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Ethics Opinion

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RI-238

June 14, 1995

SYLLABUS

    A disbarred or suspended lawyer who surrenders stock to a professional law corporation because of the discipline, may agree with the remaining shareholders to repurchase that stock if the terms of the agreement do not provide the disciplined lawyer with an ownership interest in, or the sharing of legal fees earned by the law firm during the period of suspension or disbarment, or are otherwise prohibited by law.

    References: MRPC 5.4(d)(1); MCR 9.119(E) and (F); MCL 450.221 et seq.

TEXT

A lawyer inquires whether a shareholder in a professional law corporation, who is suspended or disbarred from the practice of law, may enter into an agreement with the remaining shareholders for the surrender of the lawyer's stock to the corporation with the right to repurchase that stock if the lawyer returns to the practice of law following the period of suspension or disbarment.

The right of a lawyer to practice law in the corporate form is derived from the Professional Service Corporation Act, MCL 450.222, et seq. This committee does not have authority to opine on matters of law, but notes that, pursuant to MCL 450.229, a shareholder of a professional corporation who "becomes legally disqualified to render the professional services rendered by the corporation . . . shall sever within a reasonable period all employment with and financial interests in the corporation." See also, MCL 450.230 with respect to the transfer and redemption of shares in a professional corporation.

The Michigan Rules of Professional Conduct do not squarely address the question raised. A lawyer is prohibited from practicing in a professional corporation if "a nonlawyer owns any interest therein . . . ." MRPC 5.4(d)(1). A lawyer who is suspended or disbarred would be a nonlawyer for purposes of this rule, and is thereby prohibited from owning any interest in a professional corporation. Michigan Court Rule 9.119(F) states that, "An attorney whose license is revoked or suspended . . . may not share in any legal fees for legal services performed by another attorney during the period of disqualification from the practice of law." A suspended or disbarred lawyer may not practice law, MCR 9.119(E), and must sever all financial ties to his or her law firm. See also, "Disciplined Lawyers and the Unauthorized Practice of Law," Vol 68 No 11 MBJ 1108 (1989). MRPC 1.17, which governs the sale of a law practice would not apply to this fact situation. See Comment to MRPC 1.17, ("Admission to . . . [a] professional [corporation] . . . and similar arrangements . . . do not constitute a sale or purchase governed by this rule.")

Neither MRPC 5.4(d)(1) nor MCR 9.119(E) and (F) prohibit a lawyer from entering into an agreement to repurchase shares the lawyer surrendered to a professional law corporation, conditioned upon the lawyer being reinstated to the practice of law. Accordingly, a disbarred or suspended lawyer who surrenders stock to a professional law corporation because of the discipline, may agree with the remaining shareholders to repurchase that stock if the terms of the agreement do not provide the disciplined lawyer with an ownership interest in, or the sharing of legal fees earned by the law firm during the period of suspension or disbarment, or are otherwise prohibited by law.

 
     

 

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