Opinion 87-21
(September 1987)

You have asked the Professional Guidance Committee for guidance as to your inquiry dated June 26, 1987. Your inquiry set forth the following facts:

In May, 1987, you resigned your position with a law firm in order to start your own business. The new company is not a law firm, and is organized and doing business as a corporation, pursuant to applicable Pennsylvania corporate law. You are the President of the corporation, your husband (who is not an attorney) is its Secretary/Treasurer, and there are no other officers. The officers do not receive a salary, and you are the only employee. You plan to retain your husband, a dentist, as the company's paid medical consultant.

Your new corporation's stated purpose is to help small to medium-sized non-union employers avoid lawsuits by disgruntled employees. You plan to review the employer's personnel policies, prepare quarterly newsletters and written reports, and offer other "non-legal, employee-related" services. You have stated that your recommendations "necessarily include legal advice," although your company is not engaged in the practice of law. You have asked the Committee for its opinion as to whether your company's operations create any particular problems under the Code of Professional Responsibility or Model Rules of Professional Conduct, not yet adopted in Pennsylvania, but being used as a good guidance tool.

Your situation presents a potential problem, in that, while you maintain that your company is not a law firm and you are not engaged in the practice of law, you do state that the written recommendations you provide to your clients "necessarily include legal advice." By providing this legal advice, it is arguable that your company is, in fact, practicing law. As such, your company could be subject to the governance of the Code of Professional Responsibility, or the Model Rules (when they become effective). It must be noted that there is no clear definition of just what constitutes a "law firm" or the "practice of law." For a general discussion of what constitutes the "practice of law," see Dauphin County Bar Association v. Mazzacare, 465 Pa. 545, 351 A.2d 229 (1976). However, by giving legal advice to your clients, your company could very well be considered to be practicing law, and could be binding itself to several specific rules of conduct which impact upon your situation, particularly the retention of your husband as a paid medical consultant, and his role as a corporate officer.

First among these is Model Rule 5.3, which provides:

Responsibilities Regarding Nonlawyer Assistants.

With respect to a nonlawyer employed or retained by or associated with a lawyer, a lawyer shall be responsible for conduct of such a person that would be a violation of the rules of professional conduct if engaged in by a lawyer if:

(a) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or

(b) the lawyer is a partner in the law firm in which the person is employed, or has direct supervisory authority over the person, and in either case knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

There is no direct counterpart to this Model Rule in the existing Code of Professional Responsibility. Another significant Model Rule is Rule 5.5, providing, in pertinent part:

Unauthorized Practice of Law.

A lawyer shall not:

(a) aid a non-lawyer in the unauthorized practice of law; ....

This Rule mirrors present DR 3-101(a) in the Code of Professional Responsibility. These two Rules evidence the intent of the Model Rules (and the Disciplinary Rules) to prevent the exposure of clients to untrained or unauthorized legal advice, by holding a lawyer responsible if the non-lawyer employee operates without adequate supervision, and by preventing a lawyer from assisting a non-lawyer (whether employed by the firm or not) from rendering purported legal services. Of course, the applicability of these rules will depend on the role your husband will play as a "paid medical consultant." If he is, for example, going to advise clients on issues involving, inter alia, health insurance coverage or employers' liability for workplace-related illnesses, he may fall under the purview of Model Rule 5.5. The same is true for those non-lawyer employees who shall be performing the "reviews"; if they are passing judgment or rendering advice upon employer policies and procedures, they may be deemed to be "practicing law" for purposes of the applicable Rules.

Another possible problem is presented by your husband's role as an officer of the corporation. If your company, by virtue of its analytical and advisory services, is considered to be practicing law, your husband's position as Secretary/Treasurer would appear to violate Model Rule 5.4, which, in pertinent part, provides:

(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for profit if:

(2) a nonlawyer is a corporate director or officer thereof ....

This Rule is a hybrid of DR 3-102(A) (splitting fees with non-lawyer) and DR 5-107 (practice of law with nonlawyer as officer, director, or controlling person of professional corporation). The impact of this Rule is self-evident.

It is clear that your inquiry requires your company to draw a line between non-legal client services and the practice of law. As mentioned above, no clear demarcation exists in this gray area. However, the Committee has addressed the issue of a lawyer owning and operating a consulting business that did not render legal services. In Inquiry 77-51, the Committee decided that a lawyer who did not render legal services through his separate consulting firm, and did not draw any legal business there from, was not in violation of the Disciplinary Rules.

In conclusion, the Committee is of the opinion that to the extent your services include the "practice of law," you are at risk of violating the provisions of the Code of Professional Responsibility (and Model Rules), as discussed above. We urge you to take this into account in planning you business activities.

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.