Can Ohio lawyers own an ancillary business offering law-related services, and what must they disclose to its customers?
Ohio BPC Opinion 1994-007: Lawyers Owning an Ancillary Law-Related Business
Short answer: The opinion concluded that attorneys may own an ancillary business providing law-related services so long as it does not engage in the unauthorized practice of law and is operated consistently with the Code, that they may not require customers of the business to agree to legal representation by the attorneys as a condition of using the business, and that they must disclose their ownership interest to customers who may need legal services and obtain client consent before accepting such a customer as a client.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Ohio Board of Professional Conduct'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. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
The Board answered three questions about attorneys owning an ancillary business that provides law-related services, using the example of a workers' compensation service company providing claims-administration services for employers.
First, the Board concluded that attorneys may own such a business, provided it is operated consistently with the Ohio Code of Professional Responsibility and does not engage in activities that would constitute the unauthorized practice of law. Second, the Board concluded it is improper to require customers of the ancillary business to agree to legal representation by the attorneys or their firm as a condition of using the business's services; if a customer needs legal services, the customer may be told the attorneys can provide representation but must also be told of the ownership interest and encouraged to seek counsel of the customer's own choice. Third, the Board concluded that the attorneys' ownership interest must be disclosed to customers who may need legal services, and that before accepting employment by a customer the attorney must fully disclose the ownership interest and obtain the client's consent.
Currency note
The Ohio Board reports that this opinion was withdrawn by the Board on June 12, 2020, in light of Prof. Cond. R. 5.7, which now addresses responsibilities regarding law-related services. Because it has been withdrawn, it is indexed here as research only and is not current guidance.
This opinion issued in 1994, before Ohio's adoption of the Ohio Rules of Professional Conduct, which superseded the former Code of Professional Responsibility effective February 1, 2007. Treat this page as historical context, not current guidance. Verify against the current Ohio Rules of Professional Conduct, including Rule 5.7, before relying on any specific guidance mentioned here.
Common questions
Q: Could lawyers own an ancillary law-related business?
A: Under the opinion, yes, for example a workers' compensation claims-administration company, provided the business did not engage in the unauthorized practice of law and was operated consistently with the Code of Professional Responsibility.
Q: Could the business require customers to hire the lawyers for legal work?
A: No. The Board concluded it was improper to condition the ancillary business's services on the customer agreeing to legal representation by the attorneys or their firm.
Q: What did the lawyers have to disclose?
A: The Board concluded the attorneys had to disclose their ownership interest to customers who might need legal services, and, before accepting such a customer as a client, fully disclose the ownership interest, obtain consent, and encourage the customer to seek counsel of the customer's own choice.
Background and rules framework
The opinion interprets former Ohio Code of Professional Responsibility provisions on the unauthorized practice of law (DR 3-101(A)), the lawyer's independent professional judgment and personal-interest conflicts (DR 5-101(A)), and business dealings touching the representation, as applied to lawyer-owned ancillary businesses. The subject is now governed by Prof. Cond. R. 5.7.
Citations and references
Rules of Professional Conduct:
- Former Ohio Code of Professional Responsibility DR 3-101(A), DR 5-101(A), DR 5-104
- Compare current Ohio Prof. Cond. R. 5.7 (law-related services)
See also
- Ohio BPC Op. 1992-006: Attorney Ownership in a House-Arrest Monitoring Company
- Ohio BPC Op. 1994-009: Insurance Staff Counsel and an In-House Law Firm
- Ohio BPC Op. 1994-008: Splitting a Contingency Fee With a Non-Lawyer Investigator
Source
- Landing page: https://ohioadvop.org/advisory-opinion-index/
- Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-94-007-1.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804
OFFICE OF SECRETARY
OPINION 94-7
Issued June 17, 1994
Withdrawn by Board on June 12, 2020
[CPR Opinion-provides advice under the Ohio Code of Professional Responsibility which is superseded by the Ohio
Rules of Professional Conduct, eff. 2/1/2007.]
[Not current-subsequent rule amendments to Gov. Bar R. III, eff. Nov. 1, 1995 and to DR 2-103, eff. Jul. 1, 1996.]
