81-F-8 - Intrastate Affiliation of Law Firms

 

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 81-F-8

 

A request has been made for an opinion regarding a proposed intrastate affiliation between two law firms. The firm of A, B, C, D, E and F, a professional corporation in City I and the firm of G, H, I and J, a professional association in City II propose to affiliate whereby B is to become a partner, shareholder and practicing attorney in both firms. The name of B will remain a part of the name of A.B.C. firm and his name will also become a part of the G firm such as B, G, H, I and J or some similar combination of surnames.

The firms have structured a proposed mode of operation so that each firm can continue to operate as a separate firm, maintain existing benefit plans, office procedures, hiring policies and distribute profits in accordance with existing practices of each firm. They have also structured a fee allocation formula and a production formula whereby fees generated solely by and worked on exclusively by members of A.B.C. firm, including B, will be fully allocated to A.B.C. firm. Fees generated solely by and worked on exclusively by members of G firm, excluding B, will be fully allocated to G firm. Fees generated partly by members of each firm or worked on by members of each firm, with B deemed a member of A.B.C. firm, will be divided between the two firms in accordance with a production formula. The production formula provides that 30% of the gross fee is credited to the attorney who generated the business and the balance is allocated to the attorneys doing the work based on the amount of time worked by each in accordance with the billing rate of each attorney.

B will divide his time between providing legal services for A.B.C. firm in City I and G firm in City II.

The Code of Professional Responsibility does not prohibit the affiliation proposed, and there is no impropriety in B becoming a partner in the two firms. Further, there is no impropriety in the use of B's name in both firms as long as there are no conflicts of interest between the firms.

No opinion is expressed as to whether information available to one firm will be imparted to the other, for the purpose of determining whether either firm is disqualified by a conflict of interest.

Careful attention and special care should be taken to insure that the exact nature of the affiliation is known to the clients of each firm and to the public. There should be no confusion created in the use of letterheads, shingles and listings as to the individuals who share in the responsibility and liability for the acts of each firm.

The production formula may not be applied between the two firms so as to function as a forwarding fee from one firm to the other. In order for a firm to share in a fee, it must have performed legal services to the client. However, that rule does not apply within a single law firm, where the income may be distributed in any manner desired by the members of the firm.

This 9th day of June, 1981.

ETHICS COMMITTEE:

Randall Burcham
W. H. Lassiter
George E. Morrow

APPROVED AND ADOPTED BY THE BOARD