Can a New York lawyer affiliate and share fees with a New York resident who is admitted only in another state but in New York federal courts, purely to bring in New York clients?

Plain-English summary

A recently admitted New York lawyer wants to affiliate with an acquaintance who lives in New York but is admitted only in another state, though admitted to practice in New York's federal courts. The other lawyer is said to be good at generating business; the plan is to list that lawyer on letterhead (showing the out-of-state-only admission) as a partner, associate, or counsel, with the other lawyer attending only the initial client meeting and doing no legal work, in exchange for a share of fees. The lawyer asked whether this affiliation and fee-share, intended solely to obtain clients the other lawyer refers, is permissible.

The committee explains that a New York firm may include lawyers not admitted in New York, as long as it discloses the jurisdictional limits (Rule 7.5(d)), but that prior approvals assumed a common enterprise in which all the lawyers actually render legal services within their jurisdictional limits; the committee has never blessed an arrangement that is just signing up clients and passing them on for a fee skimmed off the top. Rule 7.2(a) bars paying for client referrals except through a Rule 5.8 relationship (not available here) or a Rule 1.5(g) fee division, and Rule 1.5(g) requires that the division reflect proportional services or a written assumption of joint responsibility; the mere cultivation of client relationships is not "services performed" (N.Y. State 954). So the plan violates Rule 7.2(a) unless the New York lawyer may properly be affiliated with the out-of-state lawyer.

That, in turn, depends on whether the out-of-state lawyer's New York activity is the unauthorized practice of law, a question of statute beyond the committee's jurisdiction. The committee frames the issue as whether a lawyer admitted only out-of-state may set up in New York for rainmaking and fee-sharing based solely on admission to New York federal courts, and discusses In re Peterson and later cases distinguishing the right to appear in a particular court from the right to practice law generally. It leaves the legal question to the inquirer, cautioning that if Peterson controls the New York lawyer would violate Rule 5.5(b) (aiding unauthorized practice), that the proposal may be improper solicitation under Rule 7.3 (which applies to out-of-state lawyers soliciting in New York via Rule 7.3(i)), that Rule 8.4(a) bars assisting another's rule violations, and that the Court of Appeals' rules on temporary practice (22 NYCRR Part 523) bar an out-of-state lawyer from establishing a systematic and continuous New York presence except as otherwise authorized.

In practice

Under this opinion, a New York lawyer should not structure an affiliation whose real purpose is to pay a not-New-York-admitted lawyer for soliciting and originating New York clients, because a bare referral-for-fee arrangement fails Rule 1.5(g) and Rule 7.2(a). The opinion holds the arrangement is improper if the other lawyer's solicitation and activities amount to the unauthorized practice of law (a legal question the lawyer must resolve), notes that New York federal-court admission does not authorize a general New York practice, and warns that the plan may also run afoul of Rule 5.5(b), Rule 7.3 solicitation limits, and the temporary-practice rules in 22 NYCRR Part 523.

Common questions

Q: Can a New York firm include a lawyer admitted only in another state?

A: Per the opinion, yes, in a genuine common enterprise where each lawyer renders legal services within their jurisdictional limits and the firm discloses those limits (Rule 7.5(d)). What the committee has never blessed is an affiliation that is just signing up clients for a fee cut.

Q: Does the other lawyer's federal-court admission let him build a New York practice?

A: Per the opinion, that is the crux. Admission to a court is the right to handle matters in that court, not a general right to practice law; the committee, citing In re Peterson, leaves the unauthorized-practice question to the inquirer but cautions that if Peterson controls the New York lawyer would violate Rule 5.5(b).

Q: Why does a pure rainmaking-for-a-fee deal fail the fee-sharing rule?

A: Per the opinion, Rule 1.5(g) requires the division to track proportional services or a written assumption of joint responsibility, and the mere cultivation of client relationships is not "services performed," so the arrangement is a prohibited paid referral under Rule 7.2(a).

Background and rules framework

The opinion applies New York Rule 7.2(a) (no paying for client referrals, with exceptions), Rule 1.5(g) (fee division between unaffiliated lawyers), Rule 5.5 (no practicing in violation of a jurisdiction's regulation and no aiding unauthorized practice), Rule 7.1 and 7.5(d) (advertising and disclosure of jurisdictional limits), Rule 7.3 (solicitation, including 7.3(i) for out-of-state lawyers), and Rule 8.4(a). These correspond to ABA Model Rules 7.2, 1.5, 5.5, 7.1, 7.3, and 8.4. The committee also notes 22 NYCRR Part 523 on temporary practice by out-of-state lawyers.

Citations and references

Rules of Professional Conduct:

• New York Rules of Professional Conduct 7.2(a) (and Comment [1]); 1.5(g) (and Comment [7]); 5.5(a), (b); 7.1; 7.5(d); 7.3; 7.3(i); 8.4(a)
• ABA Model Rules 7.2, 1.5, 5.5, 7.1, 7.3, 8.4 (analogues)

Cases:

• In re Peterson, 163 B.R. 665 (Bankr. D. Conn. 1994): federal-court admission does not authorize the general practice of law in a state
• Servidone Constr. Corp. v. St. Paul Fire & Marine Ins. Co., 911 F. Supp. 560 (N.D.N.Y. 1995); In re Desilets, 291 F.3d 925 (6th Cir. 2002): later cases applying and distinguishing Peterson

Statutes and rules:

• 22 NYCRR Part 523 (temporary practice by out-of-state lawyers)

Other opinions cited:

• N.Y. State 955 (2013); 705 (1997); 801 (2006); 864 (2011); 954 (2013); 979 (2013); 745 (2001): affiliations with out-of-state lawyers, fee-sharing, and joint responsibility

See also

• NY State Bar Op. 1172: Retired Lawyer's Referral Fee on Transferred Wills
• NY State Bar Op. 1173: Listing New York Admission on Out-of-State Letterhead
• NY State Bar Op. 1190: Nonlawyer Members of a PLLC Providing Legal Services

Source

• Landing page: https://nysba.org/ethics-opinion-1160/