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RICHMOND COUNTY BAR ASSOCIATION
COMMITTEE ON PROFESSIONAL ETHICS
OPINION # 11
December 30, 1993
An attorney proposes to enter into an association with a non-lawyer,
who is competent and qualified to represent clients protesting
their real estate tax assessments before the Tax Commission
of the City of New York.[1]
The attorney asks whether it is proper to share fees with the
non-lawyer, which fees are paid by clients on a contingency
basis, depending on whether the challenge is successful, and
is calculated on an agreed percentage of the savings to the
client. The attorney proposes that the non-lawyer participate
in the initial interview of the client, aid in evaluating the
likelihood of success of the application, consult with the lawyer
in evaluating the probable success of the application, assist
in the preparation of the case, and be available for consultation
and presence at the hearings.
Several provisions of the Code of professional Responsibility come into play under the circumstances.
DR 3—103(A) states:
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“A lawyer shall not form a partnership with a non—lawyer if any of the activities of the partnership consist of the practice of law.”
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The Code does not specifically define what constitutes the practice of law (EC 3—5). while there are many services that many be properly undertaken by lawyers and non- lawyers alike, especially in the fields of taxation and tax-planning, when such services are performed by a lawyer who holds himself out as a lawyer, they constitute the practice of law and the lawyer, in performing them, is governed by the Code (NYS Op. *557). By offering these professional services jointly with the non—lawyer, the lawyer is enabling the non-lawyer to hold himself out to his clients as offering legal services through the affiliated lawyer (Id.). This is in violation of DR 3—101(A), which prohibits a lawyer from aiding a non-lawyer in the unauthorized practice of law (NYS Op. * 557; also, Nassau County Op. * 89—34).
The fact that the lawyer would do all of the work normally considered to be legal work is of no moment. Even if the lawyer alone furnishes the legal advice, the association is impermissible (ABA Op. *297).
While it is true that a lawyer has the right to engage in an independent business (NYS Op. #60), there are certain conditions which must be met. The lawyer must not use his name in the name of the other business (Id.; also NYS Op. #26), conduct the business from the same office as his legal practice (NYS Op # 60; also, ABA Op. #57) or use the business as a
device for soliciting legal employment (NYS Op. #s 60, 465). As to the latter, it makes no difference whether the solicitation is done by the lawyer personally or those with which he is associated (Id.). Finally, while the lawyer may engage in an independent business, under the facts presented, he brings no other skill or knowledge to the business other than legal expertise, and consequently, the business must be considered the practice of law which is prohibited by DR 3-103(A).
The lawyers's inquiry is silent as to whether the lawyer will be using or lending his name to the business, whether the business will be conducted from the lawyer s office, or whether the lawyer will be using the other business for soliciting other legal employment to his law practice. As indicated above, the association runs afoul of the prohibition against associations with non-lawyers, and does so a fortiori if the stated requirements for engaging in another business are not satisfied.
Since the inquiry also indicates that fees will be shared with the non-lawyer, paid by clients on a contingency basis, the arrangement, appears to also run afoul of DR 3-102(A), which prohibits a lawyer from sharing legal fees with a non-lawyer.
The question is answered in the negative.
As to other proposed arrangements, there is nothing in the Code which prohibits a lawyer from recommending that a client contract with a lay person on a contingent fee basis as long as the non-lawyer does not engage in the unauthorized practice of law, the lawyer does not share legal fees with the non-lawyer, and the contingent fee is not payable for the testimony of the non—lawyer (NYS Op. *572). As applied here, it is apparently permissible for non-lawyers to represent clients before the Tax Commission, and by inference to do what is necessary for case preparation.
There are two scenarios which can be addressed, depending on the client s status. If the client is considered a client of the lawyer, retained on a contingency basis, nothing prohibits retaining an expert or consulting service as an expert properly chargeable to the prosecution of his or her claim (Judiciary Law § 474-a(3)). Since the client remains ultimately responsible for
the fees of the non-lawyer expert, they must be deducted from the gross amount saved before the lawyer’s fee is calculated.
The lawyer may recommend a contract directly between the client and the non- lawyer consultant which provides for specified fixed fees and disbursements payable in advance to his consulting service and to all expert witnesses, if any, plus an additional percentage contingency fee to the consulting service, the payment of which is to be guaranteed by the lawyer.
A lawyer may recommend such an arrangement to his client, so long as he retains full control of the litigation, and exercises reasonable control over expenses incurred by the consulting service. (NYS Op. #572). There is a caveat, and that is that the lawyer must be careful so that the arrangement whereby he guarantees payment as part of the contract is not considered a subterfuge for fee-splitting between a lawyer and a lay person. (Id.). If however, the lawyer s participation in the contract is made with the client s full knowledge, and is made merely to assure payment to the non-lawyer consultant for services to be rendered in the furtherance of the client s claim, it would not violate a disciplinary rule (Id.).
If, on the other hand, the client is considered a client of the non—lawyer, there is no prohibition against the client also retaining the lawyer on a contingency fee basis, so long as all of the conditions and restrictions set forth above are met, including but not limited to, the
non—lawyer s consulting service not acting, under all of the circumstances, as a “feeder” for the lawyer s practice if the lawyer has an interest in the consulting service (NYS Op. #465). Further, the total fees to be paid by the client must not be excessive (DR 2-106(A)) and the lawyer may have an obligation to reduce his fee to avoid excessiveness, especially where the lawyer shifts some of his legal work to the consulting service (NYS Op. #572).
Although this Committee cannot and does not pass on question
of law, it does note that the Court of Appeals in Blumenberg
v Nuebecker, 12 NY2d 456, upheld an agreement whereby an
attorney and accountant agreed to represent an individual in
a Federal income tax matter before the Internal Revenue Service.
They were retained under a written contract providing for a
contingent fee of one—third of the difference between the amount
of the IRS deficiency claim and that of the final determination
of the IRS or settlement, if any. It was held that under the
circumstances, a jury could find that the individual personally
(and properly) retained both the lawyer and the accountant to
render services in their particular fields. The fact that 1)
their retainer was embodied in a single agreement, 2) their
compensation was to be equal, and 3) the compensation was payable
in a lump sum contingency percentage, was of no moment as long
as it represented a fee to the accountant for accounting services
and to the lawyer for legal services, in the absence of fraud
or overreaching, and as long as it does not include a provision
permitting judicial review of the claim as included in the compensation
(Property Valuation Analysts, Inc. v Williams, 164 AD2d
131, 134).
Pursuant to Article VI, Section 19 of the R.C.B.A. ByLaws, please be advised that the statements contained herein express the opinion of the Committee alone, and have not been passed upon by the Association.
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Wayne M. Ozzi
Chairman, Professional
Ethics Committee |
[1]Apparently, the Tax Commission permits representatives who are non-lawyers to appear on behalf of petitioners who challenge their tax assessments.
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