Legal Memorandum: Professional Independence of a Lawyer

Issue: Do the Model Rules of Professional Conduct or the Model Code of Professional Responsibility prohibit a corporation from charging legal fees for services performed by in-house lawyers?

The Model Rules of Professional Conduct and the Model Code of Professional Responsibility prohibit fee splitting with non-lawyers.  Both provide that “[a] lawyer or law firm shall not share legal fees with a non-lawyer . . . .”  Model Rules of Professional Conduct Rule 5.4 (1983); Model Code of Professional Responsibility DR 3-102 (1980).  The provisions of the rule express traditional limitations of sharing fees.  See Comment to Model Rule 5.4.  The limitations are to protect the lawyer’s professional independence of judgment.  Id.  Where someone other than the client pays the lawyer’s fee or salary, or recommends employment of the lawyer, the arrangement does not modify the lawyer’s obligation to the client.  Id.

A lawyer is prohibited from sharing his or her legal fees with a non-lawyer except in three limited situations.  Rule 5.4.  A lawyer may run afoul of the ethical prohibition against fee splitting in a number of ways, including working as a salaried employee of a non-lawyer and providing services to members or clients of the employer who are charged more for those services that the services cost the employer.  Laws. Man. on Prof. Con., Sec. 41:801 (ABA/BNA) (1984-2000).

The practice of an employer who pays a lawyer a salary to provide legal services for the employer’s clients or members, and then charges or receives fees for those services that exceed the employer’s costs in providing the services involves the lawyer in unethical fee sharing.  Nat’l Treas. Employee’s Credit Union v. U.S. Dept. of Treas., 656 F.2d 848 […]