Can a Tennessee firm form an interstate partnership operating under a trade name and share a building with a title company it is affiliated with?

Plain-English summary

The Board reviewed a proposed 50-50 partnership between a Tennessee professional corporation and a Florida professional corporation operating under the trade name "SETCO Law." The Florida office would lease space from SETCO Services, a title company for which the inquiring lawyer is in-house counsel, and the Tennessee office would lease space from another firm in Memphis. The opinion addresses three questions: whether the interstate partnership is allowed, whether it may use a trade name, and whether the Florida office may share space with the affiliated title company.

On the partnership, the opinion concludes that nothing in the Model Rules or the Tennessee Rules prohibits a multijurisdictional partnership among lawyers licensed in different states, so long as the partnership status is clearly disclosed to clients and the partnership complies with the Rules. If several entities hold themselves out as a single firm, their lawyers take on the firm-wide obligations on confidences, conflicts, and supervision, including the duty of partners under RPC 5.1(a) to make reasonable efforts to ensure firm-wide compliance.

On the trade name, the opinion explains that RPC 7.5 permits a trade name if it does not imply a connection with a government agency or a public or charitable legal services organization and does not violate RPC 7.1's bar on false or misleading communications. A firm with offices in more than one jurisdiction may use the same name in each, but must indicate the jurisdictional limitations of lawyers not licensed where the office sits. On the shared space, the opinion holds that no rule restricts where a lawyer's office is located, and a lawyer may share a building with a title company. Because a title company provides "law-related services" as defined in RPC 5.7(b), the lawyer must comply with RPC 5.7(a): where the lawyer controls the entity, the lawyer must take reasonable measures to ensure each person using the services knows they are not legal services and that the protections of the client-lawyer relationship do not apply, with that communication made before the engagement and preferably in writing. The opinion relies on Tennessee Formal Ethics Opinion 82-F-34 and ABA Formal Opinion 328 for the requirement of a sincere and complete divorcement between the law office and the law-related business.

In practice

Under this opinion, a Tennessee firm may form an interstate partnership and operate it under a trade name, provided the partnership status is disclosed to clients, the trade name satisfies RPC 7.1 and 7.5, and any office identifies the jurisdictional limits of lawyers not licensed where the office is located. The opinion holds that the firm may share a building with an affiliated title company if the separation is distinct (entryway, signage, letterhead, business cards) and, because the title company provides law-related services under RPC 5.7, the lawyer takes reasonable measures, preferably a written communication before the engagement, to make clear to those using the title services that they are not legal services and that the protections of the client-lawyer relationship do not apply.

Common questions

Q: Can lawyers licensed in different states form a single partnership?

A: Yes. The opinion concludes that multijurisdictional law firm partnerships are permitted, and nothing in the Model Rules or the Tennessee Rules prohibits them, so long as the partnership status is clearly disclosed to clients and the partnership complies with the Rules.

Q: May the firm use a trade name like "SETCO Law"?

A: Yes, if it complies with RPC 7.5 and RPC 7.1. Per the opinion, the trade name may not imply a connection with a government agency or a public or charitable legal services organization and may not be false or misleading. A multi-office firm may use the same name in each jurisdiction but must indicate the jurisdictional limitations of lawyers not licensed where an office is located.

Q: Can the law firm share a building with an affiliated title company?

A: Yes. The opinion says no ethical rule restricts the location of a lawyer's office, but there must be a distinct, sincere, and complete separation between the firm and the title company in entryway, signage, letterhead, and business cards.

Q: What must clients of the title company be told?

A: Because the title company provides law-related services under RPC 5.7, the opinion requires the lawyer, where the lawyer controls the entity, to take reasonable measures so that each person using the services knows they are not legal services and that the protections of the client-lawyer relationship do not apply, communicated before the engagement and preferably in writing.

Background and rules framework

The opinion interprets several Tennessee rules against their Model Rule counterparts: RPC 7.5 / Model Rule 7.5 (firm names and trade names), RPC 7.1 / Model Rule 7.1 (communications about a lawyer's services), RPC 5.7 / Model Rule 5.7 (responsibilities regarding law-related services), and RPC 5.1 / Model Rule 5.1 (responsibilities of partners and managers). It applies RPC 5.7(b)'s definition of "law-related services" to a title company and RPC 5.7(a)'s requirement that a controlling lawyer ensure users understand the services are not legal services. The opinion also relies on Tennessee Formal Ethics Opinion 82-F-34 (carrying forward former DR 2-102(E) into RPC 5.7) and ABA Formal Opinions 328, 316, and 94-388.

