Regulatory Reform Option 3.1
Adoption of a proposed amended rule 5.4 [Alternative 1] “Financial and Similar Arrangements with Nonlawyers” which imposes a general prohibition against forming a partnership with, or sharing a legal fee with, a nonlawyer. The Alternative 1 amendments would: (1) expand the existing exception for fee sharing with a nonlawyer that allows a lawyer to pay a court awarded legal fee to a nonprofit organization that employed, retained, recommended, or facilitated employment of the lawyer in the matter; and (2) add a new exception that a lawyer may be a part of a firm in which a nonlawyer holds a financial interest, provided that the lawyer or law firm complies with certain requirements including among other requirements, that: the firm’s sole purpose is providing legal services to clients; the nonlawyers provide services that assist the lawyer or law firm in providing legal services to clients; and the nonlawyers have no power to direct or control the professional judgment of a lawyer.
Objective: With the objective of removing some of the financial barriers to the collaboration of lawyers and nonlawyers in innovating the delivery of legal services through technology or otherwise, this recommendation represents the concept of a possible amendment to rule 5.4 that would expand the exception for fee sharing with a nonprofit organization and would permit a lawyer to practice in a firm in which a nonlawyer holds a financial interest so long as certain requirements are met. ATILS is studying this concept and any rule language provided with ATILS’s request for public input is provided only for discussion purposes and does not represent actual rule revision implementation language. Public input is requested on the concept of this rule change rather than on the illustration language provided for discussion purposes only.