Can a lawyer on salary at a non-lawyer-owned company draft estate-planning documents for the company's customers, and can he have nonlawyers gather the client information?

Plain-English summary

The questions (PEC No. 92-12) were whether a lawyer employed on straight salary by a corporation not owned solely by licensed attorneys may prepare estate planning documents for the corporation's customers, and whether the lawyer may rely on nonlawyers to collect the information used to prepare the documents. In the facts, the corporation and its affiliates provide estate and financial planning; the lawyer's salary does not vary with the number of customers or estate sizes; the lawyer exercises unfettered professional judgment about what documents are needed, has personal contact with each customer, and remains responsible for the documents and the lay staff's actions.

On the first question, the Committee concluded the rules do not prohibit a lawyer from accepting salaried employment to provide legal services to a nonlawyer-owned corporation (citing prior Opinions 417 and 446), but a major constraint is that the corporation must not receive payment for the lawyer's services. If the corporation charged customers a fee that included the lawyer's services, or took income through a markup or commission that was in effect compensation for the lawyer's legal services, that would be sharing legal fees with a nonlawyer in violation of Rule 5.04(a). The Committee observed it would seem unlikely that a corporation would let a salaried employee provide legal services to its customers without receiving some compensation, and any arrangement where the corporation is so compensated for the lawyer's legal services would violate Rule 5.04(a). A footnote adds that Rule 5.04(c) also requires the lawyer's loyalty to run to the customer as client, free of influence by the employer.

On the second question, the Committee concluded the lawyer is not restricted from relying on nonlawyers to gather information or perform other functions so long as he remains responsible for the legal services. Under Rule 5.03 (and Comment 1), the lawyer with direct supervisory authority must make reasonable efforts to ensure the nonlawyers' conduct is compatible with the lawyer's professional obligations, and is subject to discipline for their conduct in the circumstances the rule specifies. The lawyer may have the independent contractors collect information from customers as long as he retains direct supervisory authority, makes those reasonable efforts, and retains responsibility for the delegated work.

Currency note

This opinion was issued in 1994, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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: Can a lawyer on salary at a non-lawyer-owned company serve the company's customers?

A: The Committee concluded yes, but only if the corporation receives no fee, markup, commission, or profit that is to any extent compensation for the lawyer's legal services; otherwise it is fee sharing with a nonlawyer under Rule 5.04(a).

Q: When does this arrangement become improper fee sharing?

A: The Committee concluded it is improper if the corporation charges customers for the lawyer's services, or earns a markup or commission that in effect pays the corporation for the lawyer's legal work.

Q: Can nonlawyers collect the client information for the documents?

A: The Committee concluded the lawyer may use nonlawyers to gather information if he keeps direct supervisory authority, makes reasonable efforts to ensure their conduct is compatible with his obligations (Rule 5.03), and retains responsibility for the work.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 5.04 (professional independence of a lawyer; no sharing of legal fees with a nonlawyer; ABA Model Rule 5.4), including 5.04(a) and 5.04(c), and Rule 5.03 (responsibilities regarding nonlawyer assistants; Model Rule 5.3) and its Comment 1. It relies on prior Opinions 417 and 446 approving similar salaried arrangements under the former Code.

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence of a lawyer), MR 5.3 (responsibilities regarding nonlawyer assistants)
• Texas Disciplinary Rules 5.04 (incl. 5.04(a), (c)), 5.03 (Comment 1)

Other opinions cited:

• Tex. Ethics Op. 417 (June 1984) and Op. 446 (Sept. 1987): approved a lawyer's salaried employment by a nonlawyer-owned corporation to serve its customers, subject to requirements

See also

• TX Ethics Op. 503: Sharing Court-Awarded Fees With a Nonprofit Referrer
• TX Ethics Op. 508: Leasing Lawyers From an Employee Leasing Company
• TX Ethics Op. 515: Contracting With a Contract-Lawyer Placement Agency

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-498/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_498.pdf

Original opinion text

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

QUESTION PRESENTED

(PEC NO. 92-12)
May an attorney, who is employed on a straight salary basis by a corporation that is not owned solely by licensed attorneys, prepare estate planning documents for customers of the corporation?
May an attorney rely on non-attorneys to collect information used to prepare legal documents?

STATEMENT OF FACTS

An attorney is employed on a straight salary basis by a corporation that is not a professional corporation owned solely by licensed attorneys. The corporation and affiliates provide estate and financial planning services to their customers. The attorney's salary does not fluctuate based upon the number of customers or the size of their estates. If estate planning documents are necessary, in the attorney's sole judgment, he prepares them as part of his employment with the corporation. The corporation also employs certain independent contractors who collect information used in evaluating whether or not a particular customer needs any estate planning services. A customer of the corporation is advised that an attorney will be contacting him and preparing any documents necessary. The attorney exercises his unfettered professional judgment in deciding what, if any, estate planning services are needed by the customer. The attorney has personal contact with each customer by telephone and/or correspondence and makes himself available to answer any questions regarding the services he and the corporation and affiliates provide. Finally, the attorney remains responsible for the content and effectiveness of the documents he drafts as well as the actions of any lay people with whom the customer may have contact.

