State Bar of Arizona Ethics Opinions

00-08: Letterhead; Of Counsel Designation; Out-of-State Lawyers; Division of Fees with NonLawyers
10/2000

A law firm may list on its letterhead attorneys who are not admitted to the State Bar of Arizona as being "Of Counsel" to the firm. The law firm must state on the letterhead the "Of Counsel" attorneys are not members of the State Bar of Arizona, identify that they are "only admitted" in certain states and that their practice in Arizona is limited to federal law matters. They also may indicate the out-of-state attorneys are available only for consultation in federal Social Security matters. The law firm may engage in a fee sharing arrangement by both paying and receiving fees from the "Of Counsel" attorneys. [ERs 1.5(e), 5.5, 7.1, 7.5]

FACTS[1]

 

The inquiring attorney is with a law firm that specializes in worker's compensation and also represents Social Security disability claimants.  Two attorneys are opening an office in Arizona.  They are not admitted to the State Bar of Arizona.  The out-of-state attorneys intend to restrict their practice to claims against the federal Social Security Administration and appeals of Social Security cases before the Federal Courts in Arizona.

 

Because of the expertise and national reputation of the out-of-state lawyers, the law firm would like to list the out-of-state lawyers as being "Of Counsel" to the firm.  The "Of Counsel" designation would make it clear that the lawyers are not admitted in Arizona and available solely for Social Security consultation and representation.

 

The law firm intends to have a fee splitting arrangement with the out-of-state lawyers on the Social Security cases that are handled by the firm and if the out-of-state lawyers send cases to the firm a fee would be paid to the out-of-state lawyers.  The inquiring attorney represents that all fee splitting would meet the requirements of ER 1.5(e).

 

QUESTIONS PRESENTED

 

1.         Can the inquiring law firm list the out-of-state attorneys on its letterhead or hold them out to the public as being "Of Counsel" to the firm with a notation that they are not admitted to practice in Arizona?

 

2.         If the "Of Counsel" arrangement is permissible does the law firm also need to indicate that the out-of-state attorneys are available only for consultation in Social Security matters?

 

3.         Can the lawyers engage in a fee sharing arrangement by paying and receiving fees whether or not the out-of-state attorneys are noted to be "Of Counsel"?

 

RELEVANT ETHICAL RULES

 

ER 1.5.            Fees

 

* * * *

 

            (e)            A division of fee between lawyers who are not in the same firm may be made only if:

 

(1)            the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation;

 

(2)            the client is advised of and does not object to the participation of all the lawyers involved; and

 

(3)            the total fee is reasonable.

 

ER. 7.1.            Communications and Advertising Concerning a Lawyer's Services

 

            (a)            A lawyer shall not make false or misleading communication about the lawyer or the lawyer's services. . . .

 

* * * *

 

ER 7.4.            Communication of Fields of Practice

 

A lawyer may communicate the fact that the lawyer does or does not practice in particular fields of law.  A lawyer shall not state or imply that the lawyer is a specialist except as follows:

 

            (a)            a lawyer admitted to engage in patent practice before the United States Patent and Trademark Office may use the designation "patent attorney" or a substantially similar designation;

 

            (b)            a lawyer engaged in admiralty practice may use the designation "admiralty," "proctor in admiralty" or a substantially similar designation; and

 

            (c)            no lawyer shall state or imply that the lawyer is a specialist in any area of law unless the lawyer has been certified by the Arizona Board of Legal Specialization or is certified by a national entity which has standards for certification substantially the same as those established by the board.  Prior to stating that the lawyer is a specialist certified by a national entity, the entity must be recognized by the board as having standards for certification substantially the same was [sic] those established by the board.  If the national entity has not been recognized by the board, it may make application for recognition by completing an application form provided by the board.

 

ER 7.5.            Firm Names and Letterheads

 

            (a)            A lawyer shall not use a firm name, letterhead or other professional designation that violates ER 7.1.  A trade name may not be used by a lawyer in private practice.

 

            (b)            A law firm with offices in more than one jurisdiction may use the same name in each jurisdiction, but identification of the lawyers in an office of the firm shall indicate the jurisdictional limitations on those not licensed to practice in the jurisdiction where the office is located.

 

* * * *

 

            (d)            Lawyers may state or imply that they practice in a partnership or other organization only when that is the fact.

 

 

RELEVANT ARIZONA ETHICS OPINIONS

 

Ariz. Ops. 80-30, 81-1, 82-6, 85-1, 86-3, and 87-24.

