State Bar of Arizona Ethics Opinions
87-24: Conflicts; Firm Names and Letterheads
Multi-person law firm listed on letterhead and other communication of another law firm as "of Counsel" to that firm.
On at least four previous occasions, this committee has been called upon to consider the ethical propriety of one law firm being listed as 'Of Counsel" on the letterhead or other communication material of another law firm. Two of our opinions have held or indicated that it is unethical. (Opinions Nos. 81-1 and 82-6.) Two other opinions have held that, at least in certain circumstances, it is ethical. (Opinions Nos. 80-30 and 85-1.) Normally, under the rules for formal opinions, the last formal opinion of the committee prevails. But the committee's latest Opinion No. 85-1, in reaching a decision approving the use of "Of Counsel' Status between law firms, failed to even allude to the earlier negative opinions of the committee. The main authority supporting our Opinion No. 85-1 was our choice not to follow the then alleged position of the A.B.A. Committee in its Formal Opinion 330 which disapproved the practice. Because of the vacillating views of the committee concerning the issue, a request for reexamination has been made.
May one law firm ethically be listed on the letterhead and other communication material of another law firm as "Of Counsel” to that firm?
ETHICAL RULES INVOLVED
ER 1.6. Confidentiality of Information
ER 1.7. Conflict of Interest: General Rule
ER 1.8(c). Conflict of Interest: Prohibited Transactions
ER 1.9 Conflict of Interest: Former Client
ER 1.10 Imputed Disqualification: General Rule
ER 2.2. Intermediary
ER 7.1. Communications Concerning a Lawyer's Services
ER 7.5. Firm Names and Letterheads
The present discussion must begin with A.B.A. Formal Opinion 330 (1972). Relying upon DR 2-102(A)(4) and DR 2-102(A)(6), Opinion 330 held that it was ethically improper for one law firm to be designated as “Of Counsel" on the letterhead, in legal directories, on shingles or on business cards of another law firm.
In our Opinion No. 80-30, we had to decide, as a matter of first impression, whether a one-person professional corporation could be named as “Of Counsel” to another law firm. The opinion distinguished A.B.A. Opinion 330 in two respects. First, the opinion relied upon (then) paragraph 8(b) of our Statement of Jurisdictional Policies providing that A.B.A. Opinions are not conclusively binding upon this committee in ruling that A.B.A. Opinion 330 would not be strictly followed in Arizona. Second, the committee distinguished the fact that the inquiry presented involved a one-person professional corporation and thus, for practical purposes, involved a sole practitioner lawyer. The opinion approved the “Of Counsel” status assuming that the professional corporation retained a continuing and substantial relationship with the other law firm, and also that it remained a one-person professional corporation. Thus, the opinion did not really distinguish A.B.A. Opinion 330, but merely redefined a law firm for the purpose of “Of Counsel” status as excluding a one-person professional corporation.
Arizona Opinion No. 81-1 considered whether two multiperson professional corporations could associate in an "Of Counsel” relationship. “Of Counsel” was defined as a relationship of a substantial and continuing nature, and not merely the relationship of forwarder-receiver of legal business. On the express authority of A.B.A. Opinion 330, the opinion held it ethically improper for two multi-person professional corporations to be “Of Counsel” to each other. (Our Opinion No. 60-30 was not considered in the opinion.)
In our Opinion No. 82-6, although the question was again presented, the committee did not believe a detailed discussion was needed in ruling on the impropriety of one law firm being “Of Counsel” to another law firm, merely citing the two former Arizona Opinions Nos. 80-30 and 81-1, as well as A.B.A. Opinion 330.
Our Opinion No. 85-1 has been our most recent opinion considering the ethical propriety of two law firms acting in an “Of Counsel” relationship. The opinion stated that A.B.A. Opinion 330 was the “only impediment" to the favorable establishment of such an "Of Counsel" relationship. The opinion never addressed any of Arizona's prior opinions clearly holding that at least multi-person professional corporate law firms could not serve as “Of Counsel” to each other. Opinion No. 85-01 (the following few words omitted due to being indistinguishable from scan) ethically be “Of Counsel,” choosing not to follow A.B.A. Opinion 330.
In A.B.A. Formal Opinion 84-351 (Oct. 20, 1984), the A.B.A. Committee expressly overruled its earlier Opinion 330 on the issue of "Of Counsel" status between law firms. Opinion 84-351 addressed the inquiry whether a law firm would violate either the Model Rules of Professional Conduct (1983) or the Model Code of Professional Responsibility (1980) by listing another law firm on its letterhead as an “associated” or “affiliated” firm. For this purpose, the opinion treated “associated” or “affiliated” as analogous to an “Of Counsel” relationship.
Opinion 84-351 traced the history of the issue since Opinion 330. After the United States Supreme Court's decision in Bates v. State Bar of Arizona, 433 U.S. 350, 97 S.Ct. 2691, 53 L. Ed. 2d 810 (1977), the A B.A. substantially revised the Model Code provisions dealing with lawyer advertising, and deleted entirely DR-102(A)(6) which had been partially relied upon in Opinion 330. Subsequently, the Supreme Court, in In re R.M.J., 455 U.S. 191, 102 S.Ct. 929, 71 L. Ed. 2d 64 (1982), overturned again the Model Code's rules on advertising in reversing an order disciplining a lawyer for failing to comply with the strict rules of the Code.
