Can a law firm form and manage a lay claims-adjustment bureau that solicits business and operates out of the firm's office?

Plain-English summary

A firm of lawyers had formed, or helped form, an association called a "Board of Adjusters" to liquidate failing mercantile institutions and adjust claims against them. The bureau's office was in the firm's office, a member of the firm superintended it, liquidation checks went out on the firm's checks, and correspondence was sometimes on the bureau's stationery and sometimes on the firm's. The bureau solicited business from mercantile institutions. The inquiry asked whether the firm's connection with the bureau was professionally ethical.

The Board of Governors adopted ABA Opinion 57, which addressed a lawyer managing a lay investigating and adjustment bureau that solicited business. The ABA committee explained that it is not necessarily improper for a lawyer to engage in a business, but impropriety arises when the business can serve as a means of procuring professional employment or a cloak for indirect solicitation, or is of a nature that, if handled by a lawyer, would be the practice of law. Claims adjustment, the committee said, is professional employment whose solicitation by a bureau readily becomes a means of procuring legal business, so a lawyer cannot manage such a bureau or lend his name to its stationery. The Board pointed to Rule 29, which makes it unprofessional to secure business by indirection through touters of any kind, and Rule 37, which provides that a lawyer's professional services should not be controlled or exploited by any lay agency intervening between client and lawyer. Identifying Rule 29 with ABA Canon 27 and Rule 37 with Canon 35, the Board condemned the firm's connection with the bureau.

Currency note

This opinion was issued in 1932, decades before Oklahoma replaced its original Rules of Professional Conduct (patterned on the ABA Canons of Professional Ethics) with the Oklahoma Rules of Professional Conduct (adopted 1988) and the later Ethics 2000 revisions. The rules cited here, Rules 29 and 37 (drawn from ABA Canons 27 and 35), belong to that superseded canon-era code. Restrictions on solicitation of the kind applied here were later affected by Bates v. State Bar of Arizona, 433 U.S. 350 (1977), and subsequent decisions; Oklahoma Ethics Opinion 310 (1998) cautions that advertising and solicitation opinions predating those changes may be outdated. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Could a law firm own and run a lay adjustment bureau that solicited business?

A: The Board concluded no. It held that a lawyer-managed bureau soliciting claims work readily becomes a means of indirect solicitation of legal business, condemned under Rule 29.

Q: Why was running the bureau from the firm's office a problem?

A: The Board, quoting ABA Opinion 57, noted that if the bureau and the law practice operate from the same office the public cannot distinguish when the lawyer acts as a lawyer and when as a layman, and Rule 37 bars a lay agency from controlling or exploiting the lawyer's services.

Q: Is it always improper for a lawyer to engage in another business?

A: No. The opinion states it is not necessarily improper, but impropriety arises when the business can be used as a cloak for indirect solicitation or is of a nature that, if handled by a lawyer, would be the practice of law.

Background and rules framework

The opinion applied Rule 29 of the then-current Oklahoma Rules of Professional Conduct, which condemned securing business by indirection through touters of any kind, and Rule 37, which provided that a lawyer's professional services should not be controlled or exploited by any lay agency intervening between client and lawyer. The Board identified Rule 29 with ABA Canon 27 and Rule 37 with Canon 35, and adopted ABA Opinion 57's analysis of lawyer-managed adjustment bureaus. These rules were patterned on the ABA Canons of Professional Ethics in force at the time.

Citations and references

Rules of Professional Conduct:

• Rule 29 (1929 Oklahoma Rules of Professional Conduct), identical to ABA Canon 27: it is unprofessional to secure business by indirection through touters of any kind.
• Rule 37 (1929), identical to ABA Canon 35: a lawyer's professional services should not be controlled or exploited by any lay agency intervening between client and lawyer.

Other opinions cited:

• ABA Committee on Professional Ethics, Opinion 57: a lawyer may not manage a lay adjustment bureau that solicits business or lend his name to its stationery.

See also

• Okla. Bar Ethics Op. 5: Runners, Touters, and Association With a Loan Shark
• Okla. Bar Ethics Op. 20: Trust-Company Will Solicitation and Lawyer-Officer
• Okla. Bar Ethics Op. 10: Sharing a Collection Fee With a Lay Forwarder

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-31/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Adopted May 27, 1932

The Board of Governors is in receipt of the following request for an opinion:

"A certain firm of lawyers in ………., Oklahoma, having formed or were instrumental in forming an association called "………. Board of Adjusters" having for its purpose the engaging in the business of liquidating the affairs of failing or failed mercantile institutions and of adjusting claims against them. Apparently the office of this association is maintained in the office of the firm of lawyers mentioned. The "Board of Adjusters" solicits employment from the mercantile institutions. The business of the bureau is superintended by a member of the firm and liquidation checks, if any, are sent out on the checks of the firm of lawyers. Part of the time correspondence connected with the business is carried on stationery of the Bureau on which does not appear the names of any of the supposed officers of the Bureau nor of the firm of lawyers as its attorneys, and part of the time for the firm of lawyers on their own stationery. The "Board" as such does not purport to engage in the rendering of a service other than that which may properly be rendered by a lay organization. Is the situation professionally ethical as far as the firm of attorneys is concerned?"

