Wisconsin Lawyer
Vol. 79, No. 4, April 2006

Dual Practice: Combining the Practice of Law with Other Occupations

by Timothy J. Pierce

As ethics counsel for the State Bar of Wisconsin, I spend a lot of my time taking calls on the Ethics Hotline. One question that regularly arises is whether, or to what extent, a lawyer may engage in the dual practice of law and another occupation, such as real estate brokerage or financial services. That topic has been addressed by the State Bar's Standing Committee on Professional Ethics in several opinions.¹ However, most of those opinions are at least 20 years old. In recent meetings, prompted by the committee's belief that several Wisconsin lawyers engage in a second occupation, the Ethics Committee has again considered the question of dual practice. In this article, I offer some suggested guidelines, derived from discussions at those meetings, for lawyers considering engaging in the dual practice of law and another occupation. Although this article does not address every possible aspect of dual practice, it should provide a useful starting point for lawyers interested in this topic.

Several states, including Wisconsin, have ethics opinions dealing with dual practice.² Although the State Bar of Wisconsin's Professional Ethics Committee's previous opinions on this topic were issued under the now superseded Code of Professional Responsibility, nothing in the current Rules of Professional Conduct (adopted in 1988) per se prohibits a lawyer from engaging in the dual practice of law and another occupation, and those opinions should be reviewed by any Wisconsin lawyer considering a second occupation. Wisconsin's older opinions took the position, consistent with the position of the American Bar Association (ABA), that dual practice was permitted by the Code. These opinions approved, subject to certain restrictions, lawyers' proposals to engage in other occupations such as real estate brokerage and the sale of title insurance. Some other states that have addressed the issue have taken the position that dual practice is not prohibited by ethics rules, but not every state has taken as permissive a view as that found in Wisconsin's opinions.³

Suggested Guidelines for Dual Practice

The following guidelines for Wisconsin lawyers considering undertaking the dual practice of law and another occupation reflect the thinking of the State Bar's Standing Committee on Professional Ethics, for which I serve as reporter. These guidelines, however, are not binding on any court or the Office of Lawyer Regulation.

1) The dual practice of law and another occupation is generally permissible, provided that certain conditions are met. This is the position of numerous ethics committees that have considered the issue, including Wisconsin's.⁴ This conclusion is based on the fact that both the ABA's Model Rules of Professional Conduct⁵ and Wisconsin's current Rules of Professional Conduct do not contain any explicit prohibition on dual practice. Therefore, there is no basis for concluding that the dual practice of law and another occupation would never be permissible in Wisconsin.

Needless to say, however, providing nonlegal services to legal clients must be undertaken with care and there are traps for the unwary. There are situations in which the provision of such services would not be permissible under the Rules, and a lawyer must carefully analyze each particular situation. It is particularly important to be mindful of conflicts of interest, as discussed below.

2) A lawyer is at all times governed by the Rules of Professional Conduct, and ordinarily, the person to whom a lawyer provides nonlegal services will be considered a legal client with respect to the applicability of the Rules of Professional Conduct. Most ethics opinions on this topic take the position that if a lawyer provides "law-related" services to a client in addition to legal services, then the lawyer is bound by the Rules of Professional Conduct in the provision of both. In Opinion E-83-14, the State Bar's Professional Ethics Committee cited New York State Bar Opinion 206 (1971) for the following definitions of law-related and unrelated occupations:

"A totally unrelated occupation would be one where the products or services provided to customers or clients would not involve either services or the need for services which would be essentially legal in nature....

"(A law-related occupation is any) business where the lawyer-participant's activity would be likely to involve frequent solution of problems that are essentially legal in nature...."

Occupations that have been found to be law-related include real estate brokerage,⁶ sale of title insurance,⁷ administrative assistance to trucking companies,⁸ and "marriage counseling, accountancy, labor relations consulting, and the operation of an insurance agency ... or a loan or mortgage brokerage office."⁹ Lawyers often choose second occupations that enable them to draw on their legal experience, and thus, most instances of dual practice involve providing law-related services to legal clients.

A lawyer engaged in a second occupation who provides law-related services to clients must be able to harmonize the Rules of Professional Conduct with the rules and regulations governing the second occupation. For example, a lawyer providing real estate brokerage services must be able to reconcile a lawyer's duty to keep all information relating to the representation of a client confidential¹⁰ with any disclosure requirements imposed on brokers.

Under some circumstances it may not be reasonable to apply the Rules to the provision of law-related services. For example, a lawyer may be an owner of a mortgage brokerage to which he has referred a personal injury client whom he has learned is looking for a house. The brokerage is completely separate and distinct in operations, personnel, and location from the lawyer's law practice, and the lawyer informs the client that the client will not enjoy the protections of the attorney-client relationship in the provision of brokerage services. Under such circumstances, it seems a stretch to require that the client be treated as a legal client when seeking a mortgage.¹¹ However, the burden to disclose to the client that the benefits of the attorney-client relationship do not attach in such a situation rests squarely on the lawyer and such disclosure is necessary so that the client is not misled.

