THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION 1994-4
COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS
May 5, 1994
ACTION: FORMAL OPINION
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THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION 1994-4
COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS
May 5, 1994
ACTION: FORMAL OPINION
TOPIC: Foreign law firm; holding out as partnership; firm
name; letterhead and professional cards
DIGEST: Use by New York affiliated firm of firm name almost identical to that of a German firm, without actual partnership or sharing of responsibility, is misleading; similarly, cannot list name of German firm as if it were a partner in the New York firm, or describe German office as the "head office."
CODE: DRs 2-102(A), 2-102(B), 2-102(C), 2-102(D); EC 2-11.
May a German law firm open an office for the practice of law in New York by the formation of a separate law partnership that uses a name almost identical to that of the German firm?
"X. & Partner Rechtsanwaelt," a German law firm, has decided to open an office in New York City for the purpose of providing information on German law and obtaining business for its various offices in Germany. In conjunction with the opening of that office, it is planned that another firm calling itself "X. & Partners, Attorneys at Law" (hereinafter "X. & Partners"), will be organized for the practice of law in the State of New York. Several ethical problems are presented by the firm names, letterhead and professional cards the inquirer proposes to use.
The Name of the Firm
EC 2-11 of the Code of Professional Responsibility provides, in pertinent part, that:
[A] lawyer in private practice should practice only under a designation containing the lawyer's own name, the name of an employing lawyer, the name of one or more of the lawyers practicing in a partnership, or, if permitted by law, in the name of a professional corporation for the practice of law, which should be clearly designated as such.
There are two exceptions to the foregoing rule. The first is contained in DR 2-102(B), which permits a firm to use, or continue to use, the name or names of one or more deceased or retired members of the firm or a predecessor firm in a continuing line of succession. See generally N.Y. State 622 (1991). The second is set forth in New York Criminal & Civil Courts Bar Assn. v. Jacoby, 61 N.Y.2d 130 (1984):
A multistate law firm (consisting of partners admitted to practice in different States) may practice law in New York State if at least one of its active partners is admitted to practice in this State, and it may conduct such practice under a firm name comprised of a combination of surnames, although none of them is the surname of a partner licensed to practice in New York.
The name X. & Partners does not fit into either of these exceptions. Moreover, even if the rule applicable to multistate law firms were to apply to multinational law firms, the name X. & Partners may still be misleading for the reasons set forth below.
The inquirer indicated that the name X. & Partners is not intended to designate one law firm that practices in several jurisdictions, but was chosen rather to specifically distinguish the inquirer's firm from the firm of X. & Partner. The reason for this is that the firm of X. & Partner does not want to assume the obligations that would normally occur in a partnership with the other members of X. & Partners. As a rule, a multistate law firm practicing in New York may use the same name it uses in other states, provided that the circumstances are not such as to cause local use of the name to be misleading. But if there is no true partnership relationship with the local lawyer, as indicated by real sharing of profits, liabilities and professional responsibility, use of an out-of-state lawyer's name in the firm would be misleading. N.Y. State 175 (1970). In our opinion, therefore, the use of a name almost identical to that of the German firm, without the sharing of responsibility, which a layman might reasonably expect from the similarity of names, would be misleading. See DR 2-102(C).
Letterhead and Professional Cards
Under DR 2-102(A):
A lawyer or law firm may use professional cards, professional announcement cards, office signs, letterheads or similar professional notices or devices, provided the same do not violate any statute or court rule, and are in accordance with DR 2-101, including the following:
1. A professional card of a lawyer identifying the lawyer by name and as a lawyer, and giving addresses, telephone numbers, the name of the law firm and any information permitted under DR 2-105. A professional card of a law firm may also give the names of members and associates.
* * *
4. A letterhead identifying the lawyer by name and as a lawyer, and giving addresses, telephone numbers, the name of the law firm, associates and any information permitted under DR 2-105. A letterhead of a law firm may also give the names and dates relating to deceased and retired members. . . .
Our review of the letterhead and business card submitted by the inquirer reveals the following problems:
A. The name "X. & Partner" is listed on the proposed letterhead. However, the persons listed on the letterhead should be natural persons or professional corporations only. The name X. & Partner does not identify individuals rendering legal services, but merely refers to a firm whose members are undisclosed. In addition, by including X. & Partner in the listing of attorneys, there is, at the very least, a possibility that potential clients of the New York firm may expect to be serviced by the attorneys employed worldwide by X. & Partner, as well as by the attorneys actually working in the New York office.
B. One of the attorneys who actually will be working out of the New York office is admitted to practice in Pennsylvania and Germany, but not in New York. The inquirer intends to qualify his listing with the statement "not admitted in New York." Since DR 2-102(D) requires that the letterhead make clear any jurisdictional limitations on those members and associates of the firm not licensed to practice in New York, we believe that the attorney should instead be described as licensed to practice only in Pennsylvania and Germany, rather than in the manner suggested by the inquirer.
