Can a New York lawyer enter an ongoing co-counsel and fee-sharing relationship with an out-of-state law firm that has nonlawyer owners?

Plain-English summary

The opinion addresses a New York lawyer who wants an ongoing business relationship with a law firm located in a jurisdiction (such as the District of Columbia or Arizona) that permits nonlawyer ownership, under which the lawyer and the ABS would regularly co-counsel matters and share the resulting fees. It concludes that such an arrangement does not violate New York Rule 5.4.

The opinion reads Rule 5.4(b) (no partnership with a nonlawyer for the practice of law) and Rule 5.4(d) (no practicing in a for-profit entity with nonlawyer owners) to bar the New York lawyer from being employed by, or participating in the day-to-day operations of, the ABS. It concludes those provisions do not bar an ongoing co-counsel relationship between a separate New York lawyer and the ABS, so long as the lawyer remains outside the ABS itself.

The opinion conditions the arrangement on three requirements drawn from the other Rules. It must be non-exclusive. It must be disclosed to the client at the outset so the client can give written informed consent. And it must comply with the rules governing conflicts of interest (Rule 1.7), payment for referrals (Rule 7.2), and fee-sharing with lawyers in different firms (Rule 1.5(g)). The opinion notes that Rule 1.5(g) applies only if the lawyer and the ABS divide a single fee; if each firm bills and is paid separately, no division occurs.

The opinion aligns its reasoning with ABA Formal Opinion 464, which addressed fee division with a firm that shares fees with nonlawyers in a jurisdiction that permits it.

In practice

Under this opinion, as the New York rules stood at the time, the dividing line is structural. The opinion holds that a New York lawyer may maintain a continuing, advertised co-counsel relationship with an ABS and share fees from joint matters, but may not become part of the ABS or take part in its day-to-day operations. The opinion holds the relationship must stay non-exclusive, be disclosed for the client's written informed consent, and satisfy the conflict, referral, and fee-sharing rules.

Common questions

Q: Can a New York lawyer regularly co-counsel with a nonlawyer-owned firm in another state?

A: Yes. The opinion concludes a New York lawyer may have an ongoing relationship with an out-of-state ABS to regularly co-counsel matters and share fees, provided the lawyer is not employed by or otherwise part of the ABS and does not participate in its day-to-day operations.

Q: Does sharing fees with the ABS violate Rule 5.4?

A: No, if structured correctly. The opinion concludes Rule 5.4(b) and 5.4(d) bar the lawyer from being inside the ABS, not from sharing fees as a separate co-counsel; the fee-sharing must still satisfy Rule 1.5(g) for divided fees, or each firm may bill the client separately so no division occurs.

Q: What does the client have to be told?

A: The arrangement must be disclosed at the outset. The opinion concludes the relationship must be non-exclusive and disclosed to the client so the client can give written informed consent, and it must comply with the conflict and referral rules.

Background and rules framework

The opinion interprets New York Rule of Professional Conduct 5.4 (professional independence of a lawyer, analogous to Model Rule 5.4), in particular Rule 5.4(b) and 5.4(d), read together with Rule 1.5 (fees and fee division, including Rule 1.5(g)), Rule 1.7 (conflicts of interest), and Rule 7.2 (payment for referrals). The arrangement concerns multijurisdictional practice because the ABS operates in a jurisdiction that permits nonlawyer ownership while the New York lawyer remains governed by the New York Rules. The opinion relies on ABA Formal Opinion 464 (2013) for the proposition that a lawyer may divide a fee with a firm that shares fees with nonlawyers where that firm's jurisdiction permits it.

Citations and references

Rules of Professional Conduct:

• NY RPC 5.4(b), 5.4(d) (professional independence; nonlawyer partnership and ownership)
• NY RPC 1.5, 1.5(g) (fees and division of fees between firms)
• NY RPC 1.7 (conflicts of interest)
• NY RPC 7.2 (payment for referrals)
• MR 5.4, MR 1.5, MR 1.7, MR 7.2 (Model Rule analogues)

Other opinions cited:

• ABA Formal Op. 464 (2013): fee division with a firm that shares fees with nonlawyers
• NYSBA Ethics Op. 889 (2011): a dually-licensed lawyer's relationship with an ABS under Rule 8.5

See also

• NYC Bar Ethics Op. 2024-4: Lawyers associating with alternative legal business entities
• ABA Formal Op. 499: Passive investment in alternative business structures
• ABA Formal Op. 464: Fee division with lawyers who share fees with nonlawyers

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-2020-1-ongoing-relationships-with-alternative-legal-business-entities/