VIRGINIA LEGAL ETHICS OPINION 1735
ATTORNEY RENDERING PROFESSIONAL SERVICES FOR CLIENTS
OF A LAW FIRM WHEN ATTORNEY IS AN INDEPENDENT CONTRACTOR
RATHER THAN AN EMPLOYEE OR PARTNER OF THE LAW FIRM
You have presented a hypothetical situation focusing on whether
an attorney (the "Attorney") may render professional services to
or for the benefit of the clients of a law firm (the "Firm") as
an independent contractor rather than as an employee or partner
of the firm. You have given the following operative facts:
The Firm and the Attorney desire to enter into an
exclusive agreement[1] for the Attorney to render
professional services to or for the benefit of the
clients of the Firm. For professional services
rendered, the Firm shall pay to the Attorney a
specified hourly rate. The Firm may bill the clients
on behalf of whom the Attorney provides professional
services at a reasonable rate based upon the rate
charged by other law firms for professional services
rendered by employee associates with experience and
background comparable to that of the Attorney. The
rate may be higher than the hourly rate paid to the
Attorney by the Firm; however, this need not be
disclosed to the clients, and the Attorney shall have
no claim against the Firm for the differences in these
two rates.Professional services to be rendered by the
Attorney to the Firm shall include review of client
files, drafting and review of client legal documents
and correspondence, meetings with attorneys or staff
employed by the Firm to discuss client files, research
requested by attorneys or staff employed by the Firm,
strategy and marketing meetings with attorneys or staff
employed by the Firm, seminars given by the Attorney on
behalf of the Firm and all other matters performed by
the Attorney at the request of attorneys or staff
employed by the Firm. The professional services
rendered by the Attorney to the Firm shall be performed
under the direct supervision of an attorney employed by
the Firm, and as such shall be considered the work
product of the Firm. Only those professional services
rendered directly to or for the benefit of clients may
be billed to the clients by the Firm; all other
professional services rendered shall be considered
charges to overhead for the firm.
The Attorney shall have a close and continuing
relationship with the Firm, and as such may be
considered to be "of counsel" to the Firm. If so, the
Attorney shall be entitled to carry business cards
designating her as "of counsel" and shall be allowed to
sign the Firm's letterhead as "of counsel." If the
Attorney is designated as "of counsel," then she may
also have both direct and indirect contact with the
Firm's clients.
If the Attorney is not designated as "of counsel," she
shall neither carry business cards of the Firm with her
name on them nor be entitled to sign the Firm's
letterhead. Also, if the Attorney is not designated as
"of counsel," she shall not have direct contact with
the Firm's clients. Indirect contact refers to
professional services performed by the Attorney on the
client's file on behalf of the Firm.
When referring a prospective client to the Firm, the
Attorney shall provide the prospective client with a
business card with the name of an attorney employed by
the Firm to call for an appointment. The prospective
client shall be interviewed by an attorney or staff
person employed by the Firm. If retained, the client
shall be a client of the Firm, not the Attorney. The
Attorney shall not be entitled to any portion of the
fees generated by such referred clients to the Firm.
The Attorney shall only be entitled to the specified
hourly rate based upon professional services rendered
by her to or for the benefit of the client on behalf of
the Firm.
The Attorney shall provide her own health, dental, life
and disability insurance. The Attorney shall also
provide her own professional liability insurance. The
Attorney shall maintain and pay all annual fees
associated with her license to practice law in the
Commonwealth of Virginia. The Attorney shall provide
her own computer and office supplies, and shall work
primarily out of her home office. The Attorney shall
obtain no less than the minimum number of hours of
Continuing Legal Education each year.
The Attorney shall be subject to the same
confidentiality and conflict of interest rules as if
she were an employee associate attorney for the Firm.
If the Attorney is designated as "of counsel," the
nature of the relationship between the Attorney and the
Firm shall be properly and fully disclosed to clients
with whom the Attorney has direct contact. Whether the
Attorney is designated as "of counsel" or not, the
relationship between the Attorney and the Firm need not
be disclosed to those clients with whom the Attorney
only has indirect contact. As noted above, the
rendering of professional services is considered to be
indirect contact, shall be provided under the direct
supervision of an attorney employed by the Firm, and
shall be considered the work product of the Firm.
Under the facts you have presented, you have asked the committee
to opine on the following questions which shall be answered in
the order they appear:
1. May a firm authorized to practice law in the Commonwealth of
Virginia (the "Firm") enter into an exclusive agreement with
an attorney licensed to practice law in the Commonwealth of
Virginia (the "Attorney") for the Attorney to render
professional services to or for the benefit of the Firm's
clients on behalf of the Firm?
Yes, it is permissible for Attorney and Firm to have an
arrangement in which Attorney provides part-time or full-
time services for Firm's clients as an independent
contractor, contract attorney or "of counsel." LEOs 442,
1293, 1554 and 1712. However, Attorney and Firm shall be
bound by the requirements of confidentiality and the
conflicts of interests rules in the same manner as if
Attorney were associated with the Firm. LEO 1712. DRs 4-
101 and 5-105.
2. May the Firm bill clients for work performed by the Attorney
at a rate which is reasonable based upon the experience and
background of the Attorney, even though the rate paid by the
Firm to the Attorney per hour for professional services
rendered to those clients is less?
In LEO 1712, the committee addressed a similar question in
the context of a law firm using the services of a contract
or temporary lawyer. In that opinion, the committee reached
the conclusion that the Firm has essentially two options.