SYLLABUS: An attorney or several attorneys within a law firm may own an ancillary business
that provides law-related services, for example, a Workers' Compensation Service Company that
provides claims administration services for employers. Attorneys who operate such law-related
businesses must do so in a manner consistent with the Ohio Code of Professional Responsibility.
The ancillary business must not engage in activities that would be prohibited as unauthorized
practice of law.
It is improper for attorneys who own an ancillary business to require that customers of the business
agree to legal representation by the attorneys or their law firm as a condition of engagement of the
services of the ancillary business. If customers of the ancillary business need legal services, they
may be informed that the attorneys can provide the legal representation, but they must also be
informed of the ownership interest and encouraged to seek legal counsel of their own choice.
An attorney’s ownership interest in an ancillary business must be disclosed to customers of the
business who may be in need of legal services. An attorney, before accepting employment by a
client who is also a customer of the business, must fully disclose the ownership interest in the
ancillary business and obtain client consent.
OPINION: This opinion addresses the propriety of attorneys within a law firm owning an
ancillary business that provides law-related services. Three questions are presented.
-
May an attorney or several attorneys within a law firm own a business that
provides law-related services, for example, a Workers' Compensation Service
Company that provides claims administration services for employers? -
Is it proper for attorneys who own an ancillary business to require that customers
of the business agree to legal representation by the attorneys or their law firm as a
condition of engagement of the services of the ancillary business? -
Must the attorney or attorneys' ownership interest in the ancillary business be
disclosed to customers of the business who may be in need of legal services?
Question 1
May an attorney or several attorneys within a law firm own a business that provides
law-related services, for example, a Workers’ Compensation Service Company that
provides claims administration services for employers?
The Board begins by noting that the Board of Commissioners on Grievances and Discipline is not a
rule-making body and thus the Board will not attempt to fashion an ancillary business rule within
this opinion. The Board will only offer an interpretation of the Ohio Code of Professional
Responsibility as it applies to the issues raised.
Traditionally, law-related services have been provided by attorneys to their clients. Examples of
law-related services include title insurance, financial planning, trust services, tax return preparation,
legislative lobbying, and other types of consulting. More recently law firms, whether for economic
or client service reasons, have sought involvement in the provision of law-related services through
business entities separate from the practice of law, commonly called ancillary businesses.
Nevertheless, within the legal profession there has been much debate over whether a lawyer or law
firm should be involved in providing law-related services through ancillary businesses. Some
argue that lawyers’ involvement in ancillary businesses facilitate the practice of law, others argue it
undermines the practice of law. Opponents point to the ethical concerns of a non-lawyer's
interference with a lawyer's professional judgment, conflicts of interest, and threats to the
preservation of client confidences and secrets. Proponents suggest that lawyers' involvement in
law-related businesses enhance the range and quality of client services. See generally, ABA/BNA
Lawyers’ Manual on Professional Conduct, 91:401-418 (5/18/94); Stephen R. Ripps, Law Firm
Ownership of Ancillary Businesses in Ohio -- A New Era?, 27:1 Akron L. Rev.1-17 (1993); and
Cindy A. Carson, Under New Mismanagement: The Problem of Non-Lawyer Equity Partnership in
Law Firms, Geo. J. Legal Ethics, 7:593-635 (1994).
Ohio's Code of Professional Responsibility is silent as to a lawyer's involvement in a law-related
business. The Code's “silence" as to law-related businesses is in contrast to the "noise" surrounding
ABA Model Rule 5.7, initially adopted in August 1991, rescinded in August 1992, then adopted in
February 1994. The first adopted version of ABA Model Rule 5.7 essentially prohibited ancillary
businesses. The current version permits, but regulates ancillary businesses.
Although not controlling in Ohio, ABA Model Rule 5.7 is set forth below as an example of the
organized bar's most recent approach to the issue of law-related services.
M.R. 5.7 Responsibilities Regarding Law-Related Services
(a) A lawyer shall be subject to the Rules of Professional Conduct with respect to
the provision of law-related services, as defined in paragraph (b), if the law-related
services are provided:
(1) by the lawyer in circumstances that are not distinct from the
lawyer's provision of legal services to clients; or
(2) by a separate entity controlled by the lawyer individually or with
others if the lawyer fails to take reasonable measures to assure that a
person obtaining the law-related services knows that the services of
the separate entity are not legal services and the protections of the
client-lawyer relationship do not exist.
