Can a lawyer own a counseling business, serve as its director and general counsel, and accept client referrals from it?

Plain-English summary

The inquirer proposed to go into business with non-lawyers counseling alcoholics, and to serve on the board of directors, act as general counsel, hold a proprietary interest in the counseling service, and accept client referrals from it. The committee was of the opinion that nothing would prohibit the lawyer from entering such a business and that the lawyer could both serve on the board and act as general counsel.

The committee qualified that conclusion with RPC 1.7: the lawyer had to make a prior determination of whether the responsibilities of the two roles might conflict, and if there was a material risk that the dual role would compromise the lawyer's independent professional judgment, the lawyer should not serve as a director.

On referrals, the committee was of the opinion that if the lawyer owned the counseling association and paid employees to make referrals to the lawyer, that would violate RPC 7.2, and the committee considered this true even if the lawyer's name were merely one of several lawyers' names on a list given to clients of the service. The committee also was of the opinion that under RPC 1.8, the lawyer's referral of legal clients to the counseling service could be made only after compliance with that rule, which would require disclosure to those clients of the lawyer's proprietary interest in the service. Finally, the committee was of the opinion that RPC 7.3 would prohibit the lawyer from directing advertisements or letters to specific recipients soliciting professional employment.

Currency note

This opinion was issued in 1987, before the 2006 revisions to the Washington Rules of Professional Conduct. The solicitation and advertising rules then numbered RPC 7.2 and 7.3, and the conflict rules RPC 1.7 and 1.8, were later amended. Treat this page as historical context, not current guidance.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 own and run a non-legal business alongside a law practice?

A: Per the opinion, yes. The committee was of the opinion that nothing prohibited the lawyer from entering the counseling business and that the lawyer could both sit on the board and act as general counsel, subject to the RPC 1.7 conflict check below.

Q: Can the lawyer be both a director and the general counsel of the same company?

A: The committee allowed both roles, but RPC 1.7 required a prior determination of whether the two roles might conflict; if there was a material risk the dual role would compromise the lawyer's independent professional judgment, the committee said the lawyer should not serve as a director.

Q: Can the lawyer pay the counseling service's employees to refer clients to the lawyer?

A: No. The committee was of the opinion that paying employees to make referrals to the lawyer would violate RPC 7.2, even if the lawyer's name appeared only as one of several on a list given to the service's clients.

Q: Can the lawyer refer the law practice's own clients to the counseling service?

A: Per the opinion, only after complying with RPC 1.8, which the committee read to require disclosing the lawyer's proprietary interest in the service to those clients.

Q: Can the lawyer send letters soliciting the service's clients as legal clients?

A: No. The committee was of the opinion that RPC 7.3 would prohibit directing advertisements or letters to specific recipients to solicit professional employment.

Background and rules framework

The opinion applies four Washington rules, each tracking its Model Rule counterpart: RPC 1.7 (concurrent conflicts of interest, here the lawyer's dual role as director and counsel), RPC 1.8 (conflicts involving the lawyer's own interests, here the duty to disclose a proprietary interest before referring clients to the service), RPC 7.2 (advertising, including the bar on paying others to recommend the lawyer's services), and RPC 7.3 (direct solicitation of professional employment). The committee treated the ownership and the dual employment as permissible in themselves, locating the limits in the conflict analysis and in the referral and solicitation rules.

Citations and references

Rules of Professional Conduct:

• Washington RPC 1.7 (conflict of interest; general rule), corresponding to Model Rule 1.7.
• Washington RPC 1.8 (conflict of interest; current client, specific rules), corresponding to Model Rule 1.8.
• Washington RPC 7.2 (advertising; paying for referrals), corresponding to Model Rule 7.2.
• Washington RPC 7.3 (direct contact with prospective clients), corresponding to Model Rule 7.3.

See also

• WSBA Ethics Op. 938: owning an escrow company with a non-lawyer and taking its referrals
• WSBA Ethics Op. 1018: distributing a firm brochure to insurers and other referral sources
• WSBA Ethics Op. 1062: asking other lawyers to refer criminal cases
• WSBA Ethics Op. 1038: a letter soliciting legal work from a city's mayor

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=179

Original opinion text

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

Advisory Opinion: 1068
Year Issued: 1987
RPC(s): RPC 1.7; 1.8; 7.2; 7.3
Subject: Ownership interest in counseling service; serving as both general counsel and director; receiving referrals from business in which lawyer has ownership interest; solicitation

The Committee reviewed your inquiry concerning your proposal to enter into a business with other non-lawyers to counsel alcoholics and in which you intend to serve on the board of directors, act as general counsel, have a proprietary interest in the counseling service, and accept referrals of clients from the service. The Committee was of the opinion that nothing would prohibit you from entering into such a business, and that you could both serve on the board of directors and be general counsel. However, RPC 1.7 would require you to make a prior determination whether the responsibilities of the two roles might conflict. The Committee was of the opinion that if there is a material risk that the dual role would compromise your independent and professional judgment, you should not serve as a director. The Committee was of the opinion that if you were an owner of the counseling association and paid employees to make referrals to you, you would be in violation of RPC 7.2. The Committee felt this to be true even if your name was merely one of several lawyers' names on a list given to clients of the counseling service. The Committee also was of the opinion that pursuant to RPC 1.8, any referrals by you of your legal clients to the counseling service could be made only after compliance with that rule, which would require disclosure to them of your proprietary interest in the service. Finally, the Committee was of the opinion that RPC 7.3 would prohibit you from directing advertisements or letters to specific recipients soliciting professional employment.