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March 27, 2014 Articles

Home Is Where the Office Is: Ethical Implications of the Virtual Office

While technology changes, the rules of ethics remain firm.

By Seth L. Laver and Jessica L. Wuebker

The practice of law is changing. More to the point, how and where attorneys operate has changed with recent technological developments. The Internet, cloud-based computing, and mobile devices provide (what some would call) the benefit of accessing contacts or materials from just about anywhere on the globe. There are fewer and fewer locales that are truly “off the grid” and there are few instances when someone is completely unreachable. As a result, attorneys practicing today, like many professionals, may not necessarily be bound to the confines of a traditional office setting. At first, many professionals took advantage of these developments while temporarily away from the office at meetings, vacations, or other shorter out-of-office stints. However, this model has drawn interest from attorneys who now opt never to set foot in a traditional office again and instead operate permanent “virtual offices.”

The idea of permanently practicing law from the home may be appealing to some, especially following this season of subzero wind chills and snowy commutes. However, real-world implementation of a “virtual law office” must be accompanied by consideration of the professional duties imposed on every attorney. Indeed, the ethical implications of such virtual offices have prompted many state professional-responsibility organizations to weigh in with guidance for the attorney who opts to establish a practice within this emerging area.

So I Don’t Have to Go to the Office? How Does This Work?
A virtual law office provides legal services to clients almost exclusively using the Internet, electronic messaging, and other technological tools. To give virtual law offices some grounding in the real world, shared spaces are becoming increasingly popular. These arrangements allow attorneys to reduce traditional office costs, because most work is done remotely, yet still maintain an accessible setting to meet in-person with clients and to conduct business. Virtual office plans can include mail services, space for meetings, and access to office equipment and administrative staff, but this space is shared with other tenants.

Advantages include a professional and convenient space to meet with clients, as many virtual offices are in well-appointed high-rise buildings that are accessible by public transportation, without the required lease payments for a traditional office space. Mail services allow law-firm mail to be collected at a corporate address rather than a home address. This feature protects privacy, enhances the professionalism of the office, and provides a recognizable address that can be listed on marketing materials and court filings. Further, many virtual office leases are month-to-month and include multiple locations throughout a region, increasing both flexibility and convenience for in-person meetings.

Perhaps the biggest concern facing attorneys who practice law virtually is the applicable rules of professional conduct. The regulatory questions surrounding the virtual office are now much clearer. Indeed, many state bars and ethics committees have weighed in on the legality of virtual offices and provided instruction for practicing remotely.

Home Office, Not Home-Free—Staying Compliant with Ethical Rules
When an attorney maintains a virtual office, rules of professional conduct regarding communication with clients, confidentiality, and supervision of employees are implicated. These rules are circumscribed by the recent revision of Model Rules of Professional Conduct 1.11.6(a)5.1(a) and (b)5.3(a) and (b), and 7.1 confirming that the duty of competence includes “keeping abreast of . . . the benefits and risks associated with relevant technology.” Model Rules of Prof’l Conduct R. 1.1 cmt. [8] (2013 ed.). Ethics opinions from several jurisdictions regarding this issue have not imposed greater or different duties on attorneys operating virtual offices; instead, they remind us that virtual offices are held to the same ethical rules and obligations as conventional ones. See, e.g., Alabama Ethics Op. No. 2010-02; Arizona Ethics Op. 09-04California Prof’l Responsibility & Conduct Formal Op. 2010-179Florida Ethics Op. 12-3; Iowa Ethics Op. 11-01; Maine Op. 194Massachusetts Ethics Op. 12-03; New Hampshire Ethics Committee Advisory Op. 2012-13/4; New Jersey Advisory Comm. on Prof’l Ethics Op. 701; New York Ethics Ops. 842 and 940; Nevada Formal Op. 33; North Carolina 2011 Formal Ethics Op. 6; Oregon Formal Op. 2011-188Pennsylvania Formal Op. 2011-200; Vermont Op. 2010-6; and Virginia Legal Ethics Op. 1872.

