Ezel / Ethics Opinions / NYSBA
NYSBA November 6, 1975

Can a law firm or professional corporation merge with or operate a collection agency business?

Short answer: The opinion concluded that it is improper under the Code for a law firm or professional corporation that practices law to merge with or engage in the business of a collection agency, which must be kept separate from the practice of law.

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This page answers the general question as of 1975. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.

Currency note: this opinion is from 1975
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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 Not binding precedent.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 on this page) is the authoritative source for any reliance.

Plain-English summary

The committee was asked whether a professional corporation formed to practice law may merge with a corporation operating as a collection agency. It expressly declined to opine on the legal right of a professional corporation to engage in other businesses or on the legality of the merger, confining itself to the ethical question. On that question, it found the activity improper under the Code, citing DR 3-101(A), DR 3-103, DR 5-107(C), EC 3-8, and EC 5-23.

The committee relied on N.Y. State 206 (1971), which detailed the need to separate the practice of law from other occupations such as a collection agency, warning of "the risk of having the other occupation used improperly as a feeder for legal practice" and directing that "every precaution should be taken to separate the other profession or business from the legal practice." It quoted ABA 225 (1941): a practicing lawyer cannot participate in the collection activities or management of an agency that solicits the collection of claims, and a lawyer who wishes to do so must withdraw from the practice of law and stop holding himself out as a lawyer.

The committee noted that the same result, finding the relationship improper, had been reached in its own N.Y. State 371 (1974), in N.Y. County 238 (1926), and in Illinois State Bar 181 (1959), and pointed to Drinker, Legal Ethics, at 168-169 (1953).

Currency note

This opinion was issued in 1975, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (a lawyer's professional independence from nonlawyers is now governed by Rule 5.4 and assisting the unauthorized practice of law by Rule 5.5). 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, deadline, or requirement mentioned here.

Common questions

Q: Can a law-practice professional corporation merge with a collection agency?

A: Under this opinion, no. The committee found the merger improper under the Code (DR 3-101(A), DR 3-103, DR 5-107(C)), while declining to address whether it would be legal.

Q: Why must a collection-agency business be kept out of a law practice?

A: Per the opinion, to avoid the risk, identified in N.Y. State 206 (1971), that the other business will be used improperly as a feeder for legal work; every precaution should separate the two.

Q: Can a lawyer personally run or manage a collection agency?

A: The committee, quoting ABA 225 (1941), said a lawyer who wishes to participate in such an agency's collection activities or management must withdraw from the practice of law and stop holding himself out as a lawyer.

Background and rules framework

The opinion applies the then-current New York Code's provisions on professional independence and the unauthorized practice of law, DR 3-101(A), DR 3-103, DR 5-107(C), EC 3-8, and EC 5-23, drawing on N.Y. State 206 (1971) and 371 (1974). The current analogues are Rule 5.4 (professional independence of a lawyer) and Rule 5.5 (unauthorized practice of law).

Citations and references

Rules of Professional Conduct:

  • MR 5.4 (professional independence of a lawyer)
  • MR 5.5 (unauthorized practice of law; multijurisdictional practice)
  • NY EC 3-8, EC 5-23; DR 3-101(A), DR 3-103, DR 5-107(C)

Cases:

  • N.Y. County 238 (1926); Illinois State Bar 181 (1959): collection-agency relationship found improper

Other opinions cited:

  • N.Y. State 206 (1971): separating a collection agency from the practice of law
  • N.Y. State 371 (1974): lawyer's relationship to a collection agency
  • ABA 225 (1941): a lawyer participating in collection activities must withdraw from practice

See also

Source

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