DISCUSSION

The Texas Disciplinary Rules of Professional Conduct do not prohibit an attorney from accepting employment on a salary basis to provide legal services to a corporation that is not a professional corporation owned solely by licensed attorneys. Professional Ethics Committee Opinion 417, Texas Bar Journal, June 1984, and Opinion 446, Texas Bar Journal, September 1987, interpreting the former Texas Code of Professional Responsibility, dealt with similar situations and approved of such arrangements provided certain requirements are met.

In situations where a lawyer is employed by a corporation that is not a professional corporation and provides legal services to customers of the corporation, a major constraint imposed on the lawyer by the Texas Disciplinary Rules of Professional Conduct is that the corporation must not receive payment for the lawyer's services. If payment were received by the corporation, the arrangement would amount to an agreement by the lawyer to share legal fees with a non-lawyer (the corporation) in violation of Rule 5.04(a).[fn1] Rule 5.04(a) provides, with exceptions not here relevant, that "[a] lawyer or law firm shall not share or promise to share legal fees with a non-lawyer . . ."

In the circumstances here presented, this Rule would be violated if the corporation required a customer to pay a fee for services that included the lawyer's services or if the economic arrangements between the corporation and the customer were such that the corporation received income in the form of a mark-up or commission on products sold that was in effect compensation to the corporation for the provision of legal services by the employee/lawyer. In fact, it would seem unlikely that a corporation would allow a salaried employee in the regular course of his or her employment to provide legal services to the corporation's customers without the receipt by the corporation of some form of compensation for the services provided. An attorney's participation in any such arrangement where the corporation received compensation for the attorney's legal services would violate Rule 5.04(a).[fn2]

With respect to the second question presented, an attorney is not restricted from relying on non-lawyers to gather information or to perform other functions so long as the lawyer remains responsible for the legal services provided. Comment 1 to Rule 5.03 recognizes that lawyers frequently employ assistants in their practice who act for the lawyer in rendition of the lawyer's professional services. In order for such non-lawyers to act in this capacity, Rule 5.03 requires that "With respect to a non-lawyer employed or retained by or associated with a lawyer:
(a) a 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; and
(b) a lawyer shall be subject to discipline for the conduct of such a person that would be a violation of these rules if engaged in by a lawyer if:(1) the lawyer orders, encourages, or permits the conduct involved; or
(2) the lawyer:(I) is a partner in the law firm in which the person is employed, retained by, or associated with; or is the general counsel of a government agency's legal department in which the person is employed, retained by or associated with; or has direct supervisory authority over such person; and
(ii) with knowledge of such misconduct by the nonlawyer knowingly fails to take reasonable remedial action to avoid or mitigate the consequences of that person's misconduct."

In the situation presented, the attorney may have the independent contractors collect information from customers of the corporation as long as the attorney retains direct supervisory authority and makes reasonable efforts to ensure that the conduct of the independent contractors is compatible with the professional obligations of the lawyer.

An attorney may not enter into an arrangement with a corporation that is not a professional corporation owned solely by licensed attorneys under which the attorney is employed on a salaried basis and regularly provides legal services to customers of the corporation if the corporation receives fees, commissions, or profits that are to any extent compensation to the corporation for the attorney's legal services to the customers.

The attorney may rely on non-lawyers to collect information from customers provided the attorney retains direct supervisory authority, makes reasonable efforts to ensure their conduct is compatible with the professional obligations of the lawyer, and retains responsibility for the delegated work.

FN1. All citations to Rules are to the provisions of the Texas Disciplinary Rules of Professional Conduct as currently in effect.

FN2. Rule 5.04(c) would also require that the lawyer's loyalties be to the customer as his client and that the lawyer not permit his professional judgment to be influenced by anyone else including the corporation by whom the lawyer is employed.

CONCLUSION

An attorney may not enter into an arrangement with a corporation that is not a professional corporation owned solely by licensed attorneys under which the attorney is employed on a salaried basis and regularly provides legal services to customers of the corporation if the corporation receives fees, commissions, or profits that are to any extent compensation to the corporation for the attorney's legal services to the customers.

The attorney may rely on non-lawyers to collect information from customers provided the attorney retains direct supervisory authority, makes reasonable efforts to ensure their conduct is compatible with the professional obligations of the lawyer, and retains responsibility for the delegated work.

Tex. Comm. On Professional Ethics, Op. 498 (1994)