Outside Interests - Frequently Asked Questions

What do the Model Rules say about outside interests?

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Model Rule 1.13: Organization as a client:

In most cases, lawyers may represent an organization as well as its officers, employees, shareholders, directors, or members at the same time.1 Generally, this dual representation is a permissible outside interest so long as the lawyer also complies with the current client conflict of interest provisions found in rule 1.7.2 For example, in a derivative action, a conflict may arise between the lawyer’s responsibilities to the organization and the lawyer’s relationship with the board since the claim may involve “serious charges of wrongdoing by those in control of the organization.”3 Rule 1.7 would dictate whether the lawyer could defend such an action.4 See “Conflicts of Interest” for further discussion of current client conflicts.

Model Rule 5.4: Professional Independence of a Lawyer:

  • Certain outside interests can impede the professional independence of lawyers and are traditionally not allowed under ethical rules.5 For example, splitting fees with a nonlawyer6 or creating a partnership with a nonlawyer is prohibited as an outside interest under the rules.7 Further, lawyers cannot provide legal services to an entity in the business of providing legal services if nonlawyers hold an ownership interest8 or serve as officers or directors of that entity.9 Additionally, nonlawyers cannot “recommend, employ, or pay the lawyer to render legal services for another…[or] direct or regulate the lawyer’s professional judgment.”10
  • The limitations regarding nonlawyers are evolving, especially in light of emerging business models and the increased use of outsourcing. Check the local rules and their interpretations frequently to ensure compliance with these changing rules.

Model Rule 5.6: Restrictions on the Right to Practice Law:

As ethical rules explain, “[a]n agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer.”11 Thus, these types of arrangements are generally impermissible outside interests that lawyers are prohibited from making.12

Model Rule 5.7: Responsiblities Regarding Law-Related Services:

  • Law-related services represent an outside interest that invokes the application of the ethics rules in certain situations.13 Law-related services are defined as those “related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyers.”14 Examples of law-related services include: “financial planning, accounting, trust services, real estate counseling, legislative lobbying, economic analysis, social work, psychological counseling, tax preparation, and patent, medical or environmental consulting.”15
  • When a lawyer performs law-related services, clients expect the same protections provided when traditional legal services are rendered, including the safeguards in place related to conflicts of interest, confidentiality, and maintaining professional independence.16 Before entering into an agreement for law-related services, it would be wise for a lawyer to make clear to the client, in writing, that an attorney-client relationship does not exist and the significance of this fact.17 However, lawyers should note that the potential for “confusion is especially acute when the lawyer renders both types of services with respect to the same matter. Under some circumstances the legal and law-related services may be so closely entwined that they cannot be distinguished from each other, and the requirement of disclosure and consultation…cannot be met.”18

Model Rule 6.3: Membership in Legal Services Organization:

Generally, it is a permissible for lawyers to participate as director, officer, or member of a legal services organization separate from the firm where the lawyer practices.19 Although an attorney/client relationship does not exist between the lawyer and members of the organization,20 lawyers should not be involved in decisions that violate client conflict of interest rules (1.7),21 or where “the decision or action could have a material adverse effect on the representation of a client of the organization whose interests are adverse to a client of the lawyer.”22 It would also be a best practice to “reassure a client of the organization that the representation will not be affected by conflicting loyalties of a member of the board,” and to establish written policies that reflect these guarantees.23

Model Rule 6.4: Law Reform Activities Affecting Client Interests:

Normally, it is permissible for lawyers to work on reforming or administering a law, while simultaneously representing a client even if the client is adversely affected by the reform or administration of the law.24 Additionally, lawyers are “professionally obligated to protect the integrity of the program by making an appropriate disclosure within the organization when the lawyer knows a private client might be materially benefitted.”25 However, the identity of the client need not be disclosed.26

Model Rule 6.5: Nonprofit and Court Annexed Limited Legal Services Programs:

Generally, lawyers provide legal advice through “quick-advice programs” sponsored by non-profit organizations or courts without being obligated to continue representing a client.27 Examples of these programs include, “legal-advice hotlines, advice-only clinics, or pro se counseling programs.”28 Conflict of interest rules are relaxed in these situations, and apply only when the lawyer giving advice has actual knowledge of a conflict.29 The lawyer must also obtain the client’s informed consent to the limited scope of the representation.30

