Proposed Opinions

Council Actions

At its meeting on April 19, 2013, the State Bar Council adopted the ethics opinion summarized below:

2013 Formal Ethics Opinion 3
Safekeeping Funds Collected from Client to Pay Expenses
Opinion examines a lawyer’s responsibilities when charging and collecting from a client for the expenses of representation.

Ethics Committee Actions

At its meeting on April 18, 2013, the Ethics Committee voted to send the following proposed opinions to subcommittees for further (or continued) study: Proposed 2011 FEO 11, Communication with Represented Party by Lawyer Who is the Opposing Party; Proposed 2012 FEO 7, Copying Represented Persons on Email Communications; Proposed 2013 FEO 1, Release/Dismissal Agreement Offered by Prosecutor to Convict; and Proposed 2013 FEO 2, Providing Defendant with Discovery During Representation. The Ethics Committee also voted to publish two revised proposed opinions (Proposed 2012 FEO 11 and Proposed 2012 FEO 13) and four new proposed opinions. The comments of readers are welcomed.  

Proposed 2012 Formal Ethics Opinion 11
Use of Nonlawyer Field Representatives to Obtain Representation Contracts
April 18, 2013

Proposed opinion rules that a law firm may send a nonlawyer field representative to meet with a prospective client and obtain a representation contract if a lawyer at the firm has reviewed sufficient information from the prospective client to determine that an offer of representation is appropriate.

Inquiry #1:

ABC law firm employs a large staff of nonlawyers, including paralegals, assistants, and others. Among the nonlawyer staff are employees called “field representatives.” When a prospective client contacts ABC, the firm sends a field representative to the prospective client’s home or other location chosen by the prospective client. The field representative provides information about the firm in an effort to convince the prospective client to choose firm ABC for representation. If the prospective client agrees, the field representative provides a representation contract and obtains the client’s signature on the contract. The field representation also obtains information from the prospective client concerning the representation.

No lawyer with the firm consults with the prospective client before the field representative meets with the person. No lawyer with the firm reviews the information obtained by the field representative before the field representative obtains the client’s signature on the representation contract. Is ABC’s use of field representatives in this manner permissible under the Rules of Professional Conduct?

Opinion #1:

No. A law firm may not send a nonlawyer field representative to meet with a prospective client and obtain a representation contract when no lawyer with the firm has reviewed the prospective client’s relevant facts and circumstances to make an initial determination that an offer of legal services is appropriate.

Inquiry #2:

If a lawyer at the firm has reviewed sufficient information from the prospective client to determine that an offer of representation is appropriate, may a firm employ a field representative to meet with the prospective client and obtain a representation contract?

Opinion #2:

The Ethics Committee has previously determined that a lawyer may delegate certain tasks to nonlawyer assistants. See, e.g., RPC 70, RPC 216, 99 FEO 6, 2002 FEO 9. Pursuant to RPC 216, when a lawyer delegates a task to a nonlawyer, the lawyer has a duty under the Rules of Professional Conduct to take reasonable steps to ascertain that the nonlawyer assistant is competent; to provide the nonlawyer assistant with appropriate supervision and instruction; and to continue to use the lawyer's own independent professional judgment, competence, and personal knowledge in the representation of the client. See also Rule 1.1, Rule 5.3, Rule 5.5.

In 2002 FEO 9 the Ethics Committee specifically determined that a nonlawyer may oversee the execution of real estate closing documents and the disbursement of the proceeds even though the lawyer is not physically present at the closing. 2002 FEO 9 states that, in any situation where a lawyer delegates a task to a nonlawyer assistant, the lawyer must determine that delegation is appropriate after having evaluated the complexity of the transaction, the degree of difficulty of the task, the training and ability of the nonlawyer, the client's sophistication and expectations, and the course of dealing with the client. The opinion holds that the lawyer is still responsible for providing competent representation and adequate supervision of the nonlawyer.

Similarly, under certain circumstances, a nonlawyer field representative may oversee the execution of a representation contract. The firm lawyer must consider the factors set out in 2002 FEO 9 and determine whether such delegation is appropriate.

