Law Tips: What Constitutes a Law Firm?

ICLEF Law Tips #34

What Constitutes a Law Firm? – Special Problems in Office Sharing

There are sticky issues than can arise for lawyers in “sharing arrangements.”  The official guidance for managing a law firm, of course, is found in the Rules of Professional Conduct and the Admission and Discipline Rules.  However, in practical application, what specific problems would it be smart to consider…if possible?  How have those “Rules” been applied previously? What are the steps to make it clear whether there is a partnership or not?  Terry Farmer, Bamberger, Foreman, Oswald & Hahn, LLP, Evansville, provides answers in his recent CLE presentation for “The Business of Managing a Law Firm” seminar.

It is not uncommon for attorneys to share space in a common office facility. However, this does give rise to issues about whether or not a group of attorneys sharing space constitute a “firm” under the Rules of Professional Conduct.  Rule l.0(c) provides: “‘Firm or ‘law firm’ denotes a lawyer or lawyers in a law partnership, professional corporation, sole proprietorship, or other association authorized to practice law; or lawyers employed in a legal services organization or the legal department of a corporation or other organization.”

Comment 2 to that Rule states: “Whether 2 or more lawyers constitute a firm within paragraph (c) can depend on the specific facts. For example, two practitioners who share office space and occasionally consult or assist each other ordinarily would not be regarded as constituting a firm. However, if they present themselves to the public in a way that suggests that they are a firm or conduct themselves as a firm, they should be regarded as a firm for purposes of the Rules. The terms of any formal agreement between associated lawyers are relevant in determining whether they are a firm, as is the fact that they have mutual access to information concerning the clients they serve.”

Conflict Issues
A determination of whether or not two lawyers constitute a “firm” most commonly arises in the area of conflicts of interest.  However, it can also arise relative to the duty to maintain the area of conflicts of interest.  However, it can also arise relative to the duty to maintain confidences and the attorney/client privilege.

The most instructive case in Indiana on this issue is Matter of Sexon, 613 NE2d, 841 (Ind. 1993).  In that case, the attorneys shared a common facility which was configured such that each lawyer apparently had access to the other’s confidential information, they used a common letterhead, shared common phone lines, and shared office personnel. Here the attorneys were found to be a “firm” even though they considered their practices to be independent.  Other cases that have considered these issues also look at the use of a common fax machine where incoming confidential information could be seen by any attorney or his staff.

While a second case, In Re: Recker, 902 NE2d, 225 (Ind. 2009), found that the lawyers were not a “firm” in somewhat similar facts, caution is urged because there was a strong dissent in that case by Justice Sullivan.  It is also important to note that this case dealt with two public defenders using a common public defenders’ office.  While their status as public defenders may not have been legally dispositive, it does seem to have influenced the court in its opinion.

Communication Issues
In considering space sharing arrangements, attorneys should carefully consider appropriate signage, letterhead, telephone listings, and website utilization to make it clear that the attorneys are not practicing as a firm.  Careful consideration also needs to be given to shared communication lines, facsimile machines, and access to files.  In particularly small offices, the ease with which conversations can be overheard may also be a factor considered by the court.  Likewise, shared office personnel may give rise to a finding that lawyers are practicing as a firm.

Liability Issues
While the ethics rules are the most common consideration, legal liability issues should also be considered.  In Indiana, there is no requirement of a written agreement to form a partnership.  If attorneys who are sharing space do not desire to be “painted,’ with a partnership brush, they should take affirmative steps to make it clear that they are not in partnership or in some other manner practicing as a firm.  Otherwise, liabilities incurred by one attorney could be imputed to the other.  This could include a liability that would not be covered by insurance that was applied for by the attorney assuming he or she was not part of a “firm.”

Thanks to Terry Farmer for providing illustrative background on “sharing space” issues. His advice clarifies the potential pitfalls for lawyers moving into, or avoiding, business relationships.  Additional questions on law firm organization are answered in the ICLEF CLE seminar “The Business of Managing a Law Firm”. To view the upcoming Video Replays, the Online/On Demand Video or purchase the e-Publication – Click Here.

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About our Law Tips faculty member:
Terry Farmer is the managing partner in the law firm of Bamberger, Foreman, Oswald & Hahn, LLP in Evansville, Indiana.  He concentrates his practice in the areas of banking and commercial litigation, bankruptcy and creditors’ rights matters, and business acquisitions and sales.  He has previously taught banking law for the American Institute of Banking and has served as an adjunct faculty member of the University of Evansville.

About our Law Tips blogger:
Nancy Hurley, Law Tips blogger, has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We plan to utilize her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook page, Twittering and other places her legal experience lends itself.

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ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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