C. The proposed letterhead carries an address described as the "head office" and a listing of other offices. This is misleading. X. & Partners has only one office; the implication that the New York firm is an office of the German firm is misleading given their real relationship. See N.Y. State 538 (1981) (New York firm cannot list on its letterhead a foreign associate or correspondent firm because such listings might mislead a person to seek the services of the New York firm on the basis of an incompletely described relationship); DR 2-102(C).
The form of business card may be also be misleading, since it implies that X. & Partners has offices outside of New York, when in fact, the one foreign address given is that of X. & Partner, and the cities listed seem to be those in which X. & Partner has offices.
We note that the problems identified above are caused by the inquirer's desire to separate the New York partnership from the German international partnership. If the German firm meets the requirements of the law and rules relating to the practice of foreign law in New York and/or the practice of New York law, as the case may be, many of the objections raised above could be avoided by having one firm, rather than two, carry on the activities contemplated.
For the foregoing reasons, we answer the question presented in the negative as a matter of ethics. We express no opinion on the legality of the proposed arrangement under applicable law.
TOPIC: Name; use of title "Esquire" No. 1994-5 COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS May 5, 1994 ACTION: FORMAL OPINION
DIGEST: Attorney may ethically use the title "Esq." after his or her name, even when acting in a non-legal capacity.
CODE: DRs 1-102(A)(4); 2-101(A); 2-101(C)(1); EC 2-13.
May an attorney properly append the suffix "Esq." to his or her name when not acting in a legal capacity?
The inquirer is counsel to a not-for-profit organization that employs staff members and volunteers who happen to be attorneys, but who perform non-legal functions such as public relations, administration, or communicating with members of the organization about the organization's positions on particular issues. The organization identifies these attorneys, who do not practice law on its behalf, in its documents with the title "Esq." following their names. The inquirer asks whether this identification is proper and whether the attorneys may appropriately use the title when communicating on behalf of the organization. We answer these questions affirmatively.
The use of the title "Esquire" has its origins in the Middle Ages. An esquire was a candidate for knighthood, acting as attendant and shield bearer for a knight. n1 Webster's New World Dictionary (1980). Over time, the title became one denoting respect, rather than a specific occupation.
n1 The word is derived from the Latin "scutum" -- a shield, and Middle English: "esquier" -- a shield bearer.
According to the Encyclopedia Britannica, after the decline of the feudal system, the title of "Esquire" was perpetuated by certain lawyers, among them William Blackstone and Edward Coke. These lawyers drew up lists of those they thought entitled to carry the title. The lists included various classes of men who were sons of peers, minor nobles, honorary knights and those who were designated with the title "esquire" upon appointment to office. These appointments were to both legal and non-legal offices and included among others, "Royal Academicians." However, it appears that the title has always been an arbitrary conferment and never reserved exclusively to lawyers. See, e.g., Black's Law Dictionary (6th ed. 1990) (defining "esquire" as a title of dignity next above gentleman, and below knight; also a title of office given to sheriffs, sergeants, and barristers at law, justices of the peace and others; in the United States, title commonly appended after name of attorney); Random House Dictionary of the English Language (2nd ed. 1987) (defining esquire as: "an unofficial title of respect having no precise significance, sometimes placed, esp. in abbreviated form, after a man's surname in formal written address; in the U.S., usually applied to lawyers, women as well as men; in Britain, applied to a commoner considered to have gained the social position of gentleman").
It is not clear how the title "Esquire" came to be used so commonly (and seemingly so exclusively) by lawyers in the United States. There is no authority that reserves the title "Esquire" for the exclusive use of lawyers. n2 Because neither the law nor any established ethical rule governs the use of the title, it would be presumptuous for any non-legislative body to purport to regulate its use. Nonetheless, based on common usage it is fair to state that if the title appears after a person's name, that person may be presumed to be a lawyer.
n2 For example, New York's Judiciary Law contains no reference to the use of the term esquire in its provisions governing "Attorneys and Counsellors." Indeed, it has been noted that:
an 'esquire' has no relation to law. It is often added to the names of poets or artists; and the term may be applied to a landed proprietor or a country squire; that being one of courtesy. . . . Nowhere do we find that the term 'esquire' denotes an attorney at law.
Antonelli v. Silvestri, 137 N.E.2d 146, 147-48 (Ohio App. 1955).
