#2022-23/01 Ancillary Businesses Under Rule 5.7

ABSTRACT:

In 2007, New Hampshire adopted NHRPC Rule 5.7, which applies to the provision of services that might reasonably be performed in conjunction with, and in substance are related to, the provision of legal services and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.  Prior to the adoption of Rule 5.7, a lawyer providing such services was considered to be practicing law when providing those services, and therefor subject to all the Rules of Professional Conduct.

After the adoption of Rule 5.7, lawyers are presumably exempt from some of the rules, if the lawyer provides law-related services exclusively under circumstances that are distinct from the lawyer’s provision of legal services to clients, or if the lawyer takes reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.  Rule 5.7 identifies some of the rules which remain applicable, giving Rule 8.4 as an example.

This opinion discusses four situations that troubled the Committee before the adoption of Rule 5.7, and which may linger after the adoption.  The first situations concern conflict of interest.  A lawyer providing law-related services to a customer might negotiate with a lawyer from the same firm providing legal services to a current client.  The lawyer providing law-related services would appear to be exempt from Rule 1.7, but the lawyer providing the legal services would need to carefully examine Rule 1.7 to confirm compliance.

Another potential conflict of interest arises if the opposing party is a former client.  Whether Rule 1.9 might apply depends in large part on whether the current matter is substantially related to previous matter handled on behalf of the former legal client.  Even if Rule 1.9 does not block the current provision of law-related services, however, the lawyer may not use information learned from the prior representation to the disadvantage of the former legal client.

The other situations involve “feeding” of one business to the other.  A law firm that refers its legal clients to its law-related business must carefully comply with the provisions of Rule 1.8.  As this Committee has stated in earlier opinions, lawyers who enter into business transactions with their clients may expect a high level of scrutiny.

A law-related business that refers its law-related customers to its law firm may run afoul of Rule 7.3 which bans certain in-person solicitation.

ANNOTATIONS:

Cases and opinions prior to the adoption of Rule 5.7 consistently disfavored the provision of law-related services, unless those services were offered under the protection of all the ethical rules.

In some cases, such as those involving real estate brokerage, the Committee believed that it would be impossible to provide such services while complying with the ethical rules.

Rule 5.7, adopted in 2007, applies to the provision of law-related services – those services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.

Under Rule 5.7, a lawyer is subject to the Rules of Professional Conduct with respect to the provision of law-related services unless the services are provided in circumstances that are distinct from the lawyer’s provision of legal services to clients; or the lawyer takes reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.

If the lawyer complies with the requirements of Rule 5.7, the lawyer may be relieved from compliance with some the Rules of Professional Conduct.

A lawyer who complies with Rule 5.7 and provides law-related services to a customer may not run afoul of the conflict-of-interest provisions of Rule 1.7, even if the lawyer’s partner represents an opposing side.  In such cases, however, the lawyer’s partner would still need to comply with Rule 1.7.

A lawyer who complies with Rule 5.7 and provides law-related services to a customer may not run afoul of the conflict of interest provisions of Rule 1.9, even if the opposing side is a former client.  In such cases, however, the lawyer may not use information learned in the prior representation to the detriment of the former client.

A lawyer may not refer a legal client to the law-related business unless the lawyer strictly complies with the provisions of Rule 1.8 dealing with business transactions with clients.

A lawyer who seeks to refer a law-related services customer to the lawyer’s law firm for legal services should be cognizant of Rule 7.3 which controls certain types of solicitation.

The current (2022) version of New Hampshire’s Rule 7.3 differs in certain material ways from the current (2019) version of ABA Model Rule 7.3.

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