Vol. 78, No. 7, July 2005

Providing Ancillary Services to Clients

by Dean R. Dietrich

Question

I am looking to generate more income for my law firm. Can I provide services other than just legal representation to my clients?

Answer

Several issues arise when a lawyer looks to provide different types of services to clients. Often, a lawyer seeks to be a "full service provider" to provide a variety of different legal and nonlegal services to a client, but this scenario creates several ethical concerns that lawyers need to fully address when providing such services.

The Wisconsin rule. A lawyer can provide different services to a client under the auspices of her law firm if the lawyer complies with all of the requirements of Chapter 20, the Rules of Professional Conduct for Attorneys. If the lawyer chooses to provide ancillary services (such as financial consultations, title insurance, life insurance, and so on), the lawyer must follow all of the Rules of Professional Conduct if the services are to be provided to the client under the auspices of the law firm. This directive to comply with SCR Chapter 20 includes compliance with rules on confidentiality, conflicts of interest, specific requirements for a business transaction with a client, advertising, and many others.

Areas of major concern. A major concern is conflicts of interest that may arise if the lawyer provides different types of services to a client and receives from other parties compensation, such as commissions for insurance sales, for providing those services. The lawyer must make full disclosure to the client of any additional compensation that the lawyer may receive from other parties and obtain the client's written waiver of any conflict of interest that may arise. Advertising and client solicitation also are concerns that must be properly addressed by lawyers who provide ancillary services as part of their legal practice. The same Rules of Professional Conduct would apply to a lawyer's solicitation of business for these ancillary activities as apply to a lawyer's solicitation of legal representation.

The ABA rule. The American Bar Association has adopted Model Rule 5.7, which provides some flexibility for lawyers who provide ancillary services to clients. Rule 5.7 is not included in Wisconsin Supreme Court Chapter 20, but it may be an item of discussion in the upcoming hearings on the proposed changes to Chapter 20 resulting from the Ethics 2000 Committee Petition recently filed with the Wisconsin Supreme Court. ABA Model Rule 5.7 provides as follows:

(a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b), if the law-related services are provided:

(1) by the lawyer in circumstances that are not distinct from the lawyer's provision of legal services to clients; or

(2) in other circumstances by an entity controlled by the lawyer individually or with others if the lawyer fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client-lawyer relationship do not exist.

(b) The term "law-related services" denotes services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.

Under this rule, a lawyer may provide ancillary services to a client and not follow the Rules of Professional Conduct if the lawyer makes it very clear to the client that the ancillary services are not part of the legal representation provided to the client. Many states have adopted this rule, but it is not clear whether Wisconsin will do so.

Dual business practice. Lawyers also often engage in the practice of law and engage in other businesses such as real estate sales or insurance sales. The State Bar of Wisconsin Professional Ethics Committee has issued several opinions that address this issue of a "dual business practice." See Ethics Opinions E-82-11, E-85-5, E-86-3, E-00-02, E-00-04. Lawyers may engage in more than one business if they: 1) keep the law practice separate and distinct from the other business; 2) ensure there are no problems with confidentiality of client information; and 3) ensure that no conflicts between the client representation and the other business practice engaged in by the lawyer would result. Lawyers must make sure that they do not have a conflict of interest when they provide services to a client that are not part of the legal representation and should obtain the client's consent to provide both legal services and other business services to the client. Lawyers also must be very careful to disclose any additional personal benefit or compensation that the lawyer would receive by providing the other business services to the client. Most importantly, when providing legal representation and when considering the provision of other types of services to the client, the lawyer must always exercise independent judgment and undivided consideration of what is in the client's best interest.

Conclusion

Lawyers are not prohibited from providing legal representation and other types of business services or products to a client if the lawyer is participating in several professions or businesses. The lawyer must be very careful, however, to comply with Chapter 20 of the Rules of Professional Conduct when considering how to provide different types of services to a client. Under the ABA Model Rules of Professional Conduct, a lawyer may participate in ancillary businesses and not be subject to the Rules of Professional Conduct when providing services from those ancillary businesses if clear notice is given to any client that the lawyer is not bound by the Rules of Professional Conduct when providing such services. At this time, however, such a rule is not applicable to Wisconsin lawyers.

Wisconsin Lawyer