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Rules, Procedure, Comments

All opinions of the Ethics Committee are predicated upon the North Carolina Rules of Professional Conduct. Any interested person or group may submit a written comment – including comments in support of or against the proposed opinion – or request to be heard concerning a proposed opinion. The Ethics Committee welcomes and encourages the submission of comments, and all comments are considered by the committee at the next quarterly meeting. Any comment or request should be directed to the Ethics Committee at no later than June 30, 2024.

Council Actions

The State Bar Council did not adopt any new ethics opinions this quarter.

Ethics Committee Actions

At its meeting on April 18, 2024, the Ethics Committee considered a total of eight inquiries. Six inquiries were sent or returned to subcommittee for further study, including an inquiry examining the ethical requirements relating to a lawyer’s departure from a law firm and an inquiry addressing a lawyer’s ability to obligate a client’s estate to pay the lawyer for any time spent defending the lawyer’s work in drafting and executing the client’s will. Additionally, in January 2024 the Ethics Committee published Proposed 2024 Formal Ethics Opinion 1, Use of Artificial Intelligence in a Law Practice; based on comment received during publication, the committee voted to return the inquiry to subcommittee for further study. The committee also approved an advisory opinion concerning a lawyer’s professional responsibility when inheriting a client file containing confidential information, and the committee approved the publication of one proposed formal ethics opinion for comment, which appear below.

Proposed 2023 Formal Ethics Opinion 3
Installation of Third Party’s Self-Service Kiosk in Lawyer’s Office and Inclusion of Lawyer in Third Party’s Advertising Efforts

April 18, 2024

Proposed opinion provides that a lawyer may allow a third-party business to install a self-service kiosk in the lawyer’s office for the provision of ignition lock services but may not receive rent or referral fees, and further concludes that a lawyer may be included in the business’s advertising efforts upon compliance with Rule 7.4.

Inquiry #1:

Lawyer’s practice consists mostly of representing clients on charges of driving while intoxicated (DWI). Lawyer has been approached by a third-party business (Company) that offers ignition lock services that are often ordered by the court in DWI cases. Company wants to rent a space in Lawyer’s law office to install a self-service kiosk that would allow Lawyer’s DWI clients to sign up for an ignition lock serviced by the business. Company would pay a rental fee to Lawyer to have the kiosk installed in Lawyer’s law office. The kiosk would be entirely supported by Company, and Lawyer would have no ownership interest or control over the kiosk or the Company.

May Lawyer permit Company to rent space in Lawyer’s law office and install the ignition lock self-service kiosk for Lawyer’s clients to use?

Opinion #1:

No, if Lawyer will collect rent from Company. Per Rule 1.7, a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if the representation of one or more clients may be materially limited by a personal interest of the lawyer, including financial interests of the lawyer. Rule 1.7(a)(2); see also Rule 1.7 cmt. [10] (“[A] lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed financial interest.”).

In this instance, the rental fee to be paid to Lawyer creates a financial interest in the kiosk. Although Lawyer does not have a direct financial interest in Company’s business, Lawyer has a financial interest in receiving additional rent from Company, which presumably will continue if Lawyer’s clients sign up for Company’s services through the kiosk in Lawyer’s office (and which will presumably discontinue if clients do not sign up for Company’s services, thus creating an incentive for Lawyer to refer clients to Company through the kiosk). As such, Lawyer has a personal conflict of interest in recommending Company to clients pursuant to Rule 1.7(a)(2).

Many conflicts of interests are consentable. However, in the present scenario where the conflict is caused by Lawyer’s financial interest in sustaining income from the kiosk, the conflict is not consentable. Therefore, Lawyer’s financial interest creates a nonconsentable personal conflict of interest for Lawyer under Rule 1.7(a). See also 99 FEO 1. Although Lawyer may allow Company to place a kiosk for ignition lock services in his office, he may not accept a rental fee for the kiosk.

Inquiry #2:

May Lawyer recommend Company to his clients for ignition lock services via the kiosk if Lawyer does not receive a rental fee from Company for the kiosk?

Opinion #2:

Yes, provided Lawyer’s recommendation of Company is in the client’s best interest and is derived from Lawyer’s independent judgment. Rule 5.4(c).

