State Bar of Arizona Ethics Opinions

98-08: Paralegal; Nonlawyer; Estate Planning; Employees of Lawyer; Initial Interviews
10/1998

An attorney ethically may contract with a paralegal to have the paralegal assist with conducting initial interviews of and signing of documents by estate planning clients, as long as: 1) the attorney supervises and controls the paralegal’s activities to assure that the paralegal does not engage in the unauthorized practice of law; 2) there is no fee sharing; 3) the initial interviews are only with existing clients; and 4) there is no solicitation of new business by the paralegal. [ER 1.6, 5.3, 5.4, 5.5, 7.3]

FACTS:[1]

 

The inquiring attorney proposes to contract with a paralegal 1) for the purpose of engaging the paralegal to conduct initial interviews of current or prospective clients that have requested estate planning or other legal services from the attorney; and 2) to supervise the signing and notarization of estate planning portfolios prepared for the client by the attorney (the "Contract").

 

Although it does not appear from the terms of the Contract that the inquiring attorney intends to have the paralegal solicit business, the danger of solicitation does exist.  Language used in various provisions of the Contract is troubling to the extent that it suggests the intent to engage in solicitation.  The pertinent provisions of the Contract are set forth in Addendum A.

 

The Contract further specifies that the paralegal shall participate in training provided by the attorney and shall not disclose confidential information received from a client.  The paralegal is to be paid on a case-by-case basis and is required to repay the attorney should the client desire to revoke the estate plan and request a refund of attorney's fees.

 

Question Presented

 

May the inquiring attorney ethically associate with the paralegal in the manner described above?

 

Applicable Ethical Rules

 

ER 1.6             Confidentiality of Information

ER 5.3             Responsibilities Regarding Nonlawyer Assistants

ER 5.4             Sharing Legal Fees With a Nonlawyer

ER 5.5             Unauthorized Practice of Law

ER 7.3             Direct Contact with Prospective Clients            

 

Relevant Prior Ethics Opinions

 

93-01

97-09

 

Opinion

 

The use of paralegals is a long and well-established fact throughout the legal profession.  In 1989, the United State Supreme Court recognized the pervasiveness of the delegation of substantive legal work to paralegals:

 

         It has frequently been recognized in the lower courts that paralegals are

         capable of carrying out many tasks, under the supervision of an attorney,

         that might otherwise be performed by a lawyer and billed at a higher rate.

         Such work might include for example, factual investigation, including

locating and interviewing witnesses, assistance with depositions,

interrogatories, and document production; compilation of statistical and

financial data, checking legal citations, and drafting correspondence.  Such

work lies in a gray area of tasks that might appropriately be performed

either by an attorney or a paralegal.

 

Missouri v. Jenkins, 491 U.S. 274, 288 Footnote 10 (1988); Opinion No. 1, Indiana State Bar Association Legal Ethics Committee (1997) at 1-2.  Although the range of activities of traditional paralegals has expanded, and according to the American Bar Association, will continue to expand, the need for lawyer control and supervision of paralegals remains critical.  ABA Commission on Nonlawyer Practice.  Nonlawyer Activity in Law Related Situations; A Report With Recommendations, 53 (1995); Opinion No. 1, Indiana State Bar Association Legal Ethics Committee (1997), at 2.  The paramount guidelines for lawyers are that they supervise and control their paralegals and that paralegals cannot engage in conduct that would be unethical if done by a lawyer.  With this in mind, we address the specific concerns raised by the Contract.

 

I.  Solicitation

 

Ethical Rule 7.3 prohibits a lawyer from soliciting professional employment from a prospective client with whom the lawyer has no family or prior professional relationship in person or by telephone, when a motive for the lawyer's doing so is the lawyer's financial gain.  Clearly, a lawyer may not accomplish through an associate what he may not accomplish himself.  If, therefore, the paralegal solicits business in estate planning from individuals not already clients of the attorney, the solicitation would be contrary to Ethical Rule 7.3

 

