Firms on Letterhead and
Elsewhere; Affiliated Law Firms Clearing
Conflicts as a Single Unit
TOPIC: Professional Notices, Letterheads, and Signs; Conflict of Interest; Imputation Rule
DIGEST: An attorney or firm may permit the name of another firm to appear on its letterhead together with the descriptive term "affiliated" or "affiliate" if the relationship between the attorney/firm and the "affiliated" firm is "close and regular, continuing and semi-permanent" (the equivalent of an of counsel relationship); "affiliated" attorneys/firms must consider themselves as one unit for conflict clearing purposes.
CODE: DR 2101; DR 2102; DR 5105
QUESTION: May an attorney or firm list another firm as "affiliated" with or an "affiliate" of the attorney or firm and, if so, would the "affiliated" entities be required to consider all of their clients as one unit for conflicts of interest purposes?
As the twenty-first century begins, state and national borders are giving way to international law firms and cooperation agreements among attorneys and law firms to share skills and clients. Increasingly, law firms and individual attorneys are pooling their resources with one another in order better to serve clients whose needs exceed the capacity of the individual lawyer or law firm. In this context, questions have been raised about whether it is permissible under the Code of Professional Responsibility to refer to the members of such a cooperative arrangement as "affiliates" on the letterheads, professional notices, and the like. In this connection, a related question arises whether the "affiliated" firms or attorneys are required to treat the clients of all the constituent firms as their own "clients" when determining whether a conflict exists in deciding if a new client can be accepted.
As indicated more fully below, attorneys and firms may use the term "affiliated" or "affiliate" in describing another member of a cooperative group provided that the relationship is "close and regular, continuing and semi-permanent" (the same requirement for the proper use of the more commonly used "Of Counsel" designation). By the same token, the close and enduring nature of the relationship among attorneys or law firms that is necessary to enable them to properly describe themselves as "affiliated" also mandates that they treat the clients of each constituent entity or "affiliate" as their own in determining whether or not conflicts of interest exist.
The issues raised here have been considered previously by this and other ethics committees. Because these precedents give context to our consideration and inform our conclusions, we describe them below.
Use of the Term "Affiliated"
In N.Y. City 82-28, this Committee rejected as misleading the use of the term "affiliated" to describe the relationship between two firms, despite the inclusion of lengthy disclaimers published by the subject firm to its prospective clients. Several years later, the Committee on Ethics and Professional Responsibility of the American Bar Association ("ABA") approved the use of the terms "associated" or "affiliated" in describing the relationship between lawyers or law firms where that relationship was closely similar to that of "of counsel." ABA Opinion 351 (1984). The ABA limited the use of "associated" and "affiliated" to relationships that were:
close and regular, continuing and semi-permanent and not merely that of forwarder-receiver of business. The "affiliated" or "associated" firm must be available to the other firm and its clients for consultations and advice.
Id. In that same opinion, the ABA also required that conflicts of interest be cleared among all lawyers in the group considered as one unit:
When a firm elects to affiliate or associate another with it and to communicate that fact to the public and clients, there is no practical distinction between the relationship of affiliates under that arrangement and the relationship of separate offices in a law firm. Under both the Model Rules and the Model Code, the Committee would ordinarily apply the same analysis to both arrangements to determine when the firms have a disqualifying conflict of interest treating the "affiliated" or "associated" firms for this purpose as a single firm.
ABA Opinion 388
Ten years later, the ABA opined (ABA 388
(1984)) that where firms or lawyers are using the term "affiliated"
and other similar terms, a detailed description of the terms of such
arrangement should be provided to prospective clients where the retention
made it appropriate to do so. Although the opinion expressed frustration
with the expansion of lawyer to lawyer, and law firm to law firm, relationships
and the terminology used to describe them in the decade since ABA 351
was issued, it had no difficulty in reaffirming the "one unit"
conflict clearing requirement in the circumstances presented in ABA
351 and, we believe, here:
A client is also entitled to know of conflicting commitments where, as described in Formal Opinion 84-351, the relationship between the two firms is "close and regular, continuing and semi-permanent, and not merely that of forwarder-receiver of legal business." In that relationship one firm was "available to the other firm and its clients for consultation and advice." Quite apart from the name that is applied to that relationship, the Opinion correctly concluded that lawyers of the "affiliated" or "associated" firm will not simultaneously represent persons whose interests conflict with the client's interests, just as would be true of lawyers who occupy an "Of Counsel" relationship with the firm. The same expectation necessarily exists when two firms are "Of Counsel" to each other. Formal Opinion 90-357; Informal Opinion 1315 (1975). In each case, of course, if the lawyer believes the representation will not be adversely affected, the client can be asked to consent to the representation.
This Committee's Formal Opinion 19958
In Formal Opinion No. 19958, this Committee considered the scope of DR 2102 (A)(4) and other related issues in analyzing the extent to which individual lawyers and firms ethically could identify themselves as part of a larger organization where their relationship fell short of partnership. In that opinion, we considered the circumstances under which one firm could be properly "of counsel" to another firm, and where it would be permissible for firms to state publicly that they were "associated" or "affiliated."
While it does not refer to the use of the term "affiliated," the Code of Professional Responsibility does discuss another form of cooperative venture: the "of counsel" relationship. The circumstances in which the phrase "of counsel" is properly used is found in DR 2102(A)(4) which (as amended June 1999) provides that:
A lawyer or law firm may be designated "Of Counsel" on a letterhead if there is a continuing relationship with a lawyer or law firm, other than as a partner or associate.