(b) The term "law-related services" denotes services that might reasonably be
performed in conjunction with and in substance are related to the provision of legal
services, and that are not prohibited as unauthorized practice of law when provided
by a non lawyer.
In Ohio, there is no rule within the Code of Professional Responsibility that expressly prohibits a
lawyer's ownership of an ancillary business, nor is there a rule that comprehensively governs such
activities. The issue of a lawyer's ownership of an ancillary business is sometimes confused with
the related yet distinct issue of a non-lawyer's partnership in the practice of law. Both are
controversial issues within the legal profession. Ohio's disciplinary rules expressly prohibit the
latter, not the former. Under Disciplinary Rule 3-103(A) "[a] lawyer shall not form a partnership
with a non-lawyer if any of the activities of the partnership consist of the practice of law." Under
Disciplinary Rule 5-107 (C) "[a] lawyer shall not practice with or in the form of a professional
corporation or association authorized to practice law for a profit, if: (1) A non-lawyer owns any
interest therein . . .; (2) A non-lawyer is a corporate director or officer thereof; or (3) a non-lawyer
has the right to direct or control the professional judgment of a
lawyer." Under Governing Bar Rule III Section 1 of the Supreme Court Rules for the Government
of the Bar of Ohio, a non-lawyer may not be a shareholder, director, or officer of a legal
professional association or legal clinic organized to practice law pursuant to the provisions of
Chapter 1785 of the Ohio Revised Code. Also, under Governing Bar Rule III Section 1, a legal
professional association or legal clinic is authorized "to engage in the practice of law in Ohio and in
such other activities only as are essential to the practice of law."
Thus, while these rules clearly prohibit a non-lawyer from becoming a partner in a law firm, they
do not necessarily prohibit a lawyer from owning a business that provides services related or
"ancillary" to the practice of law. In fact, in the past this Board has found it proper for attorneys to
own businesses that perform law-related services. See Ohio SupCt, Bd of Comm’rs on Grievances
and Discipline, Op. 90-23 (1990) (two Ohio attorneys may own shares in a business venture to
provide lawyers or law firms with temporary lawyers); Ohio SupCt, Bd of Comm’rs on Grievances
and Discipline Op. 88-018 (1988) (an attorney may provide litigation support services, namely, a
legal research and writing service for lawyers and law firms). See also, Ohio State Bar Ass'n,
Formal Op. 37 (1989) (advising on various matters relating to the impact of the Code of
Professional Responsibility on lawyers who are also engaged in the issuance of title insurance).
Yet, attorneys who operate such law-related businesses must do so in a manner consistent with the
Code of Professional Responsibility. Under Disciplinary Rule 2-103 there must be no improper
referrals or improper compensation for referrals -- this is discussed further under Question Two.
Under Disciplinary Rule 3-101(A) a lawyer shall not aid a non-lawyer in the unauthorized practice
of law -- the services of the ancillary business may be related to the provision of legal services but
not prohibited as unauthorized practice of law. Under Disciplinary Rule 3-102(A) a lawyer or law
firm shall not share legal fees with a non-lawyer. As mentioned above, under Disciplinary Rule 3-
103(A) a lawyer may not form a partnership with a non-lawyer if the partnership activities consist
of the practice of law. Under Disciplinary Rule 4-101(B) a lawyer must preserve a client's
confidences and secrets and may reveal them only as permitted under 4-101(C). Under
Disciplinary Rule 5-101(A) a lawyer may not accept employment if the exercise of professional
judgment will be or reasonably may be affected by the lawyer's business interest, unless there is
client consent- this will be discussed further under Question Three. Under
Disciplinary Rules 5-107(A), (B), and (C) a lawyer must avoid influence by one other than the
client. Under Disciplinary Rule 7-101 a lawyer must represent a client zealously. Under
Disciplinary Rule 9-101 a lawyer must avoid even the appearance of impropriety.