Here, although the preamble to the Contract states that "attorney desires to engage paralegal to conduct initial interview of estate planning clients and supervise the signing and notarization of the estate planning portfolios prepared by attorney," language from the body of the Contract indicates that the paralegal could be acting as a feeder referral system.  For example, paragraph 2 states that "paralegal agrees to keep confidential and not disclose any information received from a client which is obtained through the attorney-client relationship or information obtained from a potential client requesting legal services."  Paragraph 3 states that "paralegal agrees not to represent that he/she can bind attorney for any legal services.  Paralegal is authorized only to forward a request for legal services to attorney for his acceptance."  Paragraphs 4 and 5, moreover, make the paralegals' compensation dependent upon payment of the attorneys' fees by the client:

 

         Paralegal's fees shall be billed by paralegal on a case-by-case basis.

         In the event that the client revokes his/her estate plan and requests a

refund of fees paid, paralegal agrees to refund to attorney all fees

paid to paralegal for services rendered to such client.  Paralegal's

fees shall be deemed earned and payable only after completion of the

estate plan, signing by client, return of deeds and assignments for

processing, if applicable and payment in full of all fees.

 

Language such as this is troubling to the extent that it suggests that the "paralegal" may be used to solicit business on behalf of the attorney or to act as a feeder-referral system of attorney.  Arizona's nonsolicitation rule is simple, express, and absolute:  A lawyer may not elicit professional employment from a prospective client with whom the lawyer has no family or prior personal relationship in person or by telephone, when a motive for the lawyer's doing so is the lawyer's pecuniary gain.  ER 7.3.  To the extent the Contract is a guise pursuant to which the attorney merely intends to solicit business, it is unethical.  Nor may a lawyer pay someone to refer clients to the lawyer.  ER 7.1(j).

 

II.  The Lawyer's Duty of Supervision

 

The relevant ethical rule is ER 5.3, which applies whenever a lawyer is "employed or retained by or associated with" a nonlawyer.  ER 5.3 requires that the lawyer exercise certain supervisory powers over the nonlawyer:

 

(b) a lawyer having direct supervisory authority over the nonlawyer

shall make reasonable efforts to ensure that the person's conduct is

compatible with the professional obligations of the lawyer . . .

 

The Comment to ER 5.3 describes the scope of this duty in greater detail:

 

         A lawyer shall give such assistants appropriate instruction and

         supervision concerning the ethical aspects of their employment,

         particularly regarding the obligation not to disclose information

         relating to representation of the client, and should be responsible

for their work product.

 

ER 5.3(b) establishes an independent duty to supervise on the part of the attorney vis a vis the paralegal.  Nonlawyers cannot be held to exactly the same professional standard as lawyers. Therefore, they are to be held to "conduct compatible with the professional obligations of the lawyer."  ER 5.3(b) was intended to parallel ER 5.1(b), which governs the supervision of subordinate lawyers.  However, because paraprofessionals are not subject to the same ethical responsibilities as are even subordinate lawyers, the supervising lawyer may be required to take even greater steps in the training and supervision of paralegals to ensure that their conduct is compatible with the supervising lawyers' ethical responsibilities.

 

Hazard & Hodes notes that the reasonable efforts required of an attorney to ensure a paralegal's ethical conduct are dependent upon the circumstances of the relationship between the lawyer and the paralegal:

 

            Circumstances dictate which constitutes a "reasonable effort" to

            instill a nonlawyer personnel in appropriate respect for their duties.

            Certainly new personnel must be carefully screened prior to

            employment and given some instruction in the fundamentals of

            professional responsibility.  Since nonlawyers cannot be disciplined

            under the Model Rules, it may be appropriate for supervising

            lawyers to exercise a correspondingly stricter discipline within

            the law office, for the public has no other protection.

