Can a New Mexico law firm organize as a limited liability company under the Rules of Professional Conduct?

Plain-English summary

Another State Bar committee asked the Ethics Advisory Committee whether it is appropriate under the Rules of Professional Conduct for a New Mexico law firm to organize as a limited liability company. Citing the rules as amended effective November 3, 2008, the committee answered that it may be ethically possible, but only if it is otherwise lawful for a law firm to do so, and that whether it is lawful raises significant questions, including separation-of-powers concerns, that the committee cannot answer because they involve substantive law.

Analyzing only the Rules of Professional Conduct, the committee said practice within any limited liability entity would be permitted so long as three conditions are met: the lawyers continue to meet all their obligations under the Rules; the lawyer's liability to the client provided by the Rules is unchanged by the form of entity; and the lawyer may lawfully practice in such an entity. It concluded the first two conditions can be met for a New Mexico LLC, but was uncertain the third can be met, because that analysis is beyond its scope. It revisited its 1996 Opinion 1996-1 (on registered limited liability partnerships), noting the firm-responsibility rules (Rules 16-501 to 16-504) had changed and that the new Rules define "firm" expansively to include "a law partnership, professional corporation, sole proprietorship, or other association authorized to practice law" (Rule 16-100(C)), leaving open what counts as an "association authorized to practice law." It also discussed the change to Rule 16-108(H) on prospectively limiting malpractice liability, and suggested (as it had in 1996-1) that a lawyer inform the client, perhaps in the engagement letter, of liability limitations created by any limited liability entity through which lawyers may lawfully practice.

The committee reviewed ABA Formal Opinion 96-401 (the Model Rules permit practice in a limited liability form if the lawyer rendering services remains personally liable, the jurisdiction's legal requirements are met, and the form is accurately described, with supervisory duties under Rules 5.1 and 5.3 unaffected), and the New Mexico Supreme Court's Rule 24-107 (allowing practice in a limited liability entity if the governing statute does not expressly prohibit law practice and expressly provides that nothing immunizes a lawyer from liability for the lawyer's own acts or omissions). It found Rule 24-107 raises unresolved separation-of-powers questions: the legislature has expressly authorized law practice in professional corporations but not in LLCs, and the Limited Liability Company Act, while providing that nothing immunizes a person for the consequences of their own acts, is silent on prospective limitation of liability as Rule 24-107 requires. Noting that only the Professional Corporation Act expressly references the practice of law, the committee concluded it remains concerned that there may be legal impediments to forming a New Mexico law firm other than as a general partnership, sole proprietorship, or professional corporation or association, and that a lawyer practicing in an unauthorized entity could face ethical concerns and lose the very liability shield sought. It suggested the concerns could be remedied by amending the LLC Act and revising Rule 24-107.

In practice

Under the rules as they stood at the time of the opinion, the committee held that the Rules of Professional Conduct alone would permit practice in a limited liability entity only where the lawyers continue to meet all rule obligations, the lawyer's liability to the client is unchanged by the form, and the lawyer may lawfully practice in that entity, and it concluded the third condition could not be confirmed for a New Mexico LLC. The opinion holds that a lawyer choosing such a form should be mindful of the associated legal risks, and it suggests the lawyer inform the client of any liability limitations, for example in the engagement letter. Because the opinion turns on then-current statutes and Rule 24-107, confirm the current statutory and rule framework before relying on it.

Common questions

Q: Does this opinion say a New Mexico law firm can be an LLC?

A: The committee concluded it may be ethically possible, but only if it is otherwise lawful, and it expressly could not resolve whether the law permits it.

Q: What three conditions did the committee identify for any limited liability entity?

A: The committee required that the lawyers continue to meet all rule obligations, that the lawyer's liability to the client be unchanged by the form, and that the lawyer may lawfully practice in the entity; it found only the first two clearly satisfied for an LLC.

Q: Why was the committee uncertain about the LLC form specifically?

A: The committee noted the legislature has expressly authorized law practice in professional corporations but not in LLCs, and that the LLC Act is silent on the prospective-limitation-of-liability point Rule 24-107 requires, raising separation-of-powers questions beyond its scope.

Q: What did the committee suggest a lawyer do about client liability?