The only ethical question posed by the use of the title "esquire" by lawyers acting in a non-legal capacity is whether such use if misleading. See DR 1-102(A)(4) (providing that a lawyer shall not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation); DR 2-101(A). We do not believe it is. DR 2-101(C)(1) permits a lawyer to use, in connection with his or her name, a designation indicating training in the law, such as "J.D." See ABA Formal Op. 321 (1969); N.Y. State 105(a) (1969); Maryland 85-21 (1984). Accord D.C. Op. 183 (1987); Iowa Op. 85-14 (1986). But see Philadelphia Op. 86-98 (1986). The title "esquire" does not legally designate an individual as a lawyer because it is not conferred in this country as an academic degree or license. It has, however, been adopted by lawyers by convention as a form of designation. Thus, one using the title in the United States is identifying himself or herself as a lawyer. But, just as a lawyer may identify his or her professional affiliation in a social context, see N.Y. State 105(a) (1969), and that a non-admitted law school graduate may use the title "J.D." on business cards and letterhead, see Maryland 85-21 (1984), the use of the title "esquire" by a lawyer in a non-legal context does not constitute an ethical transgression.
We would be more concerned if the non-practicing attorneys were signing correspondence or otherwise identifying themselves as, for example, "J. Doe, Attorney-at-Law," as opposed to "J. Doe, Esq." A recipient of such a communication could well conclude, incorrectly, that the lawyer was acting in a legal capacity. EC 2-13 states in this regard that "[i]n order to avoid the possibility of misleading persons with whom a lawyer deals, a lawyer should be scrupulous in the representation of professional status." If a member of the organization used the title "attorney" in correspondence while acting in a non-legal capacity, this might convey the impression that a legal position is being taken on behalf of the organization or that a legal opinion is being rendered. Similarly, if one were so identified in meeting minutes it might convey the impression that a member is counsel to the committee or the organization. These concerns, however, do not affect our conclusion that the simple use of the title "Esq." after an attorney's name is appropriate.
For the foregoing reasons, the question presented is answered in the affirmative.
TOPIC: In-house attorney; fees to third parties; multiple roles. No. 1994-6 COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS May 5, 1994 ACTION: FORMAL OPINION
DIGEST: Attorney may be employed in-house by bank that charges borrowers a fixed fee for the attorney's services so long as the fee represents the actual cost of these services; attorney may properly serve as shareholder, officer, and/or director of employer or client.
CODE: DRs 1-102(A)(4); 3-101(A); 3-102(A); 5-101(A); 5-109; 7-102(A)(7); ECs 4-2; 4-4; 5-1; 5-18.
1. May an attorney be employed as in-house counsel by a bank that intends to charge borrowers a fixed fee for the attorney's services?
2. May an attorney become a shareholder, officer, and/or director of an employer or of a client?
An attorney renders legal services as an independent contractor to a mortgage banking institution, but is considering an offer to become in-house counsel to the bank. The attorney is also considering the possibility of becoming a shareholder, officer and/or director of the institution.
As in-house counsel, the attorney would supervise a loan closing department which would be staffed by the attorney, one or more paralegals, and a secretary. Under the direction of the attorney, the department would prepare and review all documents required for each loan transaction, and would provide legal representation to the bank at all closings. The bank would charge each borrower a flat fee for these services, which would be paid by the borrower directly to the bank. The fee will be disclosed to each borrower prior to closing and would be used to defray the bank's cost of maintaining the closing department.
The attorney would be paid a fixed annual salary based on the full range of legal services to be rendered to the bank, regardless of the number of closings performed or the aggregate value of the closing fees generated each year. Thus, the salary received by the attorney would have no direct relation to the fees received by the bank.
A lending institution may properly require a borrower to pay the reasonable legal fees incurred by the bank in connection with a loan transaction. N.Y. City 695 (1946); N.Y. State 438 (1976); ABA Informal Op. 837 (1965). Such fees may include a charge for the lawyer's office overhead. N.Y. County 670 (1989).
Consistent with this principle, it is not improper for a bank to charge borrowers for legal services rendered by in-house counsel, provided that the amount charged does not exceed the actual cost to the bank of employing in-house counsel to provide those services, including the allocable portion of the attorney's annual salary and the bank's reasonable overhead expenses. E.g., N.Y. State 618 (1991); N.Y. County 670 (1989); ABA Informal Op. 1451 (1980). A separate fee may be charged by the mortgage bank to its customers for the legal services rendered by the attorney on behalf of the bank in connection with the closing of a loan transaction provided it is not excessive in light of market conditions.
It would be improper, however, for a bank to profit from any fee charged for the services of in-house counsel, i.e., to charge, collect and retain a fee that exceeds the actual cost of those services. Moreover, an in-house lawyer cannot ethically participate in any such arrangement because: (i) it constitutes sharing a legal fee with a lay person in violation of DR 3-102(A); (ii) it constitutes aiding a lay person in the unauthorized practice of law in violation of DR 3-101(A); and (iii) it constitutes a misrepresentation in violation of DR 1-102(A)(4) to label as "attorneys' fees" an amount which has no necessary relationship to the compensation of the attorneys involved. See N.Y. State 618 (1991). Accord N.Y. County 670 (1989); Iowa Op. 92-1 (1992); Fla. Op. 87-8 (1987); Mass. Op. 84-1 (1984).
