Can a North Carolina law firm call lawyers who hold no equity in the firm 'partners' or 'income partners' in its public communications?

Plain-English summary

A North Carolina professional corporation has three shareholder "equity partners" (A, B, C) who own all the firm's equity, and two lawyers (E and F) who own no interest and do not vote on corporate governance but can bind the firm and sign opinion letters; internally E and F are called "income partners." The firm wants to hold E and F out publicly as "partners" or "income partners," and asks whether it may.

The committee answers yes, with conditions. It notes that although Black's Law Dictionary defines "partner" as a co-owner of a business, the profession routinely uses the term without regard to that legal definition (shareholders in a professional corporation are commonly called "partners"), and the public generally equates the title with a level of experience, status, or authority within a firm rather than literal ownership. But the designation cannot be a sham. Under Rule 7.1(a)(1), a communication is false or misleading if it contains a material misrepresentation or omits a fact needed to keep the statement from being materially misleading. To avoid misrepresentation, a firm may designate a lawyer as a partner regardless of ownership if the lawyer was promoted by formal action or vote of firm management, or under the firm's governing documents, and the promotion was based on criteria showing the lawyer is worthy of it. The committee declines to dictate the criteria but offers examples (experience, integrity, industry, intelligence, communication, legal knowledge, motivation, judgment, efficiency, involvement). Finally, any lawyer identified as a partner is held to the professional responsibilities that may arise from that designation, citing Rule 5.1.

In practice

Under the North Carolina rules as they stood at the time of the opinion, the committee holds that a firm may publicly call a non-equity lawyer a "partner," "income partner," or "non-equity partner" if the lawyer was officially promoted by firm management or under the firm's governing documents, and the promotion rested on legitimate criteria. Per the opinion, the limiting principle is Rule 7.1(a)(1): the title may not be a sham, because a designation untethered from any formal promotion or genuine basis would materially mislead the public about the lawyer's status. The committee does not prescribe the criteria a firm must use but lists examples a firm may rely on.

The opinion adds that the title carries consequences: a lawyer held out as a partner is subject to the professional responsibilities that may arise from that designation, citing Rule 5.1 (responsibilities of partners, managers, and supervisory lawyers).

Common questions

Q: Can a North Carolina firm call a non-owner lawyer a "partner"?

A: Yes, if the lawyer was officially promoted to that position by firm management or under the firm's governing documents based on legitimate criteria. The opinion holds the legal ownership definition does not control, but the designation may not be a sham under Rule 7.1(a)(1).

Q: Is calling a non-equity lawyer a "partner" misleading under Rule 7.1?

A: Not if it reflects a genuine, formal promotion. The opinion treats a designation as misleading only when it is a sham, that is, not supported by a formal promotion or legitimate criteria.

Q: What criteria justify the promotion?

A: The committee declines to dictate criteria but lists examples: experience, integrity, industry, intelligence, communication, legal knowledge, motivation, judgment, efficiency, and involvement.

Q: Does the "partner" title create added responsibilities?

A: Yes. The opinion states that any lawyer identified as a partner is held to the professional responsibilities that may arise from that designation, citing Rule 5.1.

Background and rules framework

The opinion interprets Rule 7.1 (Model Rule 7.1). Rule 7.1(a)(1) provides that a communication about a lawyer's services is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement as a whole not materially misleading. The committee applies this to firm designations of lawyers as "partners." It also references Rule 5.1 (Model Rule 5.1, responsibilities of partners, managers, and supervisory lawyers) for the professional responsibilities that attach to a lawyer held out as a partner.

Citations and references

Rules of Professional Conduct:

• Model Rule 7.1 / NC Rule 7.1(a)(1) (false or misleading communications; material misrepresentation)
• Model Rule 5.1 / NC Rule 5.1 (responsibilities of partners, managers, and supervisory lawyers)

See also

• ABA Formal Op. 90-357: Use of the "Of Counsel" Designation
• ABA Formal Op. 94-388: Describing Relationships Among Law Firms
• Alabama Op. 1993-11: Use of "Associates," "Law Firm," and "Law Offices"

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2015-formal-ethics-opinion-9/

Original opinion text

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

Inquiry:

ABC Law Firm is a North Carolina professional corporation. Three lawyers, A, B, and C, are shareholders in the firm and own all of the equity of the firm. In the firm’s communications, Lawyers A, B, and C are held out as “partners” at the firm, and they are referred to internally as “equity partners.”

Lawyers E and F also work for the firm, but they do not own any interest in the firm and are not shareholders. However, Lawyers A, B, and C consider Lawyers E and F to be “partners in every sense of the word except actual ownership.” Lawyers E and F have the authority to bind the firm and to sign opinion letters on behalf of the firm, but they do not vote on matters of corporate governance. Within the firm, Lawyers E and F are referred to as “income partners.”

The firm would like to hold Lawyers E and F out to the public as “partners” or “income partners.” May the firm do so?

Opinion:

Yes, provided that any lawyer who is held out by the firm as a “partner,” “income partner,” or “non-equity partner” has been officially promoted by the law firm’s management or pursuant to the law firm’s governing documents and such promotion is based upon legitimate criteria.

Black’s Law Dictionary defines “partner” as “[o]ne of two or more persons who jointly own and carry on a business for profit.” Black’s Law Dictionary (10th ed. 2014). However, within the legal profession, the designation is often used without regard to the legal definition. For example, shareholders in a professional corporation for the practice of law are frequently referred to as “partners.” Like lawyers themselves, laymen generally equate the designation with the achievement by a lawyer of a certain level of experience, status, or authority within a law firm.

Nevertheless, referring to a lawyer as a “partner” in external communications cannot be a sham. Rule 7.1(a)(1) states that a communication is false or misleading if it “contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.” To avoid misrepresentation, a law firm may designate a lawyer as a partner, regardless of whether the lawyer satisfies the legal definition of that term, if the lawyer was promoted to the position by formal action or vote of firm management or pursuant to the firm’s governing documents. Further, to prevent the public from being misled as to the lawyer’s achievements, the promotion must be based upon criteria that indicates that the lawyer is worthy of the promotion. The Ethics Committee acknowledges that law firms have different standards or criteria for promoting a lawyer to equity or non-equity partner, and the committee declines to dictate what those criteria must be. However, the following list provides examples of legitimate criteria for such a promotion:

• Experience: Engaged in the practice of law for a substantial period of time.

• Integrity: Adherence to principles of honesty and high professional ethics.

• Industry: Willingness to work hard, beyond normal hours where clients’ needs and professional development so require, evidencing a drive to achieve.

• Intelligence: Ability to analyze law and facts; imagination and creativity.

• Communication: Ability to express thoughts clearly, both orally and in writing.

• Legal knowledge: Skill in general and specialized areas of law.

• Motivation: Willingness to accept responsibility for client’s problems, to perform work assigned punctually.

• Judgment: Ability to make logical, practical decisions.

• Efficiency: Ability to do high quality work in a reasonable amount of time.

• Involvement: Participation in professional, civic, and other outside activities.

Any firm lawyer who is identified as a “partner” shall be held to the professional responsibilities in the Rules of Professional Conduct that may arise from that designation. See, e.g., Rule 5.1.