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WISBAR August 14, 2018

Can in-house counsel for a non-law-firm company provide legal services to the company's customers?

Short answer: The opinion concludes that an in-house lawyer who provides legal services to the customers of a non-law-firm employer, for the employer's financial benefit, assists the employer in the unauthorized practice of law (SCR 20:5.5) and impermissibly shares legal fees with a nonlawyer (SCR 20:5.4), and that such an arrangement also raises conflict-of-interest and confidentiality problems.

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This page answers the general question as of 2018. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 2018
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
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Plain-English summary

Opinion EF-18-02 (August 14, 2018) considers a recurring scenario: a lawyer employed in-house by a commercial enterprise that is not a law firm, where management proposes expanding the lawyer's duties to provide legal services to the company's customers, with the company factoring those services into the fees it charges customers (as an overall fee or a surcharge). The lawyer stays a salaried employee and is not paid directly by customers. The committee updates its 1961 Opinion E-61-1, which remains valid but rested on the superseded Canons.

On unauthorized practice, the committee applies SCR 20:5.5(a)(2), which bars a lawyer from assisting another in practicing law where doing so violates the regulation of the profession. Relying on State ex rel. State Bar of Wisconsin v. Bonded Collections, in which the Wisconsin Supreme Court held a collection agency that took assignments, furnished a lawyer, and sued in its own name engaged in the unauthorized practice of law, the committee concludes that non-law-firm businesses may not offer legal services to their customers, and a lawyer who provides those services assists the entity's unauthorized practice. The committee notes that unauthorized practice is also a crime under Wis. Stat. 757.30.

On fee sharing, the committee applies SCR 20:5.4, which bars sharing legal fees with a nonlawyer outside narrow exceptions. Whether customers are charged directly (an hourly bill for legal services) or indirectly (a percentage or flat fee for the company's services), the arrangement has the company benefit financially from the lawyer's legal work, which the committee concludes is impermissible fee sharing; it agrees with Maine Opinion 180 that there is little substantive difference between sharing a fee with a nonlawyer and being salaried by a nonlawyer to serve fee-paying customers. SCR 20:5.4(b) also bars partnering with nonlawyers in such a venture, and SCR 20:5.4(c) bars letting a nonlawyer direct the lawyer's professional judgment. Wis. Stat. 757.45 separately prohibits sharing compensation. The committee adds that the arrangement raises material-limitation conflicts under SCR 20:1.7(a)(2) (the lawyer's duties to the employer may conflict with duties to the customer), confidentiality problems under SCR 20:1.6 (the employer may seek access to customer information), and third-party-payer duties under SCR 20:1.8(f) and 20:5.4(c).

In practice

Under this opinion, conduct matching its fact pattern is treated as follows. As the rules stood at the time of the opinion, a Wisconsin lawyer employed by a non-law-firm company could not provide legal services to the company's customers where the company benefits financially, because doing so assists the company's unauthorized practice of law (SCR 20:5.5) and shares legal fees with a nonlawyer (SCR 20:5.4). The committee concludes the prohibition holds whether customers are billed directly or indirectly, and that the arrangement separately raises conflict and confidentiality problems.

Common questions

Q: Can in-house counsel represent the employer's customers?

A: No, where the employer benefits financially. The committee concludes the lawyer would assist the non-law-firm employer in the unauthorized practice of law under SCR 20:5.5 and impermissibly share fees under SCR 20:5.4.

Q: Does it matter whether the customer is billed directly or through the company's fee?

A: No. The committee concludes the prohibition applies whether the customer is charged directly for legal services or indirectly through a percentage or flat fee for the company's services.

Q: Why is a salaried lawyer's work treated as fee sharing?

A: Because the company profits from the legal work. The committee agrees with Maine Opinion 180 that there is little difference between sharing a fee with a nonlawyer and being paid a salary by a nonlawyer to serve fee-paying customers.

Q: Are there problems beyond UPL and fee sharing?

A: Yes. The committee concludes the arrangement raises material-limitation conflicts under SCR 20:1.7(a)(2), confidentiality problems under SCR 20:1.6, and third-party-payer concerns under SCR 20:1.8(f) and 20:5.4(c).

Background and rules framework

The opinion interprets SCR 20:5.5 / Model Rule 5.5 (unauthorized practice; assisting another's unauthorized practice) and SCR 20:5.4 / Model Rule 5.4 (professional independence; fee sharing and partnership with nonlawyers), and discusses SCR 20:1.7 / Model Rule 1.7 (conflicts), SCR 20:1.6 / Model Rule 1.6 (confidentiality), and SCR 20:1.8(f) / Model Rule 1.8 (compensation from a third party). It also relies on Wisconsin's UPL definition (SCR 23.01, 23.02) and the criminal statutes on unauthorized practice (Wis. Stat. 757.30) and sharing compensation (Wis. Stat. 757.45).

Citations and references

Rules of Professional Conduct:

  • Wis. SCR 20:5.5(a)(2) / Model Rule 5.5 (assisting unauthorized practice)
  • Wis. SCR 20:5.4 / Model Rule 5.4 (fee sharing; partnership with nonlawyers; professional independence)
  • Wis. SCR 20:1.7(a)(2) / Model Rule 1.7 (material-limitation conflicts)
  • Wis. SCR 20:1.6 / Model Rule 1.6 (confidentiality)
  • Wis. SCR 20:1.8(f) / Model Rule 1.8 (compensation from one other than the client)

Statutes:

  • Wis. Stat. 757.30 (penalty for practicing without a license); Wis. Stat. 757.45 (sharing of compensation by attorneys prohibited)

Cases:

  • State ex rel. State Bar of Wisconsin v. Bonded Collections, 36 Wis. 2d 643, 154 N.W.2d 250 (1967), collection agency furnishing a lawyer engaged in unauthorized practice
  • In re Mid-Am. Living Trust Assocs., 927 S.W.2d 855 (Mo. 1996), trust-marketing firm's in-house counsel did not cure unauthorized practice

Other opinions cited:

  • Maine Ethics Op. 180: salaried lawyer serving a nonlawyer's fee-paying customers is the equivalent of fee sharing
  • Texas Ethics Op. 531; Illinois Advisory Op. 14-03: in-house counsel serving the employer's customers

See also

Source

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