Thus, participation in the proposed arrangement would not be improper provided that the fee collected by the bank does not exceed the portion of the attorney's salary allocable to each loan transaction, plus the allocable overhead of the loan closing department, including the cost of paralegals, secretaries, utilities and similar expenses. Moreover, it is important that the bank make appropriate disclosure to each borrower concerning the nature and calculation of the fee. See DR 1-102(A)(4) (prohibiting lawyer from engaging in conduct "involving dishonesty, fraud, deceit or misrepresentation"); DR 7-102(A)(7) (prohibiting lawyer from assisting the client in conduct that the lawyer knows to be fraudulent).
Whether the bank's receipt and retention of a fee for legal services constitutes the unauthorized practice of law in violation of N.Y. Judiciary Law § 495 is a question of law. See Thompson v. Chemical Bank, 84 Misc. 2d 721 (Civ. Ct. N.Y. Co. 1975). Accordingly, this Committee expresses no view concerning the applicability of this statute. We do note, however, that if the proposed arrangement were deemed to constitute the unauthorized practice of law, the attorney would be prohibited by DR 3-101(A) from rendering any assistance to the bank in connection with such conduct.
There is no per se rule of professional ethics that prohibits a lawyer for a corporation from owning stock in, or serving as an officer or a director of, the client company. Such multiple roles are permissible regardless of whether the lawyer is employed as an in-house attorney or retained as outside counsel. N.Y. State 589 (1987); Oregon Op. 91-91 (1991); Phila. Op. 87-14 (1987).
Nevertheless, counsel to a corporation "owes his [or her] allegiance to the entity" and must exercise independent professional judgment solely for its benefit. N.Y. State 589 (1987); EC 5-1; EC 5-18. Moreover, the attorney must discharge this ethical responsibility to the corporation without regard to the interests of any other person, including the lawyer's own interests as shareholder, director or officer of the company. Id. See also DR 5-109. If those interests diverge from the lawyer's duties as counsel, the lawyer may be precluded from providing legal representation to the corporation with respect to the matter that gives rise to the actual or potential conflict of interest.
A related concern is that, absent client consent following full disclosure, a lawyer is prohibited from accepting or continuing employment if the lawyer's exercise of professional judgment on behalf of the client will, or reasonably may, be affected by the lawyer's own financial or business interests. DR 5-101(A). This general "conflict-of-interest" rule could operate, for example, to prohibit a lawyer/director or lawyer/officer from rendering legal advice to the corporation when both the company and its officers or directors are named as defendants in a lawsuit. N.Y. State 589 (1987). But whatever the particular circumstances presented, a lawyer must carefully consider the potential for conflict and refrain from acting as counsel (absent client consent) whenever there exists a risk that his or her professional judgment may be compromised.
Even in the absence of an actual or potential conflict of interest, a lawyer must disclose to a client corporation the potentially adverse consequences of his or her multiple roles within the organization. For example, a lawyer who also serves as an officer or director of a corporate client must disclose the risk that certain communications with the corporation may not be protected by the attorney-client privilege. N.Y. State 589 (1987). The client should be aware that the lawyer's conversations with corporate personnel subsequently may be held to have been in the role of director or officer rather than counsel, thereby invalidating any assertion of the attorney-client privilege that the corporation may attempt to make. See SEC v. Gulf & Western Industries, 518 F. Supp. 675, 683 (D.D.C. 1981). See also EC 4-2 (obligation to protect client confidences and secrets); EC 4-4 (lawyer should act in a manner which preserves privilege).
Subject to the caveats discussed above: (1) an attorney may be employed in-house by a bank that proposes to charge borrowers a fixed fee to cover the cost of the services rendered by the attorney; and (2) an attorney may become an officer, director or shareholder of the bank regardless of whether the attorney accepts employment as in-house counsel or continues to render legal services as an independent contractor.
TOPIC: Legal referral services. NO. 1994-3 COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS April 13, 1994 ACTION: FORMAL OPINION
DIGEST: Attorney may not participate in a for-profit private legal referral service unless authorized under DR 2-103(D).
CODE: DRs 2-103(B), 2-103(C); 2-103(D); EC 2-15.
May an attorney participate in a legal referral service that is operated for profit and not sponsored or approved by any bar organizations?
A law firm has been approached by a representative of a referral service, who has asked if the law firm would be interested in participating. The service has been organized to provide referrals for doctors, lawyers and accountants. It will advertise in print and on radio and will refer clients who call an "800" number to member attorneys. The referral service intends to screen each of its listed attorneys to verify that they are members in good standing of the bar. Participants in the referral service will be charged either (1) a flat monthly listing fee plus additional fees for any clients referred to that attorney, or (2) a fee for each referral made to the attorney during the month (up to a fixed maximum amount). The referral service is not operated, sponsored or approved by any bar association.
