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I.
Unauthorized
Practice of Law
Q.
When a company provides an online document automation application that
assembles legal forms and documents automatically, does a lawyer commit
the unauthorized practice of law when entering into a relationship with
the company in order to make web-enabled document automation available
to the lawyer’s clients as part of the lawyer’s legal services?
A.
Under ABA Model
Rule 5.5 and the corresponding rules of professional conduct in most
states, a lawyer can commit the unauthorized practice of law in either
of two ways – by providing legal services where the lawyer is not
admitted or otherwise authorized to practice and by assisting a
non-lawyer in conducting the practice of law.
First, a lawyer commits the unauthorized practice of law when he or she
provides legal services in a jurisdiction where the lawyer is not
admitted or does not otherwise have the authority to provide those
services (such as through pro hac vice or special exceptions set out in
the state rules of professional conduct). Under this rule, it would
generally be inappropriate for a lawyer admitted in one jurisdiction to
provide legal services for clients with matters in another jurisdiction
(unless the lawyer had some type of authority to do so). Therefore a
lawyer who provides online document preparation to clients must be
certain that the matter involves a jurisdiction where the lawyer is
admitted. In other words, it would not be appropriate for a lawyer
admitted only in Illinois (and without any special admission status) to
provide online document preparation to a client for a matter in
Wisconsin. The same would
be true for documents prepared offline as well as any other legal
services that would be deemed the practice of law.
Second, a lawyer commits the unauthorized practice of law when the
lawyer assists a non-lawyer, whether that is a person or a corporation,
to undertake the practice of law. This leads to the question of whether
online document automation that creates a legal form or document from
data provided by the client is the practice of law. The definition of “the
practice of law” varies from state-to-state but frequently includes the
drafting of legal documents and the use of legal knowledge or skill.
(For specific state definitions, see
http://www.abanet.org/cpr/model-def/model_def_statutes.pdf).
However, the question here revolves around whether the lawyer is
“assisting” the software vendor in practicing law when the document
preparation is provided as a legal service of the law firm. This is
analogous to services provided by paralegals and other outsourced
services. In most states, for example, paralegals have no independent
authority to provide legal services. If they independently provide
document preparation or use their legal skills in serving clients, they
may be deemed in violation of their state’s UPL laws, as are any lawyers
who assist them in providing those services. However, if paralegals
provide those same services under the direction of a lawyer and the
lawyer assumes supervisory obligations, the paralegal is not practicing
law and is not violating UPL laws, nor is the lawyer who provides the
supervision “assisting” in the unauthorized practice of law.
ABA Formal Opinion 08-451 (Aug. 5, 2008) clarifies that a lawyer may
outsource legal services, subject to several considerations. The opinion
directly addresses independent contractors, such as temporary lawyers,
but also mentions sources of tasks such as a photocopy shop, a document
management company and a third-party vendor for the firm’s computer
services. In its discussion of Model Rule 5.5 and the unauthorized
practice of law, the Opinion states, “Ordinarily, an individual who is
not admitted to practice law in a particular jurisdiction may work for a
lawyer who is so admitted, provided that the lawyer remains responsible
for the work being performed and that the individual is not held out as
being a duly admitted lawyer.”
Therefore, even if a document automation application would be deemed the
unauthorized practice of law (if its services were provided independently
of a lawyer’s services), once those services or the documents produced by
the software application are provided under the lawyer’s direction and
supervision and within the scope of the lawyer’s services, the lawyer can
no longer be assisting the document preparation in the practice of law
and no longer has a risk of assisting in the unauthorized practice of
law.
II.
Confidentiality
Q. Does a lawyer breach his or her obligation to maintain
a client’s confidentiality when using an online document automation
application for his or her clients, which is provided from a third party
vendor?
A.
The rules of professional conduct of every state impose an obligation on
lawyers to maintain the confidences of their clients. In addition, rules
of evidence protect lawyers from testifying against their clients under
the attorney-client privilege.
ABA Model
Rule 1.6 addresses confidentiality and has been adopted by most
states. The rule provides that a “lawyer shall not reveal information
relating to the representation of a client unless the client gives
informed consent, the disclosure is impliedly authorized in order to
carry out the representation or the disclosure is permitted” by one of
the exceptions set out in the next part of the rule, none of which
pertain to this situation. Paragraph 16 of the comment to the rule
states, “A lawyer must act competently to safeguard information relating
to the representation of a client against inadvertent or unauthorized
disclosure by the lawyer or other persons who are participating in the
representation of the client or who are subject to the lawyer’s
supervision.”