Inquiry #3:

May Lawyer receive a referral fee from Company for each client that signs up for Company’s services via the kiosk in Lawyer’s office?

Opinion #3:

No. Accepting a referral fee for every client referred to Company could create a significant financial windfall, interferes with Lawyer’s professional judgement, and therefore is a nonconsentable conflict of interest. Rule 1.7(a).

The Ethics Committee previously opined that a lawyer may not receive a referral fee for referring a client to a third-party investment advisor. The opinion provides:

A lawyer must exercise independent professional judgment on behalf of a client when referring a client to a third party for services related to the subject matter of the legal representation. See Rule 1.7(b). If a lawyer will receive a referral fee from the third party, the lawyer's professional judgment in making the referral is or may be impaired. Written disclosure to the client will not neutralize the potential for the lawyer's self-interest to impair his or her judgment. Other ethics opinions are consistent with this holding. CPR 241 rules that a lawyer who sells insurance should not sell insurance to clients for whom he has done estate planning. Similarly, RPC 238 permits a law firm to provide financial planning services provided no commission is earned by anyone affiliated with the firm.

99 FEO 1.

Lawyer must not allow his personal financial interest in receiving referral fees to interfere with his professional judgment. Rule 1.7(a)(2); see also Opinion #1. Here, the referral fees are tied to performance by Lawyer. If Lawyer does not refer enough clients to Company, Company will likely remove the kiosk from Lawyer’s office and Lawyer will lose that additional source of income. Lawyer is, therefore, more likely to refer every DWI client to Company for ignition lock services even if the referral is not in the client’s best interest. Because accepting a referral fee may impair Lawyer’s professional judgment, it is a nonconsentable conflict of interest to accept a referral fee from Company. See also 2006 FEO 2 (lawyers may not accept a “finder’s fee” from a financial company in exchange for a referral).

Inquiry #4:

May Lawyer participate in Company’s efforts to market their product, which includes listing Lawyer’s name and contact information in the Company’s list of providers or affiliates?

Opinion #4:

Yes, provided Lawyer complies with Rule 7.4.

Intermediary organizations are organizations that engage in “referring consumers of legal services to lawyers or facilitating the creation of lawyer-client relationships between consumers of legal services and lawyers willing to provide assistance.” Rule 7.4(a). When participating in an intermediary organization, a lawyer must make reasonable efforts to ensure that the intermediary organization’s efforts comply with the professional obligations of the lawyer, including the following:

(1) The intermediary organization does not direct or regulate the lawyer’s professional judgment in rendering legal services to the client;

(2) The intermediary organization, including its agents and employees, does not engage in improper solicitation pursuant to Rule 7.3;

(3) The intermediary organization makes the criteria for inclusion available to prospective clients, including any payment made or arranged by the lawyer(s) participating in the service and any fee charged to the client for use of the service, at the outset of the client’s interaction with the intermediary organization;

(4) The function of the referral arrangement between lawyer and intermediary organization is fully disclosed to the client at the outset of the client’s interaction with the lawyer;

(5) The intermediary organization does not require the lawyer to pay more than a reasonable sum representing a proportional share of the organization’s administrative and advertising costs, including sums paid in accordance with Rule 5.4(a)(6); and

(6) The intermediary organization is not owned or directed by the lawyer, a law firm with which the lawyer is associated, or a lawyer with whom the lawyer is associated in a firm.

Rule 7.4(b). If a lawyer discovers that an intermediary organization in which the lawyer participates is noncompliant with Rule 7.4(b), the lawyer must either seek to correct the noncompliance or withdraw from participating in the intermediary organization. Rule 7.4(c).

In this scenario, Company is acting as an “intermediary organization” in that its marketing efforts are “referring consumers of legal services to [Lawyer] or facilitating the creation of lawyer-client relationships between consumers of legal services and Lawyer[.]” Rule 7.4(a). Accordingly, Lawyer is tasked with ensuring that Company complies with Rule 7.4(b); if Lawyer discovers that Company is not in compliance with the Rules, Lawyer must seek to correct Company’s efforts or withdraw from participating in Company’s marketing efforts pursuant to Rule 7.4(c). 

The Ethics Committee welcomes feedback on the proposed opinion; feedback should be sent to

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