer: The committee concluded that a property management firm's recoupment of a lawyer's office costs, apportioned among its client partnerships by the lawyer's hours, is not by itself prohibited fee splitting under former Rule 1-320, provided the charges are solely reimbursement and not a disguised surcharge on the lawyer's time, and the lawyer may represent the firm and its clients concurrently only if their interests do not conflict.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Los Angeles County Bar Association's view of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

Plain-English summary

A property management firm (M) provided a lawyer (L) with an office and related services free of charge, and L did M's legal work at a reduced hourly rate. M was the general partner of several limited partnerships for which L also did legal work at the reduced rate. M proposed that each partnership reimburse M for a proportionate part of L's office cost, apportioned by the hours L spent for that partnership, with the total payable not including office cost attributable to L's work on M's own matters.

On the fee-splitting question, the committee identified Rule 1-320 (formerly Rule 3-102) as prohibiting a member from directly or indirectly sharing legal fees with a non-lawyer. It distinguished its Opinion 431 and California State Bar Opinion 1981-60, both of which condemned arrangements where a lay intermediary profited from the lawyer's work (a 20% override and an eight-percent exchange charge). Here, the committee concluded, M's purpose was not to profit from L's services but to apportion fairly the overhead of an office from which the partnerships benefited by receiving services at a reduced rate. The committee analogized this to several clients retaining a lawyer in a common enterprise and sharing the fee according to the work done for each.

The committee identified the critical assumption as the absence of conflicting interests. Under Rule 3-310(B), a lawyer may not concurrently represent clients whose interests conflict except with their informed written consent. If the purposes and business goals of M and all the partnerships are to profit from real estate investments and not from one another or at one another's expense, their interests do not conflict so as to invoke the rule. The committee noted it lacked sufficient information to determine that this was true, and observed that if the interests conflicted, it was unlikely the partnerships could give free and fully informed consent through their general partner, whose individual interests were adverse to theirs; without such consent, L could not ethically represent both parties, and the fee question would become moot.

Currency note

This opinion predates California's November 1, 2018 adoption of the renumbered Rules of Professional Conduct; it interprets former Rule 1-320 (fee sharing with non-lawyers), former Rule 3-102, and former Rule 3-310 (concurrent representation), which correspond to current Rules 5.4 and 1.7. 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 mentioned here.

View original opinion

Common questions

Q: Is reimbursing a non-lawyer company for a lawyer's office overhead the same as splitting fees with a non-lawyer?

A: Per the opinion, not necessarily. The committee concluded that charges solely for reimbursement of true office costs, apportioned by the lawyer's hours, are distinguishable from arrangements where the lay intermediary profits from the lawyer's work, which is the fee splitting Rule 1-320 prohibits.

Q: What turns a permissible reimbursement into prohibited fee splitting?

A: The committee identified the line as whether the charge is solely reimbursement of the management firm's cost or a disguised surcharge on the lawyer's time that lets the non-lawyer profit from the lawyer's work.

Q: Can the lawyer represent both the management firm and its client partnerships?

A: Per the opinion, only if their interests do not conflict. Under Rule 3-310(B), concurrent representation of clients with conflicting interests requires informed written consent, and the committee doubted such consent could be freely given through a general partner whose interests were adverse to the partnerships.

Background and rules framework

The opinion interprets former California Rule 1-320 (formerly Rule 3-102), which prohibits sharing legal fees with a non-lawyer and corresponds to ABA Model Rule 5.4, and former Rule 3-310(B) (concurrent representation of clients with conflicting interests), which corresponds to Model Rule 1.7. The committee read the fee-splitting prohibition as aimed at arrangements that let a lay intermediary profit from a lawyer's work.

Citations and references

Rules of Professional Conduct (former):

  • California Rule 1-320 (sharing fees with non-lawyers), formerly Rule 3-102
  • California Rule 3-310(B) (concurrent representation)

Other opinions cited:

  • LACBA Formal Opinion 431 (business management firm's fee override condemned as fee splitting)
  • California State Bar Formal Opinion 1981-60 (service-exchange charge condemned as fee splitting)

See also

Source