With certain limited exceptions, DR 2-103 prohibits an attorney from paying a fee or giving "anything of value to a person or organization to recommend or obtain employment by a client, or as a reward for having made a recommendation resulting in employment by a client." DR 2-103(B). DR 2-103(D) lists the type of referral services that are excepted from this prohibition: legal aid offices or public defender offices, military legal assistance offices, lawyer referral services "operated, sponsored or approved by a bar association," or a "bona fide organization which recommends, furnishes or pays for legal services to its members or beneficiaries" provided specific conditions are satisfied.
The Code of Professional Responsibility encourages the use of referral services because they can assist clients in selecting qualified counsel. EC 2-15. However, DR 2-103(D) limits the type of referral services to which attorneys can make a payment in exchange for a reference. Thus, if a referral service is a for-profit, private corporation the purpose of which is to advertise and solicit clients in exchange for referral fees from lawyers and other professionals, and if that organization does not fall within any of the categories listed in DR 2-103(D), it is not a referral organization from which an attorney may properly accept a referral in exchange for the payment of a fee. See generally Ad Hoc Committee on Private Legal Referral Services, "Regulation of Private Legal Services - A Recommendation," 44 Record Assn. Bar City N.Y. 3, 7-9 (1989).
Another concern is DR 2-103(C), which provides:
A lawyer shall not request a person or organization to recommend or promote the use of the lawyer's services . . . other than by advertising or publicity not proscribed by DR 2-101. . . .
(The approved bar association referral services and other organizations enumerated in DR 2-103(D) are exempt from this rule.) Unless the attorney knows the nature, extent and content of the advertisements a for-profit referral service will place, the attorney cannot ensure that the service will comply with the advertising requirements of DR 2-101 as required. See N.Y. State 597 (1989) (an attorney may not enter into an advertising contract in which the advertiser, without including the name, office address and telephone number of the lawyer, suggests in generic ads that viewers call an "800" number, and for a monthly fee, refers all calls from a designated geographical area to that lawyer, as the service arrangement both violates the requirement that all advertising made by an agent of the lawyer conform to court rules on advertising and constitutes a prohibited referral). *
* Accord Iowa 91-18 (1991) (lawyer may not pay membership dues to an organization whose purpose is to secure mutual referrals among members in exchange for the payment of dues); Kentucky E-344 (1991) (lawyer may not participate in a for-profit lawyer referral service); South Carolina 86-13(B) (1986) (lawyer may not participate in a lawyer referral service which is operated by private corporation for profit). Compare Alabama 86-78 (1986) (lawyer may participate in lawyer referral service operated by not-for-profit agency created by state legislature) and Nebraska 87-2 (1987) (lawyer may accept cases from not-for-profit referral services if lawyer does not give anything of value for services).
The question is answered in the negative.
TOPIC: Part-time administrative law judge; conflict of interest. NO. 1994-2 COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS April 13, 1994 ACTION: FORMAL OPINION
DIGEST: Part-time administrative law judge for Parking Violations Bureau may not receive a referral fee for a potential lawsuit against the Office of the Sheriff, which aids in the enforcement of the judge's rulings.
CODE: DRs 2-107(A), 2-107(A)(2); CJC Canon 2.
May a part-time administrative law judge make a referral and receive a referral fee for a potential lawsuit against an arm of the government that aids in the enforcement of the judge's rulings?
The inquirer is a per diem administrative law judge, employed by the Parking Violations Bureau of the City of New York ("PVB"). This employment constitutes one-third of the inquirer's professional time. In this capacity, the inquirer adjudicates parking tickets issued by the PVB. In the event the inquirer upholds a ticket, the respondent has the right to appeal only after the fine ordered in the judgment is paid. If the fine is not paid, the Office of the Sheriff of the City of New York attempts to collect on the judgment. Under certain circumstances, the Sheriff is authorized to impound a car registered to a party with outstanding parking judgments.
The inquirer has been consulted by a potential client who claims to have been assaulted and injured by persons acting under the direction of the Office of the Sheriff while they were seizing a car registered to him. The car, which was towed because there were unpaid parking judgments against the client, has never been recovered. The potential client has asked the inquirer to refer the matter to litigation counsel in order to bring a civil action against the Office of the Sheriff and the City of New York. The inquirer has conducted a preliminary investigation of the matter and now wishes to refer this matter to another attorney from whom the inquirer would expect to receive a referral fee.
The inquirer asks whether it would be proper to refer this matter to litigation counsel and receive a fee for the referral and/or for the work already performed.
