Can a Tennessee lawyer who is a vowed member of a communal religious order turn his legal fees over to the order, as the order's rules require?

Currency note

This opinion was issued in 1984, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Plain-English summary

An attorney who had joined a communal religious order in 1972, classified by the IRS as a communal religious community under I.R.C. Section 501(d), asked whether he could charge fees for his legal services and turn those fees over to the order. Members of the order took vows of poverty and were irrevocably required to surrender all revenue from any source to the order, which dispensed funds for the members' food, housing, medical care, and other necessities; that requirement was necessary to retain the order's tax classification. The attorney, admitted to the Tennessee bar in 1982, had spent his first year providing free legal services to order members and the broader community, but the order's mounting debt from commercial farming and new ventures meant it would now require him to charge fees and remit them.

The opinion applied Disciplinary Rule 5-107(C), which barred practicing law in a for-profit association in which a non-lawyer owns an interest, serves as a director or officer, or can direct or control the attorney's professional judgment; DR 3-103(A), which barred sharing a legal fee with a non-lawyer; and DR 3-103, which barred forming a partnership with a non-lawyer for any activity that includes the practice of law. It reasoned that these prohibitions exist "to protect the consumers of legal services against the practice of law by untrained and unqualified persons" and "to protect attorney-client relationships from interference by non-lawyers," illustrated by the rule that an employer like a bank cannot collect or share in fees its in-house attorneys generate, because doing so would let the organization's own finances ("cash-flow, success or failure of new ventures") influence whether and how much the attorney charges. On that basis, the opinion concluded "it is... improper for an attorney to share his legal fees with the communal religious order to which he belongs," while clarifying that the opinion did not prohibit the attorney from making charitable gifts or contributions of his income, "provided there is no interference with the attorney's professional judgment by the recipient or donee of the funds."

Common questions

Q: Can a lawyer turn over his legal fees to a religious order he belongs to, as the order's membership rules require?

A: No. The opinion held "it is... improper for an attorney to share his legal fees with the communal religious order to which he belongs," regardless of the order's own income-sharing requirements.

Q: Why does fee-sharing with a non-lawyer organization raise an ethics problem?

A: The opinion explains the prohibition protects the attorney's independent judgment from the organization's financial pressures, since "[d]ecisions by the officers, directors or management of the organization as to the structure of the organization's finances should not be allowed to interfere with the attorney's judgment as to the amount of legal fee to be charged."

Q: Can the attorney still donate his legal income to the order as a charitable gift?

A: Yes. The opinion clarifies it "is not intended to prohibit an attorney from making charitable gifts or contributions of any or all of his income, subject to the provisions of the tax laws and accepted accounting procedures, provided there is no interference with the attorney's professional judgment by the recipient or donee of the funds."

Background and rules framework

The opinion applied Disciplinary Rule 5-107(C) (no for-profit law practice with non-lawyer ownership, directorship, or control), DR 3-103(A) (no fee sharing with a non-lawyer), and DR 3-103 (no partnership with a non-lawyer that includes the practice of law). The modern correlate is Model Rule 5.4 (professional independence from non-lawyers), cited here as a navigational cross-reference rather than a rule the opinion itself applied.

Citations and references

(No cases or other Tennessee opinions are cited in the opinion text.)

See also

No sibling opinions yet indexed.

Source

• Landing page: https://www.tbpr.org/ethic_opinions/84-f-62

Original opinion text

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

84-F-62 - Fee sharing with religious order

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 84-F-62

Inquiry is made covering the propriety of an attorney sharing revenues from the practice of law with a religious order to which he belongs.

The attorney joined the religious order in 1972. The order is classified by the Internal Revenue Service as a communal religious community. [I.R.C. Section 501(d)] According to the structure of the religious order, and consistent with the requirements of the Internal Revenue Code, all revenues to members of the order are turned over to the order and dispensed in accordance with the religious and monastic purposes of the order. Members of the order take vows of poverty and file an annual partnership return, declaring as income each member's pro rata share of the net earnings of the order, whether distributed or not. Over the past ten years, the annual pro rata share of net earnings of the order has averaged approximately $400 per member. An irrevocable requirement for membership in the order is that all revenues from any source be turned over to the order. This requirement is necessary for the order to retain the Internal Revenue classification as a communal religious community.

The religious order has, since its inception in 1971, derived its revenues from the sale of goods and services through a variety of cottage industries. In recent years, financial reverses in commercial farming and new business ventures have caused the accumulation of a large debt. The high interest rates in recent years have caused a substantial burden on the cash-flow of the order in providing items of food, housing, medical care and other essential items to the members. There has now been a restructuring of the order's finances and management in order to reduce the debt and also to stimulate revenues.

The inquiring attorney was admitted to the Tennessee bar in 1982. For the past year, the attorney's practice has consisted of providing free legal services to members of the order and also to non-members as a community service. With the advent of economic austerity of the order, the attorney will now be required by the order to charge a fee for his legal services and to turn his legal fees over to the order. The order will continue to provide the attorney and his family with a home, garden, medical care, educational facilities and other necessities. The attorney inquires about the propriety of now charging fees for his legal services and sharing the legal fees with the religious order.

Disciplinary Rule 5-107(C) of the Code of Professional Responsibility prohibits an attorney from practicing law in the form of an association authorized to practice law for a profit if a non-lawyer owns an interest therein, or acts as a director or officer, or has the right to direct or control the professional judgment of the attorney. An attorney is prohibited from sharing a legal fee with a non-lawyer [DR 3-103(A)]. Disciplinary Rule 3-103 prohibits a lawyer from forming a partnership with a non-lawyer if any of the activities consist of the practice of law.

The prohibitions against sharing fees with non-lawyers and aiding non-lawyers in the practice of law are designed to protect the consumers of legal services against the practice of law by untrained and unqualified persons; and, to protect attorney-client relationships from interference by non-lawyers. For example, a business, such as a bank, which employs attorneys, may not collect fees for legal services or otherwise share in fees generated by the delivery of legal services. To allow otherwise would subject the attorney to influences of the organization which would interfere with the attorney-client relationship in many areas. One area subject to interference is the area of legal fees; i.e., whether to charge a fee or the amount of fee to be charged. The organization would be in a position to influence or demand certain conduct from the attorney regarding the legal fee to be charged, depending upon the revenues of the organization from other sources or other factors, such as tax considerations, cash-flow, success or failure of new ventures, etc. Decisions by the officers, directors or management of the organization as to the structure of the organization's finances should not be allowed to interfere with the attorney's judgment as to the amount of legal fee to be charged, nor should the management of the organization be allowed to bring in additional attorneys in order to increase the volume of legal services delivered and legal fees received.

It is, therefore, improper for an attorney to share his legal fees with the communal religious order to which he belongs.

This opinion is not intended to prohibit an attorney from making charitable gifts or contributions of any or all of his income, subject to the provisions of the tax laws and accepted accounting procedures, provided there is no interference with the attorney's professional judgment by the recipient or donee of the funds.

This 18th day of January, 1984.

ETHICS COMMITTEE:

O. B. Hofstetter, Jr.

F. Evans Harvill

William R. Willis

APPROVED AND ADOPTED BY THE BOARD