 

OPINION

 

1.         The listing of non-Arizona attorneys on a letterhead as being "Of Counsel" is permissible.

 

This issue has been discussed, in part, in a number of prior ethics opinions, specifically Ariz. Ops. 80-30, 81-1, 82-6, 85-1, and 87-24.  In Ariz. Op. 87-24, the question was, "May one law firm ethically be listed on the letterhead and other communication material of another law firm as 'Of Counsel' to that firm?"  Ariz. Op. 87-24, relied upon ABA Op. 84-351, which held the Model Rules and the realities of the modern legal profession permit the use of "Of Counsel" status and designation between law firms.  Such usage must be tempered and qualified to express the true relationship between the firms.  Additionally, firms communicating or contemplating communicating the "Of Counsel" relationship should consider the ancillary ethical concerns including conflict of interest, confidentiality, and other areas impacted by the relationship.  The major concerns are honesty and truthfulness of communication to the public.

 

Based upon Ariz. Op. 87-24 and ABA Op. 84-351, the out-of-state attorneys may be listed as "Of Counsel".

 

2.         If the "Of Counsel" arrangement is permissible does the law firm also need to indicate on its letterhead that the out-of-state attorneys are available only for consultation in Social Security matters?

 

The law firm must indicate that the out-of-state attorneys are not admitted to the State Bar of Arizona.

 

Rule 31(a)(3), of the Rules of the Supreme Court of Arizona, states, in pertinent part:  "[N]o person shall practice law in this state or hold himself out as one who may practice law in this state unless he is an active member of the state bar, and no member shall practice law in this state or hold himself out as one who may practice law in this state, while suspended, disbarred, or on disability inactive status."

 

The out-of-state attorneys cannot hold themselves out as being able to practice law in Arizona, and it must be noted on the letterhead they are not admitted to the State Bar of Arizona.  The letterhead should affirmatively disclose that the out-of-state lawyers are only admitted to practice law in specified states in which they are admitted, and that their practice in Arizona will be limited to federal law matters.

 

ER 7.4 states that a lawyer may communicate the fact that the lawyer does or does not practice in particular fields of law, but cannot imply the lawyer is a specialist except in specific situations.  Therefore, the law firm may indicate that the out-of-state attorneys are available only for consultation in Social Security matters.

 

3.         Can the law firm engage in a fee sharing arrangement by both paying and receiving fees whether or not the out-of-state attorneys are held to be "Of Counsel"?

 

The Committee has not been provided with the exact fee splitting arrangements, however, the inquiring attorney represents the fee splitting arrangement would meet the requirements of ER 1.5(e).

 

The fee splitting arrangement would be permissible for matters in front of the Social Security Administration which does not require attorneys to be admitted to the local bar.[2]

 

As to appeals of Social Security cases before the Federal Courts, in Arizona, the fee splitting arrangement would be appropriate, as long as the out-of-state attorneys are properly admitted in Federal Court in Arizona.

 

Ariz. Op. 86-3 answered the question whether an attorney may ethically divide fees with another attorney who is "counsel" to the firm based upon the amount of work done for all clients without regard to the individual clients as such.  Ariz. Op. 86-3 further held it was ethically permissible to divide fees so long as:  1) the client is advised of and does not object to the participation of the lawyers involved, even though the share of the fee that each lawyer is to receive does not have to be disclosed; and 2) the division of fees is based upon the amount of work performed by the respective lawyers.  ER 1.5(e).

 

The proposed fee division in Ariz. Op. 86-3, did not conform to the standards of ER 1.5(e), and thus, was not permissible.

 

However, in the present situation, the out-of-state attorneys may practice federal law pursuant to federal statute, and therefore, the lawyers may split fees as long as the division complies with ER 1.5(e).

 

CONCLUSION

 

1.       The Arizona law firm can list the two out-of-state attorneys on its letterhead or hold them out to the public as being "Of Counsel" as long as there is a notation about them not being admitted to the State Bar of Arizona.

2.       The Arizona law firm may also indicate on the letterhead that the out-of-state attorneys are available only for consultation in Social Security matters.

3.       A fee sharing arrangement can be entered into between the Arizona law firm and the out-of-state attorneys in Social Security matters, and Federal Court cases before the District of Arizona, if ER 1.5(e) is satisfied.



[1] Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.  Ó State Bar of Arizona 2000

[2] An attorney in good standing who is admitted to practice before the highest court of the state, territory, district, or insular possession of his residence or before the Supreme Court of the United States or the inferior Federal Courts, shall be entitled to represent claimants before the Commissioner of Social Security.  42 U.S.C. § 406(a); 20 CFR § 404.1705(a).