NYSBA 2013-11-13

Can a lawyer partner with or be employed by a nonlawyer's 'Disability Office' to handle Social Security, Medicaid, and guardianship matters, and split fees with the nonlawyer?

Short answer: No. The lawyer may not be employed by or partner with the nonlawyer entity to provide legal services, nor share legal fees with the nonlawyer (Rules 5.4(a), (b), (d)). The lawyer may pay the businessperson for marketing or employ him in the lawyer's own firm, but compensation cannot be a share of legal fees.

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 Not binding precedent.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 992: A Nonlawyer "Disability Office" Structure and Fee Sharing

Short answer: A lawyer may not be employed by or form a partnership with a nonlawyer's "Disability Office" to provide legal services on Social Security, Medicaid, and guardianship matters, and may not share legal fees with the nonlawyer (Rules 5.4(a), (b), (d)); the lawyer may, however, compensate the businessperson for marketing or other nonlegal services and may open the lawyer's own firm employing the businessperson as an office and marketing manager, so long as the compensation is not a share of legal fees.

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

A lawyer who serves the Russian immigrant community on trusts and estates, guardianships, and government-benefits matters (SSI, SSDI, Medicaid planning, Medicare) wanted to work with a businessperson who would open a for-profit "Disability Office" to market and provide such services. Some of those services (representing claimants in Social Security and Medicaid hearings) can be performed by nonlawyers under federal and state law, while others (appeals, guardianships, Medicaid-planning advice) are the practice of law. The lawyer proposed four structures and asked which complied with the Rules: (a) the office employs the attorney and takes a percentage of fees; (b) the office has a legal-services agreement under which the attorney pays it a percentage; (c) the attorney opens a separate firm and employs the businessperson as office and marketing manager paid a percentage of business he brings in; and (d) the businessperson employs the attorney in a nonlegal capacity for matters not requiring a license.

The opinion concludes that the structures placing the lawyer's legal practice inside the nonlawyer entity are prohibited. Rule 5.4(d)(2) bars a lawyer from practicing in a for-profit entity in which a nonlawyer is an owner, officer, or holds a position of similar responsibility, so the attorney working as an employee of the Disability Office is prohibited. Judiciary Law section 495 bars a corporation or voluntary association from practicing law, and Rule 5.4(b) bars a lawyer-nonlawyer partnership if any of its activities constitute the practice of law; because the work includes guardianships and Medicaid-planning advice, which are the practice of law, the partnership is impermissible. Rule 5.8 permits certain ongoing business relationships with nonlawyer professionals, but only with the limited categories listed in the Appellate Division rules (architects, CPAs, professional engineers, land surveyors, certified social workers), which do not fit here. So neither Rule 5.4(d) nor Rule 5.8 permits the first two proposals.

On fees, the opinion concludes a lawyer may not share a legal fee with a nonlawyer (Rule 5.4(a); Judiciary Law section 491), so the structures routing a percentage of legal fees through the office are impermissible fee-splitting. The lawyer may, however, compensate the businessperson for marketing or other nonlegal services, subject to the rules, including Rule 7.2(a)'s limits on paying for recommendations. The opinion's bottom line is that the lawyer may not enter a business with a nonlawyer to handle matters where the lawyer is practicing law, even where some of those services could lawfully be performed by a nonlawyer.

In practice

Under this opinion, a lawyer cannot embed a law practice inside a nonlawyer-owned "office" or split legal fees with the nonlawyer owner, even when the venture also offers services a nonlawyer may lawfully perform. The opinion holds that, under New York's Rules 5.4 and 5.8 as they stood at the time, nonlawyer ownership of, partnership in, or employment of the lawyer to practice law is prohibited, and legal-fee sharing with a nonlawyer is prohibited. The permissible path the opinion identifies is the lawyer's own firm paying the businessperson for genuine marketing or nonlegal services, structured so the payment is not a share of legal fees.

Common questions

Q: Can a nonlawyer's company employ a lawyer to provide legal services?

A: No. The opinion concludes Rule 5.4(d)(2) bars a lawyer from practicing law in a for-profit entity in which a nonlawyer is an owner or officer, and Judiciary Law section 495 bars the entity itself from practicing law.

Q: Can the lawyer split legal fees with the businessperson who brings in clients?

A: No. The opinion concludes Rule 5.4(a) and Judiciary Law section 491 prohibit sharing a legal fee with a nonlawyer, so structures routing a percentage of legal fees to the office are impermissible.

Q: Can the lawyer pay the businessperson at all?

A: Yes, for nonlegal services. The opinion concludes the lawyer may compensate the businessperson for marketing or other services, subject to the rules including Rule 7.2(a), as long as the payment is not a disguised share of legal fees.

Q: Does it matter that nonlawyers can handle some of these matters?

A: Not for the structures involving the lawyer's legal work. The opinion concludes the lawyer may not enter a business with a nonlawyer to handle matters where the lawyer is practicing law, even if some of the venture's services could be performed by a nonlawyer.

Background and rules framework

The opinion applies New York Rule 5.4 (professional independence; cf. Model Rule 5.4): 5.4(a) (no sharing legal fees with a nonlawyer), 5.4(b) (no lawyer-nonlawyer partnership for the practice of law), and 5.4(d) (no practicing in a for-profit entity with nonlawyer ownership or officers). It applies Rule 5.8 (contractual relationships with nonlawyer professionals, limited to listed professions; a New York-specific rule), and Rule 7.2(a) (payment for recommending services; cf. Model Rule 7.2). It cites Judiciary Law sections 491 and 495 and prior opinions N.Y. State 930 (2012) and N.Y. State 885 (2011).

Citations and references

Rules of Professional Conduct:

New York RPC 5.4(a), (b), (d) (professional independence; cf. Model Rule 5.4)
New York RPC 5.8 (contractual relationships with nonlawyer professionals)
New York RPC 7.2(a) (payment for recommending services; cf. Model Rule 7.2)

Statutes:

New York Judiciary Law section 491 (sharing fees with a nonlawyer)
New York Judiciary Law section 495 (corporation or association practicing law)
42 U.S.C. 406(a)(1); 20 C.F.R. 404.1705; 18 N.Y.C.R.R. 358-3.9 (nonlawyer representation in benefits hearings)

Other opinions cited:

N.Y. State 930 (2012); N.Y. State 885 (2011): limits of Rule 5.8 nonlawyer-professional relationships

Source

Landing page: https://nysba.org/ethics-opinion-992/