Can a lawyer employed by a nonprofit run by nonlawyers represent the people it serves, and how do letterhead, the trust account, file custody, and conflicts work in that setup?

Plain-English summary

A private nonprofit corporation that assists crime victims, and that is run by nonlawyers, wanted to hire an attorney as its employee to represent the people it serves in civil actions and to prosecute their cases in magistrate's court. The committee was asked five questions: whether such employment is permissible, how letterhead and pleadings should read, how the trust account should be administered, who keeps the files if the lawyer leaves, and whether conflicts arise when the corporation's different programs serve opposing parties.

The committee answered that the threshold question was resolved in the affirmative in its earlier Opinion 02-04, which held a lawyer may serve as an employee of a nonlawyer nonprofit and represent third parties on its behalf. On letterhead, Rules 7.5 and 7.1 allow the corporation's name and logo so long as the lawyer is clearly identified as an attorney and nothing is false or misleading; because the corporation is not a law firm and cannot practice law, the lawyer signs pleadings in the lawyer's own name on behalf of the client. On trust accounts, the situation is not unique: the lawyer remains responsible for a separate trust account under Rule 1.15 and S.C. App. Ct. R. 417, and may delegate administrative tasks to corporation employees only with the supervision Rule 5.3 requires.

On files, the committee distinguished active and closed matters. When the lawyer leaves, clients with active files must be notified and given the choice to have the departing lawyer continue, to take the file and find new counsel, or to leave the file with the organization if a successor lawyer replaces the departing one; the lawyer remains counsel of record until relieved by the court. For closed files, if no successor attorney is hired the departing lawyer remains responsible (including financial records under Rule 417(e)) and must preserve confidentiality if files are stored with the corporation; if a successor is hired, the successor takes responsibility. On conflicts, the committee concluded the imputation rule should apply by analogy even though the corporation is not a law firm and the adverse party receives only nonlegal services: the lawyer may not represent a client against a person currently receiving the corporation's services except under Rule 1.7(a), must apply Rule 1.9 to former recipients, and must run conflict checks.

In practice

Under the South Carolina rules as they stood at the time of the opinion, the committee held that a lawyer employed by a nonlawyer nonprofit may represent the organization's clients, that the corporation's name and logo may appear on letterhead under Rules 7.1 and 7.5 if the lawyer is identified and pleadings are signed in the lawyer's own name, and that the lawyer keeps personal responsibility for the trust account under Rule 1.15 while supervising delegated tasks under Rule 5.3. On departure, active-file custody follows the client's choice and the lawyer stays counsel of record until relieved; closed-file responsibility turns on whether a successor attorney is retained. Conflicts are analyzed by analogy to Rules 1.7, 1.9, and 1.10 even for recipients of the corporation's nonlegal services. South Carolina revised its Rules of Professional Conduct effective 2005; verify the current text of these rules (and of S.C. App. Ct. R. 417) before relying on the specific subsections cited.

Common questions

Q: Can a lawyer be an employee of a nonprofit run by nonlawyers and still represent the people it serves?

A: The committee concluded yes, referring to its Opinion 02-04, which answered that question in the affirmative.

Q: Whose name goes on the letterhead and who signs the pleadings?

A: The committee concluded the corporation's name and logo may appear under Rules 7.1 and 7.5 if the lawyer is clearly identified as an attorney; because the corporation is not a law firm, the lawyer signs pleadings in the lawyer's own name on behalf of the client.

Q: Who runs the trust account when nonlawyers supervise the lawyer?

A: The committee concluded the lawyer remains responsible for a separate trust account under Rule 1.15 and S.C. App. Ct. R. 417, and may delegate administrative tasks to corporation employees only with the supervision Rule 5.3 requires.

Q: If the lawyer leaves, who keeps the client files?

A: For active files the committee concluded the client chooses: continue with the departing lawyer, take the file elsewhere, or leave it with the organization if a successor lawyer is in place. For closed files, the departing lawyer remains responsible unless a successor attorney is hired.

Q: Can the lawyer represent one person served by the nonprofit against another person the nonprofit also serves?

A: The committee concluded the imputation principle applies by analogy: the lawyer may not represent a client against someone currently receiving the corporation's services except under Rule 1.7(a), must apply Rule 1.9 to former recipients, and must run conflict checks.

