Rule 5.4.Professional Independence of a Lawyer
(a)A lawyer or law firm shall not share legal fees with a
nonlawyer, except that:
(1)an agreement by a lawyer with the lawyer's firm, partner, or
associate may provide for the payment of money, 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 who undertakes to complete unfinished legal
business of a deceased lawyer may pay to the estate of the deceased
lawyer that proportion of the total compensation which fairly represents
the services rendered by the deceased lawyer; and
(3)a lawyer who purchases the practice of a lawyer pursuant to the
provisions of Rule 1.17 may, in the case of a deceased lawyer or one for
which
a legal guardian or representative has been appointed, pay such estate or
representative the purchase price;
(4)a lawyer or law firm may include nonlawyer employees in a
compensation or retirement plan, even though the plan is based in whole
or in part on a profit-sharing arrangement.
(b)A lawyer shall not form a partnership with a nonlawyer if
any of the activities of the partnership 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 professional judgment in rendering such legal
services.
(d)A lawyer shall not practice with or in the form of a
professional corporation or association, or limited liability company,
authorized to practice law for a profit, except in accordance with
C.R.C.P. 265 and any successor rule or action adopted by the Colorado
Supreme Court.
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ANNOTATIONSSource:
Entire rule amended and adopted June 12, 1997, effective July 1, 1997.
Editor's note:
The 1997 amendments to this section added a new (a)(3) and renumbered the
existing (a)(3) as (a)(4). No changes were made to the comment.
COMMENT
The provisions of this Rule express traditional limitations on
sharing fees. These limitations are to protect the lawyer's
professional independence of judgment on behalf of the lawyer's client.
Moreover, since a lawyer should not aid or encourage a nonlawyer to
practice law, the lawyer should not practice law or otherwise share
legal fees with a nonlawyer. This does not mean, however, that the
pecuniary value of the interest of a deceased lawyer in the lawyer's
firm or practice may not be paid to the lawyer's estate or specified
persons such as the lawyer's spouse or heirs. In like manner,
profit-sharing retirement plans of a lawyer or law firm which include
nonlawyer office employees are not improper. These limited exceptions
to the rule against sharing legal fees with nonlawyers are permissible
since they do not aid or encourage nonlawyers to practice law. Where
someone other than the client pays the lawyer's fee or salary, or
recommends employment of the lawyer, that arrangement does not modify
the lawyer's obligation to the client. As stated in paragraph (c) such
arrangements should not interfere with the lawyer's professional
judgment on behalf of the lawyer's client. A lawyer should, however,
make full disclosure of such arrangements to the client; and if the
lawyer or client believes that the effectiveness of lawyer's
representation has been or will be impaired thereby, the lawyer should
take proper steps to withdraw from representation of the client.
To assist a lawyer in preserving the lawyer's professional
independence, a number of courses are available. For example, a lawyer
may practice law in the form of a professional legal corporation, if in
doing so the lawyer complies with all applicable rules of the Colorado
Supreme Court. Although a lawyer may be employed by a business
corporation with nonlawyers serving as directors or officers, and they
necessarily have the right to make decisions of business policy, a
lawyer must decline to accept direction of the lawyer's professional
judgment from any nonlawyer. Various types of legal aid offices are
administered by boards of directors composed of lawyers and nonlawyers.
A lawyer should not accept employment from such an organization unless
the board sets only broad policies and there is no interference in the
relationship of the lawyer and the individual client the lawyer serves.
Where a lawyer is employed by an organization, a written agreement that
defines the relationship between the lawyer and the organization and
provides for the lawyer's independence is desirable since it may serve
to prevent misunderstanding as to their respective roles. Although
other innovations in the means of supplying legal counsel may develop, the
responsibility of the lawyer to maintain the lawyer's professional independence
remains constant, and the legal profession must insure that changing
circumstances do not result in loss of the professional independence of the lawyer.
As part of the legal profession's commitment to the principle that
high quality legal services should be available to all, lawyers are
encouraged to cooperate with qualified legal assistance organizations
providing prepaid legal services. Participation should at all times be
in accordance with the basic tenets of the profession independence,
integrity, competence, and devotion to the interests of individual
clients. A lawyer so participating should make certain that a
relationship with a qualified legal assistance organization in no way
interferes with the lawyer's independent, professional representation of
the interests of the individual client. A lawyer should avoid
situations in which officials of the organization who are not lawyers
attempt to direct lawyers concerning the manner in which legal services
are performed for individual members, and should also avoid situations
in which considerations of economy are given undue weight in determining
the lawyers employed by an organization or the legal services to be
performed for the member or beneficiary rather than competence and
quality of service. A lawyer interested in maintaining the historic
traditions of the profession and preserving the function of a lawyer as
a trusted and independent advisor to individual members of society
should carefully assess those factors when accepting employment by, or
otherwise participating in, a particular qualified legal assistance
organization, and while so participating should adhere to the highest
professional standards of effort and competence.
COMMITTEE COMMENT
Subsections (a), (b), and (c) are virtually identical to DR
3-102(A), DR 3-103(A), and DR 5-107(B), respectively. Subsection (d)
has been modified so that it now corresponds to DR 5-107(C).
ANNOTATION
Annotator's note.
Rule 5.4 is similar to DR 2-103 and DR 5-107 as they
existed prior to the 1992 repeal and reenactment of the Code of
Professional Responsibility. Relevant cases construing
DR 2-103 have been included under Rule 1.5 and cases construing DR 5-107 have
been included under Rule 1.7.
Transferring various ownership interests to lawyer employees of firm
who did not receive profits and were not managers warranted suspension of
one year and a day.
Suspension appropriate because attorney made misrepresentations and was
dishonest in such transfers. People v. Reed, 942 P.2d 1204 (Colo. 1997).
Motion to dismiss should have been denied on the basis that a joint venturer
cannot shield itself from liability on the grounds that the joint venture was prohibited by
this rule of professional conduct. Bebo Constr. Co. v. Mattox & O'Brien,
998 P.2d 475 (Colo. App. 2000).
An attorney's attempt to share legal fees with nonlawyers is professional
misconduct. People v. Easley, 956 P.2d 1257 (Colo. 1998).
Conduct violating this rule in conjunction with other disciplinary rules sufficient to
justify suspension. People v. Easley, 956 P.2d 1257 (Colo. 1998).
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