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Ethics Opinion

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RI-102

October 1, 1991

SYLLABUS

    A lawyer or a law firm may be designated as "of counsel" to one or more lawyers or law firms, whether located in Michigan or out-of-state, provided that the relationship is close, personal and regular with frequent and continuing contact, and not that of a partner, shareholder, associate, occasional consultant, mere office-sharer, or forwarder or receiver of legal business.

    If the "of counsel" and the law firm are located in different jurisdictions, any jurisdictional limitations of the affiliated lawyers must be made clear on public communications concerning the relationship.

    Lawyers and law firms engaged in "of counsel" affiliations are treated as one firm for purposes of the rules governing lawyer disqualification and lawyers as witnesses.

    References: MRPC 1.10, 3.7(b), 7.1, 7.5; RI-90; CI-169, CI-298, CI-472, CI-536, CI-617, CI-749, CI-1001, CI-1018, CI-1029, CI-1167; ABA Op 90-357.

TEXT

This Committee receives many inquiries regarding whether the term "of counsel" may be used on letterhead, in law lists and other public communications to describe a variety of relationships between lawyers and law firms. Although we issued numerous opinions addressing this topic under the former Michigan Code of Professional Responsibility (MCPR), this opinion is intended to analyze "of counsel" relationships under the Michigan Rules of Professional Conduct (MRPC, effective October 1, 1988).

Former MCPR DR 2-102(A)(4) contained the following express reference to "of counsel" relationships: "[A] lawyer may be designated 'Of Counsel' on a letterhead if he has a continuing relationship with a lawyer or law firm, other than as a partner or associate . . . ." The term "of counsel" is not mentioned in the MRPC which raises the question of whether the treatment of such relationships has changed because of this omission.

In addition to the express language of former MCPR DR 2-102(A)(4), our previous guidelines for using the term "of counsel" were also premised upon (a) the prohibition against practicing under a misleading name contained in former MCPR DR 2-102(B); (b) the restriction against using false, fraudulent, misleading, or deceptive public communications articulated in Administrative Order 1978-4; and (c) the definition for "of counsel" relationships adopted by the American Bar Association. See, for example, CI-1001, CI-617 and CI-472.

The principal rationale which supported our earlier opinions on "of counsel" relationships, that is the prohibition against using any form of public communication containing information that is false, fraudulent, misleading, or deceptive, is also found in MRPC 7.1 and 7.5 which state, in relevant part, as follows:

    "Rule 7.1.A lawyer may, on the lawyer's own behalf, on behalf of a partner or associate, or on behalf of any other lawyer affiliated with the lawyer or the lawyer's law firm, use or participate in the use of any form of public communication that is not false, fraudulent, misleading, or deceptive. A communication shall not:

      "(a) contain a material misrepresentation of fact or law, or omit a fact necessary to make the statement considered as a whole not materially misleading; . . . ."

    "Rule 7.5(a). A lawyer shall not use a firm name, letterhead or other professional designation that violates Rule 7.1 . . . .

      "(d) Lawyers may state or imply that they practice in a partnership or other organization only when that is the fact."

We believe that the adoption of the Michigan Rules of Professional Conduct has not substantively altered the rationale which supported our previous definition of an "of counsel" relationship. We reach this conclusion because the MRPC has continued the requirement that communications regarding affiliations between lawyers and law firms must be truthful, and must not be false, fraudulent, misleading or deceptive. The common understanding is that a lawyer who is "of counsel" to another lawyer or law firm does not have the status of either a partner or a shareholder, but does have a close, regular and personal relationship with the affiliated lawyer or law firm. Consequently, it would be misleading to describe as "of counsel" a relationship that does not meet this standard. Accord, ABA Op 90-357; See also, The Of Counsel Agreement, A Guide for Law Firm and Practitioner, ABA (1991).

Accordingly, we reaffirm our previous opinions to the extent they held that a lawyer or a law firm may be described as "of counsel" to another lawyer or law firm, provided that the relationship is close, regular and personal and not that of a partner, shareholder or associate. CI-169, CI-298, CI-472, CI-536, CI-617, CI-749, CI-1001, CI-1018, CI-1029, CI-1167. However, in light of changing trends in lawyer and law firm affiliations described below, we disavow our prior opinions to the extent that they may be read (a) to exclude lawyer/employees from being described as "of counsel" or (b) to require "almost daily contact" between the affiliated lawyers or law firms. The requirement of close, regular and personal contact which has been described in ABA Op 90-357 as the "core" characteristic of an "of counsel" relationship, requires frequent and continuing (but not daily) contact.

Lawyers and law firms which merely have mutual referral arrangements may not be described as "of counsel" to each other. A law firm may from time to time be asked to undertake representation of a client which the firm is unable to handle due to conflicts of interest, time constraints of existing workload, or lack of competence or experience in the field in which the prospective client seeks assistance. In those situations MRPC 1.5(e) permits the lawyer to refer the client to another law firm. Some lawyers are so frequently faced with such situations that they attempt to formalize such referral arrangements with a particular receiving firm. As previously stated, an "of counsel" is treated as part of the firm for conflicts purposes. Thus, conflicts of interest would not be cured by a referral to "of counsel," and a referral fee pursuant to MRPC 1.5(e) would be improper.

Neither may a lawyer who acts only as an occasional consultant to another lawyer or firm be designated as "of counsel," since the arrangement does not satisfy the requirement of frequent and continuing contact.

