Lawyers often use the “of counsel” designation loosely and inappropriately. This article will discuss the ethical requirements for an “of counsel” relationship and some of the issues, ethical and otherwise, that might arise in such a relationship.
Scenario: The North Carolina law firm of Dewey, Cheatum & Howe, LLP comprises two lawyers. (Mr. Howe died in 2013.) Mr. Cheatum plans to retire from the firm at the end of 2015. He intends to form his own firm, Will Cheatum, PLLC, and continue practicing law. Mr. Dewey, soon to be the only remaining lawyer in Dewey, Cheatum & Howe, LLP, will terminate and dissolve Dewey, Cheatum & Howe, LLP and start his own firm, Hewey Dewey, LLP, and will also continue practicing. Mr. Dewey and Mr. Cheatum want to form an “of counsel” relationship with each other’s firms. They want to continue sharing the same office space they have now, and they want to keep the same phone number for each of the new LLPs.
Scenario: The North Carolina law firm of Hurry, Up and Wait, LLP has a large traffic court practice. They’ve noticed that they get spinoff work from clients needing representation in their family law case. Several of the lawyers in Hurry, Up and Wait, LLP have a passing familiarity with family law and would like to increase their knowledge and practice in family law. A well respected, recently retired family law attorney in town will consider an “of counsel” relationship with Hurry, Up and Wait, LLP part-time to assist the firm’s lawyers in handling family law cases.
RPC 34 (1988)
In North Carolina, we have two ethics opinions discussing use of the designation “Of Counsel:” RPC 34 provides a good starting point. RPC 34 rules that “an attorney may be designated as “of counsel” to a North Carolina law firm if the attorney is licensed in North Carolina and will have a close, in-house association with the firm which involves no conflict of interest.” RPC 34 would permit the “of counsel” relationship in the two scenario’s above. However, RPC 34 does not answer many other questions prompted by the two scenarios above.
RPC 85 (1991)
RPC 85 eliminates the “in-house” requirement. The opinion rules that an “of counsel” relationship may exist between lawyers practicing in different towns if the relationship is close, regular and personal and the designation is not otherwise false or misleading.
ABA Formal Opinion 90-357
ABA Formal Opinion 90-357 entitled “Use of Designation ‘Of Counsel’” is a thorough treatment of the subject and is excellent guidance for lawyers thinking about forming an “of counsel” relationship with another lawyer or law firm. ABA Formal Opinion 9-357 holds: The use of the title “of counsel” or variants of that title, in identifying the relationship of a lawyer or law firm with another lawyer or firm is permissible as long as the relationship between the two is a close, regular, personal relationship and the use of the title is not otherwise false or misleading. The key concepts are “close, regular, personal relationship” and the title must not be “false or misleading.”
Relationships befitting the title “Of Counsel”
ABA Formal Opinion 9—357 identifies four principal patterns to which the “of counsel” designation appropriately applies: 1) part-time practitioners, practicing in association with a firm, differently than the mainstream lawyers of the firm; 2) a retired partner of the firm who remains associated with the firm and available for occasional consultation, 3) a lawyer in effect a probationary partner to be, and 4) a permanent status in between those of partner and associate lacking an expectation of likely promotion to full partner status. In addition, the “of counsel” designation can apply to a lawyer either to meet temporary staffing needs, provide special expertise not available in the firm or to the “of counsel” lawyer or because the law firm and the “of counsel” lawyer jointly represent clients on a recurring basis.
Relationships unsuitable for the title “Of Counsel”
The relationships to which the “of counsel” designation may be applied can be understood by the relationships to which the designation cannot be ethically applied. ABA Formal Opinion 90-357 holds it is not ethically permissible to use the term “of counsel” to designation the following professional relationships: a relationship involving only an individual case; a relationship of forwarder or receiver of legal business; a relationship involving only occasional collaborative efforts among otherwise unrelated lawyers or firms; and the relationship of any outside consultant. None involve a “close, regular, personal relationship” and are not ethically an “of counsel” relationship.
