The newsletter of the ISBA’s Section on Senior Lawyers
Ethical considerations in Of Counsel relationships
So much of the practice of law has evolved over the past 40 years with the advent of technology and changes in societal norms. The use of the Of Counsel designation for older and younger lawyers has similarly undergone an evolution. This article is intended to give the reader a basic understanding of the Of Counsel concept and how the ethical use of that term has evolved with respect to the formation and operations of law firms.
Illinois has no Supreme Court Rule pertaining to the Of Counsel relationship. The ground rules for such relationships have developed from American Bar Association opinions and opinions from our Illinois State Bar ethics panels. The original American Bar Association Opinion 330 is more than 40 years old and is so outdated that it has been withdrawn by the ABA. The use of the Of Counsel designation in that opinion was so restrictive as to now be considered obsolete. In 1990, the American Bar Association recognized the need and appropriateness of Of Counsel relationships in four instances. The affiliation will generally be considered appropriate where there is a close and continuing relationship between the lawyer and the firm to which the lawyer has affiliated in an Of Counsel capacity. Retired lawyers available for consultation, and probationary lawyers “trying out” with the firm were deemed appropriate Of Counsel lawyers. Similarly, part-time retiring lawyers who have left partnership status, government service or academia and joined a firm were particularly appropriate for Of Counsel designation. The traditional original lawyer professional journey from full time partner to part-time Of Counsel lawyer was expanded in 1990 ABA Opinion 90-357.
What is significant about Opinion 90-357 is the direction given the practicing bar as to what is not a permissible use of the Of Counsel designation. The opinion concluded that single case affiliations and referral source schemes were marketing ploys, and not an appropriate or ethical utilization of the Of Counsel designation. Similarly, the collaboration of unrelated lawyers in Of Counsel designations to expand their firm expertise on paper was not permitted. Essentially, the 1990 opinion leads to the conclusion that, if an Of Counsel designation looks like good marketing, it is probably ethically suspect.
Not all of Opinion 90-357 was negative. It is this author’s belief that Opinion 90-357 liberalized traditional views of the Of Counsel designation to a limited extent. The ABA opined that no daily contact was required between lawyer and law firm. Similarly, law firms were recognized as being appropriate Of Counsel designees to one another. A prior limit of two Of Counsel lawyers was eliminated in that opinion and compensation methods were deemed immaterial to an otherwise permissible relationship. The offer of specialized services to benefit the client was recognized as beneficial to the profession.
The evolution of the Illinois Bar’s view regarding Of Counsel relationships mirrors the ABA expansion. The 1982 ethics opinion 776 recognized the Of Counsel designation as appropriate for retired lawyers with their own firm and with other firms with whom the lawyer has a continuing and close relationship. Full disclosure to the client would be required by the 1982 Illinois view, but, even with disclosure, firms acting as Of Counsel to one another was deemed inappropriate. The Of Counsel relationship was revisited later in 1982, when Opinion 817 approved the use of the designation by a state legislator working with a firm, presumably to forward business. Opinion 817, dated December 4, 1982, stressed the need for active and regular work with the firm in a continuing close relationship.
Two years after Ethics Opinions 776 and 817, Opinion 840 summarily dismissed a plan to designate firms Of Counsel to one another to cross refer business. The ethics panel dismissed the concept as a marketing scheme. It is the author’s view that Opinion 840 reaffirmed the “close and continuing” test as a key to an ethical and healthy Of Counsel relationship.
In January, 2004, the use of names in firms came under scrutiny in Opinion 03-02. A lawyer left his firm to join another firm and wanted to keep his name in his former firm name by using the Of Counsel designation. The panel believed that a retiring lawyer certainly could maintain his name in his former firm’s name. It was deemed impermissible for a withdrawing lawyer, associated with a new firm, to leave his name, in any manner, on his former firm. This practice was considered misleading to clients who would presumably believe the lawyer was still part of his former firm.
Finally, we have the first Illinois opinion on Of Counsel relationships rendered after the enactment of Rule 1.17. Rule 1.17 permitted the previously prohibited sale of a practice, under very strict guidelines. In the fact pattern presented in July of 2007, the panel in Opinion 07-02, determined that a lawyer could not sell his or her practice and then affiliate with his practice with an Of Counsel designation. The panel left a little wiggle room by opining that a sale of assets to a new firm at “fair market value” would permit the lawyer to affiliate. I would presume that the fair market value of assets would be far less than the sale price for the practice.
There are many other issues that need to be considered in a lawyer’s affiliation as Of Counsel to a firm, which are beyond the scope of this article. Health insurance, benefits and malpractice insurance all are considerations in the formation of the relationship. It is most important that the lawyer and the firm to which the lawyer affiliates have a clear and comprehensive written agreement to deal with these and other issues that might need to be memorialized. ■