January 7, 1991
A lawyer who holds a government contract to provide legal services to certain eligible individuals may provide clients who are ineligible for contract services a list of private lawyers who are qualified to undertake the client's matter, as long as the client retains choice of counsel.
Subject to any law or contract term, it is not unethical for a lawyer who holds a government contract to provide legal services to certain eligible individuals to accept a referral fee from private practitioners to whom ineligible clients are referred, as long as any referral fee is dedicated to providing services under the contract.
A contract provider's private law practice may be included on a list of lawyers to whom persons ineligible for contract services may be referred, as long as the lawyer who receives the referral has not participated personally and substantially in the matter. If the lawyer has participated personally and substantially, the lawyer may not accept the referral unless the contracting government agency consents after consultation.
A lawyer employed by a government agency who also maintains a private law practice must keep the two businesses separate.
References: MRPC 1.0, 1.5(e), 1.6, 1.7, 1.11(a); RI-5, RI-11; JI-34; CI-955; 53 Fed Reg 3377 Sec 1321.71.
A lawyer who holds the federal contract to provide Title III-B services asks whether the lawyer may refer fee generating cases ineligible for III-B assistance to private practitioners, whether the provider may accept a referral fee in such instances, and whether the provider, who concurrently operates a private law practice may ethically accept such referrals.
Pursuant to funding under the Older Americans Act, citizens 60 years old and older may obtain legal services under Title III-B of the Act. Services are provided by lawers under contract to the program. We have been told that in rural areas there is a substantial problem finding counsel for such cases. We have also been told that there is a shortage of counsel willing to become Title III-B legal providers, and that if they were unable to accept fee generating cases, fewer lawyers would be inclined to join the program.
Rules regulating the program itself provide, at 53 Fed Reg 3377, Sec 1321.71:
"(f) A legal assistance provider and its attorneys may engage in other legal activities to the extent that there is no conflict of interest nor other interference with their professional responsibilities under this Act.
"(g) No provider shall use funds received under the Act to provide legal assistance in a fee generating case unless other adequate representation is unavailable or there is an emergency requiring immediate legal action. All providers shall establish procedures for the referral of fee generating cases . . . ." Emphasis added.
The emphasized language indicates that the agency is not absolutely prohibited from undertaking fee generating cases. Sec 1321.71(g)(2) states:
"Other adequate representation is deemed to be unavailable when:
"(i) recovery of damages is not the principal object of the client;
"(ii) a court appoints a provider or an employee of a provider pursuant to a statute or court rule or practice of equal applicability to all attorneys in the jurisdiction;
"(iii) an eligible client is seeking benefits under [42 USC 401 et seq] or [42 USC 1381 et seq]."
The III-B provider may handle a fee generating case which falls into one of the stated exceptions. When the contract provider does handle the fee generating case, presumably the fees generated should accrue to the benefit of the III-B contract for services to others. See, RI-67. This opinion is thus limited to instances where none of the criteria in Sec 1321.71(g)(2) are met, and the client's situation is not an "emergency" under Sec 1321.71(g).
That Sec 1321.71(g) contemplates referrals is clear from the language "All providers shall establish procedures for the referral of fee generating cases." Whether the contract provider may ethically accept a referral fee is determined by MRPC 1.5(e) which states:
"A division of a fee between lawyers who are not in the same firm may be made only if:
"(1) the client is advised of and does not object to the participation of all the lawyers involved; and
"(2) the total fee is reasonable."
MRPC 1.5(e) addresses a division of fees between law firms. Pursuant to MRPC 1.0, Comment, Terminology, a law firm "denotes a lawyer or lawyers in a private firm, lawyers employed in the legal department of a corporation or other organization, and lawyer employed in a legal services organization." Whether the contract provider is considered to be a "lawyer in a private firm," or whether the contract provider is deemed to be a part of a "legal services organization," there is nothing per se improper in a division of fees between the contract provider and the law firm which receives a referral. If the referral is done under the government contract, any referral fee must be dedicated to purposes provided in the contract and may not be generally applied to the recipient's personal use.
Whether the enabling statutory authority or the provider's contract allow a provider to accept a referral fee is a question of law and interpretation of the Title III-B regulations, and beyond the authority of this Committee.
May the provider, who concurrently operates a private law practice, ethically accept referrals of fee generating cases from the organization? The general conflict rule, MRPC 1.7 states:
"(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client unless:
"(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
"(2) each client consents after consultation.
