Ezel / Ethics Opinions / NYSBA
NYSBA 2002-04-10

Can a New York lawyer refer clients to the lawyer's own non-legal business, and can that business refer customers back by phone or in person?

Short answer: The opinion concludes that if the lawyer gives the DR 1-106 notice that the non-legal services are not covered by the attorney-client relationship, the lawyer may refer clients to the business without meeting the specific terms of DR 5-104(A), but must still disclose the lawyer's interest and alternatives under DR 5-101(A); the business may refer customers back in person or by phone, but no referral fee may be paid.
Currency note: this opinion is from 2002
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 Not binding precedent.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 at the bottom of this page) is the authoritative source for any reliance.

NY State Bar Ethics Opinion 755: Lawyer-owned ancillary business and cross-referrals

Short answer: A lawyer who owns a distinct non-legal business and gives the DR 1-106 written notice that the non-legal services are not part of an attorney-client relationship may refer clients to that business without satisfying the specific terms of DR 5-104(A), but must still fully disclose the lawyer's interest and the availability of alternatives under DR 5-101(A); the business may refer customers back to the lawyer in person or by phone, but no referral fee may be paid for the referral.

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

View original opinion

Plain-English summary

The 2001 multidisciplinary-practice amendments added DR 1-106, which provides that the Disciplinary Rules do not apply to a lawyer's distinct non-legal services if the client is given written notice (DR 1-106(A)(4)) that those services are not the subject of an attorney-client relationship. Building on N.Y. State 752 (2002), which held that this notice is not a "safe harbor" from all rules, the committee addressed mutual referrals between a lawyer and the lawyer's own non-legal business (for example, fiduciary, mortgage brokerage, or abstract title companies) where the conflict rules permit the firms to act.

On referrals by the lawyer to the business, the committee held that DR 5-101(A) always applies: the lawyer must obtain informed consent to the personal-interest conflict created by referring a client to a business the lawyer owns, including disclosure of the lawyer's interest, the business's fee structure, and available alternatives (N.Y. State 595). The committee then concluded that the more specific business-transaction rule, DR 5-104(A), does not apply where the lawyer has given the DR 1-106 notice. DR 5-104(A) applies only when the client expects the lawyer to exercise professional judgment for the client's protection in the transaction; that expectation parallels the DR 1-106 standard, so where the client could not reasonably believe the non-legal services are part of the attorney-client relationship, the client should not expect the lawyer's protective judgment in the transaction. The lawyer therefore need not meet DR 5-104(A)'s independent-counsel and written-fairness requirements for the referral, though DR 5-101(A) disclosure remains required.

On solicitation, DR 2-103(A) bars a lawyer's in-person or telephone solicitation of prospective clients (with exceptions for close friends, relatives, and current or former clients). The committee concluded this rule does not stop the lawyer's affiliated business from referring its customers back to the lawyer in person or by phone. A contrary reading would be anomalous, letting the lawyer refer orally to the business but forcing the business to refer back only in writing, and would conflict with the joint-advertising permissions in DR 2-101(C) and DR 2-102(A). The committee distinguished Pennsylvania opinions reaching the opposite result, noting New York went further than Pennsylvania to remove "feeder" precautions (the MacCrate Report). It cautioned that this covers referrals made in operating the ancillary business; it does not let the lawyer personally cold-contact the business's customers to solicit legal work, and no referral fee may be paid.

In practice

Under the Code as it stood in 2002, the opinion concluded that a lawyer who owns a distinct non-legal business and gives the DR 1-106 notice may refer clients to it without complying with DR 5-104(A)'s specific business-transaction terms, but the lawyer must still satisfy DR 5-101(A) by disclosing the lawyer's interest in the business and the availability of alternatives and obtaining consent.

The opinion concluded the ancillary business may advertise the dual roles and refer existing customers or clients to the lawyer by in-person or telephone contact, with two limits: no referral fee may be paid, and the lawyer may not personally use the business's customer list to cold-solicit legal work outside the operation of the business.

Common questions

Q: Can a New York lawyer refer clients to a business the lawyer owns?

A: Yes, with disclosure. The opinion concludes the lawyer must obtain informed consent under DR 5-101(A) to the conflict, disclosing the lawyer's interest, the fee structure, and available alternatives.

Q: Does the lawyer have to follow the business-transaction rule, DR 5-104(A), for the referral?

A: No, where the DR 1-106 notice has been given. The opinion concludes that once the client cannot reasonably believe the non-legal services are part of the attorney-client relationship, DR 5-104(A) does not apply to the referral, though DR 5-101(A) disclosure still does.

Q: Can the lawyer's non-legal business refer customers back to the lawyer by phone or in person?

A: Yes. The opinion concludes DR 2-103(A) does not bar the affiliated business from referring its customers to the lawyer in person or by phone in operating the business.

Q: Can a referral fee be paid for these cross-referrals?

A: No. The opinion concludes no referral fee may be paid for the referral.

Background and rules framework

The opinion interprets New York's former Code of Professional Responsibility: DR 1-106 (non-legal services and the client-notice procedure), DR 5-104(A) (business transactions between lawyer and client), DR 5-101(A) (personal-interest conflicts), and DR 2-103(A) (in-person and telephone solicitation), with the joint-advertising provisions DR 2-101(C) and DR 2-102(A). The Model Rules analogues are Rule 5.7 (law-related services), Rule 1.8(a) (business transactions with a client), Rule 1.7(a)(2) (personal-interest conflicts), and Rule 7.3 (solicitation). New York replaced this Code with the Rules of Professional Conduct in 2009; the DR numbers cited here are historical.

Citations and references

Rules of Professional Conduct:

  • MR 5.7 (law-related services); MR 1.8(a) (business transactions with a client)
  • MR 1.7(a)(2) (personal-interest conflicts); MR 7.3 (solicitation)
  • NY DR 1-106, DR 5-104(A), DR 5-101(A), DR 2-103(A)

Other opinions cited:

  • N.Y. State 752 (2002): DR 1-106 notice is not a safe harbor from all rules
  • N.Y. State 595 (1988): disclosure when referring to a lawyer-owned abstract company

See also

Source