RI-130

April 27, 1992

SYLLABUS

    A lawyer may not offer or make an agreement to franchise a trade name under which a number of lawyers who are not in fact in a partnership or professional corporation relationship with the franchisor hold themselves out as practicing under one firm name.

    References: MRPC 7.5(d); RI-45; C-230.

TEXT

A law firm specializes in representing men in divorce actions and has established an expertise in this area of the law. The law firm has established methods for advertising and marketing its specialty under a trade name, and has established systems and procedures for its practice, including procedures for office structure and accounting.

The law firm proposes to franchise the use of the trade name and the developed systems to other lawyers or law firms ("franchisees"). The proposed franchise system includes the following: (a) the law firm will provide marketing plans and advertising materials and other aspects of its system to franchisees; (b) each franchisee will be given a territory in which no other person will be allowed to locate an office using the trade name; (c) each franchisee will be required to do a certain volume of advertising, maintain specific accounting systems, and acquire specific equipment; (d) each franchisee will be required to pay an initial fee and an ongoing royalty based upon the gross revenues of the franchise. The initial fee will vary depending on the size of the franchise's territory; and (e) each franchisee will be terminable by the franchisor if the franchisee has a substandard performance, fails to advertise as required, fails to pay royalty or other fees, or otherwise breaches the franchise agreement.

A lawyer from the firm asks whether the franchisor and its franchisees may share the same trade name and advertise and market legal services under that trade name; whether the franchisees may be charged an initial fee and an ongoing royalty based on gross revenues; and whether the franchise relationship must be registered pursuant to MRPC 6.3(a).

MRPC 7.5(d) states:

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

In C-230 lawyers who belonged to separate professional corporations, but from time to time worked on cases together on a contract basis, were prohibited from using joint letterhead, even with a disclaimer that the lawyers were "an association of professional corporations." See also, RI-59; CI-111, CI-298.

In RI-45 a partner-shareholder who left a partnership-professional corporation but continued to share office space with the firm, could not continue to be listed on the letterhead of the former partnership-professional corporation or be included in the former firm's firm name. The Committee reasoned:

    "In sum, the rules require that lawyers be honest and clear in the representations which they make to the public regarding the nature of their practices. Firm names, letterhead, office signs, court pleadings, advertisements, and all other communications must accurately describe the nature of the relationship with other lawyers. Consumers of legal services have a right to understand what individual or entity they can look to for the provision of legal services and who they can hold responsible for the manner in which those services are provided." Emphasis added.

Thus, it is unethical for lawyers to offer or make an agreement to franchise a law firm name when the franchisees in fact are not in a partnership or professional corporation relationship with the franchisors. This being the case, the remaining questions are moot.