Year 1995 Ethics Opinions
THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION 1995-11
COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS
July 6, 1995
ACTION: FORMAL OPINION
TOPIC: Non-lawyer employees; Supervision of Lay Personnel; Sharing Legal Fees with Non-lawyers; Confidentiality; Conflicts of Interest; Dissemination of False Public Communications.
DIGEST: A lawyer must effectively supervise non-lawyers in his or her employ, refrain from aiding or encouraging the unauthorized practice of law, ascertain that client confidences are maintained and that the public is not misled as to the status of non-lawyers. Lawyers may not share fees with non-lawyers.
CODE: DRs 1-104(A), 2-101(A), 3-101(A), 3-102(A), 3-103(A), 4-101(A), 4-101(D); ECs 3-5, 3-6, 4-4.
NOTE: Modifies N.Y. City 884 (1974).
What are the ethical responsibilities of attorneys with regard to legal assistants and other non-lawyer employees who interact with other lawyers, clients and the public?
In the two decades since this committee issued its Formal Opinion on paralegals, see N.Y. City 884 (1974), much has happened with regard to non-lawyers' involvement in the provision of legal services. Non-lawyers have formed corporations or fashioned themselves "consultants" to provide legal services independent from attorneys and developed self-help books, kits and software. See ABA/BNA Lawyers' Manual on Professional Conduct, Prohibition on Practice by Nonlawyers, 21:8024, 21:8027 (1984). See also Alexandra M. Ashbrook, Note, The Unauthorized Practice of Law in Immigration: Examining the Propriety of Non-Lawyer Representation, 5 Geo. J. Legal Ethics 237, 257-59 (1991) (New York "immigration consultants"). Several groups currently are advocating a dramatically expanded role for the paraprofessional. See, e.g., Matthew Goldstein, Bar, Public Debate Role of Paralegals, N.Y.L.J., Aug. 20, 1993, at 1 (groups advocate easing restrictions on routine legal matters such as residential real estate closings and uncontested divorces). The National Federation of Paralegal Associations, Inc. ("NFPA") and the National Association of Legal Assistants ("NALA") which mostly represent paralegals in private law firms and corporations, HALT ("Help Abolish Legal Tyranny") also known as Americans for Legal Reform and Public Citizen are among those groups who last year testified before the American Bar Association's Commission on Nonlawyer Practice on the issue. While they differ as to the extent of the expansion, ranging from supervised service to the public to unsupervised but regulated service by licensed non-lawyers, they all advocate an expansive role for paralegals. This sentiment is shared by some in the profession. For example, both the Committee on the Profession of the Association of the Bar of the City of New York in its 1992 report, "Is Professionalism Declining?", and the ABA Commission on Professionalism in its 1986 report, advocated a greater role. Recently, the City Bar's Committee on Professional Responsibility gave its "preliminary endorsement to a deregulated licensing approach that permits greater nonlawyer practice in specified areas but [which] establishes minimal requirements. . . ." Prohibition on Nonlawyer Practice: An Overview and Preliminary Assessment, 50 Record 190, 209 (1995).
These developments exist in an environment where according to the United States Department of Labor, the paralegal field is one of the fastest growing occupations in America. The vast majority of these individuals are employed by private law firms, see Department of Labor, Occupational Outlook Handbook 231 (1994-95 ed.) (hereinafter "Handbook"), where it is widely recognized that the services of various lay personnel enable the lawyer to provide clients with legal services in the most economic and efficient manner. Lawyers customarily employ secretaries, investigators and paraprofessionals in delivering legal services to the client. Some firms however have branched out to maintain a nontraditional support staff. See Daniel Wise, Non-Lawyer Partners: Ethics Problems Seen; Experts Are Divided Over D.C. Court Rule, N.Y.L.J., Feb. 27, 1990, at 1 (discussing integration of architects, lobbyists and public relations specialists into law firms). The Labor Department also predicts that "[j]ob opportunities are expected to expand as more employers become aware that paralegals are able to do many legal tasks for lower salaries than lawyers." Handbook at 232.