3) The dual provision of legal and other services to a client is normally a business transaction with a client and creates potential and/or actual conflicts of interest. Therefore, the client must consent in writing to the transaction after consultation. If the lawyer is providing nonlegal services to the client for some form of pecuniary gain or benefit, then SCR 20:1.8(a) applies. That rule requires that whenever a lawyer enters into a business transaction with a client or acquires an interest adverse to a client, the terms of the transaction must be fair and reasonable and be transmitted to the client in writing, the client must be given reasonable opportunity to seek the advice of independent counsel, and the lawyer must obtain the client's consent in writing. The Rule reads as follows:

SCR 20:1.8 Conflict of Interest: Prohibited Transactions

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;

(2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and

(3) the client consents in writing thereto.

The Wisconsin Supreme Court recently discussed the requirements of SCR 20:1.8(a) in Disciplinary Proceedings against Trewin.¹² In that case, the court held that a lawyer's acquisition of an adverse interest to a client in the form of a loan results in at least a potential conflict, and thus the written consent required by SCR 20:1.8(a)(3) must include a waiver of any conflict. The court took a broad view of what constitutes a potential conflict of interest that requires a waiver from the client, and a lawyer engaging in any sort of business transaction with a client must discuss potential conflicts and obtain appropriate waivers.

The Wisconsin Supreme Court presently is considering revisions proposed by the Ethics 2000 Committee to the Rules of Professional Conduct.¹³ In addition to the requirements of the present Rule, the proposed new SCR 20:1.8(a) requires that lawyers inform clients in writing of the desirability of seeking independent counsel and that clients give "informed consent," in writing, to the lawyer's role in the transaction.

It is very likely that the court will adopt the Rule as proposed. It is therefore important that lawyers understand "informed consent," which is defined in the proposed Rules as follows:

"`Informed consent' denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct."

Checklist for Providing Nonlegal Services. Based on the present Rule and the proposed new Rule, the following checklist is suggested for a lawyer providing nonlegal services to, and thus entering into a business transaction with, a client:

1) Ensure that the terms of the transaction are fair and reasonable to the client. For example, give consideration to prevailing market prices and the costs of reasonably available alternatives.

2) Inform the client, in writing, of the following:

a) the terms of the transaction in a manner that the client can reasonably understand (that is, use plain language);

b) the lawyer's financial interest in the transaction and the means by which it is determined;

c) any existing and reasonably foreseeable potential conflict of interest, which must be waivable;

d) the potential adverse conse-

quences arising from any conflict of interest;

e) the opportunity to consult with independent legal counsel and then to provide the client with that opportunity;

f) any reasonably available alternatives, such as the purchase of products or services other than those provided by the lawyer; and

g) whether the provision of nonlegal services will involve foregoing the protections of the attorney-client relationship, such as if the services are provided by a separate entity in which the lawyer has an interest.

3) Obtain in writing the client's informed consent to the transaction and the waiver of any actual and potential conflicts.

It also is important to keep in mind that a lawyer may not seek a client's consent to a conflict under circumstances in which the conflict is not waivable (for example, the lawyer could not reasonably believe that she could provide adequate representation to the client). Thus, the burden is on the lawyer to first determine whether or not it is appropriate to even enter into such a transaction with a client. For example, because of infirmities of aging or illness, an estate planning client may not be able to fully appreciate the conflict caused by the lawyer's interests in the sale of financial products and the availability of alternatives.

4) At all times, communications about a lawyer's services are governed by SCR 20:7.1 through 20:7.5. Any advertising that mentions the lawyer's ability or willingness to provide legal services is governed by the Rules of Professional Conduct. If a lawyer chooses to advertise nonlegal services based on the lawyer's status as a lawyer, thus implying that clients will obtain benefits from the lawyer's legal expertise, the advertisements are governed by the Rules.¹⁴ Thus a lawyer who advertises a real estate business that is owned by "Attorney X" or affiliated with the "Law Offices of Attorney X" must abide by the Rules that govern lawyer advertising.

Lawyers also must be careful to observe the ban on in-person solicitation when providing nonlegal services and may not use the second business as a way to solicit legal clients in a manner that violates the Rules. SCR 20:7.3(c), the Rule that imposes a general ban on in-person and telephone solicitation provides, in part, as follows:

SCR 20:7.3 Direct Contact with Prospective Clients

...

(c) A lawyer shall not initiate personal contact, including telephone contact, with a prospective client for the purpose of obtaining professional employment except in the following circumstances and subject to the requirements of Rule 7.1 and paragraph (d):

(1) If the prospective client is a close friend, relative or former client, or one whom the lawyer reasonably believes to be a client.

(2) Under the auspices of a public or charitable legal services organization.

(3) Under the auspices of a bona fide political, social, civic, fraternal, employee or trade organization whose purposes include but are not limited to providing or recommending legal services, if the legal services are related to the principal purposes of the organization.