The lawyer must also take precautions to avoid assisting the unauthorized practice of law. See Rule 5.5(d). The lawyer must instruct the field representative to disclose to the prospective client that he is not a lawyer and that he cannot answer any legal question. The lawyer must also admonish the field representative not to provide legal advice and to contact the lawyer should a legal question arise. Likewise, the lawyer must be available by some means to consult with and answer any legal questions the prospective client may have.

Proposed 2012 Formal Ethics Opinion 13
Duty to Safekeep Client Files upon Suspension, Disbarment, Disappearance, or Death of Firm Lawyer
April 18, 2013

Proposed opinion rules that the partners and managerial lawyers remaining in a firm are responsible for the safekeeping and proper disposition of both the active and closed files of a suspended, disbarred, missing, or deceased member of the firm.

Inquiry #1:

The law firm A & B, PA, was formed as a professional corporation in 1992. Lawyer A and Lawyer B were the initial shareholders in the firm. In 1993, Lawyer C joined the firm and became a shareholder. The professional corporation’s articles of incorporation were amended to change the professional corporation’s name to A, B & C, PA.

In 1998 Lawyer C closed a real estate transaction for a client of the firm. The file was placed among the firm’s inventory of client files.

In 2008 Lawyer A and Lawyer B learned that Lawyer C had committed numerous embezzlements from the firm’s trust account in a cumulative amount exceeding $1,000,000. Lawyer C (hereinafter, “C”) was ousted from the firm and was subsequently disbarred. The firm’s articles of incorporation were amended to change the professional corporation’s name back to A & B, PA. When C was ousted from the firm, Lawyer A and Lawyer B reviewed the files for the clients of the firm whose legal services had been provided by C. When their review was completed, Lawyer A and Lawyer B instructed or allowed C to take possession of those client files. Since 2008, paper client files have been in a storage facility to which C’s lawyer has the key, and electronic client files, to the extent that there were any, have been stored in a password-protected manner by C’s lawyer.

The client whose transaction was closed by C in 1998 is now seeking her file, which is believed to be in the storage facility. C is in prison. C’s lawyer cannot access the storage facility due to physical infirmity. However, C’s lawyer is willing to give Lawyer A and Lawyer B the key to the storage facility, and to authorize them to access and retrieve the client files. Lawyer A and Lawyer B assert that they are not obligated to help the client obtain her file.

When a lawyer leaves a firm and is subsequently disbarred, what is the professional responsibility of the lawyers remaining with the firm relative to the safekeeping and proper disposition of the files of the clients of the disbarred lawyer?

Opinion #1:

The remaining lawyers in the firm are responsible for the safekeeping and proper disposition of both the active and closed files of the disbarred lawyer in their custody. As used in this opinion, “files” applies to both electronic and paper files unless otherwise indicated. Because of the risk of loss, closed files may not be relinquished to a disbarred lawyer who is no longer subject to the regulation of the North Carolina State Bar and no longer required to comply with the Rules of Professional Conduct.

Rule 1.15 requires a lawyer to preserve client property, including information in a client’s file such as client documents and lawyer work product, from risk of loss due to destruction, degradation, or disappearance. See also RPC 209 (noting the “general fiduciary duty to safeguard the property of a client”); RPC 234 (requiring the storage of a client’s original documents with legal significance in a safe place or their return to the client); 98 FEO 15 (requiring exercise of lawyer’s “due care” when selecting depository bank for trust account); and 2011 FEO 6 (allowing law firm to use “cloud computing” if reasonable care is taken to protect the security of electronic client files).

If a lawyer practices in a law firm with other lawyers, the responsibility to preserve a client’s property, including the client’s file, is not solely the responsibility of the lawyer providing the legal services to the client. Rule 5.1(a) of the Rules of Professional Conduct requires the partners in a law firm and all lawyers with comparable managerial authority to make “reasonable efforts to ensure that the firm…has in effect measures giving reasonable assurance that all lawyers in the firm…conform to the Rules of Professional Conduct.”