Opinions that examine the lawyer’s obligation to maintain
confidentiality when using technology generally address e-mail. The
leading analysis of this is
ABA
Formal Opinion 99-413 (March 10, 1999). The opinion examined
different modes of e-mail transmission and concluded that in all modes,
“lawyers have a reasonable expectation of privacy …despite some risk of
interception and disclosure.” The opinion also cautions that when a
lawyer may send information that is “so highly sensitive that
extraordinary measures to protect the transmission are warranted,” the
lawyer should consult the client about the mode of the transmission.
Opinion 99-413
is of particular note here because it includes an examination of e-mail
transmitted over the Internet, like online forms. The opinion states
that confidentiality may be compromised by an ISP’s legal right to
monitor what is transmitted through it or stored on its network and by
illegal hacking. On the first point, the opinion indicates that by law
providers may conduct random monitoring only for mechanical or quality
service control checks. Therefore, the interception of content of a
communication sent through the Internet would be illegal in either
situation. This gives the lawyer a reasonable expectation of privacy
that requires no further action, except as noted in the highly sensitive
communication.
Although not required under the ABA Opinion or those of various states,
encryption makes the possibility of interception even more remote and
creates even greater assurances the information will be confidential.
Nevertheless, under the analysis of these opinions, the transmission of
online forms over the Internet would not breach the lawyer’s obligation
to maintain the client’s confidentiality even when the communication is
not encrypted.
Note: All information that passes from the
client to the attorney over the
DirectLaw™
virtual law office platform is encrypted.
DirectLaw subscribes to, and complies with, the Security
Standards of the
Legal
Cloud Computing Association.
III.
Division of
Fees
Q. Does a lawyer violate ethics rules prohibiting the
division of fees with a non-lawyer when entering into a relationship with
a company that provides online document automation services in order to
make web-enabled document automation available to the lawyer’s clients
as part of the lawyer’s legal services?
A.
Model Rule 5.4 and its state counter-parts prohibit a lawyer from
sharing legal fees with a non-lawyer, except under circumstances that do
not apply here. The rule has been applied to relationships lawyers may
develop with other service providers, such as investigators, and to
lawyer referral services. In a few state ethics opinions, the
prohibition has been applied when a lawyer participates in an
Internet-based service. For example,
Arizona
Opinion 99-06 concludes that a lawyer may not participate in an
Internet service that sends questions to individual lawyers when the
lawyers pay a portion of their fee to the service.
However, in all aspects of the practice of law, lawyers incur expenses
simply because they have clients. Rent for office space, telephone
charges, malpractice insurance premiums and staff salaries are traced
back to the fact that clients pay their legal bills and the lawyers
apportion some of that money for these expenses.
The distinction is whether the payment is computed as a percentage of
the fee charged to the lawyer's client. If so, the arrangement is likely to be an improper division of
fees. If not, it is likely to be an acceptable cost of doing business.
As
applied to an agreement with a company providing a lawyer with online
document automation applications, the question turns on whether the
lawyer compensates the company based on the forms provided to specific
clients, and therefore is like the referral services that charge based
on the service to those individuals, or whether the payment is a fixed
fee, such as rent or salaries. If a lawyer pays a company that provides
online document automation applications a fixed fee for a certain amount
of time, such as on a monthly basis, regardless of the number of forms
or number of clients who use the forms, the situation is not like those
that are deemed an impermissible division of fees.
Q. What if the law firm is charged a fee per document used (a
usage fee), but the document usage fee is unrelated to the fee charged
by the law firm to its clients?
A. This question addresses the issue about a fee structure of a company
that provides online document assembly to lawyers -- who then use that
service as part of the legal services provided to their clients -- where
the lawyers pay the company a set monthly fee plus a “per use” cost for
the use of the document assembly services.
The primary question is whether this arrangement creates a division of
fees between the lawyer and the service provider. The division of fees
is governed at three places in the state rules of professional conduct.
Model Rule 1.5(e) and its state counter-parts set out the circumstances
where lawyers who are not otherwise affiliated may divide fees. It is
not relevant to this analysis. Model Rule 7.2(b) prohibits a lawyer from
receiving anything of value for the recommendation of the lawyer’s
services, except for the reasonable costs of advertising and the usual
expenses of certain lawyer referral services. This rule is also not
relevant to this analysis.
Model Rule 5.4 is entitled the “Professional Independence of the Lawyer”
and prohibits a lawyer from sharing legal fees with a non-lawyer, which
would include a general corporation, except for certain exceptions that
do not apply to the issue examined here. Therefore the question is
whether the arrangement of a “per use” cost is the impermissible sharing
of legal fees with a non-lawyer.
