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    Wisconsin Lawyer
    June 01, 2000

    Wisconsin Lawyer June 2000: Ethics Opinions: E-00-01 and E-00-02

    Ethics

    Referring Attorneys Incur Enhanced Obligations to Clients

    Professional ethics opinion E-00-01 considers the division of fees between lawyers not in the same firm and defines "[j]oint responsibility for the representation" in SCR 20:1.5(e).

    by the State Bar Professional Ethics Committee

    When a lawyer forwards a client matter to a lawyer in another firm and the two lawyers agree to share any fee generated in the matter other than in proportion to the services provided by each, what must the forwarding lawyer do to comply with the requirement of "assuming joint responsibility for the representation" as defined in SCR 20:1.5(e)?

    Opinion

    DollarSCR 20:1.5(e) provides as follows:

    (e) A division of fees 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 lawyers involved and is informed if the fee will increase as a result of their involvement; and
    3. the total fee is reasonable (emphasis added).

    The only hint at a definition of the phrase "joint responsibility for the representation" provided by the Rules of Professional Conduct is a reference in the Comment to SCR 20:1.5 that "[j]oint responsibility for the representation entails the obligations stated in Rule 5.1 for purposes of the matter involved."

    SCR 20:5.1 addresses the responsibilities of a partner or supervisory lawyer and identifies that responsibility as making reasonable efforts to ensure that other lawyers conform to the Rules of Professional Conduct. This duty may be breached if the supervisory lawyer has knowledge of conduct that violates the Rules and either ratifies the conduct or having the opportunity to avoid or mitigate the consequences of such conduct fails to do so.

    ABA Informal Opinion 85-1514 defines responsibility under DR2-107(A) which is used to similar effect as joint responsibility is used in MR 1.5(e).

    That opinion states that:

    • joint responsibility does not require substantial services to be performed since the assumption of joint responsibility is an alternative to a division of fees in proportion to the services performed; and
    • joint responsibility does include responsibilities comparable to that of a partner in a law firm for other partners (as in MR 5.1) under similar circumstances, including:
      (a) financial responsibility; and
      (b) ethical responsibility such as to assure adequate representation and adequate client communications.

    Referring attorney must maintain contact with the progress of a matter. The Professional Ethics Committee opines that when a lawyer refers a matter to a lawyer not in the same law firm under the fee sharing arrangement permitted by SCR 20:1.5(e), the referring lawyer need not be involved in the day-to-day substantive handling of the matter including such activities as making tactical decisions regarding the representation or providing the legal services necessary to achieve the objective of the representation.

    However, the referring lawyer in assuming joint responsibility for the representation must maintain contact with the progress of the matter in the following regards.

    First, the referring lawyer must remain sufficiently aware of the performance of the lawyer to whom the matter was referred to ascertain if that lawyer's handling of the matter conforms to the Rules of Professional Conduct. This may be achieved by periodically reviewing the status of the matter with that lawyer, the client, or both. It also requires being available to the client regarding any concerns of the client that the lawyer to whom the matter has been referred is handling the matter in conformity with the Rules. This is not to say that the referring lawyer is the final arbiter of whether the lawyer to whom the matter is referred is complying with the Rules, such as acting competently. See SCR 20:1. However, it does involve the informed professional judgment of the referring lawyer being available to the client and acting on the client's behalf. It must be remembered that in such a referral arrangement, the referring lawyer still maintains an attorney-client relationship with the client. It is the ongoing protection of the client's interests by the referring lawyer that justifies the referring lawyer receiving a fee that is beyond the proportion of the services actually provided by that lawyer.

    Opinions and advice of the Professional Ethics Committee, its members, and assistants are issued pursuant to State Bar Bylaws, Article IV, Section 5. Opinions and advice are limited to the facts presented, are advisory only, and are not binding on the courts, the Board of Attorneys Professional Responsibility, or State Bar members.

    Attorneys with questions on professional ethics issues may contact the Ethics Hotline at (800) 444-9404, ext. 6168; or (608) 250-6168 (all day Wednesday); and (608) 629-5721 on Monday, Tuesday, Thursday, and Friday mornings. Send written requests for Professional Ethics Committee opinions to the Professional Ethics Committee c/o Keith Kaap, State Bar of Wisconsin, P.O. Box 7158, Madison, WI 53707-7158.