A: The committee suggested the lawyer inform the client of liability limitations created by any limited liability entity through which lawyers may lawfully practice, for example in the engagement letter.

Background and rules framework

The opinion interpreted the firm-structure and professional-independence rules (Rules 16-501 to 16-504, corresponding to Model Rules 5.1 to 5.4), the limitation on prospectively limiting malpractice liability (Rule 16-108(H), Model Rule 1.8), and the new definition of "firm" (Rule 16-100(C)), reading them together with Supreme Court Rule 24-107, the Professional Corporation Act, the Limited Liability Company Act, and ABA Formal Opinion 96-401.

Citations and references

Rules of Professional Conduct:

• Rule 16-100(C) (definition of "firm"); Rule 16-108(H) (limiting liability to clients); Rules 16-501, 16-502, 16-503 (firm and supervisory responsibilities); Rule 16-504(D) (professional independence; non-lawyer ownership)

Other rules:

• NMRA 24-107 (practice in a limited liability entity; effective March 28, 2005)

Statutes:

• NMSA 1978, Sections 53-6-1 to -8 (Professional Corporation Act); Sections 53-19-1 et seq., 53-19-13 (Limited Liability Company Act); Section 54-1A-306 (Uniform Partnership Act); Section 36-3-1

Cases:

• State Bar of New Mexico v. Guardian Abstract & Title Co., 91 N.M. 434, 575 P.2d 943 (1978): Supreme Court's inherent authority to regulate the practice of law
• Williams v. Central Consol. School Dist., 1998-NMCA-006; Patterson v. Globe American Casualty Co., 101 N.M. 541 (Ct. App. 1984): negative-inference statutory construction

Other opinions cited:

• NM Formal Op. 1996-1; ABA Formal Op. 96-401; D.C. Ethics Op. 235 (1993)

See also

• NM Ethics Op. 1996-1: Registered LLP as an Entity for the Practice of Law
• NM Ethics Op. 1993-1: For-Profit Referral Services, Non-Lawyer Networks, and Joint Advertising

Source

• Landing page: https://www.sbnm.org/Leadership/Committees/Ethics-Advisory-Committee/Ethics-Advisory-Opinions
• Original PDF: https://www.sbnm.org/Portals/NMBAR/AboutUs/committees/Ethics/2007-2009/2009-01.pdf

Original opinion text

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

E
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Formal Opinion 2009-01
Topic: Concerns Regarding the Practice of Law in the Form
of a Limited Liability Company
RULES IMPLICATED: Rules 16-108, 16-501, 16-502, 16-503,
16-504 NMRA 2008, eff. Nov. 3, 2008. This opinion cites the rules
as amended effective November 3, 2008. Subsequent changes to
the rules could impact the opinion provided.
DISCLAIMER: The Ethics Advisory Committee is constituted
for the purpose of providing lawyers with opinions interpreting
the New Mexico Rules of Professional Conduct. The committee’s
opinions are not binding and are intended only to assist lawyers
in the course of their conduct.
QUESTION PRESENTED: Another committee of the State Bar
requested the Ethics Advisory Committee’s opinion on whether it
is appropriate under the Rules of Professional Conduct for a law
firm to organize as a limited liability company in New Mexico.
SUMMARY ANSWER: It may be ethically possible for a New
Mexico law firm to organize as a limited liability company but
only if it is otherwise lawful for a law firm to do so. The issue
of whether it is otherwise lawful to do so raises significant issues that cannot be answered by the Committee as those issues
involve interpretation of substantive law, including implication
of separation of powers concerns. However, because the question
involves significant issues for lawyers and law firms in this state,
a review of the issues of concern to the Committee is presented
in this opinion.
From an analysis solely limited to the provisions of the Rules
of Professional Conduct, it would appear that the practice of law
within any limited liability entity would be permitted so long
as three conditions are met: (1) the lawyers acting within such
a framework continue to meet all of their obligations under the
Rules, (2) the lawyer’s liability to the client as provided by the
Rules of Professional Conduct is unchanged by the form of limited
liability entity, and (3) the lawyer may lawfully practice in such
an entity. The Committee believes that conditions (1) and (2) can
be met in the case of a New Mexico limited liability company.
The Committee is uncertain that condition (3) can be met as the
analysis required to make such a determination is beyond the
scope of the Committee’s work. Correspondingly, the Committee
continues to recommend that lawyers considering practice within
a limited liability entity other than a professional corporation
or association be mindful of the concerns and risks associated
with such an entity. Ideally, the dilemma could be remedied by
amendment of the Limited Liability Company Act or adoption of
a Professional Limited Liability Company Act, as has been done
in other jurisdictions. At the same time, a review of Rule 24-107
suggests that, assuming organization of law firms as limited liability companies is or will someday be permitted under statutory
law, revision of that rule may be helpful in addressing concerns
and clarifying ambiguities regarding entities through which the
practice of law may be engaged in this state.