Thus, a large and growing number of workers in the law firm are not subject to discipline under the Lawyer's Code of Professional Responsibility. See Preliminary Statement to The Lawyer's Code of Professional Responsibility ("[o]bviously the Canons, Ethical Considerations, and Disciplinary Rules cannot apply to non-lawyers . . ."). To ensure that its objectives are nonetheless met, the Code requires lawyers to effectively supervise non-lawyers in their employ, to refrain from aiding or encouraging the unauthorized practice of law; to ascertain that client confidences are maintained and the public not misled as to the status of non-lawyers. The situation is therefore especially taxing upon the one individual in the workplace who is to be held responsible for the observance of the Ethics rules. This opinion addresses that immense responsibility. n1
n1 This opinion is intended to be limited to a discussion of the lawyer's responsibility toward non-lawyer personnel under his or her supervision. It is not intended to address the role of non-lawyers generally in the legal system.
Supervision of Support Staff
DR 1-104(A) provides:
A lawyer shall be responsible for a violation of the Disciplinary Rules by another lawyer or for conduct of a non-lawyer employed or retained by or associated with the lawyer that would be a violation of the Disciplinary Rules if engaged in by a lawyer if (1) [t]he lawyer orders the conduct; or (2) [t]he lawyer has supervisory authority over the other lawyer or the non-lawyer, and knows or should have known of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.
The Code clearly contemplates that lawyers will delegate tasks to lay personnel. See EC 3-6. In delegating tasks, the lawyer should provide instruction regarding the ethical constraints under which those in the law office must work. While the non-lawyer may receive some guidance in this regard elsewhere, as for instance through the Code of Ethics and Professional Responsibility and Model Standards and Guidelines adopted by the NALA and NFPA, see also Mary A. DeVries, Legal Secretary's Complete Handbook 3-4 (4th ed. 1992) (instructing against solicitation of business for the firm and divulging client confidences), the lawyer should not rely on others to perform this important task.
Employers generally require formal paralegal training. However, the Department of Labor reports that while there are over 600 formal paralegal training programs, only 177 had been approved by the ABA in 1993. See Handbook at 232. Others prefer on-the-job training, often hiring persons with college education but no legal training or promoting experienced legal secretaries. See id. Given the fact that paralegals do not have legal training and are not subject to discipline, the lawyer has a heightened standard of supervision from that generally owed toward a subordinate attorney pursuant to DR 1-104(A). See Geoffrey C. Hazard Jr. & W. William Hodes, The Law of Lawyering § 5.3:100-03, at 784-85 (2d ed. 1990 & 1994 supp.). The standard of supervision is fairly strict. See In re Bonanno, 208 A.D.2d 1117, 617 N.Y.S.2d 584 (3d Dep't 1994) (attorney censured for lack of supervision of legal assistant who unbeknownst to attorney held himself out as attorney, represented clients and embezzled client funds). The lawyer must ensure that office procedures comport with the Code as well. See In re Kiley, 22 A.D.2d 527, 256 N.Y.S.2d 848 (1st Dep't 1965) (submission of false reports); In re Neimark, 13 A.D.2d 676, 214 N.Y.S.2d 12 (2d Dep't 1961) (failure to supervise office operations).
Appropriate tasks undertaken by paralegals
The law against the unauthorized practice of law, N.Y. Judiciary Law §§ 478 and 484, has been rationalized as required to protect the public from "the dangers of legal representation and advice given by persons not trained, examined and licensed for such work. . . ." Spivak v. Sachs, 16 N.Y.2d 163, 168, 263 N.Y.S.2d 953, 956, 211 N.E.2d 329, 331 (1965). Further, the state's power to license and sanction arguably ensures that attorneys will "practice ethically and with a certain minimum level of expertise." 18 Int'l Ltd. v. Interstate Express, Inc., 116 Misc. 2d 66, 67, 455 N.Y.S.2d 224, 225-26 (Sup. Ct. N.Y. Co. 1982) (and cases cited therein). That there are no similar safeguards applicable to the majority of lay personnel working in the legal field, is to some problematic. See Non-Lawyer Partners, supra ("'Only a professional who has his own license on the line' will pay sufficient attention to professional strictures. . . .").