Ethical requirements for an “Of Counsel” Relationship
Combining N.C. RPC 85 and ABA Formal Opinion 90-357, the ethical requirements for an “of counsel” relationship are: 1) the “of counsel” lawyer must be licensed in North Carolina; 2) there must be a close, personal association between the “of counsel” lawyer and the firm (The ABA terms it a close, regular and personal relationship); 3) the relationship must not involve conflicts of interest; and 4) the title must not be otherwise false or misleading.
Ethical pitfalls to Avoid in an “Of Counsel” Relationship
Lawyers interested in forming an “of counsel” relationship with another lawyer or law firm would be wise to consider the following issues: conflicts, advertising, fee-splitting, legal liability, and malpractice insurance.
An “of counsel” lawyer and the firm must make sure there are no conflicts of interest that prevent the formation of the “of counsel” relationship. N. C. Rules of Prof’l Conduct Rules 1.7 et seq. should be reviewed. Because conflicts of interest may arise during the relationship, conflicts must be continuously checked and dealt with, just as if the “of counsel” lawyer was a member of the law firm. In North Carolina, except in limited circumstances, a conflict involving one member of a firm is imputed to all members of the firm. (Rule 1.10). The same rule would likely apply to the “of counsel” lawyer and the law firm.
ABA Formal Opinion 90-357 states the “of counsel” title must not be false or misleading. NC Rule 7.1(a) states: “A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services.” N.C. Rule 7.5(a) states: “A lawyer shall not use a firm name, letterhead, or other professional designation that violates Rule 7.1.” If the “of counsel” lawyer is providing legal services in his or her own law practice and not in connection with the firm to which he is “of counsel,” he should use his own stationary and not that of the firm. This will help avoid misleading his client into thinking that on the lawyer has the backing of the firm on this legal matter. When working on matters in common with the law firm, he should use firm letterhead that confirms his “of counsel” status with the firm.
Similarly, the “of counsel” lawyer and the firm must avoid anything that would mislead clients into thinking the “of counsel” lawyer and the law firm are more closely related than they are. Rule 7.5(e) states: “Lawyers may state or imply that they practice in a partnership or other professional organization only when that is the fact.” This issue could arise where the “of counsel” lawyer and the law firm share office space.
N.C. Rule 1.5(e) governing fee splitting between lawyers not in the same firm should include the “of counsel” relationship and should be permitted, subject to the requirements of Rule 1.5(e).
The substantive law of malpractice applies to the “of counsel” relationship. The general rule is the “of counsel” lawyer is responsible for his own malpractice, but is not vicariously liable for the firm’s malpractice. The firm is liable for its malpractice and partners are vicariously liable for the malpractice of an “of counsel” lawyer acting within the actual or apparent scope of the firm’s practice and for the firm. The “apparent scope” test is viewed from the objective perspective of a client’s reasonable expectations. A firm considering forming an “of counsel” relationship with another lawyer should carefully screen potential candidates and also monitor the relationship continuously. If the “of counsel” lawyer uses the firm’s letterhead in his or her own practice and on matters not related to the law firm, vicarious liability could be imposed on the law firm for the malpractice of the “of counsel” lawyer even if the legal matter did not involve the work of the law firm.
Both the law firm and the “of counsel” lawyer should contact their malpractice insurance carriers before entering into the relationship. Usually, the “of counsel” lawyer should be added to the law firm’s malpractice policy. The “of counsel” lawyer should be required to maintain his or her own malpractice policy, preferably with the same insurer. If a retiring lawyer is assuming the title “of counsel,” the lawyer should discuss with his malpractice carrier whether “tail coverage” is necessary to protect himself from claims made after his policy expired but which arose from acts or omissions committed during the policy period.
Risk Management Pointer
Finally, it would be wise to always have a written “of counsel” agreement establishing such things as status in the firm, duties, limitations on authority to act for and in the name of the firm, malpractice liability insurance, compensation, office use, benefits and termination. For model agreements and other useful information, consult the ABA publication, OF COUNSEL – A Guide for Law Firms and Practitioners (Fourth Edition). The book is available from Lawyers Mutual’s lending library upon request.
About the Author
Mark Scruggs is senior claims counsel with Lawyers Mutual specializing in litigation, workers compensation and family law matters. You can reach Mark at 800.662.8843 or firstname.lastname@example.org.