82-F-36 - Lawyer Second Occupation

 

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 82-F-36

 

Inquiry is made concerning the propriety of a partner in a law firm incorporating as a sole shareholder in a non-legal capacity and conducting a corporate business for profit by offering skill training sessions for management on the art of effective supervision and communications.

The name of the training corporation would be Management Skills Training, Inc., or a similarly descriptive name. The officers would be the law firm partner as President and a member of his family as Secretary/Treasurer. The company letterhead would reflect a box number address and telephone number. The telephone address would be listed as the street address of a major office building. The lobby directory would identify the floor of the management training company. A small nameplate would direct a visitor to the partners law office at the law firm. There would be no direct association of the lobby nameplate to the law firm name.

The corporation would offer training services designed to upgrade on-the-job supervisory and communications skills of supervisors and managers. A behavior modeling training system would be used. Typical supervisory skill modules would address improving performance; improving work habits; utilizing effective disciplinary action; handling grievances; improving attendance; taking immediate corrective action; terminating an employee; delegating responsibility; overcoming resistance to change; handling emotional situations; improving skills of supervisors function in union environments; etc.

Training services will be billed at an hourly rate covering training time and administrative expenses. Training materials, telephone and travel expenses will be billed at cost. All billing will be on training company letterhead. All receipts would be allocated to wages, expenses and taxes. Wages paid to the Partner will be set off against the Partner's share of law firm income.

The services of this skill training company will be publicized by letter and brochure to companies in the Mid-South area. Brochure information would explain the training process and skill modules as well as describe the biography of the President. The affiliation of the President as a law firm partner will not be included in the published information.

In response to this inquiry, it is appropriate to cite certain portions of Formal Opinion 328 of the American Bar Association Committee on Ethics and Professional Responsibility which are adopted herein as follows:

The history of the so-called dual practitioner has been long and troubled. No canon of the former ABA Canons of Ethics expressly forbade a lawyer to serve simultaneously as a physician, cleric, accountant, dentist, professor, or other professional, nor did any canon purport to exclude a lawyer from any given occupation or business whether it be operating a bookstore, ranching, or playing a trombone in a professional orchestra. Nevertheless, as early as 1932 in Formal Opinion 57, this Committee expressed doubts concerning a lawyer's being engaged in certain other callings. Later opinions on the subject of dual occupations include Formal Opinions 225, 272, 297, and 305, and Informal Opinions 424, 431, 442, 506, 520, 537, 565, 627, 749, 896, 930 and 931 (all issued prior to the adoption in 1969 of the Code of ProfessionalResponsibility). Generally, see Wise, Legal Ethics 185-193 (2nd Ed. 1970).

Myriad reasons for condemning the second activity of the lawyer have been advanced by various commentators. For example, it has been suggested that it is too difficult for a lawyer to devote sufficient time to two occupations to keep abreast of current developments, see Levy & Sprague, Accounting and Law: Is Dual Practice in the Public Interest, 52 A.B.A.J. 1110 (1966); that to practice in a law-related area such as accounting is equivalent to holding out as a specialist, see Levy & Sprague, supra; that a lawyer should practice full-time, see Lawyer & Certified Public Accounts: A Study of Interprofessional Relations, by the National Conference of Lawyers and Certified Public Accountants, supra. The most common explanation for disfavoring dual practice, however, was that the second occupation constituted "indirect solicitation" and served as a "feeder" to the law practice; see e.g., Mintz, Accounting & Law, 53 A.B.A.J. 225, 228-9 (1967); ABA Opinion 297 (1961); ABA Informal Opinion 431 (1961, lawyer-bank director) and 501 (1962, lawyer-title insurance company agent); and Burke, Dueling Over the Dual Practice, 27 Maryland L. Rev. 142 (1967). Generally, see Wilson, The Attorney-C.P.A. and the Dual Practice Problem, 36 U. Detroit L.J. 457 (1959).
 
Perhaps because the terms "indirect solicitation" and "feeding the law practice" are vague as well as overbroad, they were entirely omitted from the Code of Professional Responsibility. The Code's draftsmen thus indicated an intent not to rely on those vague phrases as standards by which to judge the outside activities and occupations of lawyers. Instead, the underlying evils were attacked in the Code by means of several comprehensive but specific Disciplinary Rules, particularly DR 2-101 through DR 2-
105. Accordingly, this Committee cannot condemn any activity today on the basis of "indirect solicitation" or "feeding" of a law practice. Any proscription must be based upon the provisions of the Code.

No disciplinary rule forbids a lawyer to engage simultaneously in another business, profession or endeavor. But DR 2-102(E) prohibits certain conduct by a lawyer while he is carrying on a second business or profession. DR 2-102(E) provides:

A lawyer who is engaged both in the practice of law and another profession or business shall not so indicate on his letterhead, office sign or professional card, nor shall he identify himself as a lawyer in any publication in connection with his other profession or business.

Inferentially DR 2-102(E) recognizes the right of a lawyer to engage at the same time in another business or profession, and under the Code it is clear that a lawyer is not necessarily subject to discipline for practicing law and accounting concurrently. The answer to Question One is that the lawyer may simultaneously hold himself out as a lawyer and as an account provided the requirements of DR 2-102(E) are met. Also Cf. DR 2-101(B)(3).

... Some authorities have distinguished a second occupation which is law-related from one which has little relationship to the practice of law. For example, Opinion 206 (1971) of the Committee on Professional Ethics of the New York State Bar Association (44 N.Y.S.B.J. 120) distinguishes between unrelated occupations such as the operation of a shopping center, retail store or manufacturing plant, and related occupations such as marriage counseling, accountancy, labor relations consulting, and the operation of an insurance agency, a real estate brokerage office, or a loan or mortgage brokerage office. Also see ABA Informal Opinions 627, 709, 775 and 896, and Drinker, Legal Ethics 221-222.