The professional responsibilities of the partners and the lawyers with managerial authority relative to the files of the firm are the same, regardless of whether the lawyer has departed the firm because of suspension, disbarment, disappearance, or death.1 The lawyers are responsible for (1) ensuring that any open client matter is promptly and properly transitioned to the lawyer of the client’s choice, and (2) retaining possession of and safekeeping closed client files of the departed lawyer until the requirements for disposition of closed files set forth in RPC 209 can be fulfilled. See, e.g., RPC 48 (explaining duties upon firm dissolution including continuity of service to clients and right of clients to counsel of their choice).

All firms should recognize the possibility of suspension, disbarment, disappearance, or death of a firm lawyer. Law firms should plan for and include in their operating procedures a means or method to access and secure all client files for which the firm would be responsible if such an event were to occur.

Inquiry #2:

Do Lawyer A and Lawyer B have a duty to help a former client of the firm obtain the file relating to the legal services provided to her by C when C was a member of the firm?

Opinion #2:

Yes, when the location of a file is known, the lawyers have a duty to take reasonable measures to assist a client to obtain the file. See Opinion #1 and RPC 209.

Endnote

1. This opinion does not address the professional responsibilities of the firm lawyers when a lawyer leaves the firm to practice elsewhere.

Proposed 2013 Formal Ethics Opinion 4        
Representation in Purchase of Foreclosed Property
April 18, 2013

Proposed opinion examines the ethical duties of a lawyer representing both the buyer and the seller on the purchase of a foreclosure property and the lawyer’s duties when the representation is limited to the seller.
Editor's note: This opinion supplements and clarifies 2006 FEO 3.

Inquiry #1:

Bank A foreclosed its deed of trust on real property and was the highest bidder at the sale. Bank A listed the property. Seller entered into a contract to purchase the property.

An addendum to the Offer to Purchase and Contract (“Contract”) signed by the parties states that the closing shall be held in Seller’s lawyer’s office by a date certain and that Seller, Bank A, “shall only pay those closing costs and fees associated with the transfer of the Property that local custom or practice clearly allocates to Seller ... and the Buyer shall pay all remaining fees and costs.” Bank B is providing financing for the transaction.

Seller chose Law Firm X to close the residential real estate transaction. Law Firm X did not participate in the foreclosure of the property prior to the sale; however, Law Firm X regularly does closings for properties sold by Bank A.

Law Firm X proposes to send Buyer a letter advising Buyer that it has been chosen as settlement agent and advising Buyer that it will be representing both parties in the transaction. Law Firm X will charge Buyer $425 for the closing.

May Lawyer at Law Firm X participate in the joint representation of Buyer and Seller as contemplated by the Contract?

Opinion #1:

If a lawyer is named as the closing agent for a residential real estate transaction pursuant to an agreement such as the one set out above, the lawyer has a duty to ensure that he can comply with Rule 1.7 prior to accepting joint representation of the buyer and seller. When contemplating joint representation, a lawyer must consider whether the interests of the parties will be adequately protected if they are permitted to give their informed consent to the representation, and whether an independent lawyer would advise the parties to consent to the conflict of interest. Representation is prohibited if the lawyer cannot reasonably conclude that he will be able to provide competent and diligent representation to all clients. See Rule 1.7, cmt. [15]. As stated in comment [29] to Rule 1.7, the representation of multiple clients “is improper when it is unlikely that impartiality can be maintained.”

The Ethics Committee has previously concluded that, under certain circumstances, it may be acceptable for a lawyer to represent the borrower, the lender, and the seller in the closing of a residential real estate transaction. See, e.g. CPR 100, RPC 210. Joint representation may be permissible in a residential real estate closing because, in the usual transaction, the contract to purchase is entered into by the buyer and seller prior to the engagement of a lawyer. Therefore, the lawyer has no obligation to bargain for either party. Similarly, the buyer and the lender have agreed to the basic terms of the mortgage loan prior to the engagement of the closing lawyer. However, in CPR 100, the Ethics Committee specifically stated that:

[a] lawyer having a continuing professional relationship with any party to the usual residential transaction, whether the seller, the lender, or the borrower, should be particularly alert to determine in his own mind whether or not there is any obstacle to his loyal representation of other parties to the transaction, and if he finds that there is, or if there is any doubt in his mind about it, he should promptly decline to represent any other party to the transaction.

In addition to the above determination, Rule 1.7 requires that the lawyer obtain any affected client’s informed consent to the joint representation and to confirm that consent in writing. Rule 1.7.

