Can a real estate brokerage's general counsel provide limited-scope legal services to the brokerage's customers as part of the brokerage's package, paid by salary?

Plain-English summary

The inquirer was general counsel to a licensed real estate brokerage that syndicated home listings online. He proposed providing limited-scope legal services to the brokerage's customers, answering miscellaneous legal questions tied to the home-selling process, with disclosure of the limited scope and of his role as the brokerage's counsel, and with the customer paying no extra fee because the service would be folded into the brokerage's total package. The inquirer would draw a straight salary regardless of whether his work was for the brokerage alone or included representing customers.

The committee concluded the arrangement violates RPC 5.4(a) and (b), which prohibit a lawyer from splitting fees with, or forming a partnership with, a non-lawyer where any part of the business is to provide legal services. It also found the arrangement may implicate RPC 5.5 (unauthorized practice). The committee reasoned that the conflict-of-interest and limited-scope concerns were, by contrast, manageable: under RPC 1.2(c) a lawyer may reasonably limit the scope of a representation with informed consent, RPC 1.5(b) requires communicating the scope and fee basis, and RPC 1.7 requires checking for direct adversity or material limitation between the customer and the brokerage. The committee analogized to Informal Opinion 2153, where representing for-sale-by-owner sellers through a similar structure was found to violate the RPCs, including 5.4. Notwithstanding that the conflict issues could be overcome, the committee held the RPC 5.4 fee-splitting and partnership bar defeats the arrangement.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee treated RPC 5.4 as the controlling obstacle: a non-lawyer entity cannot package a lawyer's legal services to its own customers as part of its offering, even where the lawyer is salaried and the customer is charged nothing extra, because any part of the activity that is the practice of law triggers the fee-splitting and partnership prohibitions of RPC 5.4(a) and (b). The opinion holds that the related limited-scope and conflict issues are separately curable, RPC 1.2(c) permits a reasonable scope limitation with informed consent, RPC 1.5(b) governs communicating scope and fee, and RPC 1.7 requires resolving any direct adversity or material limitation between customer and brokerage, but that curing them does not save an arrangement that still runs afoul of RPC 5.4. The committee also flagged a possible RPC 5.5 unauthorized-practice concern without resting its conclusion on it.

Common questions

Q: Can a non-lawyer business offer its customers legal services through its in-house lawyer as part of its package?

A: No, where any part of the activity is the practice of law. The committee concluded the arrangement violates RPC 5.4(a) and (b)'s bar on fee splitting and partnership with a non-lawyer, regardless of the salary structure or that the customer pays no separate fee.

Q: Does it matter that the lawyer is paid a flat salary and the customer is charged nothing extra?

A: No. The committee held the RPC 5.4 prohibition applies because the brokerage's business would include providing legal services; the absence of a separate customer charge did not remove the fee-splitting and partnership problem.

Q: Could the conflict-of-interest concerns be cured with disclosure and consent?

A: The committee said the limited-scope and conflict issues under RPC 1.2(c), 1.5(b), and 1.7 could generally be managed with appropriate disclosure and informed consent, but that this did not rescue the arrangement because RPC 5.4 independently barred it.

Background and rules framework

The opinion interpreted Washington RPC 5.4(a) and (b) (Model Rule 5.4, professional independence; bar on sharing fees with and forming partnerships with non-lawyers to practice law), RPC 5.5 (Model Rule 5.5, unauthorized practice), RPC 1.2(c) (Model Rule 1.2, limiting the scope of representation with informed consent), RPC 1.5(b) (Model Rule 1.5, communicating scope and fee basis), and RPC 1.7 (Model Rule 1.7, conflicts of interest with current clients). The committee applied RPC 5.4 as the dispositive rule and treated the remaining rules as cabining how a limited-scope representation could otherwise be structured.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / Washington RPC 5.4(a), (b) (sharing fees with and partnership with non-lawyers)
• Model Rule 5.5 / Washington RPC 5.5 (unauthorized practice of law)
• Model Rule 1.2 / Washington RPC 1.2(c) (limited-scope representation)
• Model Rule 1.5 / Washington RPC 1.5(b) (communicating scope and fee)
• Model Rule 1.7 / Washington RPC 1.7 (current-client conflicts)

