You have asked the Committee to consider the situation addressed in your letter of December 23, 1988. Briefly, the facts presented are as follows. An attorney with extensive practical background in environmental law has been offered employment with an engineering consulting firm. This firm's services to its client include advice regarding the investigation, evaluation and remediation of environmental problems, including issues of compliance with governmental regulations. In addition to general in-house duties associated with doing business in Pennsylvania, the attorney will have the following responsibilities which are of particular moment to this inquiry:
(i) Direct counseling of clients of the firm and consultation with counsel regarding questions of environmental law and regulations as the same impact upon projects undertaken by the firm;
(ii) Representation of the firm before administrative boards having jurisdiction over projects undertaken by the firm; and
(iii) Representation of clients of the firm before the same administrative boards.
Pursuant to your conversation with Paul Kazaras, Esquire, the Committee s liaison, the issues of potential unauthorized practice of law raised by your inquiry shall be addressed in detail by the Unauthorized Practice of Law Committee. The Professional Guidance Committee has reviewed your inquiry with an eye toward that issue, in general, and any others raised. Your inquiry was considered at the Committee's January meeting. The Committee determined, as discussed below in detail, that the situation presented in your inquiry raised significant concerns about the professional independence of the lawyer, the unauthorized practice of law, and potential conflicts of interest. These concerns shall be addressed seriatim:
1. Professional Independence.
Rule 5.4 of the Rules of Professional Conduct sets forth several proscriptions intended to preserve the independence of a lawyer's judgment and ultimate work-product. Two discrete proscriptions contained in the Rule may impact significantly upon your inquiry. The first is subsection (a), which prohibits a lawyer or law firm from sharing legal fees with a non-lawyer, except in certain limited circumstances not relevant to this inquiry. Since you have indicated that the lawyer's duties will include giving legal advice to clients of the consulting firm, and, presumably, a fee will be paid for that service, to the extent that these fees become revenues of the firm and are distributed to non-lawyer personnel, a concern arises that Rule 5.4(a) s proscriptions are implicated. The Committee feels very strongly that such a situation would, in fact, constitute a violation of that Rule.
Subsection (b) prohibits the formation of a partnership with a non-lawyer if that partnership engages, in whole or in part, in the rendering of legal services. While the lawyer's employment status is not clear from your inquiry letter, should a partnership be involved, a clear problem arises as a result of Rule 5.4(b).
Perhaps most troubling are the implications of Rule 5.4(c) on your inquiry. That portion of the Rule provides:
(c) A lawyer shall not permit a person who recommends, employs or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services.
Assuming that the lawyer in question is receiving compensation (a salary or a draw) from the firm in the course of performing his work on behalf of the firm's clients, he is within the scope of this provision. It is not unreasonable to anticipate that management at the consulting firm might seek to influence, or have input into, the work performed by the lawyer for the firm's client giving rise to issues of loyalty to the client. The Committee expressed concern that, in a non-law firm business which, as part of its services, advises clients on legal matters, an attorney may be frequently subjected to business-development concerns and legal concerns which are in competition. These competing concerns may give rise to situations where the firm's business interests are not well served by attention to the client's legal concerns. The Committee felt that such a situation is clearly of the type which Rule 5.4(c) was intended to prevent.
2. Unauthorized Practice of Law.
While this issue is, as you discussed with Mr. Kazaras, beyond the scope of your inquiry to this Committee, the Committee felt it prudent to point out that services performed by in-house counsel for outside company clients almost always raise the issue of the role played by non-lawyers in rendering that service. The lawyer's reliance on non-lawyer support personnel is not, per se, a transgression of the provisions of Rule 5.5, so long as those personnel are supervised in accordance with the lawyer's responsibilities under Rule 5.3. However, because much of the firm's business relationship with its clients will likely be carried out by non-lawyers, there is substantially more risk of a non-lawyer becoming involved in the rendering of legal advice to the client. Clearly, this is not the traditional "lawyer-and-paralegal" relationship most frequently encountered under Rules 5.3 and 5.5.
3. Potential Conflict of Interest.
Potential conflicts of interest must be considered in light of Rule 1.7. Rule 1.7 prevents a lawyer from acting on behalf of one client if such action will be adverse to1 or will limit the attorney's ability to service, another client's interests. As with the other concerns expressed herein, this concern is made complex by the fact that the lawyer shall be simultaneously serving as in-house counsel and advising the company's clients. It is not unreasonable to expect that occasions will arise where the representation of the firm itself, in pursuit of its own commercial goals, might adversely impact the interests of certain firm clients.
Similarly, it is possible that the firm may act in furtherance of one client's interest to the inadvertent detriment of the interests of another, a practice which is, perhaps, commonplace in the marketplace but is problematic when the services of a lawyer are involved. The Committee expressed concern that a firm such as the one at issue is not likely to possess the institutional and administrative safeguards against potential conflicts that are common in law firms, simply because most businesses do not conduct their daily affairs under the mandate of the Rules of Professional Conduct or other rules governing the unique relationship between lawyer and client.
In sum, the Committee expressed substantial concern that the use of the lawyer's services in rendering counsel and legal assistance to the consulting firm's clients is fraught with risk. The situation presented by your inquiry must be carefully examined by the lawyer in the light of the concerns expressed herein.
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