For example, a lawyer must always act competently to protect the confidentiality of client information, regardless of how that information is transmitted and stored. What does this mean when virtual firms increasingly look to the “cloud” or other means of using a third party to store and transmit confidential client data? This duty does not require an attorney to guarantee that a breach of confidentiality cannot occur when using an external service provider; rather, the lawyer is only required to use “reasonable care” to protect information relating to the representation of a client. That means exercising care in the selection of the third-party vendor, having a reasonable expectation that the vendor will ensure that others cannot access the data, and directing the vendor to preserve confidentiality. Here, due diligence prior to selecting a vendor is key; examining the vendor’s use of technology and terms of service (or enlisting a qualified third party to conduct this evaluation) is a prudent way to determine whether the vendor sufficiently safeguards client information.

Also consider the fact that the majority of client communication is electronic. A lawyer should take precautions to ensure that the communication is not only clear and appropriate but is received and understood by the client. Specifically, Model Rule 1.4 requires a lawyer to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” The communication duties, along with the duty to “explain,” require an attorney working from a virtual office to do more than hit “send” when communicating with a client. Further steps may include asking for a confirmation reply email when sending important messages to clients; ensuring messages, even those sent through the ostensibly informal medium of email, are clear and thoughtful; and setting up disclaimers in email footers regarding confidentiality and what should happen if the message reaches an unintended recipient. Data backup systems should also be implemented because of the paperless nature of much of the virtual office’s work.

This duty is accompanied by the duty to inform clients of the nature of their office structure. For example, it is inappropriate for a lawyer with a virtual office to represent to any client or prospective client that his or her practice is larger and/or more geographically diverse than it truly is. Further, depending on the circumstances, it may be improper for an attorney to list or advertise a rented office space as his or her “law office” on a letterhead or other public communications. See, e.g.Model Rules of Prof’l Conduct R. 7.1. Factors to consider when listing a shared space include how frequently the lawyer uses the space, whether and how frequently non-lawyers also use the space, and whether signage indicates that the space is used as a law office.

Though the virtual office enables lawyers and staff to work in separate locations, rather than together in a central space, the managing attorney still has the same responsibility to take steps to supervise subordinate lawyers and staff. The “reasonable steps” will vary depending on the firm’s structure and practice, and additional steps may be necessary to supervise colleagues who are staffed in a different location.

Beyond the consideration of ethics, a lawyer operating a virtual office must ensure that he or she is authorized to provide legal services in the appropriate jurisdictions. The “online” nature of the office carries with it a concomitant danger that a client could come from and/or have a case in a jurisdiction in which the attorney is not licensed. When operating a virtual office, a lawyer should be concerned about the lawyer’s physical location and the place where the legal work is provided. Most states require that a lawyer who establishes an office in that state be admitted in that state, raising questions about whether a virtual office has a true “location” and can be “established” at all. To be safe, a lawyer should be admitted where he or she is routinely located when providing legal services through the virtual office. Further, if a lawyer regularly provides legal services in a particular jurisdiction, he or she should be licensed to practice in that jurisdiction, as many states also require that a lawyer be authorized in any jurisdiction where the lawyer has a “systematic and continuous” presence, and some state rules stipulate that such a presence may be established even if the lawyer is not physically present in that jurisdiction. See, e.g., Michael Downey, “Ethics and the Virtual Office,” St. Louis Law., Feb. 2013 (citing Mo. S. Ct. R. 4-5.5 cmt. [4]).

Complicating the issue are attorney websites. When a website crosses the line from “temporary and occasional” to “continued and systematic” is an issue still being ironed out by the courts. A good rule of thumb for virtual-office firms is to serve only clients who are residents of the states where the firm is authorized to practice and clients whose matters are venued in those states where the firm is licensed to practice.

