Proposed association between Arizona lawyer and a two-man New York law firm subject to certain conditions.
FACTS
The inquiring attorney is a member of both the Arizona and New York State Bars. Re presently practices law as a sole practitioner in the Phoenix area, but he also travels to New York on occasion to represent the interests of clients in that state. The inquiring attorney has referred clients in need of New York counsel to law firm A, B & A, a New York law firm. Law firm A, B & A has provided the inquiring attorney with office space in the firm, secretarial services, the use of its telephone number, and has listed the inquiring attorney on the door and building directory. Law firm A, B & A and the inquiring attorney now wish to enter into an association for the practice of law pursuant to a written agreement in the form attached as Appexdix 'A" ( the "Agreement"), and use a letterhead format in the form attached as Appendix "B".
QUESTIONS
1. Does the proposed agreement of association by law firm A, B & A and the inquiring attorney constitute a “true partnership” so as to comply with the ethical requirements for an interstate law firm? 2. Does the form of letterhead proposed by the inquiring attorney make suitable and clear disclosures of jurisdictional limitations on practice?
ETHICAL RULES INVOLVED
ER 7.1. Communications Concerning a Lawyer's Services
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:
(a) contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading;
(b) 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; or
(c) compares the lawyer's services with other lawyers' services, unless the comparison can be factually substantiated.
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) ***
(d) Lawyers may state or imply that·they practice in a partnership or other organization only when that is the fact.
OPINION
The Committee has consistently stated in the past that an Arizona attorney may enter into a partnership with attorneys admitted in other jurisdictions provided that the jurisdictional limitations on the attorneys are clearly set forth on the firm's letterhead and other permissible listings. See our Opinions Nos. 85-9, 80-8, 77-8, 73-12. Indeed, in an opinion rendered under the prior Code of Professional Responsibility, the Committee affirmatively ruled that "a New York attorney or firm of New York attorneys, none of whom are admitted to practice law in Arizona," could “form a partnership with an attorney who resides and is admitted to practice law in Arizona.” Opinion No. 81-21 at 1,2. The Committee also confirmed that a “true partnership with an attorney licensed to practice in Arizona must precede the interstate operation contemplated.” Id. at 2. The “interstate operation" contemplated by the inquiring attorney in that opinion was a partnership.
The Committee's previous approach to the issue has not been changed by the adoption of the Rules of Professional Conduct. ER 7.5(b) implicitly condones interstate group practice by permitting a law firm to utilize "the same name in each jurisdiction" provided that "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." However, lawyers may estate or imply that they practice in a partnership or other organization only when that is the fact." ER 7.5(d). In addition, lawyers may not practice under a 'trade name," and they may not use a firm name, letterhead or other professional designation that is false or misleading. ER 7.5(a); ER 7.1.
The Committee has from time to time considered whether proposed associations of lawyers involved misleading name designations. For example, in our Opinion No. 83-10, we concluded that it was ethically impermissible for three Arizona attorneys to "practice under their last names, such as X, Y, and Z", for the limited purpose of handling "nonpublic defender indigent appeals during a certain fiscal year". Opinion No. 83-10 at 1. Given the limited purpose of the association, the Committee stated that the proposed designation, which would "indicate that a partnership exists for all purposes," would be impermissibly misleading to the public. Id. at 2.
The Committee has also referred, in previous opinions, to factors related to a determination of whether an association of lawyers constitutes a “partnership." For example, in its Opinion No. 73-12, the Committee indicated that true partnership involves "a real sharing of profits, liabilities and professional responsibility." Opinion No. 73-12 at 1. And in its Opinion No. 80-8, the Committee stated that an ability to “bind the partnership" was significant to the establishment of a true partnership. Opinion No. 80-8 at 5. More recently, however, the Committee has stated that the question whether a "proposed arrangement amounts to a legal partnership is a question of law and, therefore, is outside the jurisdiction of this committee." Opinion No. 83-1 at 4.
Whether the proposed arrangement in this instance constitutes a legal partnership is also a question of law, or a mixed question of law and fact, and, therefore, is outside the jurisdiction of this Committee. See Statement of Jurisdictional Policies, State Bar of Arizona Committee on Rules of Professional Conduct. Accordingly, we are unable to answer that as part of the initial inquiry as presented here.
_________________
1
A common law definition of "trade name” might be considered to apply to any law firm whose name does not bear the names of all of its lawyers. See G. Hazard & W. Hodes, The Law of Lawyering S35 (1985). However, the Comments to ER 7.5, as adopted in Arizona, provide that a “firm may be designated by the names of all or some of its members, or by the names of deceased members where there has been a continuing succession in the firm's identity”.
