Oliver v. Board of Governors, Kentucky Bar Ass'n

779 S.W.2d 212, 1989 Ky. LEXIS 97, 1989 WL 134432
CourtKentucky Supreme Court
DecidedNovember 9, 1989
Docket88-SC-1013-KB
StatusPublished
Cited by3 cases

This text of 779 S.W.2d 212 (Oliver v. Board of Governors, Kentucky Bar Ass'n) is published on Counsel Stack Legal Research, covering Kentucky Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Oliver v. Board of Governors, Kentucky Bar Ass'n, 779 S.W.2d 212, 1989 Ky. LEXIS 97, 1989 WL 134432 (Ky. 1989).

Opinions

LAMBERT, Justice.

This case comes to us by way of Supreme Court Rule 3.530 and presents the question of whether a temporary attorney service may be operated by a member of the Kentucky Bar. Appellant Alfred C. Oliver sought an advisory opinion from the Ethics and Unauthorized Practice Committee of the Kentucky Bar Association concerning his proposed business. The Board of Governors issued a formal opinion which disapproved all temporary lawyer services. Appellant timely filed a motion for review by this Court of the KBA opinion. We granted review pursuant to SCR 3.530(5).

In his 1987 letter of inquiry, by counsel, to the Chair of the Ethics Committee, appellant proposed to furnish attorneys through his service to other attorneys, law firms and corporate legal departments needing part-time or temporary legal services. Concerning particular features, appellant specified:

1) all placed attorneys would have malpractice insurance;
2) client firms 1 would pay all fees to the service, who would then compensate the temporary attorneys and retain the excess as profit;
3) client firms would be required to supervise the temporary’s work, and to assume full responsibility for that work performed by the temporary;
4) the temporary would be required to observe strict confidentiality regarding any information obtained in the course of temporary employment;
5) in order to assure that the temporary would not be placed in a conflict position, accurate records of all firms or entities with whom the temporary had been placed would be maintained, and client firms would also be required to maintain similar records.

The Ethics Committee issued a draft opinion which was unfavorable to appellant’s proposal in June 1988. Despite appellant’s attempt to address the Committee’s objections and his personal appearance before the Board of Governors, the opinion was formally adopted and published as KBA Advisory Opinion E-328, 52 Kentucky Bench & Bar 64 (Fall 1988) [hereinafter “KBA E-328”].

[214]*214- As no authority was available to guide its decision-making early in 1988, the Committee relied principally upon the American Bar Association Code of Professional Responsibility [hereinafter “Code”], adopted by SCR 3.130. The KBA opinion cites Disciplinary Rule 6-102 (hereinafter “DR 6-102”)2 and the principle that “those who would profit from the privilege of rendering legal services should be fully accountable to the client and fully subject to discipline by the Bar.” KBA E-328.

The Board’s second concern dealt with fee-splitting with non-lawyers and fee-sharing among lawyers who are not in the same firm “when the fee-sharing is not based on work performed and responsibility assumed. DR 2-107(2).” Id. The KBA took the position that if the ownership or management of the service involved non-lawyers, it would run afoul of the Code’s prohibition on fee-splitting with non-lawyers. On the other hand, even if the service was run by lawyers, the service fee paid by a client to the service for the procurement of an attorney would not be an authorized splitting of the total fees paid because no legal service had been rendered nor had any legal responsibility been assumed by the temporary attorney service.

The third category of objections was simply an expression of doubt that a temporary service could succeed in avoiding conflicts of interest and guaranteeing client confidentially.

Finally, the KBA was concerned about the service supplying lawyers directly to individuals and businesses, rather than only to other lawyers. Appellant’s proposal emphasized, however, that the service would not be marketed or available to non-lawyers.

Since appellant’s 1987 proposal, several state bar association ethics committees and the American Bar Association Standing Committee on Ethics and Professional Responsibility have considered proposals for temporary attorney services. We note that the bar associations of Connecticut, Florida, and New York City, as well as the A.B.A.3, have approved such services when provided in compliance with guidelines designed to avoid ethical problems under either the Code or the Model Rules of Professional Conduct [hereinafter “Model Rules”]. This Court recently adopted the Model Rules. See Kentucky Rules of Professional Conduct, SCR 3.130 (amended July 12, 1989, eff. January 1, 1990). We now review KBA E-328, insofar as it addresses temporary lawyer services4, in light of the Model Rules and developing authority.

Although we share the concerns expressed by the KBA, we find that they painted with too broad a brush in banning all temporary lawyer services. We view the ABA Committee’s approach to be generally. thorough and well-reasoned and adopt substantial portions of its Formal Opinion 356 (1988). If a lawyer operating a temporary lawyer service in the Commonwealth of Kentucky complies with the guidelines hereinafter set forth, we believe that such a service may function within the ethical constraints of the Model Rules of Professional Responsibility. However, this opinion is advisory in nature.

We begin our discussion of the ethical implications of a temporary attorney service by addressing two issues bearing upon professional accountability.

FEE ARRANGEMENTS

Appellant proposed initially that the client firm would pay to the service a fee to be calculated on an hourly, daily, weekly or monthly basis, depending upon the period [215]*215of engagement of the temporary by the firm. The temporary would be compensated by the service on the basis of the contractual agreement entered into with the service. The service’s profit would be taken from the difference between the fee charged to the client firm and the compensation paid to the temporary attorney. As stated above, the KBA viewed this arrangement as an impermissible sharing of fees.

Reaching a contrary result, the American Bar Association Ethics Committee concluded that such a payment scheme does not violate either the Code or the Model Rules because the total amount paid to the service is not a “legal fee” as the term is commonly understood.

“A legal fee is paid by a client to a lawyer. Here the law firm bills the client and is paid a legal fee for services to the client. The fee paid by the client to the firm ordinarily would include the total paid the lawyer and the agency, and also may include charges for overhead and profit. There is no direct payment of a ‘legal fee’ by the client to the temporary lawyer or by the client to the placement agency out of which either pays the other.” ABA Op. 88-356 at 12.

While this analysis of what constitutes a “legal fee” may be technically correct, we believe the arrangement proposed to the KBA has the potential to jeopardize the professional independence of the temporary attorney rendering legal services to the ultimate client.

Model Rule 5.4(c) provides:

“A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such services.”

This Court is of the opinion that an attorney’s primary loyalty will, as a practical matter, rest with the person or entity who pays him.

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Oliver v. Board of Governors, Kentucky Bar Ass'n
779 S.W.2d 212 (Kentucky Supreme Court, 1989)

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Bluebook (online)
779 S.W.2d 212, 1989 Ky. LEXIS 97, 1989 WL 134432, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oliver-v-board-of-governors-kentucky-bar-assn-ky-1989.