Saul Singer, District of Columbia Bar

D.C. Rule 5.4(b) is a client-centric rule — it is all about the client.

The D.C. Bar serves both a representative and a regulatory function for the District of Columbia. Its core functions are the registration of lawyers, operation of a lawyer disciplinary system, maintenance of a Clients’ Security Fund, and other administrative operations. The D.C. Bar’s Legal Ethics Program provides informal guidance to lawyers on questions that arise under the D.C. Rules of Professional Conduct. Saul Singer serves as Senior Legal Ethics Counsel.

My job with the D.C. Bar is to provide informal guidance to D.C. lawyers regarding their ethical duties and responsibilities under the rules of the professional conduct for the District of Columbia.

The District is an outlier jurisdiction. We are not a wholesale ABA Model Rule jurisdiction — our rules are very different from the ABA Model Rules in many areas. In some instances we are stricter than the ABA (as regards confidentiality, for example). But in other areas the D.C. Rules are more lenient.

Save for one exception, the District of Columbia is the only jurisdiction in the U.S. that under very limited circumstances actually permits ownership or management of a law firm by nonlawyers. (The exception is Washington State, which allows lawyers to share fees with Limited License Legal Technicians).

Because we are the only jurisdiction that allows this (again, save for Washington State), this is something that must be done very carefully. Anyone seeking to do this must be sure to dot their i’s and cross their t’s.

The Rule is 5.4(b). It has four elements, all of which must be strictly met.

Where the rubber meets the road is with respect to the first element, which requires that the firm have as its sole purpose providing legal services to clients.

Here is a situation contemplated by this: let’s say I am a personal injury lawyer. A case comes in the door, and I gather all the pertinent information, including the medical records. I send the medical records to “Doc,” who is my consultant. Doc reviews the file, telling me if this is a good or a bad case, and where the holes might be. If I decide to take the case, Doc continues to act as my consultation, helps me to prepare expert witnesses, etc.

One day we get the great idea that instead of simply acting as my consultant, Doc should come in-house and be my partner. He’ll continue to do what he’s always been doing, but with an ownership interest in the firm. We’ll be a team — I will be the law guy and he will be the medicine guy.

This is ok, as long as these very strict conditions are met:

1)         Doc cannot be involved in any way in making any legal decision. He cannot have any say in whether the firm should take on a case or not. He can make a recommendation, but he cannot decide.

2)         The firm must be managed by lawyers. Doc’s decision making authority  may not be greater than 50%. The Rule does not actually contain this cap, but this limit must reasonably apply in order to assure that the nonlawyer does not have control of the firm and cannot vote down the lawyers.

3)         Doc must actively participate in the operation of the law firm. That is, he must actually help the firm to represent its clients. Passive investment by a nonlawyer is not permitted.

4)         I, as the firm’s supervisory lawyer, will bear responsibility for Doc’s conduct. So, if Doc violates an ethics rule, I can be on the line for it and it could cost me my law license.

There is no requirement that D.C. firms that have nonlawyer partners declare this fact to the D.C. Bar, and the D.C. Bar does not keep a registry or record of any kind of the firms that do have nonlawyer partners. For that reason, we do not know how many D.C. firms have nonlawyer partners.

That being said, a firm cannot keep secret the fact that it has a nonlawyer partner. For example, if a firm lists its partners on its letterhead or on its website, then the nonlawyer’s name must be included, or that would be considered a misrepresentation or omission in violation of Rules 7.1 and 7.5. Of course, in listing the nonlawyer’s name, there must also be a clear indication that the person is not a lawyer, much in the same way you would indicate that a lawyer is not admitted in the District of Columbia  but in a different state.

D.C. Rule 5.4(b) is a client-centric rule — it is all about the client. The Rule was adopted to help lawyers better serve their clients. We recognize that in a complex environment, a nonlawyer can provide significant help and assistance to a lawyer, especially if they are in-house. This is why passive investment is not allowed — because a passive investor will not do anything the help the client. But someone like a doctor definitely will.

At the same time, lawyers cannot abdicate their responsibility to make legal decisions, all the way through. Nonlawyers can provide input, but they cannot call the shots.

I can understand that in some states, simply hiring Doc as a contractor or simply paying him a salary would be considered sufficient compensation, and that may be one reason why those states do not permit nonlawyer ownership. My personal opinion — it is not the official position of the D.C. Bar — is that there is an advantage to bringing a nonlawyer in as a partner rather than an employee. There is a big difference between the motivation of a contractor or an employee and the motivation of an owner. An ownership interest, as opposed to just a salary, is a great motivator for anyone. Again, that is not the D.C. Bar’s official position, it’s my personal opinion.

This story is supplemental material for Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind? To learn more about the book, please click here.

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