2
If, of course, the arrangement does not constitite a partnership, the proposed letterhead, which affirms that the relationship is one of partnership, would be misleading and therefore violative of the provisions of ER 7.5(d) and ER 7.1
Beyond the legal issue of whether the proposed arrangement would constitute a partnership is some factual uncertainty about its intended structure. It is not entirely clear to us whether the proposed Agreement contemplates a partnership structure consisting of an individual (the inquiring attorney), and another partnership (the New York firm of A, B & A), or whether the arrangement is to consist of three individual attorneys as partners. For example, the Agreement recites that the "parties" to it are the firm of A, B & A and the inquiring attorney. But the Agreement also refers to the revocation of “the right of any partner to practice law”. (Emphasis supplied.) While we do not rule on the legal efficacy of a partnership structure for lawyers that consists of an individual and another partnership, we see nothing in the Rules of Professional Conduct or in our prior decisions that prohibits such a structure per se.
Indeed, in a previous opinion under the Code of Professional Responsibility, the Committee observed:
In [a] prior opinion (No. 73-121) the inquiring attorney was a sole practitioner in Arizona and contemplated entering into a partnership with a law firm in Colorado. In the present inquiry the Arizona lawyer is a sole practitioner who contemplates entering into a partnership with a single lawyer in Colorado who employs several associates. The ethical considerations are the same whether or not the contemplated partnership is between a lawyer from one state and a law firm in another state or a lawyer in one state and a lawyer from another state who also employs associates.
Opinion No. 76-8 at 1-2.
In a subsequent opinion not involving the issue of interstate law practice, the Committee determined that it was "ethically permissible for attorneys to conduct a law practice through a partnership composed of two or more professionals
Neither do we consider, in this Opinion, the ethical rules applicable to New York attorneys, or the propriety of the past conduct of the inquiring attorney with respect to his relationship with the New York law firm. See Statement of Jurisdictional Policies, State Bar of Arizona Committee on Rules of Professional Conduct.
corporations," provided that certain conditions were met and “the public is not misled by the name of the firm."Opinion No. 77-9 at 6. The conditions included fulfillment of client expectations of a "unified law firm,” the existence of other partners or associates from whom advice could be obtained, an institutional safeguarding of client confidences, and the availability of recourse against "the assets of the total firm” in the event of “any derelictions or malpractice of the individual lawyer." Id. at 4. In other words, atide from any legal requirements for the existence of a particular association, the public's expectations with respect to the nature of that association must be considered in an evaluation of its name and structure.
Assuming that the arrangement proposed by the inquiring attorney constitutes a partnership, and it is therefore not misleading to so describe it on the firm's letterhead, the firm must also comply with the “expectational" requirements referred to in Opinion No. 77-9. That is, it must be established as a "unified" firm with lawyers that are available for client services and that are institutionally solicitous of client confidences. It must also be an entity whose total assets are available to satisfy malpractice liability claims. The proposed Agreement in this inquiry does not appear to be inconsistent with these concerns, but it does not deal explicitly with each of them, so we cannot unequivocally state, on the basis of the Agreement alone, that the proposed partnership would comply with the expectational standards referred to.
The remaining ethical issue is whether, assuming the existence of a partnership, the proposed letterhead is otherwise misleading to the public. We have no difficulty concluding that the proposed letterhead properly discloses the jurisdictional limitations on the attorneys involved. Thus, it identifies each of the lawyers by name, and it sets forth the jurisdictions in which each lawyer is admitted. It is consistent with our previous statements on the matter. See, e.g., Opinion No. 82-21. And it complies with this aspect of ER 7.5(b).
It is less obvious whether the proposed letterhead is misleading with respect to the structure of the proposed partnership. The proposed name, a combination of the name of the New York firm's name and that of the inquiring attorney,
3
In this connection, we note that the Maryland State Bar Association Committee on Ethics recently held, in an October 10, 1985 opinion, that a "non-equity partner” could be designated as a partner on the firm's letterhead, as long as he is treated by the firm as a partner for purposes of liability to third parties. See Opinion No. 86-25 (Maryland).
and the explanatory reference to the firm as "a partnership of law practices” are consistent with a structure consisting of a partnership and an individual lawyer. If that is indeed the proposed structure, we do not find the letterhead to be misleading. The question is similar to that referred to in Opinion No. 77-9 , where the Committee stated:
The code does not specifically authorize a law firm's letterhead to contain a fuller explanationof the form of organization such as “Jones, Smith and Roe, A Partnership of Professional Corporations,” but this would not be misleading in any way. . . so long as a more complete explanation [is] furnished upon request.
