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MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 1987-37
Of Counsel: Nature of Relationship
You advise that recently you and several other persons withdrew from your existing firm, effective March 1987, to form your own firm. After it had become known that you had withdrawn, you were approached by a lawyer with whom you have dealt with for many years. This lawyer is involved in the entertainment industry and 60 to 80 percent of his work as a lawyer comes from one entertainment client. He inquired as to whether or not you would be interested in having him associate with your new firm as ""of Counsel."" This ""Of Counsel"" relationship would only before his work as a lawyer other than for his one principal client. After talking this over at some length with your partners, you agreed that the following ""Of Counsel"" relationship would be established, subject to a favorable ruling by the Ethics Committee.
(a) The ""Of Counsel"" relationship would exist only for that portion of the attorney's practice other than for his one entertainment client.
(b) The ""Of Counsel"" attorney and the firm would both maintain separate offices in different geographic locations.
(c) That both the ""Of Counsel' attorney and the new firm would obtain their own malpractice insurance, that this malpractice insurance would cover each of them separately, and there would be no overlapping coverage. The policy for the new firm would cover only members and specifically would not cover the 'of Counsel"" attorney and conversely, the ""Of Counsel"" attorney's policy would cover only that attorney and not the new firm.
(d) That the ""of Counsel"" attorney would have no interest in the new firm nor any voice or vote in the management of the new firm.
(e) That any new business referred by the ""of Counsel"" attorney on any matters other than from his one principal entertainment client would be handled jointly and any fees generated shared.
(f) That on any business referred by the ""of Counsel"" attorney from his chief entertainment client, the new firm would be hired on an hourly basis to represent both the entertainment client and the ""Of Counsel"" Attorney.
There is a possibility that the ""Of Counsel"" attorney may be named as a co-party or witness in litigation brought against the chief entertainment client by a third party. You believe that it would not be a conflict in this case for the new firm to represent either the principal entertainment client and/or the ""of Counsel"" attorney in any matters that may be brought after the agreement between the ""Of Counsel"" attorney and the new firm is signed since the agreement will only deal with matters of clients other than the principal client. In addition, the parties will also not be responsible for each other's actions in cases dealing with the principal client other than whatever responsibility they would have as attorneys to the client.
You asked for guidance as to whether, under the factual situation outlined, it would be ethical for you to enter into this ""Of Counsel"" relationship and not be prohibited in the future from representing either the ""of Counsel"" attorney and/or the ""Of Counsel's"" principal client in litigation or other matters in which they wish to retain your new firm.
With the adoption of the Rules of Professional Conduct, the standards for behavior of lawyers in the State of Maryland have been substantially changed. Under the former rules, a division of fees among lawyers was not allowed unless the client consented and the division was made in proportion to the services performed and the responsibilities assumed by each lawyer. DR 2-107(A)(1) & (2). Also, subject to exceptions not here relevant, a lawyer could not accept employment in contemplated or pending litigation if he knew or it was obvious that he or a lawyer in his firm ought to be called as a witness. DR 5-101(B).
The new Rules of Professional Conduct, which went into eri.ecl in Maryland on January 1, 1987, are quite different. While the rules on imputed disqualification deal with lawyers ""associated"" in a firm, as opposed to lawyers in the same firm, the rules on imputed disqualification expressly do not apply to the situation where a lawyer acts as a witness. See, Rule 1.10(a). Instead, the Rules of Professional Conduct, at Rule 3.7(b), provide ""A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9."" Neither Rule 1.7 nor Rule 1.9 is applicable to your inquiry. Thus, it appears clear that if a lawyer in the advocate's firm may testify, a lawyer associated with the advocate's firm by the ""of Counsel"" relationship would not implicate the imputed disqualification rule.
Division of fees between lawyers not in the same firm may now be made without reference to the allocation to work performed so long as such division is made by written agreement with a client, each lawyer assumes joint responsibility for the representation, the client is advised of it and does not object to the participation of all the lawyers involved, and the total fee is reasonable. Rule 1.5(e). Therefore, so long as these requirements are satisfied, we see no problem with the referral of legal work back and forth between the lawyer designated ""Of Counsel"" and your firm.
You also mentioned the possibility that the ""of Counsel"" attorney might be a party to the litigation as opposed to being a witness. See, Rule 1.10(a), which concerns witnesses. In this event, so long as there is no conflict of interest between the entertainment client and the ""Of Counsel"" attorney, you may represent both. of course, in the event of a conflict you could not represent the entertainment client since the disqualification of the ""Of Counsel"" attorney, who is ""associated"" with your firm, is imputed to you. Rules 1.10(a) and 1.7, subject to exception in the event of consent. See Rule 1.7(a)(2), (b)(2) and (c).
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