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ommittee

ANALYSIS:
A. Formal Opinion 1996-1
This Committee previously issued a formal opinion, 1996-1,
in which it addressed the question of whether lawyers could
practice in the form of a registered limited liability partnership
(RLLP), an entity that was created by statute. See, NMSA 1978,
§§ 54-1-44 et seq. (1995); §§ 54-1-44 through 54-1-46 repealed
by L. 1997, Ch. 76. §23, eff. July 1, 1997. Formal Opinion 19961 began: “Lawyers are being presented with increasing choices
for the form of organization they may choose in providing legal
services to their clients.” That statement remains true today. Since
that opinion was issued, utilization of the Limited Liability Company Act, NMSA 1978, §§ 53-19-1 et seq. (1993), as a form of
organization by lawyers in New Mexico has increased. Moreover,
as noted above, since the issuance of Formal Opinion 1996-1, the
old RLLP statutes (as well as the old Uniform Partnership Act)
were generally repealed (except for § 54-1-47, which requires the
maintenance of certain levels of liability insurance) and the new
Uniform Partnership Act was adopted, which includes provision
for limited liability partnerships. See, e.g., NMSA 1978, § 54-1A306(d) (1996). Nevertheless, the fact that some law firms have
elected to form as limited liability companies or limited liability
partnerships is not dispositive to the question of whether doing
so is either legal or ethical.
Formal Opinion 1996-1 concluded with the following statements:
The Committee is mindful that its role is circumscribed: to provide advice on questions of ethics. It
is the opinion of the Committee that it would not be
unethical for lawyers to choose to practice in a Registered LLP, if they order the affairs of the Registered
LLP to provide accountability under the Rules of
Professional Responsibility, particularly those which
address their duties inter se and their responsibilities
to their clients. However, the Committee is also mindful of the maxim expressio unius est exclusio alterius
[“the expression of one thing implies the exclusion
of another”] and that neither the legislature nor the
Supreme Court has provided explicit legal authority
for lawyers to practice in the Registered LLP form.
Accordingly, lawyers who opt to practice through
a Registered LLP must assess the legal risks which
inhere in that choice.
Formal Opinion 1996-1 raised several concerns regarding the
choice of entity for practicing law under the Rules of Professional
Conduct.
First, certain portions of Rules 16-501 through 16-504,
which have undergone changes since Formal Opinion 1996-1
was issued, were of concern to the Committee because, in 1996
and until the revisions made effective on November 3, 2008,
those rules made reference only to professional corporations or
associations in addition to partnerships. See, eg, former Rule
16-504(D) which expressly prohibited “practice with or in the
form of a professional corporation or association authorized
to practice law for a profit, if” a non-lawyer owns any interest
in or has any right to direct or control the lawyer’s professional