Opinion No. 77-9 at 5. 4
On the other hand, if the proposed firm is to consist simply of three individual partners, we believe it would be more accurate to omit the letterhead designation referring to "a partnership of law practices." Such a designation, in that context, would indicate the existence of a further internal structure to the partnership where none exists. 5
In summary, we conclude that we are not able to answer the legal question presented by the initial inquiry as to whether the proposed arrangement constitutes a “true partnership”. Assuming that a partnership exists, however, the proposed letterhead properly indicates the jurisdictional limitations on the practicing attorneys. If established, the proposed partnership must also comply with the expectations of the public of a unified law firm that has lawyers available for legal services, that is institutionally solicitous of client confidences and that has its total assets available to satisfy claims of legal malpractice. Finally, we also note that the letterhead designation “a partnership of law practices" may be misleading, depending upon how the proposed partnership is to be structured.
4
For purposes of this opinion, we assume without declding, for lack of information, that the three-party name of the New York law firm which has only two lawyers, is consistent with the Comment to ER 7.5 regarding a “continuing succession in the firm's identity”.
5 We note in passing, that the inclusion of the expression "Law Office" in the name of a law firm has been approved by the American Bar Association Committee on Ethics and professional Responsibility. See Formal Opinion No. 318 at 13. The inclusion of that term, or the plural version of it featured here, in the name of a law firm is certainly not misleading, and we find no reason to disagree with the view of the ABA Committee.
APPENDIX “A”
THIS AGREEMENT made this _________ day of , 19___, by and between A, B & A , a, partnership engaged in the general practice of law, New York and C a practitioner engaged in the general practice of law, Arizona.
1. Status of Parties. A, B & A is composed of two partners, A and B . Both are attorneys at law admitted to practice before the Courts of the State of New York. C is an attorney at law admitted to practice before the Courts of the States of Arizona and New York.
2. Business Purpose. The parties hereby form a partnership to engage in the general practice of law in the States of Arizona and New York. This partnership is specifically intended to fulfill the needs of clients in one state requiring legal services in the other state, or, requiring coordinated legal services in both states.
3. Limitations on Practice. No individual attorney shall perform any acts constituting the practice of law in a jurisdiction in which that attorney is not admitted for the practice of law, except on a case-by-case basis in such cases, if any, in which that attorney has been admitted to practice pro hac vice for good cause shown. The general public shall be kept fully aware of the jurisdictional limitations of each attorney through appropriate use of clear and simple delineations in all stationery, business cards and advertisements.
4. Firm Name. The name of the partnership shall be A, B, A & C
5. Principal Place of Business. The principal offices of the partnership are to be located at _______ and at _____________. The offices may be removed to other locations from time to time as the parties may agree. However, at any given time, there shall be two offices, one located in the State of New York and the other located in the State of Arizona.
6. Term. The partnership shall begin upon the execution of this Agreement and shall continue thereafter from time to time until terminated as provided therein.
7. Capital. The capital of the partnership shall consist of -the following items:
(a) Office equipment, furniture, library, supplies and lease of suite at _____ New York to be contributed by A, B & A and
(b) Office equipment, furniture, library, supplies and lease of suite at Arizona to be contributed by C
8. General Financial Considerations. The parties acknowledge that such factors as cost of living expenses, labor costs, commercial rents and acceptable fee structures vary significantly between the greater _____ metropolitan area and the greater _____ metropolitan area. Therefore, the parties desire to design an appropriate financial structure suitable for dealing with these factors.
9. Classes of Work. In order to account for the economic differences set forth in Paragraph 8, the parties desire to make a distinction between in-state cases and interstate cases. An in-state case is one in which the client and the legal services required are both located in the same state. An interstate case is one in which the client and some or all of the legal services required are located in different states.
10. Division of Fees Earned. Each of the parties, respectively, shall be entitled to receive all of the fees earned for in-state work performed by each of the respective parties, without accounting to the other party therefor. The parties shall divide the fees earned by the partnership for interstate work performed by the partnership on a proportionate basis in direct relationship to the value of the legal services performed, respectively, by each of the parties.
11. Immediate Responsibility to Clients. It is specifically intended that, with regard to in-state cases, the party practicing in the state in which the client and the matter are located will bear immediate responsibility to the Client for the satisfactory performance of legal services, as well as for billing, accounting, collecting fees and making appropriate disbursements. With regard to interstate cases, each party will bear responsibility to the Client for those services performed by it. It is anticipated that specific circumstances pertaining to interstate cases may vary from case to case. Therefore, the retainer agreement provided to the Client in an interstate case shall contain a checklist of functions, duties and responsibilities, and the name of the attorney directly responsible to the Client for each item on the checklist. Such a division of duties shall be subject to approval in writing by the Client prior to the partnership's acceptance of the legal matter. Each office will maintain an appropriate Trust Account in accordance with the requirements of the state in which that office is located, which shall be under the sole supervision of the attorney or attorneys staffing that office.