Citations and references

Rules of Professional Conduct:

• Model Rule 7.5 / Tennessee RPC 7.5 (firm names and trade names)
• Model Rule 7.1 / Tennessee RPC 7.1 (communications about services)
• Model Rule 5.7 / Tennessee RPC 5.7 (law-related services)
• Model Rule 5.1 / Tennessee RPC 5.1 (responsibilities of partners and managers)

Other opinions cited:

• ABA Formal Op. 94-388 (1994): relationships among law firms
• ABA Formal Op. 328: law-related (ancillary) businesses; ABA Formal Op. 316 (1967)
• D.C. Bar Legal Ethics Op. 278 (1998)
• Tennessee Formal Ethics Opinion 82-F-34

See also

• ABA Formal Op. 94-388: Relationships Among Law Firms
• ABA Formal Op. 507: Office Sharing Arrangements
• ABA Formal Op. 90-357: Use of "Of Counsel" Designation

Source

• Landing page: https://www.tbpr.org/ethic_opinions/2017-f-164-proposed-interstate-law-firm-setco-law

Original opinion text

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

2017-F-164 - Proposed interstate law firm SETCO Law

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 2017-F-164

The Board of Professional Responsibility has been requested to issue a Formal Ethics Opinion regarding the opening and operation of a proposed interstate law firm, using a trade name, SETCO Law (the “Firm”).

OPINION

Interstate law firm partnerships are permitted if they comply with The Tennessee Rules of Professional Conduct. Such interstate law firm partnerships may use a tradename if it complies with RPC 7.1 and RPC 7.5. Interstate law firm partnerships may lease space from a title company if there is a distinct separation between the law firm and the title company with regard to entry way, signage, letterhead, business cards, etc., and the customers of the law related services are advised that the protections of the client-lawyer relationship do not apply to the provision of the law related services of the title company, preferably in writing.

INTRODUCTION

The requesting lawyer proposes a 50%-50% partnership between a Tennessee Professional Services Corporation (PA) and a Florida Professional Services Corporation (PA) that will operate under a trade name, SETCO Law. The Florida PA will lease space from SETCO Services, a title company, for which the requesting lawyer is in-house counsel, in Destin, Florida. The Tennessee PA will lease space from another law firm, Brannon Law, located in Memphis, TN.

The proposed Firm will have a separate computer system, including secure email system, apart from SETCO Services and can only be accessed by employees of the Firm. The Firm will have its own logo which will be conspicuous within the building. All clients, before engagement with the Firm, will be provided with a written engagement letter that provides in detail that SETCO Law is an entity separate and apart from SETCO Services and Brannon Law and that engagement with the Firm is in no way tied to any affiliation with SETCO services or any services provided therefrom.

ISSUES

I. Do the Tennessee Rules of Professional Conduct allow a partnership between a Tennessee Professional Services Corporation and a Florida Professional Services Corporation?

II. Can the partnership ethically use a trade name?

III. Can the Florida office of the partnership ethically lease space from SETCO Services, a title company?

DISCUSSION

I.

Do the Tennessee Rules of Professional Conduct allow a partnership between a Tennessee Professional Services Corporation and a Florida Professional Services Corporation?

“The growth, development and diversity of the legal profession have spawned a proliferation of new ways of conducting the practice which have taken lawyers far beyond the sole practitioner and single office law firm models of an earlier era. Today law firms operate in multiple cities, form networks or law firms under a common firm name or trade name, and join forces and pool resources in any number of business arrangements.”[1]

“In the United States multi-jurisdictional law firm partnerships-formed by attorneys licensed to practice and physically located in more than one state-are accepted without question.”[2] “The formation of partnerships between attorneys authorized to practice in different jurisdictions is not unethical.”[3] Nothing in the Model Rules or the Tennessee Rules of Professional Conduct would prohibit such a partnership so long as the partnership status is clearly disclosed to the clients, and the partnership complies with the Rules of Professional Conduct.

If several entities are held out as a single firm, then their lawyers must meet not only the obligations regarding preservation of confidences and avoidance of conflicts, but also those arising under rules that normally come into play only when lawyers are associated in the same firm.[4] Those obligations and responsibilities include the partners making reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct.[5]

II.

Can the partnership ethically use a trade name?

Tennessee Rules of Professional Conduct Rule 7.5 recognizes that a trade name may be used, if it does not imply a connection with a government agency or with a public or charitable legal services organization, and the rule requires that such a trade name does not violate RPC 7.1[6] which prohibits lawyers from making false or misleading communications about the lawyer or the lawyer’s services.[7]

If a law firm licenses its name to another firm, it must in fact, operate as a single firm and shall be treated as a single firm for all purposes under the Model Rules, [8] Lawyers may state or imply that they practice in a partnership or other organization only when that is the fact.[9]

“A law firm with offices in more than one jurisdiction may use the same name or other professional designation in each jurisdiction, but identification of the lawyers in an office of the firm shall indicate the jurisdictional limitations on those not licensed to practice in the jurisdiction where the office is located.”[10]

III.

