NYSBA 2019-01-02

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?

Short answer: The opinion concludes the arrangement is improper if the other lawyer's soliciting clients, sharing fees, and other activities would, as a matter of law, be the unauthorized practice of law; a federal-court admission does not authorize a general New York practice, and a bare rainmaking-for-a-fee-cut deal does not satisfy Rule 1.5(g).

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 Not binding precedent.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) is the authoritative source for any reliance.

NYSBA Ethics Opinion 1160: Fee-Sharing With a New York Resident Lawyer Not Admitted in New York

Short answer: The opinion concludes that it would not be proper for a New York lawyer to affiliate with, and share fees with, a New York resident who is admitted only in another state (and in New York federal courts) for the purpose of having that lawyer solicit and originate New York clients, if the solicitation, fee-sharing, and any other services would as a matter of law constitute the unauthorized practice of law; admission to New York federal courts does not authorize a general New York practice, and a bare rainmaking-for-a-fee deal does not meet Rule 1.5(g).

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association's view of New York'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 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

Source

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