Improper for attorney to accept employment from for-profit corporation established to provide pre-paid legal services where fees are split between participating attorney and corporation.
FACTS
The inquiring party requests an opinion from the committee as to whether there would be any ethical impropriety for an attorney to accept employment from a corporation which is established to provide prepaid legal services on a limited scale, as outlined in the attached Exhibits 1, 2 and 3.
Apparently, the corporation proposes to request attorneys who are in good standing with the Arizona Bar to accept referrals from it of persons or businesses who have paid the necessary personal or business subscription charges. As set forth in Exhibits 1 and 2, the attorney would have very limited services to render the subscribers at first contact; however, some of the contacts could lead to substantial fees and legal involvement.
QUESTION
Would it be ethically proper for an Arizona attorney to accept legal employment from Arizona Law Plan, Inc., under the fact situation described in this opinion and the exhibits attached hereto?
CODE PROVISIONS INVOLVED
DR 2-103. Recommendation of Professional Employment.
DR 3-102. Dividing Legal Fees with a Non-Lawyer.
OPINION
The structure of the proposed law plan is such that it would violate several of the Disciplinary Rules, as well as Ethical Considerations. However, attention will be focused on Disciplinary Rules 3-102 and 2-103(D)(4). Disciplinary Rule 3-102 involves dividing legal fees with a non-lawyer and provides in part as follows:
(A) A lawyer or law firm shall not share legal fees with a non-lawyer, . . .
Exceptions are then set forth; however, none of the exceptions apply in this case.
DR 2-103(D)(4) provides in part as follows:
A lawyer or his partner or associate or any other lawyer affiliated with him or his firm may be recommended, employed or paid bye or may cooperate with, one of the following offices or organizations that promote the use of his services or those of his partner or associate or any other lawyer affiliated with him or his firm if there is no interference with the exercise of independent professional judgment in behalf of his client:
. . . . .
(4) Any bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries, provided the following conditions are satisfied:
(a) Such organization, including any affiliate, is so organized and operated that no profit is derived by it from the rendition of legal services by lawyers, and that, if the organization is organized for profit, the legal services are not rendered by lawyers employed, directed, supervised or selected by it except in connection with matters where such organization bears ultimate liability of its member or beneficiary.
(b) . . . (c) . . . (d) . . .
(e) Any member or beneficiary who is entitled to have legal services furnished or paid for by the organization may, if such member or beneficiary so desires, select counsel other than that furnished, selected ot approved by the organization for the particular matter involved; and the legal service plan of such organization provides appropriate relief for any member or beneficiary who asserts a claim that representation by counsel furnished, selected or approved would be unethical, improper or inadequate under the circumstances of the matter involved and the plan provides an appropriate procedure for seeking such relief.
On the facts submitted, it is evident that the plan suggested is for profit, and that the subscription fee would be split between the attorney furnishing the services to the subscriber and the corporation, which corporation is obviously not a lawyer. This fee Splitting would thus violate DR 3-102 and, as a consequence, any lawyer in good standing would not ethically be able to undertake representation of such subscriber.
Under Disciplinary Rule 2-103(D)(4), the plan must fail: first, in that it does make a profit; secondly, in that it provides a feeder for outside "legal" businesses to participating lawyers; and third, the person subscribing under the proposed plan would be obligated to take one of the attorneys suggested, and, should there be a conflict, the only recourse such subscriber would have would be that he would "not be covered by the plan" for that particular dispute. So it, in effect, is on a "first come, first served" basis and does not give the second subscriber any protection at all, which would contravene DR 2-103(D)(4)(e).
There are many other group plans that are appropriate, but they deal primarily with public interest law firms or prepaid group legal service plans, such as those for union members, members of an association or church, or participants in a legal insurance plan. The proposed plan has already been considered by the Arizona Department of Insurance, and it was concluded that, as a matter of law, the plan was not an insurer and therefore, that aspect of prepaid legal insurance would not apply. Thereafter, the Arizona Legislature passed A.R.S. 55 20-1097 to 20-1097.13, inclusive, effective July 27, 1983, which subjected prepaid legal insurance plans to regulation by the Arizona Department of Insurance. Accordingly, this Committee expresses no opinion on the legal question of whether the plan is subject to regulation by the Arizona Department of Insurance.
It is therefore the committee's conclusion that it would be unethical for any lawyer to participate in the plan as outlined and submitted by the inquiring party.
EXHIBIT 1
TITLE: Arizona Law Plan, Inc. / Personal Legal Retainer Plan
TERM: 12 months from date of acceptance by Arizona Law Plan, Inc.
ELIGIBILITY: Subscriber, spouse and unmarried children, provided they are dependent upon subscriber for support and maintenance. Children ineligible nineteen or more years of age.
SUBSCRIPTION CHARGES: Personal Legal Retainer: Plan - All Benefits: $85.00 Personal Legal Retainer Plan - Limited Series: $48.00
SCHEDULE OF BENEFITS: Personal Legal Retainer Plan - All Benefits
SCHEDULE OF BENEFITS: Personal Legal Retainer Plan -Limited Series
NOTE: One law firm cannot advise or represent both sides in the same dispute. If this situation should arise, the 2nd person to have joined the plan will be referred to other counsel and will not be covered by this plan for that particular dispute.
SEE PDF COPY FOR ADDITIONAL EXHIBITS.
Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rule changes, a different conclusion may be appropriate.
© State Bar of Arizona 1985