The Firm can charge the Attorney's services as a
disbursement or cost advance, in which case the amount
charged to the client for the Attorney's services must be
the amount actually paid by the Firm to the Attorney for the
work performed by the Attorney on that client's case. The
client may, of course, agree to a markup on the
disbursement, but this would require disclosure of the
compensation paid by the Firm to the Attorney. Under this
first option the Firm cannot, absent full disclosure and
consent, charge the client more than the amount which the
Firm actually paid the Attorney. Alternatively, instead of
billing the actual amount paid to Attorney as a
disbursement, the Firm may simply bill the client for
services rendered in an amount reflecting its charge for the
Attorney's services, based upon the Attorney's experience
and background, in the same manner as it would bill the
client for an associate's work on the client's case. The
fee charged to the client must be reasonable. DR 2-105.
This second option obviates the need to disclose to the
client the payment arrangement between the firm and the
Attorney.
3. Must the Firm disclose to the clients for whom or for whose
benefit the Attorney renders professional services the
difference between the rate billed to the clients by the
Firm for professional services rendered and the rate
actually paid to the Attorney by the Firm for professional
services rendered?
The committee refers you to its response to inquiry number
two, supra. Disclosure of a markup (the difference between
the amount paid by the Firm for the Attorney's services and
the amount charged to the client) is required if the firm
bills the amount paid to Attorney as an out-of-pocket
expense or disbursement. Disclosure is not required if the
firm bills for Attorney's work in the same manner as it
would for any other associate in the Firm and so long as
either the attorney works under the direct supervision of
the firm or, absent that supervision, the firm adopts the
work product as its own.
4. May the Firm designate the Attorney as "of counsel" because
of the close and continuing relationship between the Firm
and the Attorney, even though the Attorney is not and never
has been either an employee associate or a partner of the
Firm?
Yes, the firm may designate Attorney as "of counsel"
provided the requirements for that relationship are met.
Prior opinions issued by the committee would permit a law
firm to designate as "of counsel" an attorney, working on a
full-time or part-time basis, where the Attorney has a
close, continuing relationship with the Firm and direct
contact with the firm and its clients. LEOs 1554, 1293 and
442. See also ABA Formal Op. 90-357.
5. If the Attorney is designated as "of counsel" by the Firm,
may she have direct contact with the Firm's clients as long
as the nature of the relationship between the Firm and the
Attorney is properly and fully disclosed to the clients
prior to such contact with the clients?
Yes, but as the committee has stated in a previous opinion,
with regard to public communications regarding the Attorney
who is "of counsel" the lawyers in the Firm must be
scrupulously careful in their representation of the
Attorney's professional status not to hold the Attorney out
as being a partner or associate with the Firm. DR 2-101
(A), DR 2-102 (A), (C); EC 2-15; LEO 1293.
6. May the Attorney render professional services to or for the
benefit of the clients of the Firm, although she will have
no direct contact with the clients, if she is not designated
as "of counsel" by the Firm?
Under this scenario, while no direct supervision by the firm
of the attorney would occur, the firm would adopt the
attorney's work product as its own. The Attorney need not be
"of counsel" to the Firm in order to provide legal services
for or on behalf of clients of the Firm. Such services
could be provided with or without the Attorney having direct
contact with the Firm's clients. The "of counsel"
relationship is but one of several relationships by which
the Attorney may provide legal services to the Firm for or
on behalf of its clients.
7. If the Attorney is not designated as "of counsel," must the
independent contractor relationship between the Attorney and
the Firm be disclosed to the clients to whom or for whose
benefit the Attorney renders professional services on behalf
of the Firm, even if the Attorney never directly interacts
with or corresponds with those clients and if the Attorney
never represents the clients in court?
The committee believes that LEO 1712 is also dispositive of
this inquiry. Normally, when a law firm associates another
attorney outside the firm to work on a client's matter, the
client must be informed and consent to the arrangement. DR
2-105(D). However, to the extent that a temporary or
contract attorney works directly under the supervision of an
attorney in the Firm, the temporary or contract lawyer is
not regarded as a lawyer outside the firm as contemplated by
DR 2-105 (D). The client hires the Firm and not simply the
lawyer initially consulted and the work is assigned to an
attorney "associated with the firm." If the contract lawyer
will work on the client's matter under the direct
supervision of an attorney associated with the Firm, the
Firm will ordinarily not have to disclose to the client the
fact that a contract attorney is working on that client's
matter. In addition, if Attorney and Firm intend to form an
"of counsel" relationship, DR 2-105 (D) does not apply. On
the other hand, if the contract attorney will work
independently, without close supervision by an attorney
associated with the Firm, then the client must be informed
of the contract attorney's participation in the client's
case and the client's consent must be obtained.
8. May the Attorney, whether or not designated by the Firm as
"of counsel," refer clients to the Firm by arranging for the
prospective client to meet with an attorney or staff person
employed by the Firm rather than interviewing such
prospective clients herself on behalf of the Firm?
Yes, but the Firm may not compensate Attorney, directly or
indirectly, for simply referring a prospective client to the
Firm, where Attorney assumes no other responsibility to the
client. DR 2-105 (D).[2]
9. Must the Firm maintain professional liability insurance for
the Attorney if she is providing her own professional
liability insurance in amounts deemed appropriate by the
Firm?
This is a legal question beyond the purview of the
committee.
Committee Opinion
October 20, 1999
1 Attorney would not provide services to any other law firm
but the Firm would be free to employ other contract lawyers
in addition to Attorney.
2 Payment of a "forwarding" or "referral" fee will be
permissible under the Rules of Professional Conduct (RPC)
effective January 1, 2000. See RPC 1.5 (e).
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