    Professional Ethics Committee opinions may be found online.

    Second, the referring lawyer has the supervisory duty to refer legal matters only to lawyers who are competent to handle the matter in question. In this regard, a lawyer referring a matter to another lawyer, especially in circumstances in which the referring lawyer may have a financial stake in the referral, must select that lawyer solely for that lawyer's ability to provide the legal services that the client needs and not because that lawyer may be willing to enter into a fee sharing arrangement with the referring lawyer.

    Third, the referring lawyer must assume financial responsibility for the matter though this may be secondary to the financial responsibility assumed by the lawyer to whom the matter was referred. Typically, financial responsibility will involve the responsibility for paying or advancing payment of costs associated with the handling of the matter (for example, court costs, expert fees, discovery costs, and so on). Whether this involves advancing costs or the assumption of responsibility for paying costs by the responsible lawyers is a matter for agreement with the client subject to the Rules of Professional Conduct. See SCR 20:1.8 (a), (e), and (j).

    The committee also opines that "joint responsibility for the representation" implies that both the referring lawyer and the lawyer to whom the matter was referred must reach a common understanding of their respective joint responsibilities as well as their individual responsibilities to the client. This understanding is fundamental to the proper exercise of their respective obligations to the client. The client should be informed of that common understanding, preferably in writing. See SCR 20:1.4.

    The question of the legal liability of a referring lawyer for the manner in which the client's matter is handled to completion is a question of law. However, the committee notes that the requirements of joint responsibility imply an active concern and attention on the part of the referring lawyer for the competent handling of the matter to completion. The referring lawyer is still the client's lawyer, even though the lawyer to whom the matter is referred will usually be the lawyer responsible on a day-to-day basis for the handling of the matter. The duty of joint responsibility imports a serious responsibility as a lawyer and is not a mere hand off of the case to another lawyer to handle in his or her own unfettered discretion. This opinion earlier noted the Comments to SCR 20:1.5 that relate the duty of joint responsibility for a referring lawyer to the responsibility of a partner or a lawyer having supervisory authority of another lawyer in a law firm. See SCR 20:5.1. In a law firm, that responsibility is one of vicarious liability unless that liability is adjusted by the implementation and operation of limited liability law. See SCR 20:5.7. While the sharing of fees and the imposition of joint responsibility under SCR 20:1.5(e) does not create a legal partnership, lawyers should be mindful of these enhanced obligations created when the lawyer receives more than the value of the services provided as a referral fee.

    Lawyers Sharing Space Must Ensure Client Confidentiality

    Professional ethics opinion E-00-02 considers lawyers sharing office space, support staff, and equipment with unrelated entities.

    by the State Bar Professional Ethics Committee

    Under what conditions may a lawyer or law firm share office space, staff, and equipment with lawyers not in the same firm or with nonlawyers?

    Opinion

    The Rules of Professional Conduct do not prohibit lawyers from sharing office space, support staff, or equipment with either another lawyer or a nonlawyer provided adequate protection is taken to protect clients' interests.

    Client confidentiality. An obvious client interest at risk in such an arrangement is the protection of client confidences. See SCR 20:1.6(a). When lawyers share space with anyone outside their firm, they must ensure that persons not associated with the law firm cannot intentionally or inadvertently access client files, in-person communications between lawyers and clients, mail, telephone, fax, email, answering machines, voice mail, and other forms of communications that may contain confidential or privileged information. The appropriate steps to ensure such protection depend on the particular circumstances in place. Such steps may include procedures such as keeping all files in closed or locked files or in lawyers' offices; securing the receipt, transmission, and handling of correspondence, fax transmissions, or similar documents in such a way as to prevent them from being inadvertently viewed by unauthorized personnel; restricting access to telephones or other means of communication by unauthorized personnel; dividing office space to avoid the inadvertent disclosure of confidential information; and training personnel on appropriate confidentiality protocols. It is important for lawyers to realize that even the negligent or inadvertent disclosure of privileged communications between lawyer and client could defeat the lawyer-client privilege. See Wis. Stat. § 905.03.