As a part-time administrative law judge and a practicing attorney, the inquirer's professional conduct is governed by both the Code of Judicial Conduct ("CJC") and the Code of Professional Responsibility (the "Code"). n1 See Compliance with the Code of Judicial Conduct, contained in the Code of Judicial Conduct; N.Y. City 1990-4 (citing N.Y. City 814 (1956) and N.Y. State 365 (1974)).
n1 Because an administrative law judge has limited jurisdiction under certain circumstances not applicable herein, an administrative law judge may be exempt from certain of the prohibitions of the CJC. N.Y. State 594 (1989).
Application of the CJC and the Code to the facts presented produces the same result whether the inquirer decides to represent the potential client directly in a litigation against the City or to refer the matter to a third party with the expectation of receiving a legal fee either for the work performed to date or work to performed in conjunction with litigation counsel. DR 2-107(A) states:
A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of the lawyer's law firm or law office, unless:
1. The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
2. The division is in proportion to the services performed by each lawyer or, by a writing given to the client, each lawyer assumes joint responsibility for the representation.
3. The total fee of the lawyers does not exceed reasonable compensation for all legal services they rendered the client.
It is clear that the inquirer cannot accept a fee for a mere referral, but instead must satisfy the conditions set forth in DR 2-107(A)(2). If the inquirer expects to receive a fee based solely upon the value of the work performed prior to the date of the referral, that fee must bear a reasonable relationship to the legal services rendered in the matter as a whole. Id.; N.Y. City 81-65 (1981). If the inquirer expects to receive a fee based upon the amount of the recovery in litigation, the fee must be based upon the inquirer's continuing contribution to the action by assuming joint responsibility for the litigation or actually rendering legal services. Thus, in order for the inquirer to accept a fee from the litigation counsel, the inquirer must continue some measure of participation in the suit.
Although the inquirer might not be confronted with a potential conflict of interest by commencing an action against a department of the City of New York with which the inquirer is not affiliated, because the inquirer is a judicial officer involved in the same parking enforcement system that led to the seizure, the facts suggest issues of potential conflict that are not easily resolved. In N.Y. City 894, this Committee concluded that, under certain circumstances, a private attorney may represent the City on a pro bono basis while simultaneously representing a private party in litigation with interests adverse to those of the City. n2 Accord N.Y. State 447 (1976) (when a government body is organized into a number of separate departments or agencies, such department or agency and not the parent governmental unit should be treated as the client for purposes of the rule which forbids the current representation of one client against another); see also N.Y. State 655 (1993).
n2 The Committee listed certain standards to be met to avoid the potential conflict: (i) it must be obvious that the lawyer can adequately represent interests of the City and private clients; (ii) informed consent of both parties must be obtained; (iii) matters cannot be substantially related; (iv) files and communication regarding matters must be kept entirely separate to the extent possible; (v) no representation by counsel to the client that legal representation of the City might assist private party in its litigation against the City.
The fact that the contemplated action will not name the PVB as a party does not relieve the inquirer of any potential conflict or appearance of conflict, which arises out of the perceived linkage between the PVB and the Office of the Sheriff with respect to the enforcement of parking judgments. Had the Office of the Sheriff committed the same acts in the enforcement of a judgment not connected to parking judgments, the conflict that we find here might not be present.
Another bar to the proposed arrangement is created by 22 N.Y.C.R.R. § 100.5(b), which provides:
A part time judge may accept private employment or public employment in Federal, State or municipal department or agency, provided that such employment is not incompatible with judicial office or interfere with proper performance of the judge's duties.
Thus, a judge may not receive a fee, directly or indirectly, in a matter which originated in his or her court. N.Y. Advisory Committee on Judicial Ethics ("ACJE") 88-108. Nor may a part-time judge appear before a planning or appeals board of the municipality in which he or she sits. ACJE 90-59, 90-65. Accord, N.Y. State 632 (1991). In these opinions, a part-time judge intended to appear before a planning board in his capacity as a private attorney. The ACJE and State Bar concluded that although the judge had no jurisdiction to review decisions made by the zoning or planning board, he could not practice before said boards. n3 In reaching this determination, the ACJE and State Bar relied upon Canon 2 of the CJC, which states:
A judge should respect and comply with the law and should conduct himself at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.
n3 N.Y. State 632 states:
Because the municipal judge is a permanent member of the municipality's governmental structure . . ., and has jurisdiction over some zoning matters, we concluded that the part-time judge must refrain from practice before the zoning boards within the same municipality.
In addition, the State Bar noted that zoning and planning matters are often fraught with emotion and that the involvement of the judge in these matters may reflect poorly on his office.