Can the Florida office of the partnership ethically lease space from SETCO Services, a title company?

No ethical rules restrict the location of the office of a lawyer. Nothing prevents a lawyer from entering into a landlord-tenant relationship and having an office in the same building as a land title company.[11]

Tennessee Formal Ethics Opinion 82-F-34, based on the prior Code section DR 2-102(E) which has been carried into RPC 5.7, holds that “The Code of Professional Responsibility would not necessarily prohibit a real estate closing business from being located in the same building as the law firm. However, the divorcement between the offices must be sincere and complete with no common use of stationary, cards, announcements, names on doors, etc.”[12] The Tennessee Opinion was based on ABA Formal Opinion 328 which held that a lawyer may practice law and conduct a law related business from the same office as long as all the provisions of the Code of Professional Responsibility, are complied with, particularly DR 2-102(E).

This is because the real estate title company provides law related services as defined in RPC 5.7(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 nonlawyer.”[13]

A real estate title company provides a law related service and therefore lawyers must adhere to RPC 5.7(a) with regard to their responsibilities regarding law related services.

“A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, (1) if the law related services are provided in circumstances that are not distinct from the lawyer’s provision of legal services to clients; or (2) in other circumstances by an 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 are not legal services and that the protections of the client-lawyer relationship do not exist.”[14]

“Law related services may be provided through an entity that is distinct from that through which the lawyer provides legal services. If the lawyer individually or with others has control of such an entity’s operations the Rule requires the lawyer to take reasonable measures to assure that each person using the services of the entity knows that the services provided by the entity are not legal services and that the Rules of Professional Conduct that relate to the client-lawyer relationship do not apply. A lawyer’s control of an entity extends to the ability to direct its operation. Whether a lawyer has such control will depend upon the circumstances of the particular case.”[15]

The lawyer should communicate in writing to the person using the law-related service the significance of the fact that the provision of the law related service will not create a client-lawyer relationship. The communication should be made prior to an agreement to provide the law related services and should preferably be in writing.[16] “The burden is on the lawyer to show that the lawyer has taken reasonable measures under the circumstances to communicate the desired understanding.[17]

CONCLUSION

The Tennessee Rules of Professional Conduct permit interstate law firm partnerships that comply with the rules. Such interstate law firm partnerships may use a tradename if it complies with RPC 7.1 and RPC 7.5. Interstate law firm partnerships may lease space from a title company if there is a distinct separation from the law firm with regard to entry way, signage, letterhead, business cards, etc., and the customers of the law related services are advised that the protections of the client-lawyer relationship do not apply to the provision of the law related services of the title company, preferably in writing. The proposed interstate partnership appears to comply with these requirements. It is incumbent upon SETCO Services to make it clear that persons using the law related services that it provides understand that it is separate and apart from the Firm leasing space and that the law related services do not create a client-lawyer relationship with the Firm.

This _day of_, 2017.

ETHICS COMMITTEE

Bridget Willhite, chair

Ruth Ellis

Jimmie Miller

APPROVED AND ADOPTED BY THE BOARD

[1] ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 94-388 (1994) at page 1.

[2] D.C. Bar Legal Ethics Op. 278 (1998)

[3] ABA, Comm. on Prof’l Ethics & Grievances, Formal Op. 316 (1967).

[4] ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 94-388 (1994) at page 7.

[5] Tenn. Sup. Ct. R. 8, RPC 5.1(a).

[6] Tenn. Sup. Ct. R. 8, RPC 7.5 (a).

[7] Tenn. Sup. Ct. R. 8, RPC 7.1.

[8] ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 94-388 (1994) at page 1.

[9] Tenn. Sup. Ct. R. 8, RPC 7.5 (d).

[10] Tenn. Sup. Ct. R. 8, RPC 7.5 (b).

[11] AR Jud Eth. Adv. Comm. Advisory Opinion 2000-01 at page 1.

[12] Tennessee Formal Ethics Opinion 82-F-34 at page 1.

[13] Tenn. Sup. Ct. R. 8, RPC 5.7(b).

[14] Tenn. Sup. Ct. R. 8, RPC 5.7(a).

[15] Tenn. Sup. Ct. R. 8, RPC 5.7 comment [4].

[16] Tenn. Sup. Ct. R. 8, RPC 5.7 comment [6].

[17] Tenn. Sup. Ct. R. 8, RPC 5.7 comment [7].