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Litigation Journal

Summer 2021: Crisis

"Of Counsel" Relationships

Michael P Downey


  • ABA Model Rule 7.2(b) generally prohibits a lawyer from ‘paying anything of value for recommending the lawyer’s services.’
  •  But a lawyer can give nominal gifts of gratitude, if they are not intended or expected to be compensation for the referral.
  • The gift should be no ‘more than a token item,’ such as a holiday or hospitality gift.
"Of Counsel" Relationships
© Marco Bottigelli via Getty Images

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“Would you let me know when you have a few minutes to speak?” Paradox asked from the hall outside Ethox’s office.

“Now is a good time,” Ethox responded. “How can I help you?”

“We are considering having a lawyer join the firm in an ‘of counsel’ role,” Paradox responded. “Managing Partner suggested I speak with you to make sure we set up the relationship correctly.”

“Before we get into those details,” Ethox replied, “the best place to start when considering having a lawyer associate with a law firm is whether the lawyer will be treated as inside or outside the firm for ethics purposes.”

“What is the difference?” Paradox asked.

“When a lawyer is treated as inside the firm,” Ethox responded, “that lawyer is treated as a firm lawyer in all respects. The clients and matters of the firm create conflicts for the lawyer, and the lawyer’s clients and matters generally impute—unless it is a personal interest conflict—to all other lawyers in the firm, as ABA Model Rule 1.10 provides.

“This can be a problem,” Ethox continued, “because it will require conflict checks for all the firm’s matters across the lawyer’s entire practice and for all the lawyer’s matters using the firm conflict-checking system. However, there are also three major advantages when a lawyer is ‘inside’ the firm. First, the firm may freely share client information with the lawyer. Second, the firm may also share legal fees with the lawyer without specific client consent, without worrying about Rule 1.5(e). Third, the firm may hold out or advertise the lawyer as a firm lawyer in advertising and marketing materials, without worrying about clarifying the relationship.”

“And if the lawyer is ‘outside’ the firm?” Paradox inquired.

“Then the situation is the opposite. Conflicts generally would not impute between the lawyer and the firm under Rule 1.10,” Ethox answered. “Instead, the associated lawyer and the firm would share conflicts only on the matters where they were working together or sharing confidential information.

“Also, if the lawyer were treated as ‘outside’ the firm, the firm would need permission to share client confidences and legal fees with that lawyer under Rules 1.5(e) and 1.6(a), and the firm would likely need to clarify the firm’s and the lawyer’s relationship in marketing and similar communications.”

“Which do you think is better?” Paradox asked.

“One choice is not necessarily better than the other,” Ethox responded. “However, it is good to make the decision up front so that the lawyer’s and the firm’s arrangements with each other and with clients can address the ethical issues that would arise.

“For example, if the lawyer is going to be ‘outside’ the firm,” Ethox offered, “normally the firm would want to make sure the lawyer does not have general access to the firm’s computer system. Also, engagement agreements on the matters where the lawyer and the firm would be working together should disclose that the firm intends to share information and fees with the lawyer so the firm can secure the clients’ informed consent to those arrangements.”

“That makes sense,” Paradox agreed.

“There is one thing to be mindful about,” Ethox added. “Ethics authorities often reserve the use of the term ‘of counsel’ to lawyers who are ‘inside’ the firm. Therefore, if you do not want the lawyer to be seen as ‘inside’ the firm, you probably need a different term to describe the relationship. Otherwise, confusion may result, possibly creating headaches for the lawyer and the firm.”

“Thanks for that warning,” Paradox said. “I guess we need to know what we want before we start giving the relationship a label.”

“Precisely,” Ethox answered.