judgment. (Emphasis added). The inference from former Rule
16-504 was that partnerships as well as professional corporations
or associations are entities through which the practice of law was
permitted under the Rules of Professional Conduct. The old Rules
made no reference to other business entities, including limited
liability companies.
In contrast, the revisions to the Rules, effective November 3,
2008, provide a definition of “firm,” which seems more expansive
than the implications within the former Rules. The definition of
“firm” under the new Rules includes “a law partnership, professional corporation, sole proprietorship, or other association
authorized to practice law…” Rule 16-100(C) 2008 (emphasis
added). Thus, the new Rules indicate that a “firm” for purposes
of the Rules of Professional Conduct would include any lawfully
authorized association. This leaves open the question of what
exactly is an “association authorized to practice law.”
While the statutes at issue in Formal Opinion 1996-1 provided
that a partner in a registered limited liability partnership could
not escape liability for the partner’s own negligence or tort, the
Committee was concerned with the absence of provisions related
to RLLPs for liability associated with a “lawyer’s knowledge of
her or his partner’s conduct in violation of the Rules of Professional [Conduct][,] [and] the lawyer’s obligation to remediate the
wrongful conduct of a subordinate.” Formal Opinion 1996-1 at 2,
Rule 16-501(B). The Committee noted that this problem might
be addressed in the partnership agreement, and also took some
solace in the fact the RLLP statutes required, and require yet today,
that liability insurance be maintained by the RLLP. See, NMSA
1978, § 54-1-47 (1995). This minimized the concern associated
with the provisions now contained in § 54-1A-306 of the Uniform
Partnership Act that limit the liability of a partner within a limited
liability partnership to the partner’s own acts or omissions.
Formal Opinion 1996-1 also raised the requirements of old
Rule 16-108(H), which provided, in pertinent part:
A lawyer shall not make an agreement prospectively
limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement. . . .
The new Rule 16-108(H), effective November 3, 2008, removes
the language regarding “prohibited by law,” but the change may
be non-substantial, as the requirement for independent counsel
remains. In 1996-1, the Committee was satisfied that the provisions of the RLLP statutes regarding partner liability, which were
far more extensive than those contained in the Limited Liability
Company Act, satisfied the requirements of this Rule. The comment to the new Rule states that 16-108(H) does not “limit the
ability of lawyers to practice in the form of a limited liability entity,
where permitted by law…” Rule 16-108 NMRA 2008, Comm. ¶
14, eff. Nov. 3, 2008 (emphasis added). Even so, the Committee
suggested in Formal Opinion 1996-1, and suggests today, that
the lawyer inform the client of limitations of liability created by
the RLLP statutes or any other limited liability entity statutes
through which lawyers may lawfully practice. Such information
may be provided in the engagement letter. A similar view has
been taken by the District of Columbia Ethics Committee in DC
Ethics Opinion 235 (1993), in which the D.C. Ethics Committee
held that its form of Rule 16-108(H) (D.C.R.P.C. Rule 1.8(g)) is
not violated by incorporating a law firm under a limited liability
statute, “if the individual lawyer who committed the malpractice
remains personally liable to the client in all events, and if the
client is made aware of the limitation of personal liability of

the other lawyers in the law firm who were not involved in
the malpractice.” (Emphasis added).
B. ABA Formal Opinion 96-401.
The ABA Standing Committee on Ethics and Professional
Responsibility (ABA Committee) issued an opinion in 1996 that
concluded the Model Rules permit lawyers to practice in a “limited
liability partnership or a limited liability limited partnership if [1]
applicable law provides that the lawyer rendering legal services
remains personally liable to the client, [2] the requirements of
the law of the relevant jurisdictions are met, and [3] the form of
business organization is accurately described by the lawyers in
their communications.” ABA Form.Op. 96-401 at 1.
The ABA Committee also determined that even if the state
statutes “exempt lawyers practicing in a firm from tort liability for
the actions of subordinate lawyers and non-lawyer assistants, this
does not mean that the lawyer is freed from his supervisory obligations under [Model] Rules 5.1(b) and 5.3(b).” Cf., Rules 16-501
and 16-503 NMRA 2008, eff. Nov. 3, 2008. Essentially, the ABA
Committee determined that such a situation did not cause conflict
with the Rules because, even if civil liability were limited by statute,
the lawyer could not escape responsibility to meet the obligations
imposed by the Rules of Professional Conduct. Id. at 3.
The ABA Opinion notes that it “assumes that there is compliance with applicable state statutes…” and considered only compliance with the Model Rules. Id. at 4. Thus, the ABA Opinion
stands solely for the proposition that, so long as the conditions
referenced above are met (liability for rendering legal services,
meeting all legal requirements of the jurisdiction, and accurately
communicating the form of business), any entity would be permitted under the Model Rules. It is the “meeting all legal obligations
of the jurisdiction” for being such an entity that perhaps creates
the greatest dilemma for the lawyer and which is of most concern
to the Committee. This concern is not assuaged by the revisions to
the Rules made effective November 3, 2008, and, for the reasons
discussed in the subsequent section of this opinion, the concern
may never be remedied without action by the legislature.
C. The New Mexico Supreme Court’s Adoption of Rule 24107.
Little has occurred within the statutory scheme for limited
liability entities in New Mexico to assuage the dilemma noted
in Formal Opinion 1996-1. The applicable Rules of Professional
Conduct have undergone some modification, referenced above,
since Formal Opinion 1996-1 was issued. However, a new rule
promulgated by the Supreme Court outside of the Rules of Professional Conduct was adopted since that opinion was issued which
impacts the analysis of the problem.
Our Supreme Court adopted NMRA 24-107, within the Rules
Governing the New Mexico Bar, effective March 28, 2005. That
rule provides:
A. Authorized entities. A lawyer may practice law as a
shareholder, member, owner, partner or employee of
any limited liability entity, including but not limited
to a domestic or foreign limited liability company,
professional corporation or limited liability partnership, provided that the statutory law governing the
limited liability entity:
(1) does not expressly prohibit the practice of law in
such entity form; and
(2) expressly provides that nothing in the statute shall
be construed to immunize a lawyer from liability
or prospectively limit a lawyer’s liability for the