 

The Law of Lawyering, § 5.3:102 (Second Edition 1996).  Here, the paralegal will not be operating within the confines of the supervising attorney's office.  The supervising attorney may therefore be required to take even greater steps to ensure that the paralegal is acting subject to the lawyer's control and in a manner compatible with the lawyer's professional responsibilities.[2]

 

In the case at hand, according to the express terms of the Contract, the inquiring attorney proposes to maintain supervisory control over the actions of the paralegal.  The Contract further specifies that the paralegal shall participate in initial and periodic training conducted by the attorney, and cautions the paralegal to respect the confidentiality of client information.[3]  Most salient is the restriction of the paralegal's ability to conduct initial interviews with the clients, and the supervision of the signing and notarization of the estate planning portfolios.  The documents themselves are to be prepared by the attorney.  These duties, if supervised by the attorney, would not violate ER 5.3.[4]

 

III.  Sharing Legal Fees With a Nonlawyer

 

ER 5.4(a) prohibits a lawyer from sharing legal fees with a nonlawyer, except for three limited exceptions that are not relevant here.  The inquiring attorney's intention to pay the paralegal on a "case-by-case basis," and to require the paralegal to refund to the attorney all fees paid if the client revokes his estate plan and requests a refund of attorney's fees, suggests there would be a violation of ER 5.4(a).  See also, Ethics Opinion 93-01 (attorney's association with nonlawyers for purpose of generating fees for both the attorney and the nonlawyers deemed to violate ER 5.4(a)).

 

IV.  Forming a Partnership with Nonlawyer

ER 5.4(b) prohibits a lawyer from forming a partnership with a nonlawyer if any of the activities of the partnership constitute the practice of law.  The term "partnership" is broadly construed in these circumstances, in order to protect a lawyer's independent judgment.  The prohibition is intended to keep nonlawyers from having a stake in a lawyer's practice.  So long as it is the inquiring attorney's prior clients who are receiving the estate planning services, or persons who have legitimately come to request the lawyer's services, the arrangement should not cross the line laid down by ER 5.4(b).  If, however, the inquiring attorney contemplates reliance on the active solicitation and referral of clients by the paralegal, there would be a violation of both ER 5.4(b) and ER 7.3(a).

V.  Services by Nonlawyer Assistants

What constitutes the practice of law in Arizona is a legal issue outside the Ethics Committee's jurisdiction.  In Ethics Opinion No. 96-06, the Committee refused to provide a specific definition of what legal services constitute the practice of law, instead referring the inquiring attorney to the general definition given in State Bar of Arizona v. Arizona Land Title and Trust Co., 90 Ariz. 76, 366 P.2d 1 (1961).  That case basically provides that the practice of law is anything that lawyers have done throughout time.  The implication is that only lawyers may draft pleadings, do research, meet with clients and/or witnesses, and send correspondence on behalf of a client.  However, the opinion did conclude that such activities may be performed by a nonlawyer if supervised by a lawyer, and if the nonlawyer's status is disclosed.

 

In this case it seems that the work performed by the paralegal will be supervised by the inquiring attorney, and that the status of the paralegal should be obvious, given the client's prior association with the lawyer and given the lawyer's preparation of the estate planning documents.  Even so, the paralegal's status must be revealed to insure that ER 5.5 is not violated.[5]

 

VI.  Client Confidences

 

Paragraph 2 of the Contract, which governs client confidences, states that "if the paralegal obtains information from a client or potential client in his or her capacity other than from the relationship of the attorney client, then that information shall not be subject to this confidentiality requirement, although other confidentiality requirements may apply to such information not governed by the attorney-client relationship."  This language appears to contradict the obligations of the attorney under ER 5.3(b).[6]  The Comment to ER 5.3(b) sates that:  A lawyer should give such assistants appropriate instruction and supervision concerning the ethical aspects of their employment, particularly regarding the obligation not to disclose information relating to representation of the client . . ."  Similarly, the Comment to ER 1.6 notes that the principle of confidentiality embodied in the attorney-client privilege is separate and apart from the fundamental principle in the "client-lawyer relationship . . . that the lawyer maintain confidentiality of information relating to the representation":

 

         The principle of confidentiality is given effect in two related bodies

of law, the attorney-client privilege (which includes the work product

doctrine) in the law of evidence and the rules of confidentiality established

in professional ethics.  The attorney-client privilege applies in judicial and

other proceedings in which a lawyer may be called as a witness or otherwise

required to produce evidence concerning a client.  The rule of client-lawyer

confidentiality applies in situations other than those where evidence is sought

from the lawyer through compulsion of law.  The confidentiality rule applies

not merely to matters communicated in confidence by the client but also to all

information relating to the representation, whatever its source.  A lawyer may

not disclose such information except as authorized or required by the Rules of Professional Conduct or other law.