Background and rules framework

The opinion interprets South Carolina RPC 7.1 and 7.5 (communications and firm names/letterhead), 5.3 (supervision of nonlawyer assistants), 1.15 (safekeeping property; trust accounts) with S.C. App. Ct. R. 417, 1.16(d) (returning files on termination), and the conflict rules 1.7(a), 1.9, and 1.10(a), corresponding to the like-numbered Model Rules. It relies on the committee's Opinions 02-04 (lawyer employed by a nonlawyer nonprofit), 02-14, 97-30, 92-37, 92-19, and others on file custody.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 7.1 / Model Rule 7.1: false or misleading communications.
• South Carolina RPC 7.5 / Model Rule 7.5: firm names and letterheads.
• South Carolina RPC 5.3 / Model Rule 5.3: responsibilities regarding nonlawyer assistants.
• South Carolina RPC 1.15 / Model Rule 1.15: safekeeping property; trust accounts (with S.C. App. Ct. R. 417).
• South Carolina RPC 1.16(d) / Model Rule 1.16(d): returning papers and property on termination.
• South Carolina RPC 1.7(a), 1.9, 1.10(a) / Model Rules 1.7, 1.9, 1.10: concurrent conflicts, duties to former clients, and imputation.

Other opinions cited:

• S.C. Bar Ethics Advisory Ops. 02-04, 02-14, 97-30, 92-37, 92-19, 98-03, 98-33 (employment by a nonlawyer nonprofit; file custody and retention).

See also

• SC Bar Ethics Op. 02-14: Client files when a lawyer winds down a practice
• SC Bar Ethics Op. 02-16: When a lawyer who owns the seller helps the buyer at closing
• ABA Formal Op. 08-453: In-house ethics consulting and reporting

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-02-17/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 02-17

A private, non-profit corporation that provides assistance to crime victims wants to provide legal assistance to the individuals it serves. The corporation has several programs each addressing specific needs. For example, one provides emergency shelter, another provides services for child victims, and another provides counseling for offenders. The organization wants to hire an attorney to represent victims it assists in civil actions and also to handle the prosecution of their cases in magistrate’s court. Under the proposed arrangement, the attorney would actually be an employee of the corporation, which is run by non-lawyers.

Questions
1. Can a lawyer, as an employee of a non-legal, not-for-profit corporation, represent third parties on behalf of the corporation without violating ethical rules or engaging in the unauthorized practice of law?
2. If yes, what restrictions would there be on the type of letterhead used and how would pleadings be signed?
3. What rules unique to this situation would govern administration of a trust account?
4. If the attorney leaves the employ of the corporation, who should retain the files?
5. Since the corporation provides several types of services, would it create a conflict of interest for the lawyer to represent an individual when the opposing party has received services from another program of the corporation? For example, if a victim requested that the corporation’s attorney represent her in a divorce action, would the attorney be able to do so if a different program of the organization provided counseling to her husband as an offender?

Summary of Opinion
1. The question of whether a lawyer as an employee of a non-legal, not-for-profit corporation can represent third parties on behalf of the corporation was answered in the affirmative in our Opinion #02-04.

2. In such a situation, Rules 7.1 and 7.5 allow the use of the corporation’s name and logo on letterhead, as long as the attorney is clearly identified as such. Because the organization is not a law firm and cannot practice law, the lawyer shall sign pleadings in her own name on behalf of the client.

3. The lawyer remains responsible for maintaining a separate trust account for her clients in accordance with S.C. App. Ct. R. 417, but may delegate various tasks of administration of the account to corporation employees as long as she provides proper supervision. See Rule 5.3.

4. If the attorney leaves the employ of the corporation, current clients should be informed and given a choice as to whether they would like the attorney to retain their files and continue the representation, seek other representation, or have the succeeding attorney take over their case. As to closed files, if the organization will not be employing a successor attorney, the departing lawyer remains responsible for the closed files. If the organization will be employing a successor attorney, that attorney assumes responsibility for closed files. See Opinion #02-14.

5. Even if the organization is providing nonlegal services to an individual, the individual should nonetheless be treated as a “client.” Cf. Rule 1.10(a). When the organization is currently providing nonlegal services to the individual, the lawyer should not undertake representation of another client against that individual except in accordance with Rule 1.7(a). If the individual is a former client, the lawyer should comply with Rule 1.9.

Opinion
1. The inquirer’s first question concerning whether a lawyer as an employee of a non-legal, not-for-profit corporation can represent third parties on behalf of the corporation was answered in the affirmative in our Opinion #02-04. The Committee refers the inquirer to this opinion for a full discussion on this topic.

