State Bar of Arizona Ethics Opinions

96-08: Out of State Firms; Associates
9/1996

An Arizona attorney may be hired as an associate to operate the Arizona office of an out-of-state law firm as long as:  (1) the associate has a bona fide employment relationship with the firm; (2) the Arizona attorney must be fully responsible for the Arizona office, including the supervision of partners in Arizona who are not yet admitted in Arizona (and limiting their practices to federal law); and (3) the firm must clearly indicate on all communications and letterhead where each of the attorneys is admitted and that the Arizona associate is the managing associate for the Arizona office. [ERs 5.1, 5.2, 5.5, 7.1, 7.5]

FACTS [1]

The inquiring attorney resides and is licensed to practice law in Arizona.  A New York law firm, formed as a general partnership, has offered to employ the inquiring attorney as an associate to open a branch office in Arizona using the out-of-state law firm’s name.  One of the general partners of the New York law firm would work in the Arizona office, but limit his practice to patent prosecution before the U.S. Patent and Trademark office until his admission to the Arizona State Bar.  No one in the New York law firm is admitted to practice in Arizona.

Questions Presented

1. May an attorney who resides and is admitted to practice law in Arizona be hired as an associate, but not as a partner, to open an office in Arizona using the name of the New York law firm?
 
2. May an attorney who resides and is admitted to practice law in Arizona send out correspondence that includes the name of an attorney not licensed in Arizona but working in the branch office in Arizona if the stationery states where the out-of-state attorney is admitted, and if the attorney who is licensed in Arizona supervises his work?

Relevant Ethical Rules

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ER 5.1   Responsibilities of a Partner or Supervisory Lawyer

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(b) A lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.

(c) A lawyer shall be responsible for another lawyer’s violation of the Rules of Professional Conduct if:

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(2) the lawyer is a partner in the law firm in which the other lawyer practices, or      has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

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ER.5.2  Responsibilities of a Subordinate Lawyer

(a) A lawyer is bound by the Rules of Professional Conduct notwithstanding that the lawyer acted at the direction of another person.

(b) A subordinate lawyer does not violate the Rules of Professional Conduct if the lawyer acts in accordance with a supervisory lawyer’s reasonable resolution of an arguable question of professional duty.

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ER 5.5  Unauthorized Practice of Law

A lawyer shall not:

(a) Practice law in a jurisdiction where doing so violates the regulation of the legal professional in that jurisdiction; or

(b) Assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law.

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ER 7.1   Communications and Advertising Concerning a Lawyer’s Services
       
(a) A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services.  A communication is false or misleading if it:

(1) contains a material misrepresentation of fact or  law or omits a fact necessary to make the statement considered as a whole not materially misleading;

(2) is likely to create an unjustified expectation about results the lawyer can achieve or states or implies that the lawyer can achieve results by means that violate the Rules of Professional Conduct or other law. . . .

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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.

(c) The name of a lawyer holding a public office shall not be used in the name of a law firm, or in communications on his behalf, during any substantial period in which the lawyer is not actively and regularly practicing with the firm.

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

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Code Comparison

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With regard to ER 7.5(b), DR 2-102(D) provided that “A partnership shall not be formed or continued between or among lawyers licensed in different jurisdictions unless all enumerations of the members and associates of the firm on its letterhead and in other permissible listings make clear the jurisdictional limitations on those members and associates of the firm not licensed to practice in all listed jurisdictions; however, the same firm name may be used in each jurisdiction.”

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Relevant Prior Ethics Opinions

Op. 73-12 (April 24, 1973)

Op. 77-08 (May 2, 1977)

Op. 81-21 (July 17, 1981)

Op. 96-06 (February 7, 1996)

Opinion

1. Under certain conditions, an Arizona attorney may be hired as an associate, not a partner, by an out-of-state law firm partnership to open a branch office in Arizona that will use the out-of-state law firm name.

Prior to the adoption of the ABA Model Rules, including ER 7.5, the issue of Arizona lawyers entering into professional relationships with out-of-state attorneys or law firms for the practice of law in Arizona was governed by DR 2-102(D).  Under that code provision, this Committee repeatedly held that it would be ethically improper for an Arizona lawyer to enter into a professional relationship with an out-of-state attorney or law firm for the practice of law in Arizona unless the Arizona lawyer were a true partner “with a real sharing of profits, liabilities and professional responsibility ....” Op. 73-12 (April 24, 1973), at pp. 1-2.  See also, Op. 77-8 (May 2, 1977), at p. 3 (the existence of a “true partnership with an attorney licensed to practice in Arizona must precede the interstate operation contemplated”); Op. 81-21 (July 17, 1981) (a New York attorney or firm may not use the name of the New York attorney or firm for the practice of law in Arizona by hiring as an associate but not as a partner, an attorney who resides and is admitted to practice in Arizona).  The authority for this prohibition was that “[t]he language of DR 2-102(D) requires the existence of a partnership.”  Op. 77-8, at p. 3 [emphasis added.

