January 30, 1982
It is improper for a lawyer to be paid by corporate employer/client for services rendered to a third party, which third party pays corporate employer/client for the services.
A lawyer who is House Counsel for a corporation may represent a third party in similar matters only if both the corporation and the third party consent to the dual representation after full disclosure of all potential conflicts and if the corporation agrees to make no attempt to control or interfere with the lawyer's representation of the third party and if the lawyer bills third party directly for services and not through the corporation.
Lawyer A is a licensed Michigan lawyer, is House Counsel for Corporation B. Corporation B enters into a licensing arrangement with University C. Part of the arrangement between B and C provides that C will reimburse B for legal expenses incurred in the preparation, filing, and prosecution of a patent application. Lawyer A will perform this service, but will not bill C directly. Rather, Corporation B will bill University C. Lawyer A is paid a salary by B and is additionally provided all of the necessary secretarial services, office overhead, etc. Lawyer A provides Corporation B with a reasonable estimate of what this particular legal service would cost on the outside (including overhead expense, and the like).
The question raised is whether there is any ethical problem with Corporation B billing for the legal services of Lawyer A, in light of the fact that A has been fully compensated for the legal work through the usual salary.
Both the State Bar Association Committee on Professional and Judicial Ethics and the American Bar Association Committee on Ethics and Professional Responsibility have addressed questions in reference to facts similar to those described. While there are other opinions, these appear to address the inquiry most fully. See CI-456; ABA Op 973.
Some of the relevant portions of the Code of Professional Responsibility and the Canons of ethics which must be reviewed in answering this question are 3,4 and 5 under the Code of Professional Responsibility.
It is the opinion of the Committee that lawyer A may not participate in the arrangement described without both full disclosure to both employer B and University C and without limitations upon the arrangement.
More specifically, lawyer A must fully disclose the proposed relationship to both parties; must obtain from employer B an agreement not to attempt any means of control over the services rendered to C so that A may exercise fully professional and independent judgment on behalf of C, who will be considered the client; must maintain inviolate the confidences of C who will be considered the client; and, finally, must bill University C for services directly and not through employer B.
If the foregoing limitations are met, then it is the opinion of the Committee that the arrangement described, as modified, may be allowed.