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March 08, 2021

Proposed Model Rule 5.4

Reporter's Explanation of Changes


1. Paragraph (a)(4): Permit sharing of court-awarded legal fees with nonprofit organization

This addition is proposed to clarify that a lawyer may share court-awarded legal fees with a nonprofit organization that employed, retained or recommended employment of the lawyer in the matter. The propriety of such fee-sharing arrangements was upheld in Formal Opinion 93-374 of the ABA Standing Committee on Ethics and Professional Responsibility. Other state ethics committees, however, while agreeing with the policy underlying the ABA Opinion, found violations of state versions of Rule 5.4 because the text of the Rule appeared to prohibit such fee-sharing. The Commission agrees with the ABA Standing Committee that the threat to independent professional judgment is less here than in circumstances where a for-profit organization is involved and is therefore recommending this change.

2. Paragraph (d)(2): Broaden to include nonlawyers who occupy positions with responsibilities similar to those of corporate directors or officers

The current Rule is too limited because it employs terminology peculiar to corporate law, and lawyers are now practicing in professional limited liability companies. When applied to a professional limited liability company, paragraph (d)(2) is intended to preclude a nonlawyer from serving as a manager in a company that is managed by managers rather than members and from serving in a position like that of a president, treasurer or secretary of a corporation.


[2] This Comment provides a cross-reference to Rule 1.8(f) on payment of a client's fee by a third person. No change in substance is intended.

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