Ethics Corner

Wendy J. Muchman is a Professor of Practice at Northwestern University Pritzker School of Law where she teaches courses in Legal Ethics and Professional Responsibility. The opinions expressed in this article are that of the author, Wendy J. Muchman, and not that of Northwestern University Pritzker School of Law.

This Ethics Corner will focus on two interesting ethics opinions recently issued by the ABA’s Standing Committee on Ethics and Professional Responsibility (SCEPR).

Passive Investment in Alternative Business Structures

A current topic of much discussion is the issue of nonlawyer ownership of law firms. ABA Model Rule (M.R.) 5.4 currently prohibits a lawyer or law firm from sharing legal fees with a nonlawyer in most business arrangements. While Washington, D.C. alone has long allowed these transactions, recently Arizona and Utah have modified or eliminated 5.4 to allow business structures where nonlawyers have ownership and share legal fees with the lawyers. Arizona went as far as eliminating the Rule all together and substituting a system where lawyers and nonlawyers may be certified by the Arizona Supreme Court as “Alternative Business Structures” (ABS). Many other states are contemplating changes to Rule 5.4.

In light of the changes made by some jurisdictions, the question arises whether a lawyer practicing in a jurisdiction that follows M.R. 5.4 may invest in an alternative business structure in a jurisdiction that allows ABS. ABA Formal Opinion 499 was recently released and concludes that a “lawyer may passively invest in a law firm that includes nonlawyer owners (‘Alternative Business Structures’ or ‘ABS’) operating in a jurisdiction that permits ABS entities, even if the lawyer is admitted to practice law in a jurisdiction that does not authorize nonlawyer ownership of law firms.” The Committee applied the Disciplinary Choice of Law Rule 8.5(b)(2) and found that since the predominant effect of the lawyer’s investment is in the jurisdiction(s) where the ABS is permitted, a lawyer’s passive investment in these circumstances does not violate the Rule. However, the investment must be passive only and not identify the lawyer as associated with the ABS. The M.R. lawyer will have to watch for conflicts of interest that might be caused if the lawyer represents a client with interests adverse to the ABS. As many experts have noted, ABS and lawyer involvement in those structures is an area subject to developments which will surely continue.
 

Language Access in the Client Lawyer Relationship

In an increasingly diverse, multicultural population, lawyers are faced with the reality of clients’ varying language needs, abilities, and proficiency. On October 6, 2021, the ABA issued Formal Ethics Opinion 500 examining a lawyer’s duty of communication and competence in situations involving language access, clients speaking a different language, or non-cognitive physical conditions affecting their ability to speak, such as a hearing or speech disability. “Effective communication between lawyers and clients is a fundamental element of the relationship and essential to allow clients to effectively participate in the representation.” “The lawyer must ensure that the client understands the legal significance of translated or interpreted communications and that the lawyer understands the client’s communications, bearing in mind potential differences in cultural and social assumptions that might impact meaning.” The opinion is important guidance for both lawyers and judges who increasingly grapple with these important decisions about how to best provide, or assist lawyers in providing, competent and diligent representation.