The cases and opinions on Rule 5.4 are divided into three types. First,
there are those that address circumstances that involve referral
services, such as an arrangement where a lawyer pays a percentage of the
fee for each case that is referred to the lawyer. These do not apply.
The second arrangement involves the circumstance where there is an
agency relationship between the lawyer and the service provider. One
group of cases involves the lawyer’s use of investigators and
consultants, where the agent’s compensation is based on a percentage of
the fee from a particular matter. This situation is impermissible, but
inapplicable to this analysis. In a second group of cases, the lawyer
acts as an agent of the service provider. For example, in Michigan
Opinion RI 325, a company sold estate planning kits and used the law
firm to complete the paperwork from information the corporation had
collected from its customers. The law firm then collected the fees from
the company. Essentially, this is the opposite arrangement from that
considered here, where the lawyer is the one with the client and merely
uses the document preparation service to meet the client’s needs, not
unlike a lawyer who buys blank forms from a business supply company.
The third arrangement involves payments that are based on fees but that
do not pose a threat to the independence of the lawyer’s judgment. In
these circumstances, there is a technical division of fees with a
non-lawyer, but that division has no ability to threaten the lawyer’s
fidelity to his or her client. These cases involve the payments made to
a temporary agency when a lawyer uses the services of a temporary lawyer
or other staff. Typically, the agency bills a fee, pays the temporary
service provider a portion and retains the remainder as its service fee.
Another circumstance involves the use of credit cards, where the lawyer
receives payment of fees from the client on a card. The payment is
divided with the lawyer’s bank as part of the lawyer’s merchant account
agreement with the bank. This is usually two to five percent of the
amount billed to the credit card, depending on the arrangement. This is
much like a “per use” purchase of services. In this case, it is a “per
use” of banking services to facilitate the payment of the client’s fees.
In both of these situations, the lawyer’s dedication to the client is
not compromised in any way.
Based on these authorities, if a lawyer were to provide document
preparation services to customers of a service provider as its agent and
were compensated according to the customers served, it is probable that
the arrangement would be deemed in a violation of Rule 5.4 in most
states. However, when the lawyer merely purchases the document
preparation services from the service provider in order to enable his or
her clients to complete the forms, which the lawyer then reviews, the
lawyer is not an agent of the service provider and the circumstance does
not impair the lawyer’s fidelity to the client and his or her
independence of judgment, even when the arrangement is on a “per use”
basis. Therefore, it would be highly likely that a state would conclude
this arrangement was a violation of Rule 5.4 or any other provision
governing the division of fees.
IV.
Unbundling
Q. May a lawyer provide a limited scope of
representation that includes the preparation of legal forms online?
A.
ABA Model Rule
1.2(c) and its state counter-parts permit the limited scope of
representation if the limitation is reasonable under the circumstances
and the client gives informed consent to the limitation. The limited
scope of representation, or unbundling, appears to be an increasingly
common way for lawyers to deliver their services, both with the use of
technology and in a more traditional setting.
It
is important that lawyers understand that unbundled legal services are
to be done pursuant to the attorney-client relationship and therefore
must be in compliance with the rules of professional conduct in general.
See, for example,
North Carolina State Bar 2005 Formal Ethics Opinion 10 (Jan. 20, 2006).
A
lawyer may provide online forms as part of an unbundled service, but
must also be mindful of the lawyer’s other professional responsibilities
when doing so. In particular, a lawyer must provide competent legal
services when providing unbundled services. According to the
North Carolina opinion, the lawyer must make the
same inquiries, engage in the same level of communication and take the
same precautions as a competent lawyer does in an office setting.
The
ABA
Standing Committee on the Delivery of Legal Services has created a
website encouraging the provision of unbundled legal services and
assisted pro se
representation. The Standing Committee believes unbundling is an
important part of making legal services available to people who could
not otherwise afford a lawyer. The website also has compiled a list
of state ethics opinions addressing limited scope representation.
See
http://www.abanet.org/legalservices/delivery/home.html
Q.
How do I establish an Attorney/Client Relationship Online?
A. When a client registers for the law firm's web
site, they are required to accept a Limited Services Retainer
Agreement.
DirectLaw®
provides a sample Limited Services
Retainer Agreement appropriate for providing legal services
online, but this Agreement can be customized for each law firm. Before the attorney can provide online legal services to a client, a
conflict of interest check must be conducted and the attorney sends a
specific e-mail to the client indicating that they have been accepted as
a client of the law firm. These acceptance e-mails are archived for
future reference and to determine the date when the attorney-client
relationship was established.
Copyright © 2017 Richard S. Granat
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