Arizona adopted the Model Rules in 1985.  ER 7.5, in contrast to DR 2-102(D) which it superseded, now provides that a law firm with offices in more than on jurisdiction may use the same name in each jurisdiction so long as the identification of the lawyers in an office of the firm indicates the jurisdictional limitations of those not licensed to practice in that office’s jurisdiction.  ER 7.5 does not require the existence of a partnership as a condition for an interstate law firm.

Other jurisdictions, in adopting ER 7.5, have reached the same conclusion and held that under certain circumstances an out-of-state law firm partnership may hire a local attorney as an associate (and not as a partner) to open a branch office within the jurisdiction.  See Rhode Island Op. 89-11 (June 15, 1989) (a lawyer who associates with out-of-state lawyers who are not licensed to practice law in Rhode Island may open an office for the partnership in Rhode Island provided that only the lawyer who is licensed in Rhode Island will practice in the state and the partnership’s stationery clearly expresses the jurisdictional limitations of the partners); Rhode Island Op. 90-20 (May 31, 1990) (a lawyer who is a member of the Rhode Island bar may staff the Rhode Island office of a partnership of attorneys who are not members of the Rhode Island bar if the lawyer is either a partner or associate of the partnership).

Although ER 7.5(b)’s language no longer requires the existence of a partnership, the requirement’s rationale is largely still valid today.  The rational behind DR 2-102(D)’s requirement that there must be a true partnership with a licensed resident partner responsible and in charge of the local practice is that the resident Arizona attorney must have the authority and responsibility to make decisions in the Arizona practice for the out-of-state firm.  There must be an attorney in charge of the branch office to whom the public, clients and judicial authorities may look to for the law firm’s compliance with the rules, regulations and ethical standards relating to the practice of law in Arizona.  If there is no Arizona “partner in charge” for the out-of-state firm against whom clients have recourse, the out-of-state law firm may thereby evade full responsibility for its presence in Arizona.

If the Arizona associate has no real responsibility for the practice and is merely directed by supervisory partners, not admitted in Arizona, there will be no one ultimately responsible to the Arizona public, clients, courts or disciplinary authorities, and the out-of-state law firm is engaging in the unauthorized practice of law in violation of ER 5.5(b) if the partners are practicing Arizona law.  If the resident New York partner limits his or her practice to federal law, the State Bar and Supreme Court would have disciplinary jurisdiction over the partner pursuant to Ariz. S.Ct.R. 46(b).  Nevertheless, under normal circumstances, ER 5.1 makes the partner responsible for the associate’s conduct when the partner has knowledge and fails to take reasonable remedial action.  ER 5.2 absolves the associate who acts in accordance with the partner’s reasonable resolution of arguable questions of professional duty.  If the person in charge of the branch office and who supervises the Arizona associate is not admitted here then no one is in charge for purposes of the Rules of Professional Conduct.

These concerns may be addressed, however, if the associate attorney, through whom the out-of-state law firm will act in Arizona, is fully responsible for the Arizona practice.  The associate attorney would have total responsibility for the conduct of the practice and be accountable to the public, disciplinary, judicial and licensing authorities.  See, e.g.  Rosenberg v. Johns-Manville Sales Corporation, 99 Misc. 2d 554, 557-559, 416 NYS 2d 708, 710-712 (Supreme Court of New York, 1979).  This means at a minimum that the associate must have a bona fide employment relationship with the out-of-state law firm, will be responsible to the public, clients, the courts and State Bar for the branch office’s practice of law in Arizona, and will have supervisory authority over all foreign lawyers and nonlawyers in the branch office, including firm partners not admitted in Arizona.

Additionally, the branch office’s communications concerning its services must not only set forth the jurisdictional limitations of the partners and associates but also clearly communicate that its associate, the only one admitted in Arizona, is fully responsible for the Arizona practice, and avoid any false or misleading communications that the associate is practicing law in Arizona at the direction of non-lawyers or that the non-lawyers are somehow authorized to practice law in Arizona through the associate.  As used in this opinion, a “non-lawyer” is anyone not admitted to practice in Arizona, even attorneys admitted elsewhere.  See Op. 96-06 (February 7, 1996), at p.3.