Comment [6] to Rule 1.0 (Terminology) provides that, to obtain “informed consent,” a lawyer must “make reasonable efforts to ensure that the client or other person possesses information reasonably adequate to make an informed decision.” Comment [6] clarifies that, ordinarily, this will require: (1) communication that includes a disclosure of the facts and circumstances giving rise to the situation; (2) any explanation reasonably necessary to inform the individual of the material advantages and disadvantages of the proposed course of conduct; and (3) a discussion of the individual’s options and alternatives.

To obtain Buyer’s “informed” consent in the instant scenario, Lawyer must: (1) explain the proposed scope of the lawyer's representation; (2) disclose Lawyer’s prior relationship with Seller; (3) explain the advantages and risks of common representation; and (4) discuss the options/alternatives Buyer has under the Contract, such as hiring his own lawyer at his own expense. See Rule 1.0, 97 FEO 8, 2006 FEO 3.

If the above requirements are met, Lawyer may proceed with the common representation. If Lawyer subsequently determines that he can no longer exercise his independent professional judgment on behalf of both clients, he must withdraw from the representation of both clients.

If Lawyer determines at the outset that the common representation will be adverse to the interests of either Buyer or Seller, or that his judgment will be impaired by loyalty to Seller, Lawyer may not represent both parties. Similarly, if Buyer does not consent to the joint representation, Lawyer may not represent both parties.

Inquiry #2:

Buyer notifies Lawyer at Law Firm X that he wants to have his own lawyer represent him at the closing. Therefore, Law Firm X intends to limit its representation to Seller. To clarify its role in the transaction, Lawyer sends Buyer an Independently Represented Buyer Acknowledgement to sign agreeing that, although Law Firm X was providing services necessary and incidental to effectuating a settlement of the transaction, including providing an opinion of title for the Buyer’s policy to the title insurance company chosen by and affiliated with Bank A, there will be no attorney-client relationship between Law Firm X and Buyer. Law Firm X informs Buyer that the charge for the closing will be reduced to $325.

May Law Firm X limit its representation to Seller and charge Buyer $325 for closing the real estate transaction?

Opinion #2:

Upon notice that Buyer wants to have his own lawyer represent him at the closing, Lawyer must first determine whether Buyer desires Law Firm X to continue to represent his interests in conjunction with his own lawyer. If Buyer desires Law Firm X to continue to represent his interests in the closing, then Law Firm X may continue to advise Buyer and the firm would not be required to adjust its fee.

If Buyer does not consent to the joint representation, Lawyer may limit his representation to Seller in the absence of a conflict of interest. Under the circumstances, it is incumbent upon Lawyer to clarify its role to Buyer. 2006 FEO 3 specifically holds that a lawyer may represent only the seller’s interests in a transaction and provide services as a title and closing agent, as required by the contract of sale. There must, however, be certain robust and thorough disclosures to the buyer.

Pursuant to 2006 FEO 3, Lawyer must “fully disclose to Buyer that Seller is his sole client, he does not represent the interests of Buyer, the closing documents will be prepared consistent with the specifications in the contract to purchase and, in the absence of such specifications, he will prepare the documents in a manner that will protect the interests of his client, Seller, and, therefore, Buyer may wish to obtain his own lawyer.” 2006 FEO 3.

If Lawyer limits his representation to Seller, Lawyer may not perform any legal services for Buyer. At the conclusion of the representation, Lawyer needs to consider the factors set out in Rule 1.5(a) and determine whether the fee of $325 is clearly excessive for the services performed for Seller.

Whether the contract to purchase the property requires Buyer to pay Lawyer’s fee for representation of Seller is a legal question outside the purview of the Ethics Committee. However, a lawyer may be paid by a third party, including an opposing party, provided the lawyer complies with Rule 1.8(f) and the fee is not illegal or clearly excessive in violation of Rule 1.5(a). See RPC 196.

Similarly, Buyer’s authority to renegotiate the terms of the Contract pertaining to the selection of the closing lawyer, and/or the payment of the closing costs and fees associated with the closing, are outside the purview of the Ethics Committee.

