Opinion 91-13
(June 1991)

You have requested a Guidance Opinion from the Professional Guidance Committee concerning the following circumstances, as presented in your Inquiry letter: You are an attorney currently practicing with a small firm, and you are contemplating starting a "claims processing business" with your wife, who is not an attorney. While you intend to operate this business "in isolation" from your practice of law, you foresee the possibility that clients of the claims processing business might be referred to you for legal consultation and services.

You have asked the Committee to consider whether it would violate the Rules of Professional Conduct to accept and represent clients whom you have solicited or whom have been referred to you through the claims processing company. You also would like to know whether you could participate in the operations of the company while maintaining your practice of law. The Committee considered your request at its May 13, 1991 meeting.

Your establishment, and participation in the operations, of the claims processing company, while maintaining your practice of law is not per se a violation of any Rule of Professional Conduct. The Committee has considered similar situations in the past, such as Inquiry 77-51, in which the Committee determined that a lawyer who did not render legal services through his separate consulting firm, and did not draw any legal business therefrom, was not in violation of the prior Disciplinary Rules. In order to stay in compliance with the Rules of Professional Conduct, you must take care to comply with certain specific Rules which are, potentially, implicated in your proposed conduct.

First, receiving legal referrals from the claims processing company is likely a violation of Rule 7.3 concerning Direct Contact with Prospective Clients. Rule 7.3(a) provides:

A lawyer shall not solicit in-person or by intermediary professional employment from a prospective client with whom the lawyer has no family or prior professional relationship

In the Committee's opinion, the claims processing company is an "intermediary" for purposes of this Rule. Therefore, you may not receive legal referrals from the claims processing company.

A second potential problem arises in that, while you do not state that the claims processing company will be providing any legal advice to its clients, your presence in the operations of the company raises the possibility that such legal advice might be passed along. If this happens, it is arguable that your claims processing company is, in fact, "practicing law" for purposes of the Rules of Professional Conduct. While there is no clear definition of just what constitutes "practicing law" or a "law firm" (for a general discussion of the topic see Dauphin County Bar Association v. Mazzacare, 465 Pa. 545, 351 A.2d 229 (1976)), by giving legal advice to its clients, your claims processing company could be considered to be practicing law, and could be binding itself to several specific Rules of Professional Conduct.

First among these is 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.

Another significant Rule is Rule 5.5 which, in pertinent part, provides:

Unauthorized Practice of Law.


A lawyer shall not:

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

These two Rules evidence the intent of the Rules of Professional Conduct to prevent 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 from rendering purported legal services of course, the applicability of these Rules will depend upon whether the services rendered by the claims processing company ever spill over into the "practice of law."

Another possible problem is presented by your wife's, or another non-lawyer's, ownership interest in the claims processing company. If the company is considered, by virtue of its "claims processing" services, to be practicing law, then the company's revenues may be considered legal fees. If a non-lawyer receives any of these legal fees, Rule 5.4 is implicated:

(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 non-lawyer is a corporate director or officer thereof....

The impact of Rule 5.4(d) is self-evident.

In conclusion, your Inquiry requires your claims processing company to draw a line between non-legal client services and the practice of law. So long as the company carefully avoids rendering legal services, and so long as your law practice receives no client referrals from the company, your participation in the company's operations should not present any ethical problems.

 

   

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.