Attorney Davis operates a law firm and also owns a separate, non-legal business providing financial planning services. Davis frequently refers his law clients to his financial planning business without disclosing his ownership interest in the financial planning business. The financial planning services are related to the legal services provided. Has Davis violated the Model Rules of Professional Conduct?
- AYes, because Davis failed to disclose his ownership interest in the law-related service.
- BNo, because financial planning is a 'law-related service' and thus permitted.
- CYes, because a lawyer should not engage in any business other than the practice of law.
- DNo, as long as the financial planning services themselves are ethical and competent.
Show answer & explanationAnswer & explanation
Correct answer: A. Yes, because Davis failed to disclose his ownership interest in the law-related service.
Model Rule 5.7 addresses responsibilities regarding law-related services. If law-related services are provided by a lawyer or entity controlled by a lawyer in circumstances that are not distinct from the lawyer's provision of legal services, then the lawyer must comply with the Rules of Professional Conduct regarding the law-related services. If the services are provided in circumstances distinct from the legal services, then the lawyer must take reasonable measures to assure that the recipient understands that the services are not legal services and that the protections of the client-lawyer relationship do not exist. Comment [8] to Rule 5.7 specifically states that when a lawyer owns or controls an entity providing law-related services, the lawyer should disclose the lawyer's interest in the entity to the client.
Why the other options are wrong
- B. While financial planning can be a law-related service, specific ethical obligations, such as disclosure of ownership, apply.
- C. Lawyers are permitted to engage in other businesses, including law-related services, but they must do so in compliance with specific ethical rules, particularly Rule 5.7.
- D. Competence and ethics of the service itself are necessary but not sufficient; the lawyer's ethical obligations regarding disclosure and client understanding still apply.
Responsibilities Regarding Law-Related Services
A lawyer providing law-related services must ensure clients understand these are not legal services and lack client-lawyer protections, and must disclose any ownership interest in the entity providing such services.
- Ensure client understanding of non-legal nature.
- Disclose lawyer's ownership/control interest.
- Full RPCs apply if not distinct from legal services.
Memory trick: For 'Related' 'Services', 'Disclose' your 'Role', or 'Ethics' take a 'Toll'.