Because of these Supreme Court decisions, the Model Rules were issued simply prohibiting, by ER 7.1, the lawyer from making any “false or misleading communication about the lawyer or the lawyer's services." ER 7.5 involving letterheads prohibits the use of information which violates ER 7.1. A.B.A. Opinion 84-351 was also mindful of the growing trend in American law of law firms practicing in multiple states and associating with one another in specific areas of law or types of cases. Because of these changes, the opinion concluded that a blanket prohibition of law firms being “Of Counsel" should be replaced with the identification of appropriate circumstances when "Of Counsel" status could be used, and other ancillary ethical concerns which need to be considered.
Opinion 84-351 stated that the false or misleading proscription of Rule 7.1 meant that the use of an “Of Counsel” communication had to be consistent with the actual relationship of the firms, and would not be misleading if the relationship comports with the plain meaning which persons receiving the communication would normally ascribe to those words. Thus, at a minimum, firms must be closely connected in an “ongoing and regular relationship." The relationship must be continuing and semi-permanent, and not merely that of forwarder-receiver of legal business; and one firm must be available to the other firm and its clients for consultation and advice.
Further, Opinion 84-351 cautioned that more descriptive language might be required to explain the true relationship to avoid misleading the public. For example, the use of “Of Counsel in all tax matters" might have to be used if the "Of Counsel" firm only provides tax advice for the other firm.
Two ancillary ethical concerns were especially important to Opinion 84-351. The first dealt with the issue of conflict of interest. ER 1.10(a) provides that, while lawyers are associated in a firm, none of them shall knowingly represent a client when any one would be prohibited from doing so by ER 1.7, 1.8(c), 1.9 or 2.2. The comment to ER 1.10 makes clear that a “firm", for conflict purposes, includes any association of lawyers who represent to the public that they are legally affiliated.
A second ancillary concern of Opinion 84-351 was protection of the confidences of the client under ER 1.6 and 1.9. An “Of Counsel” firm must respect a client's confidentiality in the same manner as if it were a separate division of the other firm.
The committee believes that A.B.A. Opinion 84-351 is well reasoned, highly persuasive, and elects to follow it. The committee is mindful of the rapid changes occurring in the legal profession with the greater degree of nationalization and affiliation of law firms and the new methods of marketing legal services. The field of legal ethics must keep pace with these changes.
ER 7.5(d) provides that lawyers may state or imply that they practice in a partnership or other organization only when that is the fact. ER 7.5(a) states that a lawyer shall not use a letterhead or other professional designation that violates ER 7.1. And, finally, ER 7.1 dictates that a lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. Thus, the main theme in communications about legal services under the Model Rules is honesty and truthfulness. A communication must be so communicated to the public that it describes the actual legal relationship and services and does not mislead the public. Stating that one firm is "Of Counsel” to another, then, is not unethical provided such is in fact true.
Giving blanket approval to firm-level “Of Counsel” usage, however, is no better than the former blanket disapproval. The words “Of Counsel," “association” and “affiliation” have certain meanings when used with respect to the legal profession in communications with the public. “Of Counsel” status implies a "substantial and continuing relationship.” An isolated sharing or transfer of cases is not an “Of Counsel” relationship. Such a relationship between firms adds other concerns. If only one member of a 100-person law firm ever associates with another firm, it would be deceptive for the latter firm to say that the entire 100-person law firm is “Of Counsel.” In such a situation, the letterhead of the latter firm might state that 'Attorney A of the X Firm is Of Counsel.' Also, as was mentioned in A.B.A. Opinion 84-351, if only one or two specific areas of law are shared, the 'Of Counsel" designation would have to be qualified by the specific area or areas, such as “Of Counsel in tax and bankruptcy.” The aim is honest communication to the public.
Because of the growing interrelationships of lawyers and the law, ethical concerns to protect the public must keep abreast. A.B.A. Opinion 84-351 addressed the areas of conflict of interest and client confidentiality. In addition, however, firms contemplating an “Of Counsel” arrangement should consider the practical problems of assuring that conflict and confidentiality, as well as other ethical rules such as those relating to fee splitting, are not violated. Inter-firm and additional intra-firm controls for conflict and confidentiality must be considered and implemented. Also, attempts at drawing lines at just where the “Of Counsel” status starts and stops must be made. For example, is there a conflict situation if the wife of a client of the firm retains an “Of Counsel” firm to handle her divorce from the client, and the “Of Counsel” relationship to date has only involved labor law?
In conclusion, the committee concurs in the reasoning of A.B.A. Formal Opinion 84-351 that the Model Rules and the realities of the modern legal profession permit the use of “Of Counsel” status and designation between law firms. But 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 concern of the new Rules is honesty and truthfulness of communication to the public. Arizona Opinions Nos. 80-30, 81-1, 82-6 and 85-1 are hereby superseded, as the present position of the committee is set forth in this opinion.
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 proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.
© State Bar of Arizona 1987