1 See MODEL RULES OF PROF’L CONDUCT R. 1.13(g) (1983) (amended 2013).

2 See MODEL RULES OF PROF’L CONDUCT R. 1.13(g) (1983) (amended 2013).

3 See MODEL RULES OF PROF’L CONDUCT R. 1.13 cmt. 14 (1983) (amended 2013).

4 See MODEL RULES OF PROF’L CONDUCT R. 1.13 cmt. 14 (1983) (amended 2013).

5 See generally MODEL RULES OF PROF’L CONDUCT R. 5.4 (1983) (amended 2013).

6 See MODEL RULES OF PROF’L CONDUCT R. 5.4(a) (1983) (amended 2013).

7 See MODEL RULES OF PROF’L CONDUCT R. 5.4(b) (1983) (amended 2013).

8 See MODEL RULES OF PROF’L CONDUCT R. 5.4(d)(1) (1983) (amended 2013).

9 See MODEL RULES OF PROF’L CONDUCT R. 5.4(d)(2) (1983) (amended 2013).

10 See MODEL RULES OF PROF’L CONDUCT R. 5.4(c) (1983) (amended 2013).

11 See MODEL RULES OF PROF’L CONDUCT R. 5.6 cmt. 1 (1983) (amended 2013).

12 See MODEL RULES OF PROF’L CONDUCT R. 5.6(a) (1983) (amended 2013).

13 See generally MODEL RULES OF PROF’L CONDUCT R. 5.7 (1983) (amended 2013).

14 See MODEL RULES OF PROF’L CONDUCT R. 5.7(b) (1983) (amended 2013).

15 See MODEL RULES OF PROF’L CONDUCT R. 5.7 cmt. 9 (1983) (amended 2013).

16 See MODEL RULES OF PROF’L CONDUCT R. 5.7 cmt. 1 (1983) (amended 2013).

17 See MODEL RULES OF PROF’L CONDUCT R. 5.7 cmt. 6 (1983) (amended 2013).

18 See MODEL RULES OF PROF’L CONDUCT R. 5.7(a)(1) (1983) (amended 2013); MODEL RULES OF PROF’L CONDUCT R. 5.7 cmt. 8(1983) (amended 2013).

19 See generally MODEL RULES OF PROF’L CONDUCT R. 6.3 (1983) (amended 2013).

20 See MODEL RULES OF PROF’L CONDUCT R. 6.3 cmt. 1 (1983) (amended 2013).

21 See MODEL RULES OF PROF’L CONDUCT R. 6.3(a) (1983) (amended 2013); MODEL RULES OF PROF’L CONDUCT R. 6.3 cmt. 1 (1983) (amended 2013).

22 See MODEL RULES OF PROF’L CONDUCT R. 6.3(b) (1983) (amended 2013).

23 See MODEL RULES OF PROF’L CONDUCT R. 6.3 cmt. 2 (1983) (amended 2013).

24 See generally MODEL RULES OF PROF’L CONDUCT R. 6.4 (1983) (amended 2013).

25 See MODEL RULES OF PROF’L CONDUCT R. 6.4 cmt. 1 (1983) (amended 2013).

26 See generally MODEL RULES OF PROF’L CONDUCT R. 6.4 (1983) (amended 2013).

27 See MODEL RULES OF PROF’L CONDUCT R. 6.5(a) (1983) (amended 2013).

28 See MODEL RULES OF PROF’L CONDUCT R. 6.5 cmt. 1 (1983) (amended 2013).

29 See MODEL RULES OF PROF’L CONDUCT R. 6.5(a)(1) (1983) (amended 2013); MODEL RULES OF PROF’L CONDUCT R. 6.5(a)(2) (1983) (amended 2013).

30 See MODEL RULES OF PROF’L CONDUCT R. 6.5 cmt. 2 (1983) (amended 2013).

 

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Information provided by Attorney Protective is not intended as legal advice. This publication provides best practices for use in connection with general circumstances, and ordinarily does not address specific situations. These best practices are not intended to meet or establish the standard of care, and sometimes recommend practices that exceed the standard of care. Specific situations should be discussed with legal counsel licensed in the appropriate jurisdiction. By publishing practice and risk prevention tips, Attorney Protective neither implies nor provides any guarantee that claims can be prevented by use of the suggested practices. Though the contents of Attorney Protective's Best Practice Database have been carefully researched, Attorney Protective makes no warranty as to the accuracy, applicability or timeliness of the content. Anyone wishing to reproduce any part of the Attorney Protective Best Practices Database content must request permission from Attorney Protective by calling 877-728-8776 or sending an email to erin.mccartney@attorneyprotective.com. Additionally the rules cited in the contents of this database may have since changed. You should check the laws and model rules in your state for specific information on the topics addressed here.