RI-325

July 16, 2001

SYLLABUS

A lawyer may not enter in a lawyer-client relationship under circumstances where the lawyer's obligations to third parties prevents the lawyer from exercising independent professional judgment.

A lawyer may not assist another in the commission of the unauthorized practice of law.

A lawyer may not engage in a venture with non-lawyers in which the non-lawyers most likely engage in the unauthorized practice of law, make materially false and misleading statements, and conduct in person solicitation of legal business.

A lawyer may not give anything of value to a person for recommending the lawyer's services other than paying the reasonable cost of advertising or communication.

References: MRPC 1.4, 2.1, 5.3(a), 5.5, 7.1, 8.4; R-1; RI-128, RI-191.

TEXT

The Committee has received numerous requests for guidance regarding the participation of attorneys in the creation, marketing, and execution of legal documents as part of mass produced and mass marketed "estate planning kits." As generally structured, these arrangements proceed as follows. A for-profit business (usually based out of state and operating in multiple states) creates template estate planing documents such as living wills, living trusts and powers of attorney. The business then enters into an arrangement or understanding with an attorney and begins marketing in that geographic area. The marketing usually consists of direct mail advertisements run in conjunction with seminars. Non-lawyers conduct the seminars. Non-lawyers representatives of the company then visit interested parties in their homes. The Committee is informed that during both the seminars and the in home consultations, the company representative provides legal advice and guidance, such as recommending particular types of estate documents, giving counsel on different types of estate planning tools, and explaining the probate process. The representative also makes potentially misleading assertions regarding the efficacy of the instruments being marketed, both as to their own merits and vis a vis more traditional forms of estate planning.

The non-lawyer then collects personal information and the client is informed that the next step of the process involves meeting with a lawyer. The business refers all clients to the lawyer with whom it has reached the above-mentioned arrangement for completion of the paperwork. The lawyer enters into a formal attorney client relationship with the client, but addresses no conflict of interest issues with the client. However, in various marketing material disseminated by the company, the lawyer is referred to as "a lawyer who represents our company." The client is required to draft two checks: one for a small amount, representing a few hours of time, to be made payable to the lawyer, and one for an amount five or six times greater, to be payable to the kit company. Using the information provided to the company, the lawyer then completes the preparation of the will and trust kit. The lawyer does not always meet with the client, and almost never determines that the kit documents are inappropriate for the client's particular legal needs. The completed documents are, with the exception of specific identities of testator, beneficiaries and the like, identical for all clients (including clients in different states). Moreover, the documents often bear a copyright protection in the name of the company.

The Committee is concerned that legal and business practices such as described in the various requests received pose substantial risk of ethical transgressions. These risks permeate the relationship between the lawyer, the client and the kit company to such an extent that the entire transaction can be legitimately called into question. This relationship gives rise to two distinct sets of ethical issues for the lawyer. The first relates to the lawyer's potential responsibility for actions undertaken by the kit company and its employees or agents. The second relates to the potential impact of the lawyer-company relationship on the lawyer's obligations to the client. Both call into question the ability of the lawyer to comply with the Michigan Rules of Professional Conduct.

First, regarding the lawyer's potential responsibility for the actions of the kit company and its formally designated agents, MRPC 8.4(a) provides that "[I]t is professional misconduct for a lawyer to violate or attempt to violate the Rules of Professional Conduct . . . or [to] do so through the acts of another." Similarly, MRPC 5.3(c) provides that, with respect to a non-lawyer employed by, retained by or associated with a lawyer, a lawyer "shall be responsible for conduct of such a person that would be a violation of the rules of professional conduct if engaged in by a lawyer if: (1) the lawyer orders or with knowledge of the relevant facts and the specific conduct, ratifies the conduct involved." The precise details of the relationship between the lawyer and the company are not provided, but the Committee can identify several factors that potentially could make the lawyer responsible under the applicable rules. These include the fundamental nature of the repetitive and effectively exclusive referral service provided by the company. The marketing of the lawyer as "our lawyer" and the active (if not exclusive) role played by the company's non-lawyer agents in the steps leading to the legal relationship and documents further underscores the joint venture nature of the enterprise. Given the close association between the company and the lawyer, and their respective roles, it may well be the case that the lawyer is deemed to be responsible for the actions of the company agents.

This is problematic, for several aspects of the kit company's practices appear to constitute violations of the Michigan Rules of Professional Conduct if committed by a lawyer. For example, MRPC 7.1 provides that a lawyer may not use, or participate in the use of public communications that contain material misrepresentations of fact or law, or are likely to create an unjustified expectation about results that the lawyer can achieve, or compare the lawyer's services with those of another lawyer without substantiation. Yet the Committee has been advised that in marketing and selling the legal documents that the lawyer is ultimately retained to produce, representatives of the company do in fact make statements that my be materially misleading or deceptive regarding the efficacy of the documents sold by the company (produced by the lawyer) and inaccurately compare these documents to traditional estate planning documents and strategies. These statements, if made by a lawyer, would be in violation of MRPC 7.1. Compare Opinion 25, New Jersey Supreme Court Committee on Attorney Advertising, 153 N.J.L.J. 1298 (1998) (finding similar statements to be in violation of New Jersey's version of Rule 7.1). Given the repeated dealings between the lawyer and company, and their respective roles on these transactions, it is difficult if not impossible to reconcile the company's practices and the lawyer's professional obligations.