"(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
"(1) the lawyer reasonably believes the representation will not be adversely affected; and
"(2) the client consents after consultation . . . ."
The Comment to MRPC 1.7 states in part:
"The critical questions are the likelihood that a conflict will eventuate and, if it does, whether it will materially interfere with the lawyer's independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client."
It is impossible to see how a conflict would not occur if the client's case involved a cause of action against the program itself or against another client of the program. In such instances, there would be no way to sanitize or eliminate the possibility of conflict in a manner which would satisfy the constraints of the rules. Thus, pursuant to MRPC 1.7(b), a contract provider may not accept referrals of cases which assert a claim against the program.
In other instances, whether there is an impermissible conflict of interest would depend on the facts of each case. While the lawyer is serving as contract provider, the lawyer is bound by the terms specified in government statutes and regulations, and is analogous to a "public employee" within MRPC 1.11, which states:
"(a) Except as law may otherwise expressly permit, a lawyer shall not represent a private client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee, unless the appropriate government agency consents after consultation. No lawyer in a firm with which the lawyer is associated may knowingly undertake or continue representation in such a matter, unless:
"(1) the disqualified lawyer is screened from any participation in the matter and is apportioned no part of the fee therefrom; and
"(2) written notice is promptly given to the appropriate government agency to enable it to ascertain compliance with the provisions of this rule."
By analogy, a lawyer who has personally and substantially participated in a matter as a contract provider may not represent the client as a private lawyer without the consent of the contracting government agency, MRPC 1.11(a). For a discussion of "personal and substantial participation, see JI-34, RI-11. Clearly, the lawyer who accepts a referral cannot be the same individual who provides the agency's consent to the lawyer's participation in the matter, MRPC 1.7(b).
We have previously held that although a lawyer may be involved in a separate business or employment outside the lawyer's law practice, the lawyer may not allow the two independent businesses to "feed" each other. A lawyer may not accept representation which requires the lawyer to pass judgment on the propriety of the services or products of the lawyer's other business, RI-5. Nor may the lawyer undertake representation where the lawyer's advice to the client would be slanted by the advice given the client by the lawyer's other business. Nor may a lawyer, when dealing with a client for one business, elicit or use confidential information from a client solely to promote the lawyer's other business, MRPC 1.6. Finally, it was believed that for a lawyer to handle a client's business to recommend the client seek services of the lawyer's other business was improper solicitation. But see, MRPC 7.3.
In this case, the federal rules themselves permit contract providers to engage in private practice and to remain otherwise eligible for referrals from the agency. Second, under the facts stated, these cases are not eligible for agency assistance. Finally, under the facts stated, there is an inadequate pool of qualified attorneys from which to select. Under these compelling circumstances, we believe procedures can be devised by the contract provider which will satisfy the ultimate objective of obtaining qualified counsel for the client, while refraining from undue influence on the client in that selection of counsel.
At a minimum, the contract provider and the private law practice must be maintained as separate entities, even if they are one in the same person. Separation of the physical premises is the ideal solution. While the ideal might not always be obtainable, the same objective may be accomplished with the use of separate offices, signage, telephone numbers, and personnel. See, 69 Mich BJ 948 (October 1989), for further information on office-sharing.
Second, the role of the lawyer should be clarified for the client at each step of the agency review process, to avoid the impression that the client is represented by the contract provider when in fact the representation is by retained counsel.
Third, a list of eligible and qualified lawyers, including the name of the contract provider's private law practice, may be maintained by nonlawyer agency staff, to provide to clients whose cases are being referred. Every effort should be made to give the client a choice of counsel and an opportunity to seek counsel of the client's choice. The fact that a lawyer is a contract provider may be relevant information supplied to the client in order to permit the client to make an informed decision.
Fourth, the lawyer receiving the referral may not have personally and substantially participated in the matter. The contract provider may screen incoming claims to determine eligibility and still be included on the referral list, as long as the screening process is ministerial, does not involve investigation, and does not require the contract provider to go beyond specific guidelines to make the determination that a case must be referred.
We conclude that it is permissible for a contract provider to refer fee generating cases to private practitioners. A contract provider's private law practice may be included on a list of lawyers to whom persons ineligible for provider assistance may be referred, as long as the lawyer who receives the referral has not participated personally and substantially in the matter. A separation between the agency and the lawyer's private law practice must be maintained, so that the client will not be confused about the nature of the representation or the role of the lawyer.