Inquiry #3:

May Lawyer provide an opinion of title to the title insurance company for Buyer’s title insurance policy under the circumstances described in Inquiry #2?

Opinion #3:

In representing Seller, Law Firm X may provide an opinion on title to the title insurer sufficient and necessary to satisfy the requirements of the Contract and facilitate completion of the transaction on behalf of Seller. See CPR 100, RPC 210, 2006 FEO 3.

CPR 100 and RPC 210 provide that a lawyer who is representing the buyer, the lender, and the seller (or any one or more of them) may provide the title insurer with an opinion on title sufficient to issue a mortgagee title insurance policy, when the premium is paid by the buyer. CPR 100 further recommends that, because a buyer-borrower is usually inexperienced in the purchase of real estate and the securing of loans thereon, “any lawyer involved in the transaction, even though not representing the borrower, should be alert to inform the borrower of the availability of an owner's title insurance policy which is usually available to the borrower up to the amount of the loan at little or no expense to the borrower, and assist the borrower in obtaining an owner's title insurance policy.”

Proposed 2013 Formal Ethics Opinion 5        
Disclosure of Confidential Information to Lawyer Serving as Foreclosure Trustee
April 18, 2013

Proposed opinion rules that a lawyer/trustee must explain his role in a foreclosure proceeding to any unrepresented party that is an unsophisticated consumer of legal services; if he fails to do so and that party discloses material confidential information, the lawyer may not represent the other party in a subsequent, related adversarial proceeding unless there is informed consent.

Inquiry:

Lender requests that Lawyer’s Firm serve as the substitute trustee under a note and deed of trust to commence foreclosure proceedings based on an alleged event of default. Borrower under the note and deed of trust is a limited liability company. While Firm is acting as substitute trustee, Borrower’s member-manager meets with Lawyer and explains to Lawyer why he believes Borrower is not in default. Borrower is a small business and its member-manager is inexperienced in matters requiring legal representation.

During the meeting with the member-manager, Lawyer did not explain the role of the trustee or the trustee’s relationship to the borrower and lender in a foreclosure. The member-manager informed Lawyer that Borrower’s theory is that the note required the subject property to be cleaned and cleared, and Borrower does not believe this condition was met. Borrower’s member-manager shows Lawyer pictures and other documents supporting Borrower’s theory of the case during this meeting.

The foreclosure proceeding is subsequently dismissed and superior court litigation between Borrower and Lender ensues. A new substitute trustee is appointed under the deed of trust. The primary issue in the lawsuit is the same issue Lawyer and the member-manager of Borrower discussed at their meeting while Firm was substitute trustee, i.e. whether Lender fulfilled its obligations under the note to clean and clear the property.

Now that Firm is no longer the substitute trustee, may Lawyer represent Lender in the lawsuit?

Opinion:

RPC 90 provides that a lawyer who as trustee initiated a foreclosure proceeding may resign as trustee after the foreclosure is contested and act as lender's counsel. The opinion notes that former service as a trustee does not disqualify a lawyer from subsequently assuming a partisan role in regard to foreclosure under a deed of trust or related litigation. See also RPC 64 (lawyer who served as trustee may after foreclosure sue the former debtor on behalf of the purchaser).

The facts of RPC 90 contemplate that the trustee resigns “when it becomes apparent that the foreclosure will be contested.” In the instant matter, it appears that Lawyer continued to participate as trustee in the foreclosure after he knew that it was contested. Lawyer met with the member-manager of Borrower and discussed Borrower’s theory as to the issue of default. Lawyer obtained information from the member-manager specifically related to the issue in controversy.

The responsibilities and limitations of a lawyer acting as trustee on a deed of trust arise primarily from the lawyer's fiduciary duties as trustee as opposed to any client-lawyer relationship. RPC 82. As a fiduciary, a lawyer/trustee has a duty to act impartially as between the parties and to ensure that the foreclosure is prosecuted in accordance with the law and the terms of the deed of trust. See RPC 82. However, the trustee’s role may be unclear to an unsophisticated consumer of legal services who is unrepresented in the foreclosure. This may lead this party to make uncounseled disclosures to the lawyer/trustee on the erroneous assumption that the lawyer represents the party and has a duty of confidentiality to the party. Therefore, it is the lawyer/trustee’s duty to explain the following to any party to a foreclosure that is unrepresented by counsel and inexperienced in the employment of lawyers or the mechanics of a foreclosure proceeding:

• the trustee’s role is to ensure that the correct procedures are impartially followed in the prosecution of the foreclosure proceeding;

• the trustee does not represent either the lender or the borrower; and

• communications made by the lender or the borrower to the trustee will not be held in confidence and may be used or disclosed in subsequent actions between the lender and the borrower.