2. The inquirer next seeks advice regarding letterhead and signatures on pleadings in this situation. Rules 7.5 and 7.1 of the Rules of Professional Conduct govern the use of trade names, letterhead, and communications concerning a lawyer’s services. Rule 7.5(a) sets forth that a lawyer shall not use a firm name, letterhead or other professional designation that violates Rule 7.1, or in other words, that makes a false, misleading, deceptive or unfair statement about the lawyer or her services. Accordingly, the letterhead should contain the name of the not-for-profit corporation and identify the inquirer as an attorney at law. It may also contain other information such as the corporation’s motto or logo, if any, as long as the information therein is not inconsistent with Rule 7.1.

Rule 7.1 is also applicable to the signing of pleadings and other documents. Pursuant to S.C. R. Civ. P. 11, pleadings, motions or other papers shall be signed “in [the party’s] individual name by at least one attorney of record . . . whose address and telephone number shall be stated.” Pleadings must be signed in the name of the lawyer as attorney for the client. The corporation does not represent the client, cannot appear in court, and is not a law firm. It should not be designated in such a manner that might indicate otherwise on the pleadings.

3. The inquirer next requests advice on any specific rules regarding the administration of the trust account unique to this situation. In regard to an attorney’s responsibility for her trust account, this situation is not unique. The lawyer, despite being supervised by non-lawyers, must maintain responsibility for the trust account (See Rule 1.15) and administer the account in accordance with S.C. App. Ct. R. 417. While the lawyer may delegate various tasks regarding the trust account to employees of the organization, she must maintain proper supervision over these employees as discussed in Rule 5.3, which states in part that the “lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer.”

4. Who should retain the files if the attorney leaves the employ of the corporation? At the termination of representation, naturally files pertaining to any legal services rendered for the corporation (rather than third parties) by the attorney remain the property of corporation and should be left with the corporation. See Opinion #92-37. In regard to active files of third parties, the decision should be left to the individual clients. Thus, when the lawyer leaves the organization, clients with active files should be notified and given the following choices: (1) to have the departing lawyer retain their files and continue the representation, (2) to accept return of the files and seek representation on their own, or (3) to allow the files to remain with the organization, as long as a new lawyer is replacing the departing lawyer. See Opinion #97-30. Rule 1.16(d) provides additional guidance in this situation: “Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.” If the attorney has entered an appearance on behalf of the client, the attorney remains counsel of record until relieved by the court on appropriate motion. See S.C. R. Civ. P. 11(b); S.C. App. Ct. R. 235; Ex Parte Strom, 343 S.C. 257, 539 S.E.2d 699 (2000).

In regard to closed files, whether the departing lawyer remains responsible for maintaining the files depends on the nature of the relationship with her successor, if any. If the corporation is not retaining another attorney to fill the departing lawyer’s position, the departing lawyer remains responsible for the files and, under Rule 417(e), all financial records relating to the representation. She must take steps to ensure that if she arranges to leave the files with the corporation for storage that client confidentiality will be preserved and that she and her former clients will have appropriate access to the files. See Rule 1.6.

If the corporation will be employing a successor attorney to continue to provide legal services, then the new lawyer will be responsible for maintaining the old files. Cf. Opinion #02-14 (when lawyer continues practice of retiring attorney, lawyer becomes responsible for closed client files). In all instances, the Committee recommends entering into agreements with clients as to disposal of files prior to the undertaking of the representation so as to resolve many of these issues. Refer also to Opinions #92-19, #92-37, #98-03, and #98-33 for further discussion concerning retention and disposal of file materials.

5. The inquirer’s final question concerns whether a conflict may arise due to the nature of the services provided by the different programs of the organization. The specific example provided asks whether the attorney can represent a victim in a divorce action if a different program of the organization provided counseling to her husband as an offender.
   If the organization were a law firm, representation of the husband would be imputed to the lawyer under Rule 1.10(a). It could be argued that the imputation rule does not apply in this case because the husband is not receiving legal services from a lawyer employed by the organization. Nonetheless, the Committee believes that the imputation rule should apply by analogy to this situation and the lawyer would be precluded from undertaking representation on behalf of a client when the adverse party is currently receiving nonlegal services by another division of the organization unless the lawyer complies with Rule 1.7(a).

If the adverse party is a former client of the organization, having received either legal or nonlegal services, the lawyer should apply Rule 1.9. The lawyer should not undertake the representation of the current client if the matter is substantially related to the former representation without the consent of the former client. Rule 1.9(a). Even if the matters are not substantially related, the lawyer should not seek or use confidential information obtained by the organization against the former client. See Rule 1.9(c).
Because the conflict of interest rules apply even if the organization is providing nonlegal services, the lawyer must institute procedures to check for conflicts of interest.