In New Jersey Op. 550 (January 24, 1985), the New Jersey Supreme Court Advisory Committee on Professional Ethics addressed similar issues from two inquiring attorneys.  The facts involved a New Jersey attorney employed as an associate who wanted to practice under the name of his out-of-state employer’s law firm from an office that the law firm would open in New Jersey.  The associate’s name would not be included in the name of the firm.  The Committee also dealt with whether an out-of-state sole practitioner could employ a New Jersey attorney as an associate and open a New Jersey office using the New York sole practitioner’s law firm name in New Jersey.  The Committee held that the crucial elements necessary to allow an out-of-state firm to establish a practice in New Jersey through a New Jersey attorney were: 1) “a bona fide full time employment relationship in a bona fide law office here in New Jersey;” 2) the status of partners and associates clearly indicated on letterhead and listings; and 3) that the new Jersey attorney be responsible for the New Jersey practice, and that this be clearly communicated by the out-of-state firm in its communications.

This Committee concludes that RPC 7.5(b)[2] and RPC 7.5(c), taken together, set forth no requirement that the New Jersey attorney, through whom an out-of-state firm opens a New Jersey office, must have the status of partner in the out-of-state firm.  The status of the New Jersey lawyer as a salaried associate of the out-of-state firm is not, per se, improper . . .

[However,] because it is not a common expectation among members of the public that an associate has management responsibility in the law firm, we hold that a mere listing of the firm’s New Jersey attorney as an associate on the letterhead, with the jurisdictional limitations of the various lawyers noted but nothing more, is not sufficient to comply with the requirement of RPC 7.5(B)...We hold that such firm’s letterhead and other forms of communication used in New Jersey must indicate the New Jersey attorney’s status as an associate in the commonly accepted manner and clearly communicate the fact that he or she is responsible for the New Jersey practice.

Similarly, this Committee concludes that ER 7.5 does not prohibit an out-of-state law firm partnership establishing a branch office in Arizona through an employed associate licensed to practice in Arizona.  However, certain safeguards must first be in place.  First, the associate attorney must have a bona fide employment relationship with the out-of-state law firm.  Second, the associate, although not a partner, must be fully responsible for the Arizona practice and be the one to whom the Arizona public, clients, and authorities may look for compliance with its rules, regulations and ethical standards and not be subject to a non-lawyer’s direction or control, which would be the unauthorized practice of law.  Third, the out-of-state firm must clearly communicate on its letterhead, stationery and other communications that the Arizona associate is responsible for the Arizona practice, in addition to employment status as associate.  Even with these safeguards in place, the Committee urges Arizona attorneys to be cautious in engaging in such an arrangement because of the liability and responsibility that will be imposed on the associate.

2.  Under the facts presented, an Arizona attorney employed as the out-of-state firm’s resident attorney may send out correspondence that includes the name of an attorney not licensed in Arizona but working in the Arizona office if the correspondence duly notes where the out-of-state attorney is admitted, that the Arizona attorney is responsible for the Arizona practice, including supervising the foreign lawyer’s work, and the correspondence is not otherwise misleading under ER 7.1.

Under ER 7.5(a), the letterhead should not violate ER 7.1 by any firm name or other professional designation that is misleading.  The jurisdictional limitations of the lawyers should be listed, indicating that all but the Arizona associate are not admitted in Arizona.  The letterhead should also clearly indicate that the associate is responsible for the Arizona practice as well as the employment status as associate.  The out-of-state attorney not admitted to practice in Arizona who is working in the Arizona office may only work under the supervision of an Arizona attorney.  See Arizona Ethics Opinion 96-06.  The Arizona associate would have to have supervisory authority over the partner in the Arizona office in order to avoid the unauthorized practice of law prohibited by ER 5.5(a).

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[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.    ã State Bar of Arizona 1996

[2]  RPC 7.5 of the New Jersey Rules of Professional conduct, while substantially the same as Arizona’s ER 7.5, explicitly requires that at least one New Jersey licensed attorney be in charge of the interstate firm’s New Jersey practice and that the firm communicate this information in its communications where the name of a non-New Jersey lawyer is used in the firm name:

A law firm with offices in more than one jurisdiction may use the same name in each jurisdiction.  In New Jersey, identification of all lawyers of the firm, in advertisements, on letterheads or anywhere else that the firm name is used, shall indicate the jurisdictional limitations on those not licensed to practice in New Jersey.  Where the name of an attorney not licensed to practice in this state is used in a firm name, any advertisement, letterhead or other communication containing the firm name must include the name of at least one licensed New Jersey attorney who is responsible for the firm’s New Jersey practice or the local office thereof.