Legal Ethics Opinion No. 1368
Mediation--Arbitration: Attorneys Forming Lay Corporation to
Provide Mediation/Arbitration Services to Corporation's Customers
You have indicated that Attorneys A and B are the sole
shareholders of Virginia Corporation X which was formed for the
purpose of providing mediation and arbitration services, in all
fields except domestic relations, to the general public.
Mediation and arbitration services will be provided by A and B,
as well as by other attorneys, on an independent contractual
basis with Corporation X. Each mediator or arbitrator will
disclose to the parties at the outset that although he/she is a
licensed attorney, he/she will not be serving as an attorney and
will not provide legal advice at any time to any person during or
in connection with the mediation or arbitration process.
Further, you advise that Corporation X will charge an
administrative fee, to be totally retained by the Corporation,
and an hourly fee for the services of the mediator or arbitrator,
a portion of which will be paid to the mediator or arbitrator and
the remainder of which will be retained by the Corporation. With
specific regard to mediation, you indicate that the
lawyer/mediators would agree in advance that they (l) will
clearly inform the parties of the lawyer's role and will obtain
the parties' consent to this arrangement; (2) will draft
settlement agreements but only after advising and encouraging the
parties to seek independent legal advice before executing it; (3)
will not act on behalf of any party in court nor represent one
party against the other in any related legal proceeding; and (4)
will withdraw as mediator if any party so requests or if any of
the conditions (l) through (3) above are no longer satisfied,
following which withdrawal the lawyer/mediator will not continue
to act on behalf of any of the parties in the matter that was the
subject of the mediation. Finally, you indicate that potential
arbitrators and mediators who have prior relationships with
parties will not be appointed to serve in a dispute involving
such parties.
You have inquired if the scenario you present violates any
disciplinary rules. In addition, you have asked the committee to
consider specifically the propriety of (l) Attorneys A and B, who
will serve as mediators or arbitrators, soliciting business for
Corporation X from other attorneys, insurance carriers and the
general public; and (2) attorneys entering into contractual
arrangements with Corporation X in which the hourly fee charged
for the mediator's or arbitrator's services is split between the
corporation and the mediator.
Based on the descriptions you have provided as to the activities
involved in the proposed mediation/arbitration endeavor, and upon
Virginia Code 8.0l-58l.2l which defines a mediator as "an
impartial third party" without regard to that individual's status
as an attorney, the committee is of the view that such activities
do not constitute the per se practice of law. Therefore, the
committee opines that the Code of Professional Responsibility has
only limited application to the circumstances you describe.
Although the facts, as you have presented them, indicate that the
attorney/mediators will not be serving as attorneys and will not
be providing legal advice to the parties, the committee is of the
view that the activities involved in mediation and the subject
matter to which the mediation is addressed closely resemble the
practice of law. The committee believes that providing legal
information, albeit not legal advice, and assisting individuals
to reach agreement on such issues as division of property,
contractual obligations, liability and damages, by definition,
entails the application of legal knowledge and training to the
facts of the situation. See LEO #5ll, 5l3, 5l6, 5l9. Therefore,
under the rationale of LEO #l325 and ABA Opinion 336, the
committee believes that such activities subject the
attorney/mediator to the provisions of the Code of Professional
Responsibility while carrying out the tasks involved in
mediation.
The committee has consistently recognized the permissibility of
lawyers engaged simultaneously in the practice of law and related
entrepreneurial endeavors. Thus, the committee is of the opinion
that the solicitation of business for Corporation X, as you
describe, would not be improper. The committee cautions,
however, that the attorneys' ownership interest in the
mediation/arbitration enterprise, Corporation X, may constitute
the type of financial, business, property or personal interest
envisioned by DR 5-l0l(A). Thus, before referring a client to
Corporation X, or before accepting representation of a client who
was theretofore served by Corporation X, albeit by another
mediator or arbitrator, Attorneys A and B must obtain the consent
of the client after full and adequate disclosure of the
attorney's personal interest. See LEOs #l345, l254, ll98, ll3l,
939, 512, l87. In addition, Ethical Consideration 5-20 provides
specific direction regarding the provision of mediation services
by attorneys and their subsequent professional relationships with
the parties involved. See LEOs #849, 590, 544, 5l9, 5l6, 5l3,
5ll.
With regard to your question (2), related to the splitting of
fees between the mediator and Corporation X, the committee is of
the opinion that, since the business of Corporation X does not
constitute the practice of law, the prohibitions of the Code of
Professional Responsibility against sharing fees with non-lawyers
are inapplicable in the usual course of the business of
Corporation X. To the extent that the mediator is engaged by the
parties as a scrivener of
the agreement reached during the mediation process, such tasks do
not constitute the practice of law and, therefore, fees paid for
that service are not deemed to be legal fees. Should, however,
the mediator/lawyer provide any services beyond those of a
scrivener, the mediator/lawyer must meet the requirements of DR
3-l02, which prohibit the sharing of legal fees with a nonlawyer,
and DR 5-l07, relative to settling similar claims of clients.
See Kansas Opinion 84-8 (l0/4/84), ABA/BNA Law. Man. on Prof.
Conduct 80l:38l8; Association of the Bar of the City of New York
Opinion l987-l (2/23/87), ABA/BNA Law. Man. on Prof. Conduct
90l:6404; Tennessee Ethics Opinion 83-F-39 (l/25/83), ABA/BNA
Law. Man. on Prof. Conduct 80l:8l07.
Finally, the committee cautions that, as in any other activities
engaged in by members of the Bar, any criminal or deliberately
wrongful act, or any conduct involving dishonesty, fraud, deceit,
or misrepresentation which reflects adversely on a lawyer's
fitness to practice law would be improper and violative of DR
l-l02(A)(3 and 4) and would subject the attorney to disciplinary
action. See ABA Formal Opinion 336; LEO #l325 at 3.
Committee Opinion
December 12, 1990
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