Other opinions cited:

• WSBA Informal Opinion 2153 (representation of for-sale-by-owner sellers found to violate the RPCs, including 5.4)

See also

• AL Ethics Op. 1993-20: Rule 5.4 bars fee splitting with a non-lawyer
• GA Ethics Op. 04-1: lawyer's relationship with a non-lawyer business

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1630

Original opinion text

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

Advisory Opinion: 2169
Year Issued: 2008
RPC(s): RPC 5.4(a) and (b), 5.5, 1.5(b), 1.7, 1.2(c), FO 2153
Subject: providing limited scope legal representation to customers of a real estate brokerage firm by the firm's general counsel

I. FACTS

The inquirer is general counsel to a duly licensed real estate brokerage that syndicates houses for sale in Washington on the internet. The inquirer wants to provide limited-scope legal representation services to the customers of the brokerage. The services would be limited to answering miscellaneous legal questions relevant to the home selling process. The customer would receive a disclosure about the limited scope of the representation and relevant conflicts of interest information stating that the inquirer is also general counsel to the brokerage. Further, the customer would be advised that if conflicts of interest were to arise between them and the brokerage, the inquirer would immediately cease representation of either party and each would need to secure separate counsel. Customer questions within the limited-scope would be answered by the inquirer and, if the outside the limited-scope, the customer would be advised to seek outside counsel. The customer would not be charged any extra or special fees for the limited-scope representation because it would be part of the total services provided by the brokerage. The inquirer would be paid a straight salary for his legal work, regardless of if the services were as general counsel only or included limited-scope representation of the customers.

II. QUESTION PRESENTED Does the above arrangement violate the RPCs?

III. RESPONSE Yes, the above arrangement violates Rule 5.4(a) and (b), which prohibits the splitting of fees and partnership with a non-lawyer when any part of the activity constitutes the practice of law. The arrangement may also implicate Rule 5.5 relating to the unauthorized practice of law. Regardless of any Rule 5.5 implications, the arrangement raises difficult ethical issues under Rule 1.5(b) and Rule 1.7.

IV. ANALYSIS This arrangement raises several potential ethical issues under the Washington RPCs, though most can be satisfied with appropriate disclosures. The most significant issue arises from Rule 5.4, which prohibits fee splitting or forming a partnership with a non-lawyer if any part of the business is to provide legal services. Under RPC 1.2(c), a lawyer may limit the scope of representation if the limitation is reasonable and the client gives informed consent. As illustrated by the Comments to this rule, it is permissible for a lawyer retained by an insurer to represent an insured to limit the representation to matters related to insurance coverage. The Comments also discuss the wide latitude of a lawyer and client to craft the scope of representation. Under the facts presented, it seems reasonable for the inquirer to limit the representation of a customer to particular real estate issues with appropriate disclosure and consent. Rule 1.5(b) requires that the scope of representation and the basis or rate of a fee be communicated to the client, preferably in writing. Rule 1.7 prohibits a lawyer from representing a client directly adverse to another client or if there is a significant risk that the representation will be limited by the lawyer's responsibilities to another client or personal interest. The inquirer must be sure that the limited-scope representation of the customer does not create a conflict with the brokerage or another client. If there is a conflict, it must be determined if it is waiveable. Barring any conflict of interest, the inquirer must still determine if there is a risk of material limitation and, if so, proceed only if he believes he will be able to provide competent and diligent representation and the client consents after sufficient disclosure. This arrangement is similar to the one discussed in Informal Opinion 2153 where the Committee found that an attorney who represented for sale by owner sellers violated the RPC's, including 5.4.

Notwithstanding the conclusion that the inquirer may be able to overcome the conflicts of interest issues, the arrangement violates RPC 5.4 which prohibits the splitting of fees and partnership with a non-lawyer when any part of the activity constitutes the practice of law.