This means that when a lawyer is providing nonlegal services to a person who is not a current or former legal client, the lawyer may not offer, by means of any real-time communication, to also provide legal services should the need arise. ("Real time" is any in-person, telephone, or chat room or other instant electronic communication.) For example, a lawyer who owns a real estate brokerage may not offer to provide legal services to clients of the brokerage unless the lawyer complies with SCR 20:7.3. Such a lawyer, however, may respond to an unsolicited request for legal services. It is worth noting that the exception allowing direct contact with former clients is consistently interpreted as referring solely to former legal clients.¹⁵

In some circumstances, the advertising Rules will not necessarily apply. The lawyer who advertises a second, nonlaw-related occupation (such as a bakery) in a manner that does not mention the lawyer's status as a lawyer, and thus does not imply the availability of legal services, will not be bound by the advertising Rules with respect to such ads. However, this lawyer still could not solicit legal clients from behind the bakery counter.

5) A lawyer must at all times be mindful of SCR 20:5.4 and maintain her professional independence as a lawyer and avoid impermissible fee-sharing.

SCR 20:5.4 prohibits lawyers from sharing legal fees with nonlawyers, with limited exceptions (such as compensation of employees.) It also prohibits lawyers from entering into partnerships or other business arrangements with nonlawyers if any part of the business constitutes the practice of law. In considering business arrangements with respect to a second occupation, the lawyer must be careful not to allow nonlawyers any control over the lawyer's legal practice and must be careful to avoid any sharing of legal fees.

Conclusion

Neither the present nor proposed Rules of Professional Conduct in Wisconsin absolutely prohibit a lawyer from engaging in the dual practice of law and another occupation. However, any lawyer who chooses to engage in dual practice must exercise care to:

1) identify and resolve conflicts;

2) follow SCR 20:1.8(a) when engaging in business transactions with clients;

3) follow the Rules of Professional Conduct when providing law-related services to clients;

4) follow the Rules of Professional Conduct with respect to communications about the lawyer's services;

5) maintain the lawyer's professional independence.

Endnotes

¹See Wis. Formal Ethics Ops. E-82-11, E-83-14, E-85-05, E-86-03, E-90-02.

²Case law on this topic is extremely scant and almost all guidance comes from ethics opinions. For lawyers looking for guidance from other states with ethics rules similar to Wisconsin's, the Oklahoma Bar Association's Legal Ethics Committee Advisory Opinion 316 provides a good discussion of the sale of "ancillary services" to clients, and the Colorado Bar Association's Ethics Committee Formal Opinion 98 provides an excellent general discussion of the topic.

³For example, other states have taken the position that the conflicts of interest in providing legal and real estate brokerage services to a client in the same transaction are so great that ethics rules prohibit such an arrangement. See State Bar of N. Dak. Ethics Op. 92-17 (1993); N.Y. County Lawyers' Ass'n Ethics Op. No. 685 (1991); R.I. Ethics Advisory Panel Op. No. 96-29 (1996); W. Va. State Bar Legal Ethics Op. 89-1.

⁴See Wis. Ethics Op. E-82-11.

⁵ABA Model Rule 5.7 explicitly permits dual practice, with certain limitations.

⁶Wis. Ethics Op. E-86-03.

⁷Wis. Ethics Op. E-85-05.

⁸Wis. Ethics Op. E-83-14.

⁹ABA Formal Op. 328 (1972).

¹⁰See SCR 20:1.6.

¹¹ABA Model Rule 5.7 discusses such circumstances and reads as follows:

Rule 5.7 Responsibilities Regarding Law-related Services

(a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b), if the law-related services are provided:

(1) by the lawyer in circumstances that are not distinct from the lawyer's provision of legal services to clients; or

(2) in other circumstances by an entity controlled by the lawyer individually or with others if the lawyer fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.

(b) The term "law-related services" denotes services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.

The Model Rule provides a framework for determining when a lawyer providing nonlegal services should be bound by the Rules of Professional Conduct. This framework would ensure that a lawyer who provides law-related services from her office would be bound by the Rules, but, for example, would allow the lawyer who owns a financial services firm, which is separate and apart from her law office, to refer a client and have the separate entity not be bound by the Rules in the provision of financial services if the lawyer fully advises the client of this fact and its ramifications. ABA Model Rule 5.7 has no Wisconsin equivalent, and no equivalent rule is part of the Ethics 2000 proposal. Thus, Wisconsin lawyers may not rely on ABA Model Rule 5.7 as authority.

¹²2004 WI 116, 275 Wis. 2d 116, 684 N.W.2d 121.

¹³The proposed new Rule 20:1.8(a) (with changes red-lined) reads as follows:

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which that can be reasonably understood by the client;

(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel in on the transaction; and

(3) the client consents gives informed consent, in a writing thereto signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.

¹⁴See Utah Ethics Advisory Op. 01-05.

¹⁵See R.I. Ethics Advisory Panel Op. No. 96-26 (1996).

Wisconsin Lawyer