Moving Forward—Courts Approve High Tech, Low Overhead
In New Jersey, ethical rules surrounding the virtual office have been at the forefront in recent years. In April 2010, the New Jersey Advisory Committee on Professional Ethics and the Committee on Attorney Advertising issued a joint opinion stating that virtual offices may violate the state’s requirement that an attorney have a “bona fide office.” Specifically, the committees reasoned that a virtual office could not be a bona fide office because the attorney would only be present when she had reserved the office space and the receptionist at a virtual office did not qualify as a “responsible person acting on the attorney’s behalf” and should not be entrusted with confidential information. This “bona fide office” requirement has been significantly relaxed as of February 2013, when the New Jersey Supreme Court adopted an amendment that permitted New Jersey attorneys to use virtual offices, rather than brick-and-mortar firms, as long as these offices are structured in an appropriate way. Specifically, though a fixed physical location is not required, an attorney must structure his or her practice in such a manner as to ensure “prompt and reliable communication” with and accessibility by clients, other attorneys, and courts, such as a telephone service staffed during business hours or a promptly returned voicemail or email service. The attorney should also be reasonably available for in-person consultations, if a client so requests, at mutually convenient times and places. Further, an attorney who does not maintain a fixed physical presence in New Jersey must designate an actual location for inspection of files, hand deliveries, and service of process, though this location need not be in New Jersey. The attorney must also designate the clerk of the Supreme Court of New Jersey as the agent for service of process. For now, a lawyer who is not licensed in New Jersey but wishes to practice in the Garden State must still maintain a traditional office in the state and must “register” with the clerk of the Supreme Court; however, the court has asked its Professional Responsibility Rules Committee to review this and other rules that still refer to the bona fide office requirement, and to recommend changes.

In October 2010, the Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility weighed in on this topic with the issuance of Opinion 2010-200. The committee concluded that an attorney may maintain a virtual law office and is not required to meet with clients at the address listed in any advertisements and/or in the geographic location where the attorney will perform the services advertised. However, the committee noted that an attorney practicing in a virtual office must disclose to the client all information required under the rules of professional conduct. Further, an attorney may not state that his or her fees are lower than those of traditional law offices, but may state, if accurate, that the virtual office’s overhead may be lower than that of traditional offices, consequently possibly reducing the firm’s fees. The committee also stated that attorneys in a virtual office must take appropriate precautions to confirm the identities of clients, especially when there is a question of possible diminished capacity. Pennsylvania does not currently require attorneys in a virtual office to take any additional steps to comply with the duty of confidentiality beyond those required of all attorneys.

In New York, virtual office arrangements are permissible for both out-of-state attorneys and New York resident attorneys, as long as the attorney is licensed to practice in New York. An attorney who is licensed to practice in New York, but lives elsewhere, may practice as long as the attorney maintains an “office for the transaction of law business” within New York. N.Y. Jud. Law § 470. Opinions regarding what constitutes such an “office,” which predate the advent of cell-phone and VoIP use by attorneys, hold that rental of desk space is sufficient to constitute such an office, even if that desk is not exclusive to the attorney. See, e.g.Austria v. Shaw, 143 Misc. 2d 970 (N.Y. Sup. Ct. 1989)Rosenshein v. Ernstoff, 176 A.D.2d 686 (N.Y. App. Div. 1991)Matter of Scarsella, 195 A.D.2d 513 (N.Y. App. Div. 1993). Consequently, it is likely that now, with the availability of increased technology and telephone services, courts would not emphasize the existence of a physical workspace in defining the term “office” for purposes of this analysis. A recent opinion from the Northern District of New York may have significant implications for New York Judiciary Law section 470 and the requirement that out-of-state attorneys maintain a New York office. In Schoenefeld v. New York, 907 F. Supp. 2d 252 (N.D.N.Y. 2011), a New Jersey resident licensed to practice in New York alleged that the in-state office requirement for out-of-state attorneys violated the Privileges and Immunities Clause of the U.S. Constitution by effectively imposing a residency requirement on nonresident attorneys. The court agreed, granting the plaintiff’s motion for summary judgment. An appeal is pending in the Second Circuit, as the state alleges that the purpose of the New York office requirement for out-of-state attorneys is to “ensure that non-resident attorneys are amenable to in-state service of process and available for court proceedings and contact by interested parties.” Most virtual office arrangements will satisfy these criteria. Specifically, many virtual-law-firm operators maintain physical office space staffed by employees who can receive service of process, mail, and courier services, even if these employees are not on the attorney’s payroll. Further, with regard to availability for contact by interested parties, with the advent of cell phones, email, instant messaging, and online teleconferencing, it is no longer necessary for telecommunication to be connected with or occur in a physical office. Also, the mere fact that an attorney does not have a permanent office in New York does not mean that he or she will be unavailable for court proceedings in New York.