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consequences of the lawyer’s own acts or omissions.
B. Retroactive effect. This rule shall be given retroactive effect.
Despite what at first appears to be a definitive solution to the
dilemma, this rule creates quandaries for lawyers that require
interpretation of rules, case law, statutes and the New Mexico
Constitution that are beyond the scope of review for this Committee. Correspondingly, as referenced in Formal Opinion 1996-1,
there remain legal risks that the lawyer should consider before
selecting any form of limited liability entity.
Rule 24-107 is not a Rule of Professional Conduct. As noted
above, the recently revised Rules of Professional Conduct make
reference to traditional law firm entities (i.e., general partnerships and professional corporations or associations), as well
as any “other association authorized to practice law.” NMRA
16-100(C) (2008). Not surprisingly, the revised Rule does not
state what “other association[s]” comprise those “authorized to
practice law.” Rather than conclude that Rule 24-107 was an effort by the Supreme Court to allow lawyers to organize as limited
liability companies in the absence of legislative authorization for
lawyers (or other professionals) to do so, the rule can be viewed
as the Supreme Court’s endorsement of such an organization for
lawyers if, or when, the legislature generally allows professionals,
or lawyers specifically, to do so.
While Rule 24-107 expresses the position of the New Mexico
Supreme Court that limited liability entities would be a viable
organization for the practice of law, it clearly acknowledges the
authority of the legislature, as the final arbiter in determining what
business activities are permitted or authorized by law, to preclude
lawyers from practicing within a certain form or entity. See, Rule
24-107(A)(1) NMRA (2008). The New Mexico Supreme Court
has recognized that the legislature has plenary legislative authority
limited only by the constitutions of the United States and of New
Mexico. Albuquerque Metropolitan Arroyo Flood Control Auth.
v. Swinburne, 74 N.M. 487, 490, 394 P.2d 998, 1000 (1964).
In turn, the legislature recognizes the authority of the New
Mexico Supreme Court to regulate the practice of law within the
State of New Mexico. NMSA 1978, § 36-3-1 (1941). Further,
the Supreme Court has found that it has inherent authority to
regulate the practice of law under Article VI of the New Mexico
Constitution. State Bar of New Mexico v. Guardian Abstract &
Title Co., 91 N.M. 434, 439, 575 P.2d 943, 948 (1978). However,
our courts have recognized that general statutes, including statutes
that may impact lawyers more directly or commonly than others,
do not infringe upon the Supreme Court’s exclusive authority
to regulate the practice of law. See, e.g., Ortiz v. Taxation and
Revenue Dept., 124 N.M. 677, 679-80, 954 P.2d 109, 111-12 (Ct.
App. 1998) (legislation that effectively prohibits representation of
individual in case before state agency by lawyer who previously
served with state agency for one year after service did not infringe
upon judiciary’s inherent power to regulate the practice of law).
Despite the New Mexico Supreme Court’s exclusive authority
to regulate law in this State, the New Mexico Constitution would
not appear to provide the Supreme Court with the authority to
create limited liability entities, nor to select which powers, purposes or authorities are given to such entities other than through
interpretation of laws. See, e.g., N.M. Const., Art. III (separation of
powers provision), Art. IV, § 1 (vesting legislature with exclusive
legislative authority) and Art. XI, § 13 (vesting legislature with
authority to set laws associated with corporations). Such authority
appears to lie exclusively with the legislature.
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The legislature has expressly stated that lawyers may practice
in professional corporations. NMSA 1978, § 53-6-3(A) (1963).
The legislature has not expressly stated that lawyers may practice in any other form of limited liability entity.
a. Requirement of Rule 24-107 that Practice of Law Not
be Expressly Prohibited by Statute.
Rule 24-107 raises a significant legal concern, which the
Committee cannot answer, regarding the respective powers of the
judiciary and the legislature. Rule 24-107 provides that, in order
for a lawyer to properly practice in a form of limited liability
entity, the statutory scheme for that limited liability entity cannot “expressly prohibit” the practice of law. This is in contrast to
the express statutory permission given for lawyers to practice in
professional corporations. NMSA 1978, § 53-6-3(A) (1963).
In Williams v. Central Consol. School Dist., the Court of Appeals indicated that, where the legislature demonstrates that it can
create a right when it wants to, the absence of such language in
a statute indicates by negative inference that the legislature did
not intend to create one. 1998-NMCA-006, ¶ 9, cert. denied 124
N.M. 311, 950 P.2d 284 (1997). Williams involved comparison
of provisions within a single statute, that being the Tort Claims
Act. However, Williams cites to Patterson v. Globe American
Casualty Co., 101 N.M. 541, 685 P.2d 396 (Ct.App. 1984), in
support of the proposition. Patterson compared not one, but
“various New Mexico statutes wherein private rights of action
have been expressly created.” 101 N.M. at 544, 685 P.2d at 399.
The Patterson court concluded that
These statutes show the Legislature knows how to
create a private remedy if it intends to do so. By
negative inference, the Legislature’s failure to provide
for a private action suggests that it did not intend to
create one.
Id.
Application of the maxim referenced in Formal Opinion 19961, expressio unius est exclusio alterius, along with the similar
principles included in Williams and Patterson, and other principles of construction, creates or at least highlights the potential
of a separation of powers issue for the lawyer considering Rule
24-107 as a basis for concluding that a limited liability entity is
a lawful business form for the practice of law. On one hand, the
legislature, with the exclusive legislative authority within the
State, has expressly permitted professional activities, including the
practice of law, in the form of a professional corporation, but has
not expressly done so with regard to a limited liability company,
at least for the practice of law. On the other hand, the Supreme
Court, with exclusive authority to regulate the practice of law,
has indicated that lawyers may practice in any limited liability
entity created by the legislature so long as the legislature does not
expressly prohibit the practice of law and the second requirement
of Rule 24-107 is met.
Certain other professions, over which the legislature has
assumed regulation, have approached the same issue through
amendments to statutory provisions governing the specific profession. See, e.g., NMSA 1978, § 61-28B-3(G) (1999) (including
limited liability companies and limited liability partnerships as
types of “firms” under the Public Accountancy Act); §61-23-3(J)
(2003) (including limited liability company as a “person” under
Engineering and Surveying Practice Act). However, adding to the
uncertainty, the Podiatry Act makes reference to a “professional
limited liability company,” a term that is not used in the Limited Liability Act. NMSA 1978, § 61-8-14(A) (1998) (emphasis
added).

