The inquirer has asked the Committee for an opinion on the following facts:
The inquirer has been retained by the husband of a deceased lawyer to act as attorney for the husband in his role as executor of his wife's estate. In addition, the deceased lawyer's husband has asked the inquiring firm to agree to represent those clients who want the inquirer to provide ongoing legal representation, on the same fee basis that the deceased attorney had with those clients, subject only to price adjustments that would affect all the inquirer's other clients. The inquirer proposes to bill the estate for services rendered to clients of the deceased lawyer if the services provided to such clients became necessary solely because of the death of the lawyer. Finally, the inquirer asks whether it can pay the estate anything of value for the goodwill associated with the deceased lawyer's practice, or in return for the transfer of the files to the inquirer.
Regarding services to clients billed to the estate, although they might properly be billed to the clients and not to the estate, if the executor wishes to pay for such services out of the estate, then he is free to do so. However, in light of the fact that the executor is the inquirer's client as well, this fact must be recognized when examining potential conflicts of interest between the inquirer's firm, the estate and the clients involved. A corollary issue related to the question of who is billed for such services, is the question of the proper procedure to be followed before undertaking work on behalf of the deceased lawyer's clients. The inquirer has proposed that the executor would notify the clients of the deceased lawyer's death, and in such notice, would give the clients an opportunity to select new counsel or to have the inquirer handle their ongoing legal needs. More must be accomplished in such notice to the clients.
Rule 1.16(d) prescribes the steps to be taken upon termination of representation. These steps include giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned.
Thus in addition to the points which the executor proposed to cover in his notice to the clients, the executor must also provide the clients with (1) information concerning the return of unearned fees paid to the deceased lawyer; (2) information concerning the clients right to obtain their files and other property held by the deceased lawyer on their behalf; and (3) information concerning the clients right to obtain other counsel of their choosing.
There could be language in such notice informing the clients that, if no affirmative election to choose other counsel is made within a fixed period of time (such as 90 days), that the absence of an election will be presumed to be an indication of the clients desire to have the inquirer take over the representation. Those clients who do not consent to the inquirers representation must be given a reasonable amount of time to employ other counsel, and their papers must be surrendered to them, or to counsel of their choosing.
As to those clients who affirmatively choose the inquirer or who do not object to representation by the inquirer, the inquirer must also perform a conflicts check as to each client to determine whether there are any conflicts of interests prohibited by Pennsylvania Rules of Professional Conduct 1.7, 1.8 and 1.9. Any client who presents such a conflict must be notified that the inquiring firm cannot represent them, or, in the alternative, a waiver of the conflict must be obtained.1
The Committee points out that there must be compliance with Rule 1.8f, which outlines the requirements that must be met when a clients fee is paid by a third party, in this case the estate.
Regarding the purchase of the decedents goodwill and/or compensation to the estate for the value of the deceased lawyers client files, Rule 5.4a prohibits the sharing of legal fees with non-lawyers, which would be the estate of the deceased lawyer in this inquiry. Rules 5.4(a)(1) and (2) provide exceptions to the rule which prohibits the sharing of legal fees with non-lawyers, which would be the estate of the deceased lawyer in this inquiry.
Rule 5.4(a)(1) permits:
(1) an agreement by a lawyer with the lawyers firm, partner or associate may provide for the payment of money, over a reasonable period of time after the lawyers death, to the lawyers estate or to one or more specified persons.
Rule 5.4(a)(2) provides:
(2) a lawyer who undertakes to complete unfinished legal business of a deceased lawyer may pay to the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer.
These exceptions to the rule against sharing fees with non-lawyers have no application to the facts presented in the inquiry. Rule 5.4(a)(1) does not apply because the deceased lawyer was not a partner or associate of the inquiring firm. The deceased lawyer appeared to have, at most, a referral relationship with the inquirer. Rule 5.4(a)(2) does not apply because, from the facts described in the inquiry, there appears to be no issue concerning the work performed by the deceased lawyer before her death for which she was not paid. 2
Other than Rules 5.4(a)(1) and (2), and the general prohibition against sharing fees found in Rule 5.4, there is nothing in the Rules of Professional Conduct, as they currently stand, which addresses the permissibility of selling all or part of a law practice.
Model Rule 1.17, promulgated by the ABA Standing Committee on Ethics and Professional Conduct, provides specific procedures for the sale of a law practice so that such sales may be accomplished within certain ethical parameters while ensuring that the clients are protected. A proposal for Pennsylvania Rule of Professional Conduct 1.17 based on the language of Model Rules 1.17 has been submitted for consideration to the Disciplinary Board of the Pennsylvania Supreme Court. As of the writing of this opinion, the Board has not adopted proposed Rule 1.17. In the absence of adoption, the purchase of a law practice such as contemplated by the inquiring firm is prohibited by the Pennsylvania Rules of Professional Conduct.
In sum, the inquirer may perform legal work for the estate and for the clients of the deceased lawyer provided appropriate disclosure and issues are discussed as previously outlined, and the inquirer follows the dictates of Rule 1.16 regarding termination of representation. The inquirer must be aware of, and it must protect against, potential conflicts of interest which might result from such an arrangement. Finally, the inquirer may not, under the Rules as they are currently constituted, pay anything of value for the goodwill of the deceased lawyers practice or for the value of the files transferred to the inquiring firm by the deceased lawyers estate.1. One such conflict identified by the Committee that must be considered by the inquirer is the conflict between the firms representation of the estate of the deceased lawyer and the firms representation of the deceased lawyers clients. Such a conflict may arise because of the executors desire to minimize legal bills to the estate and the obligation of the inquirer to ensure that all necessary legal work is performed on behalf of clients who require legal work necessitated by the decedents death (and thus payable by the estate). Similarly, a conflict may arise in the event the inquirer learns that the deceased lawyer committed malpractice in her representation of a client.
2. Obviously, if there were any such work performed by the deceased lawyer prior to her death for which she did not obtain payment, then the inquirer is permitted, pursuant to Rule 5.4(a)(2), to share the fee according to the value of the services performed by the deceased lawyer for which she was not compensated.