Applying the reasoning of these opinions to the situation here, we believe that the inquirer's involvement in this suit would be improper. Although the seizure of a car by the Sheriff's Department is an integral part of the enforcement scheme in which the PVB plays a major role, the acts that constitute the basis for the proposed litigation arise outside of the enforcement scheme. To the extent that the litigation raises issues limited to that tortious conduct and not issues related to the issuance of the tickets and collection of the consequent fines, the inquirer's participation in the litigation may not rise to a conflict of interest. Nonetheless, the appearance of conflict and partiality may exist. See also ACJE 91-29 (part-time judge could not act as pro bono counsel to association of police juvenile officers because 22 NYCRR § 100.2 requires judges to avoid the appearance of impropriety. "[S]erving as counsel to an organization of police officers is not permissible, as there would be an appearance of partiality for any judge to act as counsel.").
Our conclusion here in no way bars the inquirer from maintaining a broad practice. In determining the scope of permissible work of a part-time judge, the ACJE and N.Y. State opinions appear to balance the need to avoid the appearance of partiality against the need to encourage service by part-time jurists by keeping to a minimum those areas of practice foreclosed to the judge. In ACJE 88-96, the Committee held that an administrative law judge may act as a town judge as the employment is compatible with judicial office and does not conflict or interfere with the proper performance of the judge's duties. A justice of the peace may act as a defense counsel for a criminal defendant in a town other than the town where he sits, "provided there is not reasonable likelihood due to proximity of the place of practice to the situs of his court. . . ." N.Y. State 150 (1970). But see N.Y. State 146 (1970) (judge who hears misdemeanors part-time cannot represent a defendant in a criminal matter in a higher court in same county); N.Y. State 181 (1971) (criminal practice by part time judge prohibited, but civil practice permitted); see also N.Y. State 146(a) 1970 (judges precluded from practicing criminal law, but not justices of the peace).
Here, we must balance the hardship imposed upon the inquirer resulting from the inability to commence or participate in an action against the City of New York and its agencies arising from the seizure of a car against the goal of promoting the integrity and impartiality of the adjudicative process. Although the likelihood of actual conflict herein is small, as the inquirer's jurisdiction as an administrative law judge is well defined, because the action arises in the context of the parking violations enforcement system, the representation will generate at the very least the appearance of a conflict of interest which should be avoided.
We therefore conclude that the CJC and the Code preclude the inquirer from representing a potential plaintiff in the contemplated action or from receiving a fee either for referring the matter to a different lawyer or for the work done to date. n4 As the matters pertaining to the contemplated action are sufficiently connected to the enforcement scheme within which the inquirer serves as an administrative law judge, participation in such litigation would not promote public confidence in the integrity and impartiality of the inquirer's role as an administrative law judge in violation of Canon 2 of the CJC. We do not believe that our interpretation of the Code and CJC materially restricts the inquirer's ability to engage in a broad civil and criminal practice. Our opinion does not preclude the inquirer from bringing actions against the City or the Office of the Sheriff under other circumstances. See N.Y. City 894. Rather, this opinion is based solely on the facts as presented. n5
n4 The inquirer may, of course, provide the prospective client with the name of an attorney capable of representing him or her without violating the duties discussed in this opinion. Only in extreme circumstances, not present here, would it be impermissible for an attorney to assist a client in finding successor counsel.
n5 We express no opinion as to whether the proposed arrangement would also be prohibited by applicable law, including the conflict of interest rules governing city employees. Nor do we express any opinion concerning the propriety of the inquirer's past conduct, i.e., undertaking of an investigation on behalf of the potential plaintiff with respect to potential claims against the Office of the Sheriff.
For the foregoing reasons, the question presented is answered in the negative.
THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK No. 1994-1 COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS March 21, 1994 ACTION: FORMAL OPINION
TOPIC: In-house attorney; discrimination claim against former employer; confidences and secrets.
DIGEST: Former in-house attorney may sue former employer for alleged discrimination and participate in the preparation of a class action against the former employer, provided the attorney does not use or reveal any confidences or secrets of the former employer or serve as class representative or class counsel.
CODE: DRs 4-101(A), 4-101(B).
May a former in-house attorney who claims to have been the victim of discrimination participate in preparations for a potential employment discrimination class action against his former employer?
Attorney X was recently discharged from employment as an in-house corporate lawyer after seventeen years of service. X believes that his discharge was improperly motivated by his activities to counter what he believed to be evidence of racial discrimination within the corporation. X is considering pursuing individual and class-wide employment discrimination claims arising under the local and federal civil rights statutes against his former client and employer, but is concerned that his participation may violate his ethical obligations as an attorney.
This inquiry raises a number of legal, as well as ethical, considerations as a result of X's desire to participate in a suit against his former client. In this opinion, we will deal only with the ethical issues and will not render any advice or opinions on the legal questions raised. The inquiry is governed by the rules contained in the Code of Professional Responsibility, which apply to in-house corporate attorneys in relation to their employers, as well as to private practitioners in relation to their clients. See Upjohn Co. v. United States, 449 U.S. 383 (1981).