Lawyer failed to explain these limitations on the trustee’s role to the member-manager of the LLC, which was unrepresented and apparently inexperienced in the mechanics of a foreclosure proceeding. The member-manager reasonably assumed that the disclosures he made to Lawyer would be held in confidence. Because Lawyer, in his fiduciary capacity, encouraged or allowed Borrower to confide in him without explaining the trustee’s role or warning Borrower that the information could be disclosed or used, Lawyer may not subsequently represent Lender in a subsequent substantially related matter if the information Lawyer received from Borrower is material to the matter. Such a practice would constitute conduct that is prejudicial to the administration of justice. See Rule 8.4(d). However, Borrower’s informed consent, confirmed in writing, would permit Lawyer to proceed with the representation. See Rule 1.7(b).

A lawyer/trustee may represent a lender against a borrower in a subsequent proceeding if the lawyer resigns as trustee upon recognizing that the foreclosure will be contested and the lawyer has not received information that may be used to the disadvantage of Borrower in the subsequent matter.

Proposed 2013 Formal Ethics Opinion 6        
State Prosecutor Seeking Order for Arrest for Failure to Appear When Defendant is Detained by ICE
April 18, 2013

Proposed opinion rules that a state prosecutor does not violate the Rules of Professional Conduct by asking the court to enter an order for arrest when a defendant detained by ICE fails to appear in court on the defendant’s scheduled court date.

Inquiry #1:

A defendant is an undocumented alien who is arrested for a crime. He is given a secured bond by the magistrate, placed in custody in the jail, and served with a US Immigration and Customs Enforcement (ICE) detainer. The defendant hires a bondsman to pay the secured bond and the bondsman does so. ICE comes to the jail and takes the defendant into custody, transporting him to a federal holding facility. The defendant’s court-appointed lawyer brings verification of the defendant’s detention by ICE to the prosecutor handling the case. Later, the defendant’s lawyer appears in court on the defendant’s court date and explains to the court that the defendant is in the custody of ICE. The defense lawyer asks the state to have the defendant brought to trial, enter a voluntary dismissal, or dismiss the case with leave pursuant to N.C. Gen. Stat.§15A-932.

The prosecutor asks the judge to call the defendant for failure to appear and to issue an order for his arrest pursuant to N.C. Gen. Stat.§15A-305(b)(2) which provides that “[a]n order for arrest may be issued when:...[a] defendant who has been arrested and released from custody pursuant to Article 26 of this Chapter, Bail, fails to appear as required.”

The court enters a forfeiture of the bond pursuant to N.C. Gen. Stat.§15A-544.3(a), which provides that when a defendant who was released upon execution of a bail bond fails to appear before the court as required, the court shall enter a forfeiture for the amount of the bail bond in favor of the state and against the defendant and the surety on the bail bond. Nevertheless, N.C. Gen. Stat.§15A-544.3(b)(9) provides that a forfeiture of a bail bond will be set aside if, on or before the final judgment date, “satisfactory evidence is presented to the court” that one of a number of listed “events” has occurred. That list includes the following “event” at subparagraph (vii):

the defendant was incarcerated in a local, state, or federal detention center, jail, or prison located anywhere within the borders of the United States at the time of the failure to appear, and the district attorney for the county in which the charges are pending was notified of the defendant's incarceration while the defendant was still incarcerated and the defendant remains incarcerated for a period of 10 days following the district attorney's receipt of notice, as evidenced by a copy of the written notice served on the district attorney via hand delivery or certified mail and written documentation of date upon which the defendant was released from incarceration, if the defendant was released prior to the time the motion to set aside was filed.

N.C. Gen. Stat.§15A-544.3(b)(9); accord N.C. Gen. Stat.§15A-544.5(b)(7).