12. Malpractice Insurance. Each of the parties shall be insured for malpractice in the sum of no less than $1,000,000.00. In obtaining the policy of malpractice insurance, each of the parties shall provide a copy of this agreement to the carrier to ensure that any necessary riders are included in the policy and that there is no possibility of the firm performing legal services of any kind that will not be covered by the malpractice insurance policy.
13. Negligence. Except to the extent that the partnership is insured against liability, a party guilty of negligence or wrongdoing shall reimburse the partnership for damages sustained by it as a result of such negligence or wrongdoing.
14. Management, Duties and Restrictions. Each of the partners shall participate in the conduct of the partnership affairs and each partner shall devote his entire time thereto. No partner shall, directly or indirectly, engage in any other business or occupation without the consent of the other partner, but nothing herein shall prohibit the activity of any partner in investing or trading in securities, bonds, commodities or other forms of investment for that partner's own benefit. No partner shall, without the consent of the other partners, make, draw, accept or endorse any bill of exchange, promissory note, or other engagement for the payment of money, or guarantee any debt or account on behalf of the partnership, or pledge the credit of the firm in any way except in the course of the partnership business. No partner shall assign any part of his interest in the partnership or enter into any agreement as a result of which any other person shall become interested with him in the partnership. No partner shall undertake any business if requested by the other partner not to do so.
15. Banking. All funds of the partnership are to be deposited in its name in such checking accounts as shall be designated by the partners. At least one such account shall be maintained in New York.
16. Books. The partnership books shall be maintained at the principal offices of the partnership and each partner shall at all times have access thereto. The books shall be kept on a cash basis for the calendar year and shall be closed and balanced at the end of each year. An audit shall be made for each calendar year that is requested by any partner.
17. Office Management. Each of the parties shall maintain and manage its own office and shall have complete discretion with regard to the setting of office hours, employment of employees, salaries, library acquisition and maintenance, office machinery and equipment, telephones, office and equipment rental, furniture and all other matters constituting normal overhead expenses and physical plant. The party so maintaining and managing these duties shall also be responsible for all financial obligations thereby created.
18. Profit and Loss. Each of the parties shall receive all fees due to it in accordance with Paragraph 10 and shall pay all those obligations incurred by it in accordance with Paragraph 17 Each of the parties may keep as its own respective profit any positive difference between the sum in Paragraph 10 and the expenses in paragraph 17, and shall in no wise be accountable to the other party therefor.
19. Termination. Should either party desire to withdraw from the partnership, dissolve, die or become unable to carry on its business due to illness for a continuous period of more than six months, then the partnership shall terminate. Upon termination, each party shall be entitled to return of its capital contribution enumerated in Paragraph 7, and all documents and files pertaining to the affairs of its in-state clients and all documents and files pertaining to the affairs of those interstate clients with legal work to be performed in the state in which that party maintains its principal office. If payment for services in any interstate matter handled for any client shall remain unpaid on the date of dissolution or shall be contingent upon results, then the party responsible for billing and collecting the fee shall be responsible to obtain the fee earned from the client and shall be liable to the other party for such other party's proportionate share of such fee on an as-received basis. Further, upon termination, each of the parties shall resume practice in its own name, and neither shall continue to use the firm name, which shall be retired.
20. Suspension of Rights to Practice. If the right of any partner to practice law is suspended or revoked in any jurisdiction, then that partner shall be deemed to have withdrawn from the partnership as of the date of such suspension or revocation, and the partnership shall terminate in accordance with the provisions of Paragraph 19.
* * *
In witness whereof, the parties have signed and sealed this Agreement the date first above written.
A, B & A C
by ________________ __________________
A , partner C
and __________________________
B , partner
STATE OF NEW YORK )
) ss:
County of New York )
The foregoing Agreement was acknowledged before me, the undersigned Notary Public, this _______ day of 19 ______ , by ___________________and __________________who acknowledged to me that they executed the same for the purposes therein contained.
______________________
Notary Public
My Commission Expires:
STATE OF ARIZONA )
County of Maricopa )
____________________
APPENDIX "B"
A, B, A & C LAW OFFICES
a partnership of law practices
Attorney A*
Attorney B* (ARIZONA ADDRESS) (NEW YORK ADDRESS)
Attorney C+ (ARIZONA PHONE NUMBER) (NEW YORK PHONE NUMBER)
*Admitted in NY only
+Admitted in NY & AZ
[Note: Attorney C is the inquiring attorney.]
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 1986