DR 4-101(B) states that a lawyer shall not knowingly:
1. Reveal a confidence or secret of a client.
2. Use a confidence or secret of a client to the disadvantage of the client.
3. Use a confidence or secret of a client for the advantage of the lawyer or of a third person, unless the client consents after full disclosure.
DR 4-101(A) defines a "confidence" as information protected by the attorney-client privilege under applicable law and a "secret" as "other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client."
An attorney must not only avoid disclosing the client's secrets but must avoid situations where the potential for disclosure exists or where it appears such secrets might be disclosed. Although X represents that he worked exclusively on corporate and international matters for the last ten years and does not have any confidential information relating to employment discrimination matters involving the former employer, this may be an overly simplistic view of his position and the access he had to confidential or secret information. Such information may have come to X as a result of his job as an attorney, despite the fact that employment issues were not directly involved in matters he worked on for the company. Additionally, X should be cautious in this area because the ethical rule against non-disclosure is broader than the attorney-client privilege and extends to the broadly defined "secrets" as well as to "confidences." Nonetheless, it is our view that the Code does not, per se, prevent X from personally initiating litigation to redress his claims of discrimination, presuming X has an adequate basis for asserting those claims. However, we caution again that care should be exercised to avoid disclosing the "confidences" and "secrets" of the former client.
The question of whether an in-house counsel may sue his or her employer has been considered by several courts with mixed results. Where the in-house counsel was pursuing a statutory right, his or her right to pursue this remedy against the former employer has been upheld. See Parker v. M&T Chemicals, Inc., 236 N.J. Super. 451, 566 A.2d 215 (1989) (upholding in-house attorney's right to sue former employer under the New Jersey Whistleblowers Act). Similarly, an in-house attorney may pursue a contractual claim based on a termination in violation of the procedure set forth in the company's employment handbook. See Nordling v. Northern State Power Co., 478 N.W.2d 498 (Minn. 1991). In contrast, where the attorney was pursuing a common law remedy, several courts have not permitted in-house attorneys to sue former employers for retaliatory termination, basing their conclusion on the confidential nature of the attorney-client relationship and the ethical requirements relating to clients' confidences and secrets. See Eckhaus v. Alfa-Laval, Inc., 764 F. Supp. 34 (S.D.N.Y. 1991) (granting summary judgment dismissing former in-house counsel's complaint of defamation on the grounds that prosecution of such action would cause the revelation of the client's confidences and secrets in violation of DR 4-101(B)); Balla v. Gambro, Inc., 145 Ill.2d 492, 584 N.E.2d 104, 105 (1991); Herbster v. North American Co., 150 Ill. App. 3d 21 (1987); Willy v. Coastal Corp., 647 F. Supp. 116 (S.D. Tex. 1986), rev'd on other grounds, 855 F.2d 1160 (5th Cir. 1988).
It is our opinion that if an attorney may bring an action against a former employer based on a state whistle-blowers statute or an employer's handbook, he or she would not be ethically precluded from bringing an action against the former employer for claimed discrimination, since this involves a much more fundamental right, grounded in numerous statutes. In fact, in Nordling, 478 N.W.2d at 502, the court noted that:
The attorney-client status of in-house counsel has apparently not precluded an inside attorney from suing her company employer for employment discrimination. See, e.g., Bellissimo v. Westinghouse Elec. Corp., 764 F.2d 175 (3d Cir. 1985), cert. denied, 475 U.S. 1035 (1986) (sex discrimination claim maintained by in-house counsel against her employer, although attorney-client defense not asserted); Jones v. Flagship Int'l, 793 F.2d 714 (5th Cir. 1986) (sex discrimination claim; again, the attorney-client defense not asserted), cert. denied, 479 U.S. 1067 (1987).
While X is not barred by ethical rules from prosecuting his own rights based on statutes prohibiting discrimination, he is precluded from serving as a class representative by these same ethical considerations. In Doe v. A Corp., 709 F.2d 1043 (5th Cir. 1983), the court held that an in-house attorney responsible for rendering legal advice on employee benefits who, following termination, asserted ERISA claims against his former employer, could not serve as either a representative or the attorney for the class in a proposed class action although he was free to prosecute his own action.
To allow Doe to act as class representative would create tension between his obligation as representative to do all he can to vindicate the rights of the class members and his personal ethical duty to protect A Corporation's secrets.
Id. at 1048.
Finally, we further note that X not serve as the attorney for a class or a third party in the prospective discrimination, because that would raise serious ethical questions under DR 5-108, as well as the rules set forth above. See Doe v. A Corp., 709 F.2d 1043.
For the foregoing reasons, and subject to the caveats and limitations discussed above, we answer the question presented in the affirmative.