August 13, 1985
A law firm may represent a local school board where the wife of one of the law firm members is the president of the school board and the school board consents after full disclosure of any possible conflicts of interest, but the law firm should disqualify itself if as a result of a potential conflict the representation will be adversely affected.
A law firm may represent a local hospital when one of the lawyers is on the board of the hospital if the board consents after full disclosure of any possible conflict of interests and if the lawyer who is the board member disqualifies himself from discussions involving any questions regarding the propriety of the law firm's actions. The law firm should likewise disqualify itself from any evaluation it is asked to undertake of the conduct of the board and particularly its partner-member.
A law firm may charge interest on unpaid client accounts if the client has agreed to such interest in advance.
References: MCPR DR 2-110, 5-101(A); C-214; CI-77, CI-97, CI-191, CI-532, CI-537; Proposed Rules of Professional Conduct 1.7, 1.13.
The questions posed to the Committee are the following:
- The wife of a partner in the inquirer's law firm is the president of the local school board. May the law firm represent the school board in legal matters?
- A partner of the law firm is on the board of the local hospital which is supported by public funds. May the law firm represent the hospital and defend it in workman's compensation, personal injury liability matters, and/or general practice matters?
- May a law firm charge interest on unpaid client accounts?
MCPR DR 5-101(A) provides:
"Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgement on behalf of his client will be or reasonably may be affected by his own financial, business, property, or personal interests."
The Proposed Michigan Rule of Professional Conduct 1.7 provides:
"(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 . . . ."
Proposed Michigan Rule of Professional Conduct 1.13 provides:
"(a) A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders or other constituents."
Based on these rules, it appears the law firm may represent the local school board, even where the president of the board is the spouse of one of the lawyers in the firm provided the following action is taken. First, the board must be advised of the president's relationship with the firm. Further, the board must formally vote to accept the law firm in light of the fact that the president is the spouse of one of the lawyers. Finally, in any situation where it may appear that there is a conflict for the lawyer in the firm, the firm must decline to issue an opinion on that particular matter.
With regard to the second question, the law firm may continue to represent a local hospital after one of the lawyers in the firm has been made a member of the board of that hospital, subject to limitations. In CI-532, this Committee ruled that:
"An attorney who is an officer and stockholder in a closely held corporation may advise the other stockholders and officers of the corporation so long as the attorney's advice is not clouded by his own interests as a stockholder."
The lawyer may represent the local hospital in all matters that do not conflict with the lawyer's own financial interests. Thus, should any questions about the propriety of the billings or the handling of the cases be raised by the board, the lawyer who is on the board should withdraw from the discussion and leave the room. Once again, the board must give its formal consent after being advised as to the possibility of such conflicts arising in the future. Likewise, the law firm should disqualify itself from any evaluation it is asked to undertake of the conduct of the board and particularly its partner-member.
This is further supported by C-214 which held that an attorney could act as a city attorney while at the same time serving as a member of the county board of commissioners. In that opinion, the Committee noted that the lawyer would have to disqualify himself from participating as both a lawyer and a member of the board whenever a conflict of interest might occur for him.
Finally, we are asked whether a lawyer may charge interest on unpaid client accounts. The legal rate of interest is significantly lower than that charged under the Retail Installment Sales Act, which does not apply to interest on decisions directly on point. In CI-77 we held that it is improper to impose a finance charge or surcharge on delinquent accounts receivables in the absence of a prior agreement. In accord, CI-97, CI-191. In CI-537 we noted that ethics rules do not prohibit use of a lawyer-client agreement on billing policy, which policy provides for the imposition of late charges and for withdrawal for nonpayment, provided the client consents and MCPR DR 2-110 is followed. A law firm may charge interest on unpaid client accounts if the client has agreed to such interest in advance.