Use of the "of counsel" label
is limited by the provisions of DR 2101(A):
A lawyer ¼ shall not use or disseminate or participate in the preparation or dissemination of any public communication containing statements or claims that are false, deceptive or misleading.
See also EC 2-10. Prior to 1995, this Committee had disapproved of the use of terms other than "of counsel" to describe a relationship of lawyers and law firms (other than "partnership" and similar formal structures) because at the time, those terms, "did not convey a sufficiently precise description of the lawyer's relationship to the listing lawyer or law firm and thus are misleading." NY City 81-71.
In Opinion 1995-8, the Committee agreed with ABA 357 (1990) which had expressed the view -- contrary to the view then prevailing in New York -- that one law firm could become "of counsel" to another law firm as long as the previously established conditions for the formation of such a relationship among individuals were present, namely, a close, continuing, regular and personal relationship.
In concluding that an "of counsel"
relationship could properly exist between or among law firms, a relationship
now specifically approved in DR 2104(A)(4), this Committee reminded
the Bar in 19958 that, when lawyers are in "of counsel"
relationships, they must consider all lawyers in that relationship as
one unit for the purposes of analyzing conflicts of interest:
If the "of counsel" designation is employed, the attorneys will need to keep in mind that for purposes of analyzing conflicts of interest, "of counsel" relationships are treated as if the "counsel" and the firm are one unit. "In consequence there is attribution[] to the lawyer who is of counsel of all of the disqualifications of each firm, and, correspondingly, attribution from the of counsel lawyer to each firm, of each of those disqualifications. In consequence, the effect of two or more firms sharing an of counsel lawyer is to make them all effectively a single firm, for purposes of attribution of disqualifications." ABA 90-357. See also Nemet v. Nemet, 112 A.D.2d 359 (2d Dept. 1985), appeal dismissed, 66 N.Y.2d 602 (1986). [Footnote added]
This Committee also permitted law firms and lawyers to use the designation "associated" or "affiliated" so long as
1. an "of counsel" relationship existed between the lawyers/law firm involved;
2. appropriate disclosure of the nature of the relationship were provided to clients and prospective clients; and
3. "the requisites for an 'of counsel' relationship are met." (i.e., that the lawyers/firms in the relationship were considered one unit for purposes of clearing conflicts).
Conflict Clearing Among "Affiliated Firms"
It has been suggested that, as the variety
of lawyer/law firm cooperative arrangements multiplies, a broader use
of the term "affiliated" should now be accepted. See
ABA 388 (1994). Some have argued that it may be appropriate to permit
the designation of "affiliated" to be extended to situations
where the relationship between law firms would not be sufficiently close
to require that they be considered one unit for conflict clearing purposes.
We continue to adhere to the view that the relationship between firms must be sufficiently close, personal and continuing to warrant the designation of "affiliated" and that this relationship mandates that we treat the clients of each member as clients of every member of the group. The Committee does not believe any reason exists to justify a change in the position we announced in 19958. We note that ABA 388 was referred to favorably in N.Y. City 19958 where the "one unit" clearing rule was specifically made a requirement in the circumstances present here. This Committee does not believe that the reasons which led to Opinion 19958 are any less valid today: namely, the potential for public confusion as to the nature of the relationship connoted by the term "affiliated." Because the Committee believes it is not in the public's interest to expand the acceptable meanings of the term "affiliated" to describe law firm relationships beyond its (relatively recently) approved meaning (i.e., analogous for ethical purposes to "of counsel"), it follows that "affiliated" firms must consider themselves as one unit for conflict clearing purposes. In the end, having decided to obtain the benefits of forming a close, regular, continuing and semi-permanent relationship, the participants should not be excused from the provisions of DR 5-105(D):
While lawyers are associated in a law firm, none of them shall knowingly accept or continue employment when any one of them practicing alone would be prohibited from doing so under DR 5101(A), DR 5105(A) or (B), DR 5108 (A) or (B), or DR 9101(B) except as otherwise provided therein.
Any other result would incentivize "growth" through the formation of "affiliated" groups or "alliances" rather than through more traditional growth within law firms in order to minimize conflicts of interest. We hasten to add that we have no view as to which form of growth is preferable. But we see no reason to limit conflicts to each "affiliate" which may have closer working relationships than the offices of some firms.
Attorneys and firms may use the term "affiliated" or "affiliate" in describing a cooperative firm so long as the relationship is "close and regular, continuing and semi-permanent" (the same requirement for the proper use of the more often used phrase "Of Counsel"). When attorneys/firms are thus "affiliated" they must consider all the clients of each constituent entity in determining whether a conflict of interest exists.
 The Court of Appeals in Cardinals v. Gallinula, 43 N.Y.2d 288 (1977) disqualified an entire firm, under the "principle of attribution," when a lawyer "of counsel" to that firm attempted to represent a party in litigation when, at his prior firm, he had worked for the opposition. Id. at 296.
 While it is true that the term "affiliated" can and does have a variety of meanings, we believe that even sophisticated consumers of legal services would not, without more, conclude that it could reasonably describe an informal and infrequent client referral relationship. Loosening the approved use of the term, in the Committee's view, would allow its application to proliferate to the point of meaninglessness.
 While referring to the "of counsel" relationship, the Restatement (Third) of the Law Governing Lawyers (Proposed Final Draft No. 1, § 203, comment c(ii)) set out reasons justifying a "single unit" clearing rule that have equal validity here: