Holding Out Non-Equity Firm Lawyers as “Partners”
Opinion rules that a lawyer who does not own equity in a law firm may be held out to the public by the designation “partner,” “income partner,” or “non-equity partner,” provided the lawyer was officially promoted based upon legitimate criteria and the lawyer complies with the professional responsibilities arising from the designation.
ABC Law Firm is a North Carolina professional corporation. Three lawyers, A, B, and C, are shareholders in the firm and own all of the equity of the firm. In the firm’s communications, Lawyers A, B, and C are held out as “partners” at the firm, and they are referred to internally as “equity partners.”
Lawyers E and F also work for the firm, but they do not own any interest in the firm and are not shareholders. However, Lawyers A, B, and C consider Lawyers E and F to be “partners in every sense of the word except actual ownership.” Lawyers E and F have the authority to bind the firm and to sign opinion letters on behalf of the firm, but they do not vote on matters of corporate governance. Within the firm, Lawyers E and F are referred to as “income partners.”
The firm would like to hold Lawyers E and F out to the public as “partners” or “income partners.” May the firm do so?
Yes, provided that any lawyer who is held out by the firm as a “partner,” “income partner,” or “non-equity partner” has been officially promoted by the law firm’s management or pursuant to the law firm’s governing documents and such promotion is based upon legitimate criteria.
Black’s Law Dictionary defines “partner” as “[o]ne of two or more persons who jointly own and carry on a business for profit.” Black’s Law Dictionary (10th ed. 2014). However, within the legal profession, the designation is often used without regard to the legal definition. For example, shareholders in a professional corporation for the practice of law are frequently referred to as “partners.” Like lawyers themselves, laymen generally equate the designation with the achievement by a lawyer of a certain level of experience, status, or authority within a law firm.
Nevertheless, referring to a lawyer as a “partner” in external communications cannot be a sham. Rule 7.1(a)(1) states that a communication is false or misleading if it “contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.” To avoid misrepresentation, a law firm may designate a lawyer as a partner, regardless of whether the lawyer satisfies the legal definition of that term, if the lawyer was promoted to the position by formal action or vote of firm management or pursuant to the firm’s governing documents. Further, to prevent the public from being misled as to the lawyer’s achievements, the promotion must be based upon criteria that indicates that the lawyer is worthy of the promotion. The Ethics Committee acknowledges that law firms have different standards or criteria for promoting a lawyer to equity or non-equity partner, and the committee declines to dictate what those criteria must be. However, the following list provides examples of legitimate criteria for such a promotion:
• Experience: Engaged in the practice of law for a substantial period of time.
• Integrity: Adherence to principles of honesty and high professional ethics.
• Industry: Willingness to work hard, beyond normal hours where clients’ needs and professional development so require, evidencing a drive to achieve.
• Intelligence: Ability to analyze law and facts; imagination and creativity.
• Communication: Ability to express thoughts clearly, both orally and in writing.
• Legal knowledge: Skill in general and specialized areas of law.
• Motivation: Willingness to accept responsibility for client’s problems, to perform work assigned punctually.
• Judgment: Ability to make logical, practical decisions.
• Efficiency: Ability to do high quality work in a reasonable amount of time.
• Involvement: Participation in professional, civic, and other outside activities.
Any firm lawyer who is identified as a “partner” shall be held to the professional responsibilities in the Rules of Professional Conduct that may arise from that designation. See, e.g., Rule 5.1.