Others argue conversely, that allowing non-lawyers to engage in many tasks currently reserved for attorneys would help provide much needed legal services to those who find the cost of hiring an attorney daunting, see Bar, Public Debate Role of Paralegals, supra (freelance paralegal charges $150 for mortgage refinancing, compared to $500 attorney's fee) and prove a boon to firms. See Neil T. Shayne, The Use of Paralegals, N.Y.L.J., Apr. 14, 1992, at 3 (arguing that as paralegals attend to lower billed matters, attorneys are freed to devote more hours to matters billed at more remunerative rate).
DR 3-101(A) provides that "[a] lawyer shall not aid a non-lawyer in the unauthorized practice of law." There continues to be much debate over the true impetus of this ethical rule. Compare Thomas D. Morgan, The Evolving Concept of Professional Responsibility, 90 Harv. L. Rev. 702, 707-12 (1977) (fear of lower fees and increased public access lessening lawyers' monopoly) with Deborah L. Rhode, Policing the Professional Monopoly: A Constitutional and Empirical Analysis of Unauthorized Practice Prohibitions, 34 Stan. L. Rev. 1, 90 (1981) (protecting public from individuals not subject to the Bar's supervision and standards). Yet, whatever concerns are at the root of DR 3-101(A), it is the law in New York that a non-lawyer shall not practice law, and the law provides for punishment of the violator. See N.Y. Judiciary Law §§ 478, 484. Since the Code also counsels that lawyers should respect the law and refrain from illegal conduct, even minor violations of the law, debate over the underpinnings of DR 3-101(A) is engaging but inconsequential in evaluating a lawyer's responsibility.
The Code does not define what constitutes the "unauthorized practice of law". EC 3-5 merely provides:
Functionally, the practice of law relates to the rendition of services for others that call for the professional judgment of a lawyer. The essence of the professional judgment of the lawyer is the educated ability to relate the general body and philosophy of law to a specific legal problem of a client. . . .
Cf. N.Y. City 1994-9 (supervised unlimited discretion regarding sensitive matters of judgment nondelegable). Some jurisdictions have concluded that any work performed by a non-lawyer under the supervision of an attorney is by definition not the "unauthorized practice of law" violative of prohibitory provisions, see, e.g., In re Opinion 24 of Committee on Unauthorized Practice of Law, 128 N.J. 114, 123, 607 A.2d 962 (1992). This committee does not go so far. However, given that the Code holds the attorney accountable, the tasks a non-lawyer may undertake under the supervision of an attorney should be more expansive than those without either supervision or legislation. Supervision within the law firm thus is a key consideration. Cf. Yankopoulos v. State, 103 A.D.2d 95, 96-97, 478 N.Y.S.2d 633, 634 (1st Dep't 1984) (that paralegal communicated with bedridden attorney with respect to document she prepared and signed and for which she did not retain fee found "flimsy evidence" of unlawful practice).
The Department of Labor describes the duties of paralegals thusly:
Paralegals generally do background work for lawyers. To help prepare cases for trial, paralegals investigate the facts of cases to make sure that all relevant information is uncovered. Paralegals may conduct legal research to identify the appropriate laws, judicial decisions, legal articles, and other materials that may be relevant to clients' cases. After organizing and analyzing all the information, paralegals may prepare written reports that attorneys use to decide how cases should be handled. Should attorneys decide to file lawsuits on behalf of clients, paralegals may help prepare the legal arguments, draft pleadings to be filed with the court, obtain affidavits, and assist the attorneys during trials. Paralegals also keep files of all documents and correspondence important to cases. . . . They help draft documents such as contracts, mortgages, separation agreements, and trust instruments. They may help prepare tax returns and plan estates. Some paralegals coordinate the activities of the other law office employees and keep the financial records for the office.
Handbook at 231.
