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?
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This page answers the general question. Ezel answers yours: whether it's allowed on your facts, under the current California Rules of Professional Conduct, with citations.
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.
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
- LACBA Ethics Op. 488: Law Office Management Services by Non-Lawyer Companies
- LACBA Ethics Op. 510: Fee Sharing With a Financial Planning Company Employer
- LACBA Ethics Op. 500: Financing the Legal Expenses of Another's Lawsuit
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2010982
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