It is the Board's view that the Ohio Code of Professional Responsibility does not contain an express
rule that prohibits an attorney or attorneys from owning a business that provides law-related
services. Thus, in conclusion, this Board advises that an attorney or several attorneys within a law
firm may own an ancillary business that provides law-related services, for example, a Workers'
Compensation Service Company that provides claims administration services for employers.
Attorneys who operate such law-related businesses must do so in a manner consistent with the Ohio
Code of Professional Responsibility. The ancillary business must not engage in activities that
would be prohibited as unauthorized practice of law.
Question Two
Is it proper for attorneys who own an ancillary business to require that customers of
the business agree to legal representation by the attorneys or their law firm as a
condition of engagement of the services of the ancillary business?
The answer to this question is no. The answer is governed by Disciplinary Rule 2-103.
DR 2-103(A) A lawyer shall not recommend employment, as a private practitioner,
of himself [herself], his [her] partner, or associate to a non-lawyer who has not
sought his [her] advice regarding employment of a lawyer, except as provided in DR
2-101.
(B) A lawyer shall not compensate or give any thing of value to a person or
organization to recommend or secure his [her] employment by a client, or as a
reward for having made a recommendation resulting in his [her] employment by a
client, except that he [she] may pay the usual and reasonable fees or dues charged by
any of the organizations listed in DR 2-103(D).
(C) A lawyer shall not request a person or organization to recommend or promote
the use of his [her] services or those of his [her] partner or associate, or any other
lawyer affiliated with him [her] or his [her] firm, as a private practitioner, except
that [exceptions not applicable to this opinion].
The need for such a rule is explained within the Code. Ethical consideration 2-8 states that "[a]
layman is best served if the recommendation is disinterested and informed. In order that the
recommendation be disinterested, a lawyer should not seek to influence another to recommend his
[her] employment."
Customers of an ancillary business must not be forced or pressured to utilize a particular attorney's
services, particularly when the attorney owns the ancillary business. This violates a client’s
freedom to choose counsel of one's choice. It also encourages referrals that may or may not be in a
client's best interest. Specifically, it violates Disciplinary Rule 2-103(A) by being a self-referral, 2-
103(B) by providing legal services as a service of the business corporation, and 2-103(C) by
requesting and in this case requiring the business corporation to make the referral. The reverse is
also true -- clients of a lawyer must not be forced to use the services of an ancillary business owned
by the lawyer.
In conclusion, this Board advises that it is improper for attorneys who own an ancillary business to
require that customers of the business agree to legal representation by the attorneys or their law
firm as a condition of engagement of the services of the ancillary business. If customers of the
ancillary business need legal services, they may be informed that the attorneys can provide the legal
representation, but they must also be informed of the ownership interest and encouraged to seek
legal counsel of their own choice.
Question Three
Must the attorney or attorneys' ownership interest in the ancillary business be
disclosed to customers of the business who may be in need of legal services?
The answer to this question is an unqualified yes. The rule that governs is Disciplinary
Rule 5-101(A).
DR 5-101(A) Except with the consent of his [her] client after full disclosure, a
lawyer shall not accept employment if the exercise of his [her] professional
judgment on behalf of his [her] client will be or reasonably may be affected by his
[her] own financial, business, property, or personal interests.
A lawyer's ownership interest in an ancillary business is an interest that reasonably might affect a
lawyer's professional judgment. Thus, under Disciplinary Rule 5-101(A) a lawyer's ownership
interest in an ancillary business would require full disclosure and consent.
In conclusion, this Board advises that an attorney's ownership interest in an ancillary business must
be disclosed to customers of the business who may be in need of legal services. An attorney,
before accepting employment by a client, must fully disclose the ownership interest in the ancillary
business and obtain client consent.
Advisory Opinions of the Board of Commissioners on Grievances and Discipline are
informal, nonbinding opinions in response to prospective or hypothetical questions regarding
the application of the Supreme Court Rules for the Government of the Bar of Ohio, the
Supreme Court Rules for the Government of the Judiciary, the Code of Professional
Responsibility, the Code of Judicial Conduct, and the Attorney’s Oath of Office.