As the above indicates, the line between the work of an attorney and a paralegal defies clear demarcation and the courts have been only slightly more enlightening of these boundaries. Among those activities clearly prohibited are the appearance in court, holding oneself out to be a lawyer, and the rendering of legal advice to a particular client. See El Gemayel v. Seaman, 72 N.Y.2d 701, 536 N.Y.S.2d 406, 533 N.E.2d 245 (1988). In Matter of Stenstrom, 194 A.D.2d 277, 605 N.Y.S.2d 603 (4th Dep't 1993), an attorney was disbarred in part because he:
delegated to nonlawyer employees virtually all responsibility for client contact, the preparation of legal documents and the management of office finances. . . . Nonlawyer employees routinely misrepresented to clients the status of their cases and routinely advised clients on legal matters, on some occasions providing inaccurate advice that prejudiced or damaged the clients. . . . Nonlawyer employees were given signatory power with respect to the client trust account. . . .
194 A.D.2d at 278-79, 605 N.Y.S.2d at 604.
Suffice it to say that a lawyer should not permit a paralegal within his or her employ to give advice regarding legal relationships, rights or obligations which he or she has developed independent of or unbeknownst to a supervising attorney; nor counsel on the legal consequences of actions or the application of legal precepts to facts. Unless authorized by law in the circumstances, lawyers should not permit paralegals in their employ to appear alone in court with clients nor represent the legal position of the client in communications in the absence or without the knowledge of an attorney. Paralegals may communicate with clients and witnesses to obtain facts for purposes of legal representation and complete legal forms for attorney review and signature. A paralegal may engage in such activity as the organizing, indexing, reviewing, summarizing and proofreading of documents. He or she may draft correspondence, briefs and affidavits under the direction and supervision of an attorney. Besides these clearly acceptable activities, it remains with the legislature and courts to decide what activities are permissible.
Various forms of non-lawyer practice have either been authorized or recognized as not the practice of law. See In re Sharon B., 72 N.Y.2d 394, 534 N.Y.S.2d 124 (1988) (corporation may represent itself in child protection proceeding); Bennett ex re. Fed. Bar Ass'n v. Goldsmith, 254 A.D. 855, 6 N.Y.S.2d 748 (1st Dep't 1938) (completing immigration forms alone not practice of law), aff'd, 280 N.Y. 529 (1939); New York Family Court Act § 838 (non-witness friend, relative counselor or social worker may be present in courtroom but not participate). Moreover, proposed legislation indicates this trend shows no signs of abatement in New York. See 1993 Senate Bill No. 4750 (unemployment insurance hearings); 1993 Assembly Bill No. 5446 (representation of tenants in housing court). Further, certain law students and law school graduates may, under lawyer supervision, engage in law-related activities in the work of a legal aid organization, in certain Family Court proceedings, in assisting District Attorneys, and other programs approved by the Appellate Division, see N.Y. Judiciary Law §§ 478, 484. See also N.Y. County 682 (1990). Yet, that specific lay personnel are authorized to perform certain tasks does not authorize all individuals -- including paralegals -- to perform those tasks. See Lefkowitz v. Lawrence Peska Assocs., 90 Misc. 2d 59, 393 N.Y.S.2d 650, 652 (Sup. Ct. N.Y. Co. 1977) (that patent agents are permitted by law to prepare applications does not make that nonlegal work).
Maintaining Client Confidences
The lawyer is responsible for maintaining the confidentiality of client information. DR 4-101(A), EC 4-4. DR 4-101(D) provides:
A lawyer shall exercise reasonable care to prevent his or her employees, associates, and others whose services are utilized by the lawyer from disclosing or using confidences or secrets of a client, except that a lawyer may reveal the information allowed by DR 4-101(C) through an employee.
