July 3, 1996
A lawyer owner of a nonlaw business offering alternative dispute resolution [ADR] services is not per se prohibited from rendering ADR services to clients of lawyers who are opposing counsel to the lawyer in legal matters unrelated to the ADR matter, to clients of other lawyers who are co-counsel with the lawyer in legal matters unrelated to the ADR matter, or to clients of other lawyers who are members of the lawyer owner's law firm.
The lawyer owner must evaluate on a case by case basis whether the lawyer's interest in maintaining the ADR business of opposing counsel materially limits the lawyer's ability to diligently represent a client in the unrelated matter against opposing counsel.
The lawyer owner may not render ADR services to current clients of the lawyer, the lawyer's law firm colleagues, or the lawyer's co-counsel, unless:
the lawyer's interest in the ADR business is disclosed to the client;
the terms of the ADR services are fair and reasonable, fully disclosed and transmitted to the client in writing in a manner that can be reasonably understood by the client;
the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
the client consents in writing.
References: MRPC 1.2, 1.4(b), 1.7(b), 1.8(a), 2.1; RI-190, RI-212.
A practicing lawyer has established a nonlaw business offering alternative dispute resolution [ADR] services. The lawyer asks whether ADR services may be rendered to (a) clients of other lawyers who are opposing counsel to the lawyer in legal matters unrelated to the ADR matter; (b) clients of other lawyers who are co-counsel with the lawyer in legal matters unrelated to the ADR matter; (c)
clients of other lawyers of the lawyer's law firm. The lawyer also asks whether the lawyer may recommend the nonlaw business's services to the lawyer's clients.
The facts state that the business is a nonlaw business. Ethics rules do not prohibit a lawyer from owning and operating a nonlaw business while engaging independently in a law practice, and do not per se prohibit the lawyer from serving the same individuals concurrently or consecutively in each business.
MRPC 1.7(b) states:
"(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. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved."
With regard to rendering ADR services to clients of opposing counsel, the lawyer owner needs to evaluate whether the desire to please opposing counsel as a customer or referrer of business to the ADR business materially limits the lawyer owner's ability to represent the lawyer's clients against opposing counsel. If so, the lawyer must cease representation of the clients unless a disinterested lawyer reasonably believes the legal representation will not be adversely affected and the clients consent after consultation. The lawyer would be required to disclose to the clients the lawyer-owner's interest in the nonlaw business, and how it could potentially affect the relationship with opposing counsel and the representation of the client.
With regard to rendering ADR services to clients of co-counsel or firm members, MRPC 1.8(a) states:
"(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless:
"(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client;
"(2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
"(3) the client consents in writing thereto."
Absent special circumstances, a client of one lawyer in a firm is the client of the entire firm. For example, MCR 2.117(B)(3) states that a court appearance of an attorney is deemed to be the appearance of every member of the law firm, and that any lawyer in the firm may be required by the court to conduct a court ordered conference or trial. A special circumstance may be an agreement between a law firm and a particular lawyer that the lawyer may bring clients into the firm from a former practice and those clients will remain the clients of the lawyer, not the firm.
Thus, absent special circumstances which are not present in these facts, the clients of other lawyers in the lawyer owner's law firm are the clients of the lawyer owner. Similarly, when a lawyer is co-counsel with another lawyer, the firms are treated as one firm for purposes of conflicts of interest rules.
Under that analysis, MRPC 1.7 might be triggered if the lawyer owner's duties to ADR customers or to forwarders of ADR business materially limit the lawyer owner's ability to serve clients of the law practice. The lawyer owner must evaluate, for example, whether serving opposing counsel's clients in ADR establishes any level of duty to please opposing counsel which would materially limit the lawyer's ability to represent clients whose interests are opposed by opposing counsel. Is the lawyer owner's interest in maintaining good will with opposing counsel for ADR services interfering with the lawyer owner's ability to diligently oppose that counsel on behalf of a client? If so, then the tiers of MRPC 1.7(b) must be met in the lawyer's law practice.
If clients of the law firm are urged to use services of the ADR business, MRPC 1.4(b) would dictate that the lawyer owner's interest in the ADR business be disclosed. The lawyer must also comply with MRPC 2.1 which states:
"In representing a client, a lawyer shall exercise independent professional judgment and shall render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social, and political factors that may be relevant to the client's situation."
Further, a lawyer may recommend that the lawyer's clients use the nonlaw business which he owns, as long as MRPC 1.8(a) is followed. In RI-190 and prior opinions regarding the lawyer ownership of a nonlaw business and recommending the use of the service to clients, the Committee opined that a lawyer must comply with the provisions of MRPC 1.6(b) and 1.6(d) with regard to the lawyer's duty to protect the client's confidences, with MRPC 1.2 and 1.4 requiring a lawyer to provide a client with sufficient information and explanation to enable the client to make informed decisions, and with MRPC 1.7(b), 1.8(a) and 1.9 regarding conflicts of interest.
Finally, if the inquirer desires to enter into a business transaction, i.e., ADR services, with current clients of law firm members or current client of co-counsel, the lawyer must comply with MRPC 1.8(a), advise the client that the client is entitled to seek services from any other independent nonlaw service business, and advise the client of the opportunity to obtain independent counsel before deciding whether to seek the lawyer's nonlaw services. See, RI-190, RI-212.