Following is the 54th post in a series from Parker Law Group about recent changes to the California Bar Association (CBA)’s Rules of Professional Conduct (RPC). This rule is found in Chapter 5 – “Law Firms and Associations,” focusing on financial arrangements with non-lawyers. This Rule of Professional Conduct, as revised, is as follows:
Rule 5.4 Financial and Similar Arrangements with Non-Lawyers
(a) A lawyer or law firm shall not share legal fees directly or indirectly with a non-lawyer or with an organization that is not authorized to practice law, except that:
(1) an agreement by a lawyer with the lawyer’s firm, partner, or associate may provide for the payment of money or other consideration over a reasonable period of time after the lawyer’s death, to the lawyer’s estate or to one or more specified persons;
(2) a lawyer purchasing the practice of a deceased, disabled or disappeared lawyer may pay the agreed-upon purchase price, pursuant to rule 1.17, to the lawyer’s estate or other representative;
(3) a lawyer or law firm may include non-lawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement, provided the plan does not otherwise violate these rules or the State Bar Act;
(4) a lawyer or law firm may pay a prescribed registration, referral, or other fee to a lawyer referral service established, sponsored and operated in accordance with the State Bar of California’s Minimum Standards for Lawyer Referral Services; or
(5) a lawyer or law firm may share with or pay a court-awarded legal fee to a nonprofit organization that employed, retained or recommended employment of the lawyer or law firm in the matter.
(b) A lawyer shall not form a partnership or other organization with a non-lawyer if any of the activities of the partnership or other organization consist of the practice of law.
(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s independent professional judgment or interfere with the lawyer-client relationship in rendering legal services.
(d) A lawyer shall not practice with or in the form of a professional corporation or other organization authorized to practice law for a profit if:
(1) a non-lawyer owns any interest in it, except that a fiduciary representative of a lawyer’s estate may hold the lawyer’s stock or other interest for a reasonable time during administration;
(2) a non-lawyer is a director or officer of the corporation or occupies a position of similar responsibility in any other form of organization; or
(3) a non-lawyer has the right or authority to direct or control the lawyer’s independent professional judgment.
(e) The Board of Trustees of the State Bar shall formulate and adopt Minimum Standards for Lawyer Referral Services, which, as from time to time amended, shall be binding on lawyers. A lawyer shall not accept a referral from, or otherwise participate in, a lawyer referral service unless it complies with such Minimum Standards for Lawyer Referral Services.
(f) A lawyer shall not practice with or in the form of a nonprofit legal aid, mutual benefit or advocacy group if the nonprofit organization allows any third person to interfere with the lawyer’s independent professional judgment, or with the lawyer-client relationship, or allows or aids any person to practice law in violation of these rules or the State Bar Act.
According to the Cross-Reference Chart produced by the California Bar Association, comparing the new and revised RPC to the previous RPC, Rule 1-310 (“Forming a Partnership with a Non-Lawyer”) has been replaced by Rule 5.4 – one of the many revisions that went into effect on November 1, 2018. That previous rule was one sentence long and can now be found in subdivision (b) of the revised rule.
The new rule (as set forth above) is a long one, divided into six subdivisions that discuss fees and other issues relating to an attorney’s professional relationships with non-lawyers. The last two subdivisions of the rule cover minimum standards for lawyer referral services and restrictions against a lawyer practicing with a nonprofit legal aid or advocacy group
The corresponding rule found in the American Bar Association (ABA)’s Model RPC (Rule 5.4 – Professional Independence of a Lawyer) contains most of the same information found in the CBA’s revised rule. Three subdivisions, however, are NOT found in the ABA’s rule. Subd. (a)(5) of CBA’s rule – pertaining to court-awarded legal fees to nonprofit organizations – is one of those. Subds. (e) and (f) are the other two.
Benefit: The consolidation of several topics in this new rule – topics previously split among multiple rules – makes it easier, generally speaking, for attorneys to find information on financial and other types of arrangements they may be trying to create.
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Rules of Professional Conduct, California Bar Association, American Bar Association, Legal Malpractice, Legal Representation, Breach of Fiduciary, Parker Law Group, Port Parker