    Representation of the relationship with nonrelated entities. When lawyers or law firms share office space with another entity they must not mislead the public about the relationship between the two entities - such as that they are affiliated or the same entity - when that is not the case. When lawyers not in the same law firm share office space there is a material risk that the public will assume they are part of the same entity unless specific efforts are made to clarify that they are practicing as separate entities.

    If lawyers or law firms associate only for the purpose of sharing office space, equipment, personnel, or other resources, they may not share the same letterhead. They may not denominate themselves as "Smith & Jones," for example, in stationary, business cards, signage, entrances, or advertising and promotional materials. See SCR 20:7.5 (d) ("Lawyers may state or imply that they practice in a partnership or other organization only when that is the fact"), SCR 20:7.1(a), and Wisconsin Ethics Opinion E-90-1. Use of disclaimers such as "not a legal partnership" does not necessarily avoid a violation of these Rules. If a group of lawyers wants to appear to be a law firm, it must be a law firm.

    Whether an association between lawyers actually constitutes a law firm is a question of law that is beyond the authority of this committee to opine. However, the existence of such a relationship may be evidenced by such facts as the existence of a formal legal status (for example, partnership, service corporation, or LLC), the use of a common trust account, a common policy of malpractice insurance coverage, joint work on cases, and sharing the income, profits, and liabilities of the common enterprise.

    Conflicts of interest. When lawyers who are not in the same law firm share office space, they must be sensitive to the circumstances of their relationship that may give rise to conflicts of interest. These circumstances may arise when their business or personal relationships may preclude them from effectively representing their respective clients whose interests may be adverse to each other or when the relationship between them may otherwise materially limit their representation of a client, SCR 20:1.7(b), or when confidential information may be so important or sensitive that the lawyers in an office sharing arrangement cannot adequately ensure the degree of protection of sensitive information that their clients may require, SCR 20:1.6(a). See ABA Informal Opinion 1486. Should such conflicts arise, they may be subject to written client waiver with the proper disclosure and consultation. The committee withdraws E-86-2 which is superceded by E-00-02.

    Sharing office staff. Office staff may work for multiple lawyers and law firms who share office space. See generally E-86-13. When they do, however, the lawyers must be sure that staff understand that the entities are separate, do not share their respective clients, and that this imposes obligations of special care with respect to protecting the confidences of the separate clients, the risk of conflicts of interest, and the duty to make clear to the public that the lawyers and law firms are separate entities. See SCR 20:5.3(b) ("A lawyer having direct supervisory authority over a non-lawyer shall make reasonable efforts to make sure that the person's conduct is compatible with the professional obligations of the lawyer"). If the lawyers share a receptionist, the receptionist should answer the phone with a general greeting such as "law offices" instead of "Jones and Smith." See SCR 20:7.5(d).

    Lawyers not in the same law firm sharing a receptionist pose a more limited risk of violating the Rules of Professional Conduct. However, when lawyers not in the same law firm share secretaries, legal assistants, or other staff who have access to sensitive or privileged client documents, more serious risks to the interests of clients may arise.

    Sharing fees. Lawyers who are not in the same firm but who share office space may still from time-to-time co-counsel on a legal matter and as a result may share legal fees. Generally, they should provide separate bills for the services they each perform to clients to avoid the impression that they are in the same law firm. However, with proper explanation to the client of the nature of the relationship between separate law firms, the firms may send out a joint bill or a bill from one of the firms in which the lawyers share in the fee. Any sharing of a fee among lawyers not in the same firm is subject to restriction in SCR 20:1.5(e). A division of fees proportional to the services performed by each lawyer is permitted so long as the overall fee is reasonable, the client does not object to the division after notice, and the client is informed if the fee will increase as a result of the involvement of multiple counsel. If the division of fees is not in proportion to the services performed by each lawyer, the lawyers must - with the written agreement of the client - assume joint responsibility for the matter. See Wisconsin Ethics Opinion E-00-01 (Division of fees between lawyers not in the same firm - joint responsibility for the representation in SCR 20:1.5(e)).


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