There is little ethical difficulty with the operation of an unrelated occupation from the same location as a lawyer's law office so long as the lawyer complies with DR 2-102(E). In this situation there may be an increased risk, of course, that the lawyer will violate some other disciplinary rule. For example, a lawyer who also operates a retail store may be in violation of DR 2-104(A) if he accepts employment as a lawyer from a customer of his retail store after volunteering the suggestion to the customer that the customer needs to seek legal advice about some matter. Nevertheless, mere existence of this risk does not mean that the second occupation cannot be conducted from the premises where the lawyer has his law office.

If the second profession or occupation is law-related, a greater ethical difficulty is encountered. It may be impossible to know whether the lawyer's work for another person is performed as part of the practice of law or as a part of his other occupation or profession. As stated in Opinion 57 (1932), "It is difficult to conceive how a lawyer could conduct a claims adjustment bureau, a company for the organization of corporations, or a bureau for securing income tax refunds, without practicing law." Also see Informal Opinion 775 (1965) and Drinker, Legal Ethics, 221-222.

In carrying on law-related occupations and professions, the lawyer almost inevitably will engage to some extent in the practice of law, even though the activities are such that a layman can engage in them without being engaged in the unauthorized practice of law. See Opinion 57 (1932). This truism has been recognized in several of our former opinions. For example, in Opinion 272 (1946), it was said:

In every case where a lawyer performs services for a client which could be performed by one not a member of the bar, nevertheless, in performing them in the course of his legal services he is acting as a lawyer and subject to the Canons. (Emphasis added.)

In Informal Opinion 709 (1964) it is said:

A real estate brokerage business is so closely related to the practice of law that, when engaged in by a lawyer, it constitutes the practice of law.

If the second occupation is so law-related that the work of the lawyer in such occupation will involve, inseparably, the practice of law, the lawyer is considered to be engaged in
the practice of law while conducting that occupation. Accordingly, he is held to the standards of the bar while conducting that second occupation from his law offices. With this qualification, the lawyer may carry on a lawrelatedoccupation, such as that of a C.P.A., from the same office.

The qualification just stated is a substantial one, however. Illustrations may indicate its scope. For example, fees set by a lawyer purporting to carry on, from his law office, a mortgage brokerage or loan brokerage business must conform with DR 2-106. Publicity given to the second occupation and methods of seeking business must be in accord with DR 2-101, DR 2-103 and DR 2-104. The lawyer may have a duty under DR 4-101 to preserve confidences and secrets, or information, acquired in carrying on the second occupation even though others engaged in that occupation do not have a similar duty. Similarly, the lawyer may, in connection with the second occupation, owe a duty as a fiduciary even though the relationship of others in that occupation to their clients and customers is not that of a fiduciary; see DR 5-101 and DR 5-105.

... a lawyer may conduct, in compliance with DR 2-102(E), his law practice and a second occupation, not law-related, from one office; and he may practice from the same office both as a lawyer and as a member of a law-related profession or occupation, such as a marriage counsellor, accountant, labor relations consultant, real estate broker, or mortgage broker, if he complies not merely with DR 2-102(E) but with all provisions of the Code of Professional Responsibility while conducting his second, law related occupation. A lawyer may not, of course, accept his obligations under DR 2-102(E) and under other disciplinary rules of the Code by the stratagem of ostensibly dividing into two separate offices his office quarters which are, for practical purposes, unitary or integral. The following language from Informal Opinion 775 (1965) is relevant:

While ... the Committee does not consider it to be necessarily unethical to practice law and concurrently, but in different transactions, engage in the real estate business, the Committee is of the opinion that to do so in accordance with the Canons is so difficult that suspicions of unethical conduct are almost inevitable. For that reason alone, it is our opinion that only a very few lawyers will expose themselves to such suspicions on the part of their brother lawyers and the public. The lawyer who does so must be willing to undertake the tremendous burdens of conducting his real estate business ethically under our Canons ....

It is the opinion of this Committee that the activity described in this inquiry is lawrelated. The partner in the law firm may incorporate as sole shareholder in a non-legal capacity and conduct a corporate business for profit by offering skill training sessions for management in the art of effective supervision and communications. The partner and the entire law firm are required to adhere to the Code of Professional Responsibility in the operation of the law-related business and are ethically responsible for the risks which are inherent in conducting a law practice and law-related business simultaneously.

All advertising of the law-related business shall be done in conformity with Ethical Consideration 2-8 and Disciplinary Rule 2-101 of the Tennessee Code of Professional Responsibility in the operation of the law-related business and are ethically responsible for the risks which are inherent in conducting a law practice and law-related business simultaneously.

All advertising of the law-related business shall be done in conformity with Ethical Consideration 2-8 and Disciplinary Rule 2-101 of the Tennessee Code of Professional Responsibility which presently requires the use of a disclaimer when indicating areas of practice and prohibits the use of handbills, circulars or other advertising except regularly published print media and established electronic media.

Special care and attention must be given to insure full and complete compliance with Disciplinary Rules 2-103, 2-104 and 2-105. Solicitation by mail or any other means is prohibited. All of the provisions of the Code of Professional Responsibility must be complied with in the operation of the law-related business.

This 1st day of December, 1982.

ETHICS COMMITTEE:

W. J. Flippin
Edwin C. Townsend

APPROVED AND ADOPTED BY THE BOARD