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Ethical Issues in Virtual LAw Practice

Virtual Law Firm Learning Center 

Ethical Issues in Delivering Online Legal Services

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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

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.

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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.

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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.

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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

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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.

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Copyright © 2017 Richard S. Granat