In many of our neighboring states, the dilemma has been
eliminated by the legislature’s adoption of statutes permitting
the creation of “professional limited liability” entities. Texas
has adopted a Professional Entities Law within its Business Organizations Code. Oklahoma has adopted a Professional Entity
Act, within Title 18, Section 801 of its statutes. Utah statutorily
permits professional services to be provided through an an LLC
in § 48-2c-1503 of its Revised Limited Liability Company Act.
Professional LLCs are also permitted under Article 11 of Arizona’s
Limited Liability Company Act.
In Colorado, the concern was met with modification of their
form of Rule 16-504(D), i.e., Colorado RPC 5.4(d):
A lawyer shall not practice with or in the form of
a professional corporation, association, or limited
liability company, authorized to practice law for a
profit, except in accordance with C.R.C.P. 265 and
any successor rule or action adopted by the Colorado
Supreme Court. (Emphasis added).
Colorado Rule of Civil Procedure 265 provides an expansive
rule regarding the requirements of lawyers practicing in the form
of limited liability entities, including many provisions that relate
to the ethical concerns associated with practice of law within a
limited liability company. Such a solution, limited to court rules,
would not eliminate the concern regarding separation of powers.
b. Requirement of Rule 24-107 of Non-Immunization by
Statute.
New Mexico’s Rule 24-107 also requires that the statutory
scheme must “expressly provide that nothing in the statute shall
be construed to [a] immunize a lawyer from liability or [b] prospectively limit a lawyer’s liability for the consequences of the
lawyer’s own acts or omissions.” (Emphasis added). The Limited
Liability Company Act provides, in pertinent part: “Nothing in
this section shall be construed to immunize any person from
liability for the consequences of his own acts or omissions for
which he otherwise may be liable.” NMSA 1978, § 53-19-13
(1993). While this provision expressly provides that a lawyer
would not be immunized from the consequences of the lawyer’s
own acts or omissions, it is silent as to the issue of prospective
limitation of liability. Although the Committee does not advise
as to issues of substantive law or court rules other than the Rules
of Professional Conduct, the Committee is concerned that the
Limited Liability Company Act does not expressly provide what
Rule 24-107 requires in a statutory scheme.
Interestingly, the New Mexico Professional Corporation Act,
under which law firms have formed for several decades, contains
a more generic provision: “The Professional Corporation Act
does not modify the legal relationships, including confidential
relationships, between a person performing professional services and the client or patient who receives such services; but
the liability of shareholders shall be otherwise limited as provided