A "secret" under DR 4-101(A) must be kept inviolate even if it does not reach the level of attorney-client privilege. See N.Y. State 503 (1979). It is especially important to supervise non-lawyers in this area since client conversations with lay personnel may not always be treated the same as communications with an attorney. Compare People v. Mitchell, 86 A.D.2d 976, 976, 448 N.Y.S.2d 332, 333 (4th Dep't 1982) (statements made in law office waiting room to paralegal and two secretaries in attorney's absence found not privileged), aff'd, 58 N.Y.2d 368, 461 N.Y.S.2d 267 (1983) with CPLR 4503(a) (confidential communication made between the attorney or his employee and the client in the course of professional employment protected).
Further, the transient nature of lay personnel is cause for heightened attention to the maintenance of confidentiality. See generally Kelly A. Randall, Note, Do Your Clients' Confidences Go Out the Window When Your Employees Go Out the Door?, 42 Hastings L.J. 1667 (1991) (proposing conflict of interest rule for non-lawyers). Similar to instances where a law firm has been disqualified due to the confidentiality imputed from a lawyer in the firm, so too may it be due to a non-lawyer employee. See Glover Bottled Gas Corp. v. Circle M. Beverage Barn, Inc., 129 A.D.2d 678, 678, 514 N.Y.S.2d 440, 441 (2d Dep't 1987) (attorneys disqualified after hiring paralegal who had worked on subject litigation while previously employed by opponent). Lawyers should be attentive to these issues and should sensitize their non-lawyer staff to the pitfalls, developing mechanisms for prompt detection of potential conflict of interest or breach of confidentiality problems.
Letterhead, Correspondence, Briefs & Business Cards
DR 2-101(A) counsels that a lawyer cannot be involved in the dissemination of communications containing false, deceptive, or misleading statements. To this end, any communication generated out of the law firm that does not properly designate the non-lawyer status of any non-lawyer named therein is prohibited. See, e.g., Nassau County 87-14. To allow otherwise is to allow the public to be misled given the imprimatur of lawyer status and all it entails that a firm document automatically conveys. Therefore, a lawyer may not list paralegals on letterhead or business cards without clearly identifying their non-lawyer status. Cf. New York Criminal & Civil Courts Bar Ass'n v. Jacoby, 61 N.Y.2d 130, 136, 472 N.Y.S.2d 890, 894 (1984). Cf. N.Y. City 1987-1 (lawyer sharing an office with a non-lawyer must avoid misleading public into believing that the non-lawyer office-mate is a lawyer). Similarly, a legal assistant, designated as such, may be credited in a brief.
Further, in corresponding either orally or in writing with a client, another lawyer or member of the public, the legal assistant must make known his or her lay status. Ambiguous titles which do not make clear that the individual is a non-lawyer are prohibited. See N.Y. State 640 (1992); see also N.Y. County 673 (1989).
Compensation of Support Staff
DR 3-102(A)(3) prohibits lawyers or law firms from sharing fees with non-lawyers, except that "[a] lawyer or law firm may include non-lawyer employees in a retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement." See also DR 3-103(A). The compensation of a non-lawyer employee may not be a commission or bonus that is directly linked to a percentage of profits or fees received from any client or the volume of business development, or be a reward for clients brought or referred by the non-lawyer to the firm. See, e.g., ABA 316 (1967); N.Y. State 633 (1992); Maryland 84-103. Non-lawyer compensation may, however, be tied to the net profits and business performance of a firm. See ABA Inf. 1440 (1979) (noting that the source of a law firm's funds to pay any non-lawyer employee is fees for legal services, and approving compensation of a non-lawyer administrator based in part on a percentage of net profits of the firm). Similarly, discretionary bonuses, which are almost always tied to the profitability of the firm, may properly be paid to non-lawyer employees without violating the rule against sharing legal fees. See Virginia 767 (1986) & 806 (1986).
Given the large and growing number of non-lawyers in the law firm coupled with the indecision over what is and what ought to be the proper role of non-lawyers in the provision of legal services, an attorney must take care to educate her non-lawyer employees regarding the rules of ethics and delegate and supervise the completion of appropriate tasks. He or she must ascertain that client confidences are maintained, that the public is not misled as to the status of non-lawyer employees and that non-lawyer compensation does not interfere with the lawyer's professional independence.