 

To the extent the confidentiality provision of the Contract undermines the attorney's obligation to ensure that the paralegal is acting in a manner compatible with the attorney's professional obligation, it is problematic.

 

VII.  Conclusion

 

To comply with ER 5.3, the inquiring attorney must supervise and control the nonlawyer's activities, and must maintain the primary duties in the provision of legal services.  Provided that the lawyer gives the necessary supervision, ER 5.3 is not violated.  ER 5.4(a) prohibits a lawyer from sharing legal fees with a nonlawyer.  The inquiring attorney should separate the compensation of the paralegal from particular estate planning cases handled by the paralegal to assure compliance with ER 5.4 - i.e., the legal assistant should not bear the risk of fees being returned.  Compliance with ER 5.5 is problematic given the difficulty defining what constitutes the practice of law.  Although the conducting of initial interviews which may turn out to be the only interviews provided, does constitute an activity traditionally carried on by lawyers, it is a function well within the realm and competence of a paralegal.  If the interviews are supervised by the inquiring attorney a violation of ER 5.5 will not occur.  Finally, it is imperative that the inquiring attorney allow the paralegal to conduct initial estate planning interviews only with clients (i) who have a prior relationship with the attorney or (ii) who have made the request of the attorney for such services.  If the inquiring attorney desires the paralegal to solicit estate planning business from individuals who are not already clients of the attorney, there would be a violation of ER 7.3.

"ADDENDUM A"

Whereas Attorney desires to engage Paralegal to conduct initial interviews of estate planning clients and supervise the signing and notarization of estate planning portfolios prepared by Attorney, and

 

Whereas Paralegal desire to perform interviewing services, and signing and notarization services for Attorney,

 

AGREEMENT:

 

In consideration of the above recitals and the mutual promises contained herein, the parties agree as follows:

 

1.  Paralegal Services to be Provided:  Upon the request of Attorney, Paralegal agrees to interview potential clients that have requested estate planning or other legal services form Attorney,  and upon further request, Paralegal agrees to supervise the signing and notarization of estate planning portfolios prepared by Attorney.

 

2.  Confidentiality of Client Information:  Paralegal agrees to keep confidential and not disclose any information received from a client which is obtained through the attorney-client privilege relationship or information obtained form a potential client requesting legal services.  If the Paralegal obtains information from a client or potential client in his or her capacity other than from the relationship of attorney-client, then that information shall not be subject to this confidentiality requirement, although other confidentiality requirements may apply to such information not governed by the attorney-client relationship.

 

3.  Acceptance of Retainer:  Paralegal is not authorized to accept a retainer for legal services on behalf of Attorney.  Only attorney can make such an acceptance and create a retainer agreement with a client.  Paralegal agrees not to represent that he/she can bind Attorney for any legal services.  Paralegal is authorized only to forward a request for legal services to Attorney for his acceptance.  Such a request for legal services shall not be binding upon Attorney until and if Attorney accepts same in writing and communicate such acceptance to client directly.

 

4.  Compensation:  Paralegal shall be compensated for his/her services for interviewing and signing services according to an hourly rate of $75.00 per hour, but may be adjusted from time to time by mutual agreement by Attorney and Paralegal.  Paralegal's fees shall be billed by Paralegal on a case-by-case basis.  In the event that the client revokes his/her estate plan and requests a refund of fees paid, Paralegal agrees to refund to attorney all fees paid to Paralegal for services rendered to such client.  Paralegal fees shall be deemed earned and payable only after completion of the estate plan, signing by client, return of deeds and assignments for processing, if applicable and payment in full of all fees.