Of a similar nature, this Committee has previously addressed the special perils generated by using agents or assistants to generate client relationships in a factual scenario very similar to that submitted by the requester. In RI-191, the Committee concluded that a business venture in which non-lawyer agents traveled door to door selling will and trust forms and referring all legal issues to the lawyer violated numerous ethical rules. That opinion noted the high likelihood that the non-lawyer agent would, of necessity, engage in conduct and the giving of advice that would constitute the unauthorized practice of law, in violation of MRPC 5.5. Moreover, that opinion also concluded that in person visits by non-lawyer agents who have de facto exclusive referral relationships with a lawyer also "violates the ban on in person solicitation [MRPC 7.3] and . . . would probably violate the prohibition against giving anything of value to a person for recommending a lawyer's services [MRPC 7.2]." RI-191. The exact details and terms of the relationship between the lawyer and the kit company are not provided, but it would appear that the concerns addressed in RI-191 would foreclose the relationship as described.

The lawyer's relationship with the document company and their respective roles in the client's transactions renders it impossible for the lawyer to fulfill his or her obligations to the client. For example, MRPC 1.4 requires that a lawyer "explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation." MRPC 2.1 requires that a lawyer "shall exercise independent professional judgment and shall render candid advice." As described in the request, however, the lawyer often generates comprehensive estate planning documents on behalf of a client without ever meeting or communicating directly with the client. As was noted in both R-1 and RI-128, relying upon non-lawyers to conduct all interactions with clients poses an insurmountable risk that the non-lawyer will engage in the unauthorized practice of law, and will operate to deprive the client of the lawyer's independent judgment and professional services. This is incompatible with the lawyer's professional obligations to the client and to the bar. Similarly, RI-298 made clear that a lawyer may not agree to be identified as the drafter of a legal document such as a deed if in fact the lawyer does not review or conduct any analysis of the document until after the closing has occurred. The facts presented to the Committee clearly indicate that the lawyer often does not exercise independent professional judgment on behalf of the client, and sometimes does no legal work whatsoever, and therefore cannot ethically purport to be the drafter of the legal documents.

Two final issues posed by the proposed business relationship warrant attention. The first relates to the degree to which the exclusive relationship between the lawyer and the kit company creates an impermissible burden on the lawyer's professional independence. The primacy of the lawyer's professional independence underlies many important rules of professional conduct, including Rule 1.7(b) (relating to conflicts of interest posed by a lawyer's obligations to third parties or the lawyer's own interests), Rule 1.8(f) (regarding the receipt of compensation from one other than the client), Rule 5.4 (prohibiting the sharing of fees with non-lawyers and the directing or regulating of the lawyer's judgment by a non-client) and Rule 7.2(c) (prohibiting the giving of anything of value to a person recommending the lawyer's services). As was noted in both RI-135 and RI-191, "referrals given over only to one lawyer cannot help but generate 'the definite appearance of a quid pro quo . . . [which] constitutes 'giving value' for a recommendation . . . ." Both the reality and the appearance of this cloud on the lawyer's ability and willingness to exercise independent judgment on behalf of a client renders any such business relationship impermissible.

Finally, although determinations as to what constitutes the unauthorized practice of law are beyond the jurisdiction of this committee, special emphasis must be placed on the provisions of MRPC 5.5(b). That rule prohibits a lawyer from assisting a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law. Given the integral role of the employees of the kit company, as reflected in the structure of the business relationship, in the division of fees, and in the uniformity of the documents generated, it appears highly likely that the company and its employees are in fact engaged in the unauthorized practice of law. Rule 5.5(b) flatly prohibits a lawyer from assisting in such conduct. Given the on going and repetitive nature of the lawyer's contacts with such practices, it appears that the lawyer is in danger of running afoul of this rule.

CONCLUSION

A lawyer may not enter into a business arrangement with a company engaged in the business of selling legal documents and "kits" under circumstances where the company's representatives engage in conduct that is prohibited by the Michigan Rules of Professional Conduct and that conduct can be attributed to the lawyer. The lawyer must also ensure that he or she always exercises his or her best professional judgment on behalf of a client, and cannot allow this judgment to be clouded by the nature or frequency of referrals from other interested entities. Finally, the lawyer must be wary of engaging in conduct that may be deemed to be assisting another in the unauthorized practice of law.