It should be noted that "of counsel" is only one of many terms that may be used to describe an affiliation between lawyers or law firms. See ABA Op 90-357. It is permissible to use in public communications any term which describes an affiliation between lawyers (other than active partners, shareholders, or associates) or law firms, provided that the relationship is "close, regular and personal," not mere office-sharing, and not that of an occasional consultant or forwarder or receiver of legal business. The term "of counsel" as used throughout this opinion is intended to include these similar terms.

ABA Op 90-357 identifies four relationships in which the designation "of counsel" is appropriate.

    "Perhaps the commonest of such relationships is that of a part-time practitioner, who practices law in association with a firm, but on a basis different from that of the mainstream lawyers in the firm. Such part-time practitioners are sometimes lawyers who have decided to change from a full-time practice, either with that firm or with another, to a part-time one, or sometimes lawyers who have changed careers entirely, as for example former judges or government officials. A second common use of the term is to designate a retired partner of the firm who, although not actively practicing law, nonetheless remains associated with the firm and available for occasional consultation. A third use of the term is to designate a lawyer who is, in effect, a probationary partner-to-be: usually a lawyer brought into the firm laterally with the expectation of becoming partner after a relatively short period of time. A fourth, relatively recent, use of the term is to designate a permanent status in between those of partner and associate - akin to the category just described, but having the quality of tenure, or something close to it, and lacking that of an expectation of likely promotion to full partner status."

Michigan ethics opinions are generally consistent with the ABA formulation, e.g., the full-time or part-time practitioner [CI-169 and CI-298], the retired partner or shareholder [RI-90].

A lawyer or law firm may establish an "of counsel" affiliation with a law firm in another state, see CI-472, CI-749, and CI-1018. However, if the affiliation is with a firm in another state, the jurisdictional limitations (if any) of the affiliated lawyers must be made clear on any public communications, such as letterhead, announcements, and advertising, MRPC 7.1, 7.5. There may be other aspects of multistate practice, such as limitations on the amount of contingency fees or the appropriateness of a referral fee, that are not addressed here but which would require careful consideration.

The term "of counsel" may not be used to describe lawyers or law firms that merely share office space, other office facilities or non-legal staff because such an arrangement, without more, does not satisfy the requirement that lawyers who are "of counsel" to one another must practice law in a close, regular and personal relationship. As we have frequently held, mere office-sharers may not share letterhead or otherwise hold themselves out as "an association of lawyers" unless they are in fact one law firm, C-230; MRPC 7.5.

With respect to each type of affiliation described, a permissible "of counsel" relationship:

    (a) must be close, regular and personal and not that of a partner, shareholder, or forwarder or receiver of legal business, or mere office-sharer,

    (b) requires more than the mere availability for consultation (except that this requirement does not apply to retired partners or shareholders who are "of counsel" to their former firms),

    (c) requires frequent and continuing, but not daily, contact between the affiliated lawyers or law firms, and

    (d) is subject to other general principles discussed throughout this opinion.

The method of compensation is not relevant to determining whether an affiliation between lawyers may be designated "of counsel." See, ABA Op 90-357; The Of Counsel Agreement, a Guide for Law Firm and Practitioner, American Bar Association (1991). For example, a retired partner or shareholder may be designated as "of counsel" to the lawyer's former law firm even though the retired lawyer is compensated by the firm (through retirement benefits or otherwise). Prior opinions which suggested that a lawyer could not be designated as "of counsel" if that lawyer was compensated as an employee are disavowed. Also, retired partners and shareholders may be "of counsel" to their former law firms, even if they are only available for occasional consultation, because this would not be inconsistent with the public perception of the relationships between retired lawyers and their former firms.

Because the common understanding is that lawyers whose names appear on a law firm's letterhead, without any special designation of status, are either partners, shareholders, associates or employees of that firm, it would be misleading to include on firm letterhead the name of an "of counsel" without a description of that lawyer's special relationship. It would be misleading, and therefore not permissible, for a firm name to include the name of a lawyer who is "of counsel" to the firm, if that lawyer never held the status of either partner or shareholder of the firm, RI-90. If a retired partner or shareholder continues to practice law, but not with his or her former firm, then that lawyer's name may not appear in the name of the former firm.

It is possible for a lawyer or law firm to be "of counsel" to more than one lawyer or law firm. However, the guidelines described here apply to each "of counsel" affiliation and impose practical limits on the number of such arrangements. Although there is no ethical guidance regarding a maximum number of such affiliations, it is difficult to conceive of a situation in which a lawyer or law firm could establish numerous "of counsel" affiliations and still maintain the required close, regular and personal contact with each affiliated lawyer or law firm. The implications for disqualification and malpractice liability will also operate to limit the number of "of counsel" affiliations.

Lawyers and law firms that engage in "of counsel" relationships are cautioned that an "of counsel" affiliation is treated as one firm for purposes of the ethics rules, e.g., lawyer disqualification [MRPC 1.10] and lawyers as witnesses [MRPC 3.7(b)]. Accordingly, care must be taken to evaluate new clients and new matters for possible conflicts of interest with existing clients and matters of each affiliated lawyer or firm. There may also be the potential for shared malpractice liability between lawyers and/or law firms which are affiliated in "of counsel" arrangements, however, further consideration of this topic is outside the scope of this Committee's jurisdiction.

 
     

 

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