by the Business Corporation Act and as otherwise provided by
law.” NMSA 1978, § 53-6-8 (1969) (emphasis added). It is unclear
and is beyond the Committee’s scope whether this language would
be deemed to “expressly provide that nothing in the statute shall
be construed to immunize a lawyer from liability or prospectively
limit a lawyer’s liability for the consequences of the lawyer’s own
acts or omissions” as required by Rule 24-107(B). However, a
strong argument exists that, based on the traditional relationships
secured by the Professional Corporations Act, there is a least an
inference that nothing in the Professional Corporation Act would
immunize the lawyer from liability for the lawyer’s own acts or
omissions, prospectively or otherwise.
D. In New Mexico, Only One Limited Liability Entity Statute
References the Practice of Law.
The purpose of the Professional Corporation Act “is to provide
for the incorporation of an individual, or group of individuals, to
render the same professional service to the public for which such
individuals are required by law to be licensed or to obtain other
legal authorization.” NMSA 1978, § 53-6-1 (1963). The Professional Corporation Act, among other things, limits the purpose of
the corporation to “one specific type of professional service and
services ancillary thereto,” as well as own realty, personalty and
make investments. NMSA 1978, § 53-6-5 (1963). Except to the
extent provisions of the Business Corporation Act conflict with
provisions of the Professional Corporation Act, the Business Corporation Act applies to professional corporations. NMSA 1978,
§ 53-6-4 (1963). The Limited Liability Company Act does not
contain similar language. The absence of any express legislative
authority for lawyers to organize in a limited liability company,
when such express authority exists for professional corporations,
continues to give the Committee pause in concluding that New
Mexico lawyers may permissibly organize their New Mexico law
firm as a limited liability company.
CONCLUSION
For the reasons set forth above, despite the adoption of Rule
24-107 and the revisions to the Rules of Professional Conduct
made effective November 3, 2008, the Committee remains concerned that there may be legal impediments to the formation of
a New Mexico law firm other than as a general partnership, sole
proprietorship or professional corporation or association. To the
extent that the practice of law in the form of a limited liability
company or other limited liability entity is not authorized by
law, the lawyer practicing in such an entity would face ethical
concerns but may also lose the very liability shield that would
presumably have been a significant basis for organizing as such
a limited liability entity.
The concerns raised in this opinion could, in the Committee’s
view, be remedied by amendments to New Mexico’s Limited Liability Company Act as well as revision of Rule 24-107 NMRA
to clarify the requirements of statutory provisions associated with
limited liability entities.

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