MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 2013-07

May a Maryland attorney whose conduct occurs in Maryland, whose conduct has a predominant effect in Maryland or who is handling a matter before a tribunal in Maryland, practice with or in a District of Columbia professional corporation

The following question has arisen: May a Maryland attorney whose conduct occurs in Maryland, whose conduct has a predominant effect in Maryland or who is handling a matter before a tribunal in Maryland, practice with or in a District of Columbia professional corporation or other District of Columbia association authorized to practice law for profit when the District of Columbia firm includes a non-lawyer who owns an interest in the firm or a non-lawyer lawyer who serves as corporate director or officer thereof or occupies a position of similar responsibility. The short answer is no. The Maryland Rules of Professional Conduct specifically prohibit lawyers from sharing legal fees with non-lawyers or practicing law with or in a firm in which a nonlawyer owns an interest.

 RELEVANT RULES

 

 Rule 5.4 provides, in pertinent part, as follows:

 

(a) A lawyer or law firm shall not share legal fees with a nonlawyer…

 

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(d)  A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

 

(1)  a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;

 

(2)  a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation; or

 

(3)  a nonlawyer has the right to direct or control the professional judgment of a lawyer.

 

Rule 5.5 provides, in pertinent part:

 

(a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.

 

Rule 8.5. Disciplinary Authority; Choice of Law.

 

(a) Disciplinary Authority.

 

(1)  A lawyer admitted by the Court of Appeals to practice in this State is subject to the disciplinary authority of this State, regardless of where the lawyer’s conduct occurs.

 

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(b) Choice of Law. In any exercise of the disciplinary authority of this State, the rule of professional conduct to be applied shall be as follows:

 

(1)  for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and

 

(2)  for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.

 

 D.C. Rule of Professional Conduct 5.4 – Professional Independence of a Lawyer  

 

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that: 

 

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(4) Sharing of fees is permitted in a partnership or other form of organization which meets the requirements of paragraph (b);

 

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(b) A lawyer may practice law in a partnership or other form of organization in which a financial interest is held or managerial authority is exercised by an individual nonlawyer who performs professional services which assist the organization in providing legal services to clients, but only if:

 

(1) The partnership or organization has as its sole purpose providing legal services to clients; 

 

(2) All persons having such managerial authority or holding a financial interest undertake to abide by these Rules of Professional Conduct; 

 

(3) The lawyers who have a financial interest or managerial authority in the partnership or organization undertake to be responsible for the nonlawyer participants to the same extent as if nonlawyer participants were lawyers under Rule 5.1; 

 

(4) The foregoing conditions are set forth in writing. 

 

(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.

 ANALYSIS

The Maryland Lawyers’ Rules of Professional Conduct (MLRPC) clearly prohibit a Maryland-barred attorney from sharing fees with a nonlawyer. MLRPC 5.4(a). Additionally, Maryland lawyers are not permitted to work at a firm in which a nonlawyer either owns any interest or has the right to direct or control the professional judgment of the lawyer. MLRPC 5.4(d)(1), (3). Rule 5.5 prohibits a lawyer from practicing law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assisting another in doing so. Under these rules, a Maryland attorney cannot share fees with a nonlawyer or practice in a firm where a nonlawyer either owns any interest or has the right to direct or control the professional judgment of the lawyer.    The D.C. Rules of Professional Conduct (DCRPC) permit a lawyer to share fees with a nonlawyer and work at firm “in which a financial interest is held or managerial authority is exercised by an individual nonlawyer who performs professional services which assist the organization in providing legal services to clients” provided the firm meets certain enumerated criteria. DCRPC 5.4(a), (b). This Committee previously referred to law practice organized under this rule as an “Alternative Practice Firm.” See Md. State Bar Ass’n Op. 2012-12.

The Committee has previously recognized that the practice of law frequently requires lawyers to act in more than one jurisdiction. This is often the case in the Washington-metropolitan area. Where there is a conflict in the rules of conduct between two or more jurisdictions, the determination of which rule applies for conduct other than conduct before a tribunal is “the rule[] of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct.” See MLRPC 8.5(b)(2). The rule further states that “[a] lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.” Id.

The Comment to MLRPC 8.5 notes that where “the rules of professional conduct differ, principles of conflict of law may apply… Where the lawyer is licensed to practice in two jurisdictions which impose conflicting obligations, applicable rules of choice of law may govern the situation.” Following this rationale, this Committee has opined that “[w]here a Maryland attorney is acting in a foreign jurisdiction in accordance with that jurisdiction’s Code of Professional Responsibility… this conduct is ethical per se.” Md. State Bar Ass’n Op. 86-28. When the MLRPC “impose different, more stringent requirements on its attorneys, it does not require its attorneys to behave in a manner that is inconsistent or at variance with the code of conduct prescribed by another jurisdiction when practicing law there.” Id.

A Maryland lawyer who is also licensed in D.C. would not run afoul of MLRPC 5.4(d) so long as the predominant effect of the conduct at issue – sharing fees and working at a firm in which a nonlawyer either owns any interest – occurred in the District of Columbia.  But a Maryland lawyer whose conduct either occurs in Maryland, has a predominant effect in Maryland or involves a matter before a tribunal in Maryland cannot work in an Alternative Structure Firm. Rule 5.4(d) of the Maryland Rule of Professional Responsibility specifically forbids this conduct. See also  Prahinski v. Prahinski, 321 Md. 227, 241 (1990) (applied 5.4(b) and (d), precluding a lawyer from forming partnerships for the practice of law with persons who are not lawyers, in holding that a non-lawyer spouse “has no interest in the lawyer spouse’s practice and therefore the goodwill of the practice may not be included as marital property”). This is so regardless of whether the attorney is barred in both jurisdictions.

When the conduct occurs in Maryland, has a predominant effect in Maryland, or involves a matter before a Maryland tribunal, the Maryland Code of Professional Responsibility applies pursuant to MLRPC 8.5. This is consistent with Committee’s opinion issued last year in which we stated that a Maryland lawyer would violate MLRPC 5.4(a) if the Maryland lawyer shared fees with or worked in an Alternative Structure Firm organized under District of Columbia Rule of Professional Conduct 5.4(b) even if the non-lawyer partner was screened from all clients in the State of Maryland and received no profits or fees derived from legal work in the State of Maryland if the predominant effect of the attorney’s conduct was in Maryland. The Committee’s opinions find support in ABA Ethics Op. 91-360 which, in analyzing Model Rule 5.4(b), concluded that should a lawyer wish to practice in a state that prohibits fee sharing with non-lawyers, “the lawyer must see to it that no part of the lawyer’s practice is conducted through a firm with a nonlawyer partner or principal.”

 

 

This opinion assumes that the firm in question meets the requirements of D.C. Rule of Professional Conduct 5.4(b)(1) – (4).