In response, attention is called to Opinion No. 57 of the American Bar Association's Committee on Professional Ethics appearing in the May issue of the American Bar Association Journal where in connection with a similar inquiry the following inquiries were answered:

1. Is it proper for a lawyer, who is engaged in general practice, at the same time to manage an investigating and adjustment bureau, which solicits business from insurance companies?

2. Assuming that the previous question is answered in the affirmative, is it proper for the lawyer to practice law and conduct the adjustment bureau in one and the same office?

3. Is it proper for a lawyer, who is actively engaged in general practice, to allow his name to appear on the stationery of such an adjustment bureau, as its manager, with the intent that this stationery shall be used by the bureau in its solicitation of business?

In answer to the inquiries, it was said:

"It is not necessarily improper for an attorney to engage in a business; but impropriety arises when the business is of such a nature or is conducted in such a manner as to be inconsistent with the lawyer's duties as a member of the bar. Such an inconsistency arises when the business is one that will readily lend itself as a means for procuring professional employment for him, is such that it can be used as a cloak for indirect solicitation on his behalf, or is of a nature that, if handled by a lawyer, would be regarded as the practice of law. To avoid such inconsistencies it is always desirable and usually necessary that the lawyer keep any business in which he is engaged entirely separate and apart from his practice of the law and he must, in any event, conduct it with due observance of the standards of conduct required of him as a lawyer.

Some businesses in which laymen engage are so closely associated with the practice of law that their solicitation of business may readily become a means of indirect solicitation of business for any lawyer that is associated with them. Opinions 31 and 35. The adjustment of claims, the incorporating of companies and the handling of matters before governmental commissions and boards and in government offices fall within such classifications. It is difficult to conceive how a lawyer could conduct a claim adjustment bureau, a company for the organization of corporations, or a bureau for securing income tax refunds, without practicing law. In performing the services which he would ordinarily render in connection with any of these activities, his professional skill and responsibility as a lawyer would be engaged. The fact that a layman can lawfully render certain service does not necessarily mean that it would not be professional service when rendered by a lawyer. On the contrary lawyers are frequently called upon to render much service for the very reason that it can be better rendered by a lawyer.

The adjustment of insurance claims by a lawyer is professional employment. In performing such a service his professional skill and responsibility are engaged. He cannot properly render legal services to a lay intermediary for the benefit of its patrons. Opinions 8, 31, 35, 41 and 56. Furthermore the investigation and adjustment of insurance claims must frequently lead to some litigation, so that the solicitation of business by a bureau handling them must readily lend itself as a means of procuring professional employment for any lawyer in general practice who may be interested in or connected with it.

For the reasons stated a lawyer cannot properly devote a portion of his time to managing a bureau for the adjustment of insurance claims nor permit his name to be used on its stationery. Having thus answered the first and third questions in the negative, it is unnecessary to answer the second question. Nevertheless, reference to it is desirable because it so aptly illustrates the necessity of keeping any business in which a lawyer may be engaged entirely separate and apart from his practice of law. If such a business and his law practice should be conducted from the same office, the public could not be expected to distinguish between his dual capacities and know when he is acting in the capacity of a lawyer and when in that of a layman."

Rule 29 of the Rules of Professional Conduct of the State Bar provides:

"… It is equally unprofessional to secure business by indirection through touters of any kind, whether allied real estate firms or trust companies. …,"

Rule 37 provides:

"The professional services of a lawyer should not be controlled or exploited by any lay agency, personal or corporate, which intervenes between client and lawyer. A lawyer's responsibilities and qualifications are individual."

Rule 29 is identical with Canon 27 of the Canons of Legal Ethics of the American Bar Association, and Rule 37 with Canon 35.

The opinion of the Committee of the American Bar Association herein quoted from is adopted by the Board of Governors as being in accordance with its views.

Accordingly, the response to the inquiry is that the connection of the firm of lawyers with the "Board of Adjustment" in question is condemned as in violation of the spirit, if not the express language of Rules 29 and 37 of the Rules of Professional Conduct of the State Bar.