May 28, 1992
A lawyer may rent office space under an arrangement to pay rent calculated on the lawyer's gross income from the law practice, as long as client confidences are not violated in determining the amount of rent due.
References: MRPC 1.5(e), 5.4(a); RI-104.
A lawyer asks whether a contractual relationship with another lawyer who would provide office space, utilities, equipment, and a secretary to the lawyer/tenant in return for a percentage of the lawyer/tenant's gross income violates ethics rules. There would be no actual association or indicia of association between the lawyer/landlord and the lawyer/tenant. The lawyer/landlord would have no right to supervise or control the lawyer/tenant or the provided secretary.
The proposed contractual relationship does not fall within MRPC 1.5(e), since the lawyer/landlord is not participating in the transaction as a lawyer.
It is clear that a lawyer may engage in another profession and/or hold ownership interest in a business at the same time that the lawyer is engaged in the practice of law. See CI-614, CI-1065, RI-5, RI-135.
MRPC 5.4(a) states:
"(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:
"(1) an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate, or to one or more specified persons;
"(2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may pay to the estate or other representative of that lawyer the agreed-upon purchase price pursuant to the provisions of Rule 1.17; and
"(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement."
The contractual relationship between the lawyer/landlord and the lawyer/tenant as posed by the inquirer is not one of the enumerated situations in MRPC 5.4(a) and therefore the prohibition of sharing legal fees with a nonlawyer would come into play if the contractual relationship constitutes sharing fees with a nonlawyer.
In RI-104, the Committee addressed whether a law firm could pay a consultant 25% of the tax savings realized by law firm clients in successful representations in which the consultant played an advisory role. After an examination of the history of the rule and its underlying rationale which does not need to be repeated here, the Committee concluded that the fee arrangement violated MRPC 5.4. Crucial in the Committee's determination was that the consultant was an independent contractor who performed services for the lawyer in the course of the client representation.
"One danger presented by fee splitting is that a nonlawyer may 'cut corners' in order to maximize profits under the fee sharing arrangement. In this inquiry, this concern is addressed by the law firm's control of the representation matter, including the right to utilize the consultant only in the law firm's discretion. The law firm remains bound by the ethics rules to see that the client receives competent representation, MRPC 1.1, and advice on a variety of matters, both law and nonlaw, MRPC 2.1.
"Another rationale for the prohibition against fee sharing with nonlawyers is the observation that fee splitting encourages nonlawyers to practice law . . . ." RI-104.
Neither policy question is present in this inquiry. By the terms of the contract in this inquiry, the lawyer would agree to pay the landlord rent calculated as a percentage of the law firm's gross income, rather than the usual flat fee rent. The proposed rent is not based upon any particular case or client, the landlord is not involved in the law practice and does not participate with the tenant on any cases of the tenant. The proposal is simply a method for the lawyer to pay one of the law firm's regular bills, and allows flexibility as the law firm prospers. As long as there is no violation of client confidences in calculating the rent due, the arrangement is not ethically improper.