 

5.  Paralegal Responsibilities:  Paralegal agrees to the following responsibilities:

  • Paralegal agrees to participate in the initial and periodic training provided by Attorney and to follow attorney's procedures and regulations.
  • Paralegal agrees to represent Attorney in a reliable and professional manner and shall not misrepresent Attorney to Attorney's clients, potential clients, and/or the general public.
  • Paralegal acknowledges that all expenses incurred by him/her while doing responsibility of attorney or his representatives.  These expenses include, but are not limited to, auto expenses, telephone, postage, business cards, personal income taxes and FICA contributions.
  • Paralegal agrees to forward deposits, payments, receipts, requests for services and completed fact finding questionnaires to Attorney within 48 hours of receiving same from client.
  • Paralegal shall not give any tax or legal advice to clients (unless otherwise legally licensed to do so under the Paralegal's independent authority) or later any wills or trusts; or insure any liability on behalf of Attorney.


[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.  ãState Bar of Arizona 1998

[2] Ethics Opinion No. 93-01 describes the particular circumstances that permit a business relationship between a lawyer and a nonlawyer assistant.  First, a lawyer may not provide legal services in association with a nonlawyer unless the nonlawyer's activities relating to the lawyer's representation of the client are subject to the lawyer's supervision and control.  See also, Matter of Galbasini, 163 Ariz. 120, 786 P.2d 971 (1990) (lawyer who associated with a nonlawyer debt collection agency, and who failed to supervise the nonlawyer assistants, was found to have violated ER 5.3).  Second, the lawyer's role in the provision of legal services must not be limited and secondary.  For example, a lawyer associated with a debt collection service, but failing to prepare the summons and complaint used by the service, is in violation of ER 5.3  Ethics Opinion No. 93-01.

 

[3] Confidentiality concerns are discussed below.

 

[4] The National Association of Legal Assistants has promulgated guidelines for the appropriate use of legal assistants.  Although drafted from the legal assistant's perspective, they give some guidance on the limitations or restrictions pursuant to which a legal assistant must adhere to ensure that the attorney work for is complying with his or her ethical obligations:

V.                   Legal assistants should:

1.        Disclose their status as legal assistants at the outset of any professional relationship with a client, other attorneys, a court or administrative agency or personnel thereof, or members of the general public:

2.        Preserve the confidences and secrets of all clients; and

3.        Understand the attorney's Code of Professional Responsibility and these guidelines in order to avoid any action which would involve the attorney in a violation of that Code, or give the appearance of professional impropriety.

VI.                 Legal assistants should not:

1.        Establish attorney-client relationships; set legal fees, give legal opinions or advice; or represent a client before a court; nor

2.        Engage in, encourage, or contribute to any act which could constitute the unauthorized practice of law.

IX.                Except as otherwise provided by statute, court rule or decision, administrative rule or regulation, or the attorney's Code of Professional responsibility . . . a legal assistant may perform any function delegated by an attorney, including but not limited to the following:

1.        Conduct client interviews and maintain general contact with the client after the establishment of the relationship, so long as the client is aware of the status and function of the legal assistant, and the client contact is under the supervision of the attorney.

2.        Locate and interview witnesses, so long as the witnesses are aware of the status and function of the legal assistant.

3.        Conduct investigations and statistical documentary research for review by the attorney.

4.        Conduct legal research for review by the attorney.

5.        Draft legal documents for review by the attorney.

6.        Draft correspondence and pleadings for review by and signature of the attorney.

7.        Summarize depositions, interrogatories, and testimony for review by the attorney.

8.        Attend execution of wills, real estate closings, depositions, court or administrative hearings and trials with the attorney.

9.        Author and sign letters provided the legal assistant's status is clearly indicated and the correspondence does not contain independent legal opinions or legal advice.

[5] See footnote 3, supra.

 

[6] This language also suggests that the paralegal has a formal relationship with the client separate and apart from the lawyer's relationship with the client.  Say, for example, that the "paralegal" is actually an insurance salesperson, and that the trust and estate services are solicited and provided after the sale of an insurance contact.  Under those circumstances the "paralegal" function, even if defined by contract, is superfluous and is only being used in an attempt to legitimize the insurance salesperson's solicitation of clients for the lawyer.  This conclusion is buttressed by a compensation scheme that pays the "paralegal" only if the lawyer gets paid.  This scenario, which is only theoretically raised by the Contract at issue, would not only give rise to the ethical concerns identified in the body of this opinion, it would also raise an issue of professional misconduct under ER 8.4.