Role of Lawyer for Public Interest Law Organization [2013 Formal Ethics Opinion 9]

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The opinion seeks to provide guidance to lawyers who are employed by a public interest law organization that (1) provides legal and non-legal services to its clientele, and (2) has a non-lawyer executive director.  Per the facts of the opinion, Attorney A is a staff attorney at Immigrant Aid Corporation (IAC), and IAC is a public interest nonprofit provider of services to immigrants.

IAC provides legal assistance in immigration matters.  While staff attorneys provide these services, non-lawyer BIA representatives also provide the services with the authorization of the Federal Government.  New clients sign retainer agreements for the services to be provided by staff lawyers.  The agreement “specifies a total fee, which is the aggregate of the fees for the various legal services that it is anticipated the client will need.”  The retainer agreement also provides that the executive director or office manager will determine the outcome of: (1) requests for waiver of legal fees; (2) complaints regarding legal services; and (3) disputes regarding legal fees.  Regarding payment, a client’s cash or check payment for a fee is locked in a staff member’s desk until the funds can be deposited into IAC’s operating account.

Due to the volume of inquiries and resulting opinions of 2013 FEO 9, it is helpful to divide the conclusions into the categories below.

General Conclusions

• North Carolina lawyers employed by IAC are subject to the North Carolina Rules of Professional Conduct.  “The North Carolina Rules of Professional Conduct apply not only to lawyers working at law firms, but also to lawyers working in-house at public and private companies and for non-profit organizations.”  See Preamble, Rule 0.1; Rule 1.0(d).

Professional Independence of a Lawyer

• North Carolina lawyers may work for a 501(c)(3) corporation in which a non-lawyer serves as the executive director.  “The nonprofit corporation must have a governing structure that does not permit an individual or group of individuals other than an attorney duly licensed to practice law in North Carolina to control the manner or course of the legal services rendered…”  N.C. Gen. Stat. § 84-5.1.
• Rule 5.4(c) prohibits non-lawyers associated with such a corporation to “direct or regulate” the staff lawyer’s professional judgment.

Fees

• Non-lawyers in 501(c)(3) corporations may have final approval authority for fees to be charged.  Such approval may not interfere, however, with the staff lawyer’s exercise of professional judgment (see Rule 5.4).  Additionally, a method must exist by which the staff lawyer can object (for example, if the fee is clearly excessive and thus violative of Rule 1.5(a)).
• The staff lawyer does not participate in prohibited fee-sharing with a non-lawyer by allowing the nonprofit corporation to collect and retain legal fees.  NCGS § 84-5.1 (see above) protects the lawyer’s professional judgment by requiring nonprofit public interest law organizations to have governing structures prohibiting such interference.
• Staff lawyers must insure that a schedule of fees is either included in the retainer agreement or discussed with the client at the time of executing the retainer agreement.  Rule 1.4(b) requires a lawyer to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding representation.”  The opinion rules that a client cannot make an informed decision about entering into the representation agreement without sufficient knowledge of the legal fees.
• Fee agreements may not contain the term “nonrefundable fee” because a fee is always subject to refund (in whole or in part) if demonstrated to be clearly excessive (see 2008 FEO 10).  Fee agreements may specify that a fee is non-refundable, unless the fee is demonstrated to be clearly excessive.
• While the IAC may establish an internal mechanism for reviewing complaints about legal fees, that mechanism does not replace the mandatory North Carolina State Bar fee dispute resolution program detailed in Rule 1.5(f).

Advertising

• A statement that legal services are provided at “reasonable prices,” as long as it is truthful, does not violate advertising rules for lawyers.
• “A lawyer employed by IAC has a duty to ensure that the content of any information IAC provides to prospective clients about the lawyer or the lawyer’s services is truthful and not misleading.”  See Rule 7.1; 2004 FEO 1.

Safekeeping Property

• Rule 1.15 requires that “[i]f money is collected for a staff lawyer’s services, the lawyer must ensure that IAC handles the money in a manner that is consistent with the lawyer’s duty to safekeep client property.”
• Regarding money collected for costs and legal services, the staff lawyer must insure that the money is deposited into a trust account.  “Any portion of a payment that is intended to cover costs must be deposited in a trust account.”  See RPC 158.
• “Any check representing any portion of legal fees that are not earned immediately must be promptly deposited in a trust account.  In the event that trust funds cannot be immediately deposited in a trust account, the funds should be securely maintained until they can be deposited.”

Responsibilities of Staff Lawyers Regarding Institution’s Compliance with Rules of Professional Conduct

• The supervising lawyer—though not a director, officer, or manager of IAC—is responsible for IAC’s compliance with the Rules of Professional Conduct.  Rule 5.1 requires that “[a] lawyer who … possesses … managerial authority, shall make reasonable efforts to ensure that the firm or the organization has in effect measures giving reasonable assurance that all lawyers in the firm or the organization conform to the Rules of Professional Conduct.”
• Per Rule 5.2, a subordinate lawyer is “bound by the Rules of Professional Conduct notwithstanding that the lawyer acted at the direction of another person.”

Referrals

• When necessary to refer an individual elsewhere, a staff lawyer may refer that individual one or two specific lawyers on a list maintained by management if: (1) the listed lawyer is qualified to handle the matter, and (2) the listed lawyer did not give anything of value in exchange for the referral.  See Rule 7.2.

If you wish to respond or otherwise offer a guest contribution discussing this formal ethics opinion, please contact the ethics editor at cu***********@em***.edu.