If ICE decides to release the defendant from custody and there is an outstanding order for his arrest from a North Carolina court, ICE will detain the defendant until he can be released to the custody of the State.1 See N.C. Gen. Stat.§15A-761.

Is the prosecutor’s conduct a violation of Rule 3.8 or any other Rule of Professional Conduct?

Opinion #1:

No. Rule 3.8, on the special responsibilities of a prosecutor, prohibits a prosecutor from prosecuting a charge that the prosecutor knows is not supported by probable cause. The comment to the rule, moreover, emphasizes the prosecutor’s duty to seek justice. However, there is no legal requirement that a defendant’s failure to appear in court be willful. In the instant inquiry, the legal requirements for requesting an order of arrest were satisfied and there was a procedural reason for seeking the order of arrest. Therefore, although the prosecutor knows that the defendant’s failure to appear is not willful, the prosecutor’s exercise of his professional discretion within the requirements of the law does not violate the Rules of Professional Conduct.

Inquiry #2:

Did the judge violate the Rules of Professional Conduct or the Code of Judicial Conduct by issuing the order for arrest and forfeiting the bond?

Opinion #2:

Opining on the professional conduct of judicial officers is outside the purview of the Ethics Committee. Therefore, no opinion will be offered in response to this question.

Endnote
1. As a practical matter, however, a person who is detained by ICE is rarely released. Deportation or federal incarceration is more likely.

Proposed 2013 Formal Ethics Opinion 7        
Sharing Fee from Tax Appeal with Nonlawyer
April 18, 2013

Proposed opinion rules that a law firm may not share a fee from a tax appeal with a nonlawyer tax representative unless such nonlawyer representatives are legally permitted by the tax authorities to represent claimants and to be awarded fees for such representation.

Inquiry:

A is a nonlawyer independent tax representative who has worked with Company B in seeking to achieve a reduction in the county assessment of Company B’s property for ad valorem taxes. Under A’s contract with Company B, if A is successful in achieving a reduction in the assessment, he is entitled to receive a percentage of Company B’s tax savings. It is assumed that A is limiting his representation to activities that do not constitute the practice of law.

Pursuant to the contract with Company B, A is authorized to obtain counsel provided it does not increase the amount Company B is required to pay for representation.

A and Company B want to appeal to the North Carolina Property Tax Commission seeking a reduction in the assessment. A licensed lawyer is required to pursue the appeal.

With Company B’s consent, may A retain Lawyer to represent Company B on the appeal and pay Lawyer a percentage of A’s share of any tax savings for Company B? May Lawyer be paid out of A’s share on an hourly basis?

Opinion:

Rule 5.4(a) regulates the distribution of fees that, because of the prohibition on the unauthorized practice of law, may only be earned by a lawyer. See 2005 FEO 6. The purpose of the prohibition, as noted in comment [1] to the rule, is to protect the lawyer's professional independence of judgment from interference from a nonlawyer. The prohibition also prevents solicitation of cases by lawyers and discourages nonlawyers from engaging in the unauthorized practice of law. See 2003 FEO 10.

Unless nonlawyers are legally permitted to represent taxpayer/claimants before any taxing authority, and to be awarded fees for such representation, the proposed arrangement constitutes improper fee sharing in violation of Rule 5.4(a).

The instant scenario can be distinguished from those addressed previously by the Ethics Committee in 2003 FEO 10 and 2005 FEO 6. The two prior opinions apply to nonlawyer representatives of disability claimants before the Social Security Administration (SSA). 2003 FEO 10 holds that a Social Security lawyer may agree to compensate a nonlawyer representative for the prior representation of a disability claimant before the SSA. 2005 FEO 6 provides that the compensation of a nonlawyer law firm employee who represents Social Security disability claimants before the SSA may be based upon the income generated by such representation. However, nonlawyers are legally permitted to represent disability claimants before the SSA and to be awarded fees for such representation. See 42 U.S.C. § 406. When generated by a nonlawyer as authorized by law, such a fee cannot be designated a “legal fee” subject to the limitations of Rule 5.4(a). See 2005 FEO 6.

Lawyer should negotiate his fee directly with Company B.