Living in the Past—Stuck in the Office
In December 2013, the Supreme Court of Delaware suspended an attorney who worked from his Pennsylvania home office while practicing Delaware law for violating Delaware’s “bona fide” office rule, Delaware Supreme Court Rule 12(d), which states, in pertinent part:

[A]n “office for the practice of law” means a bona fide office maintained in this State for the practice of law in which the attorney practices by being there a substantial and scheduled portion of time during ordinary business hours in the traditional work week. An attorney is deemed to be in an office even if temporarily absent from it if the duties of the law practice are actively conducted by the attorney from that office. An office must be a place where the attorney or a responsible person acting on the attorney’s behalf can be reached in person or by telephone during normal business hours and which has the customary facilities for engaging in the practice of law. A bona fide office is more than a mail drop, a summer home which is unattended during a substantial portion of the year or an answering, telephone forwarding, secretarial or similar service.

(Emphasis added.)

The court held that Rule 12(d) required a “bona fide” office to be “a place where the attorney or a responsible person acting on the attorney’s behalf can be reached in person or by telephone,” and have “the customary facilities for engaging in the practice of law.” In re Fred Barakat, No. 397, 2013, Board Case No. 2012-0019-B, at 5 n.12 (Del. 2013).

Though the rule’s text supports the court’s holding, the rule and its interpretation seem outdated, particularly when compared with the holdings from neighboring jurisdictions. It does not mention the possibility of working remotely and delivering legal services using a virtual office and/or delivering legal services to clients using online means. It does not consider the use of shared rented office space that enables an attorney to meet as needed with clients, but continue to conduct the majority of the attorney’s business with clients online, even though technology now exists to enable attorneys to securely work online with clients. Instead, the rule seems to specifically prohibit the use of shared office space that an attorney uses only a portion of the time. The court’s support of this dated rule will decrease access to legal services and discourage attorneys from being innovative and cost-effective in serving clients.

Practice Pointers
The appeal of a virtual office must be tempered by considering its limitations and risks. The value of a virtual practice is determined by the client; if the attorney does not edify the client about the cost and convenience of a virtual practice, and the client does not comprehend and accept this value, the result may be misunderstanding, miscommunication, or worse—a malpractice suit. With that in mind, here are some tips for those thinking of entering the world of the virtual law practice.

Tell the truth. Because the idea of a virtual law office is new and very foreign to some potential or existing clients, it may be tempting to avoid publicizing that you have a virtual office, or to misrepresent the size of your firm. Misrepresenting your legal services is an easy way to get into trouble. A virtual office is not a license to represent yourself or your firm as something you are not.

Shhhh! Confidentiality is always an imperative but especially when much of your practice is done online, using Internet servers, and most virtual-office solutions do not offer a tangible space to store documents securely. As long as hard copies of documents can be stored securely, even in a home office, you should be in the clear. With regard to sending and receiving information electronically, make sure you are working with a legitimate, trusted vendor who you believe will not breach the confidentiality of client data. Instruct the vendor about the importance of this confidentiality; if possible, put the confidentiality agreements in writing.

Be available and communicative. Clients, other attorneys, and courts should be able to contact you even if you do not have a fixed place of business, particularly given the array of ways available today to communicate electronically and telephonically. Further, when sending communications to a client or other party, ensure that this information has been received and understood.

Share. Rental of a shared office space may be a good idea if you sometimes need a professional space in which to meet clients or other attorneys, and to ensure there is a private (non-home) address where you can receive mail and service of process.

Set some ground rules. It may be prudent to establish guidelines regarding the structure and management of your firm, especially to inform clients and prospective clients who may be unfamiliar with a virtual-office setup for your practice.

Check the laws. Taking a look at the rules in all states in which you practice is a good idea, to ensure you are compliant with rules regarding multi-jurisdictional practice.

With the right approach, attorneys and law firms can take advantage of the opportunities and efficiencies of a practice untethered to the traditional office while still adhering to our profession’s long-standing standards of ethics.

Keywords: professional liability litigation, virtual office, model rules, ethics, professionalism

Seth L. Laver is a partner and Jessica L. Wuebker is an associate of Goldberg Segalla LLP, in Philadelphia, Pennsylvania.

Copyright © 2014, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).