Can a lawyer go in-house at a marketing company and be paid a salary plus company shares to serve the company's customers?

Plain-English summary

A lawyer asked whether it would be ethical to go "in-house" with a marketing company to provide legal services to the company's customers, where the lawyer would be paid a minimal salary plus shares in the company, or, as an alternative, options to purchase shares exercisable in the future (for example, on the sale of the marketing firm).

The committee said the proposed arrangement violates RPC 5.4(a), which, with exceptions not applicable here, prohibits a lawyer from sharing fees with a nonlawyer. It directed the inquirer to several prior informal opinions and noted that the facts may also implicate RPC 5.4(b) (no partnership with a nonlawyer where any activity is the practice of law), RPC 5.4(c) (a person who refers clients may not direct or regulate the lawyer's professional judgment), RPC 5.5(b) (no assisting a nonlawyer in the unauthorized practice of law), RPC 7.2(c) (no giving anything of value for recommending the lawyer's services), and RPC 7.3 (restrictions on certain direct contacts with prospective clients), and it also pointed to RPC 1.8(f) and 1.6. The committee said that because the lawyer's fees would be shared with a nonlawyer in some unspecified way, the structure of the compensation makes no difference to the outcome. It declined to reach the inquirer's other questions, including the legal validity of contracts that violate the RPCs, because it does not render opinions on legal issues and a response was unnecessary given its answer on the primary question.

Currency note

This opinion was issued in 2004, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. The rules were renumbered and revised in 2006, though RPC 5.4 kept its number. 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 Treat this page as historical context, not current guidance.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 mentioned here.

In practice

Under the Washington rule as it stood at the time of the opinion, the committee treated the arrangement as fee-sharing with a nonlawyer regardless of how the compensation was packaged. It said paying the lawyer a salary plus shares or options, in exchange for serving the marketing company's customers, would share legal fees with the nonlawyer company in violation of RPC 5.4(a). The committee identified several other rules the facts could implicate (RPC 5.4(b), 5.4(c), 5.5(b), 7.2(c), and 7.3) but rested its conclusion on RPC 5.4(a), and it declined to address the inquirer's legal questions.

Common questions

Q: Can a marketing company employ a lawyer to serve its customers and pay the lawyer in equity?

A: The committee said no; that arrangement shares the lawyer's fees with a nonlawyer in violation of RPC 5.4(a), and paying in shares or options instead of cash does not change the result.

Q: Does the exact compensation structure matter?

A: The committee said it does not. Because the fees for the lawyer's services would be shared with a nonlawyer in some unspecified way, the structure of the compensation makes no difference to the outcome.

Q: What other rules did the committee flag?

A: It pointed to RPC 5.4(b), 5.4(c), 5.5(b), 7.2(c), and 7.3, as well as RPC 1.8(f) and 1.6, as rules the facts may also implicate.

Background and rules framework

The opinion interprets RPC 5.4 (Model Rule 5.4, professional independence of a lawyer), specifically RPC 5.4(a)'s prohibition on sharing legal fees with a nonlawyer. The committee applied that rule to a proposed in-house arrangement with a marketing company and treated equity compensation as a form of fee-sharing. It cited additional Washington rules (RPC 5.4(b), 5.4(c), 5.5(b), 7.2(c), 7.3) as potentially implicated.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / Washington RPC 5.4(a) (no sharing of legal fees with a nonlawyer); RPC 5.4(b), 5.4(c)
• Washington RPC 5.5(b), 7.2(c), 7.3 (flagged by the committee as potentially implicated)

Other opinions cited:

• WSBA Informal Opinions 1143 (1988), 1483 (1992), 1505 (1992), 1695 (1997), 1747 (1997): prior committee guidance on fee-sharing and related arrangements with nonlawyers

See also

• ABA Formal Op. 464: Fee Division Across Jurisdictions
• WA Ethics Op. 2059: Employing a Suspended Lawyer
• ABA Formal Op. 91-360: Nonlawyer Partnerships Across States

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1309

Original opinion text

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

Advisory Opinion: 2068
Year Issued: 2004
RPC(s): RPC 1.6, 1.8, 5.4, 7.2, 7.3
Subject: sharing legal fees with nonlawyer

The inquiring lawyer asks whether it is ethically permissible for a lawyer to go “in-house” with a marketing company to provide legal services to the marketing company’s customers, where the lawyer will be paid a “minimal salary” plus shares in the company (or, as an alternative to receiving shares, the lawyer is given options to purchase shares that may be exercised at a specified time in the future, e.g., upon sale of the marketing firm to another entity).

The proposed arrangement violates RPC 5.4(a), which, with certain exceptions not applicable here, prohibits a lawyer from sharing fees with a non-lawyer. The inquirer is directed to prior informal opinions of this committee, which can be searched through the Washington State Bar Association website (at http://pro.wsba.org/io/search.asp), including Informal Opinion No. 1143 (1988), No. 1483 (1992), No. 1505 (1992), No. 1695 (1997), and No. 1747 (1997). As set forth in these prior informal opinions, the facts underlying this inquiry may also implicate additional ethics rules, including RPC 5.4(b) (prohibiting lawyers from forming a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law), RPC 5.4(c) (prohibiting a person referring clients to a lawyer from directing or regulating the lawyer’s professional judgment in rendering legal services), RPC 5.5(b) (prohibiting a lawyer from assisting a non-lawyer in performing any activity that constitutes the unauthorized practice of law), RPC 7.2(c) (prohibiting a lawyer from giving anything of value for recommending the lawyer’s services), and RPC 7.3 (prohibiting certain direct contacts with prospective clients). See also RPC 1.8(f), 1.6.

Because the fees for the lawyer’s services would be shared with a non-lawyer in some unspecified way, the structure of the compensation arrangement between the lawyer and the marketing company makes no difference to the outcome of this inquiry. The inquirer has asked other questions, including the legal validity of contracts that violate the Rules of Professional Conduct. The committee does not render opinions on legal issues, and a response to the remaining ethical questions is unnecessary in light of the committee’s opinion on the inquirer’s primary question.