Can an accounting firm keep a lawyer on staff to provide legal services to the firm's clients?

Plain-English summary

The Committee was asked the three questions ABA Opinion 272 addressed about accounting firms that maintain legal counsel on staff to render legal services to the firms' clients. The questions covered a lawyer employed by an accounting firm on a salaried or other compensatory basis to practice law for the firm's clients; whether billing the legal services to the client separately changes the result; and whether a leave-of-absence arrangement, with the lawyer billing the client independently, makes an ethical difference.

The Committee was unanimous in approving the ABA committee's opinion. As the ABA opinion stated, a lawyer may properly be salaried by an accounting firm to advise the accounting firm, but such employment may under no circumstances enable the accounting firm to render legal advice or services to its clients. Paying the lawyer a percentage of firm profits or fees would create a professional association close enough to be the equivalent, for purposes of the intermediary prohibition, of a partnership. Neither separate billing nor a temporary leave-of-absence device changes that result.

The Committee recognized that accounting and law overlap, especially in tax matters, and several members thought the conflicts between the two professions should be clarified if possible, but all were firmly of the opinion that it is improper for an accounting firm to render legal advice or services to its clients even with responsible lawyers on staff (8-0).

Currency note

This opinion was issued in 1956, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. 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 Treat this page as historical context, not current guidance.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.

Common questions

Q: Could a lawyer be salaried by an accounting firm at all under this opinion?

A: Yes, but only to advise the accounting firm itself. The employment could not be used to let the firm render legal advice or services to its clients.

Q: Did billing the legal work separately or using a leave of absence cure the problem?

A: No. The Committee adopted the ABA's view that no such artificial device or temporary arrangement changes the result.

Q: What was the significance of a profit-percentage arrangement?

A: Compensating the lawyer with a percentage of firm profits or fees would be the equivalent of a partnership for purposes of the intermediary prohibition, requiring the lawyer's activities to be confined to those permitted the lay accountants.

Background and rules framework

The opinion interprets former Texas Canon 30 and adopts the reasoning of ABA Opinion 272, which applied ABA Canons 33 (no partnerships between lawyers and nonlawyers where the work involves the practice of law) and 35 (a lawyer's services should not be controlled or exploited by an intervening intermediary). The opinion also references ABA Opinion 269. The modern analogs are ABA Model Rule 5.4 (professional independence of a lawyer) and Model Rule 5.5 (unauthorized practice of law).

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence of a lawyer), as the modern analog
• MR 5.5 (unauthorized practice of law), as the modern analog
• Texas Canon 30
• ABA Canon 33 (partnerships with nonlawyers), cited by the opinion
• ABA Canon 35 (intermediaries), cited by the opinion

Other opinions cited:

• ABA Formal Opinion 272: the source of the three questions and the answers the Committee approved
• ABA Opinion 269: the lawyer's activities confined to those permitted lay accountants where compensation equals a partnership

See also

• TX Ethics Op. 136: Lawyer-CPA Holding Out in Both Capacities
• TX Ethics Op. 149: Lawyer-Owned Collection Corporation
• TX Ethics Op. 167: Salaried In-House Counsel for an Insurer

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-128/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_128.pdf

Original opinion text

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

QUESTION PRESENTED

Our committee has been asked to answer three questions which were presented to and answered by the American Bar Association's Committee on Professional Ethics and grievances. The questions deal with the practice of some accounting firms who maintain legal counsel on their staffs to render legal services to clients of the accounting firms, whether employed on salary or compensated in some other manner.

The three questions are taken from a portion of Opinion No. 272 of the American Bar Association committee as follows:

"2. (a) Is it ethical for a lawyer to be employed by a firm of accountants ON A SALARIED OR OTHER COMPENSATORY BASIS and to practice law for the clients of the accounting firm? "

"The last paragraph of Canon 33 is as follows:

"'Partnerships between lawyers and members of other professions or nonprofessional persons should not be formed or permitted where any part of the partnership's employment consists of the practice of law.'

"Canon 35 provides:

"'The professional services of a lawyer should not be controlled or exploited by any law agency personal or corporate, which intervenes between client and lawyer. A lawyer's responsibilities and qualifications are individual. He should avoid all relations which direct the performance of his duties by or in the interest of such intermediary. A lawyer's relation to his client should be personal, and the responsibility should be directed to the client. . . '

"A lawyer may properly be employed by a firm of accountants on a salaried basis to advise the accounting firm, but such employment may, under no circumstances, be used to enable the accounting firm to render legal advice or legal services to its clients.

"Should a lawyer be employed by a firm of accountants on the basis of receiving a percentage of the firm profits or fees, this would result in such close professional association between them as to be equivalent, for the purpose of Canon 35, to a partnership between them; and under our Opinion 269 would necessitate the subsequent confinement of the lawyer's activities to such as were permitted the lay accountants.

"2. (b) Does it make any legal difference if the services of the lawyer are billed to the client separately, and the accountant firm participates in no way in the compensation received for legal services?
"No such artificial device would, in our opinion, change the result.

"2. (c) Does it make any ethical difference if, by leave of absence or other temporary arrangement, the lawyer considers he is rendering the legal services on his own time, and the lawyer bills the client independently?
"Our answer is the same as that to 2(b),"

18 Baylor L. Rev. 245 (1966)

PARTNERSHIPS - ACCOUNTING FIRMS
An attorney may be employed by an accounting firm on a salaried basis to advise the firm, but this employment may not, under any circumstances be used to enable the accounting firm to render legal advice or legal services to its clients. If the attorney received a percentage of the firm's profits or loss for his services, this would be the equivalent of a partnership with the firm.

Canon 30. A.B.A. Canon 33.

The members of our committee are unanimous in approving the opinion of the American Bar Association committee.

At the same time it is recognized that there are often situations where there is an overlapping of accounting and legal professions, especially in connection with tax matters. Several members of the committee feel that there should be some clarification of the conflicts between, the two professions, if that be possible, but all of them are firmly of the opinion that it is improper for an accounting firm to render legal advice or services to its clients even though it has lawyers on its staff who are responsible for the advice given. (8-0)

Tex. Comm. On Professional Ethics, Op. 128 (1956)