Today, several jurisdictions (D.C, Utah and Arizona) permit lawyers to practice in organizations where non-lawyers have ownership interests. For example, D.C.’s Rule 5.4(b) permits D.C. barred attorneys to “practice law in a partnership or other form of organization in which a financial interest is held or managerial authority is exercised by an individual nonlawyer who performs professional services which assist the organization in providing legal services to clients,” so long ss certain requirements are met.
For firms with offices in jurisdictions that bar non-lawyer ownership, this raises a question: Does the adoption of rules permitting nonlawyer ownership in these jurisdictions mean we can we allow nonlawyers in those jurisdictions become partners? The Professional Ethics Committee for the State Bar of Texas (the “Committee”) recently issued Opinion 704, which answers the question, at least for Texas attorneys. It concluded that a Texan attorney, practicing in Texas, could not join a D.C. law firm in which a nonlawyer is a partner.
Texas Rule 5.04(b) (as with most jurisdictions around the country) prohibits lawyers from forming “a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law.” Further, the Committee notes that subsection (d) expands the prohibition to include professional corporations or associations. The main reasons for the prohibition in Texas, as described in the comments are to prevent nonlawyers from soliciting clients, to avoid assisting nonlawyers in the practice of law and to protect the professional independence of lawyers.
Even the rules are bigger in Texas
The Committee applied Texas Rule 5.04 to lawyers licensed and practicing in Texas that are seeking to join partnerships in jurisdictions where the Rules of Professional Conduct affirmatively allow lawyers partner with nonlawyers.
In doing so, they relied on the nearly 35 year old ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 91-360. There, the ABA Committee opined that when a lawyer is licensed both in a state that allows nonlawyer law firm ownership such as D.C. and also in a state that prohibits it, the ethics rules of the latter state would forbid the lawyer from practicing law within the state as a member of a D.C. law firm with a nonlawyer partner. Yet, the ABA Committee opined that if that same lawyer had joined a D.C. firm with a nonlawyer partner, but only practiced in D.C., the lawyer would not be subject to discipline.
Recent ethics authorities have called for revisiting Op. 91-360, because it no longer reflects either the current language ABA Model Rules or the realities of the legal profession.
The Committee also pointed to NYSBA Ethics Op. 1038 in justifying the wide application of its Rule. There, the NYSBA Committee on Professional Ethics determined that a New York barred attorney practicing principally in New York was prohibited from joining a firm in D.C. that had nonlawyer members.
Opinion 704 makes clear that a Texas-barred attorney practicing law in Texas violates Rule 5.04 by joining a firm with a nonlawyer partner or owner, regardless of whether the firm is in a state that permits nonlawyers to own law firms.
Takeaway
Lawyers cannot pick and choose which rules to follow based on the rules that are the most favorable to their situation. Lawyers or firms licensed or operating in multiple states must be cognizant of the jurisdictional differences in ethics rules. Until more follow D.C.’s lead in allowing nonlawyer firm ownership, the state with the most restrictive rule will govern lawyers’ ability to share legal profits with non-lawyers.