Counsel of Counsel Relationships: Avoid Conflicts

Nature abhors a vacuum, so the saying goes.  So it’s not surprising that with big law’s demise,  we’re seeing every flavor of alternative structure evolve, from upscale contract lawyer services  to remained law firms,  some  that rely entirely on outsourced workers  to meet client needs to groups of lawyers who operate separately but hold themselves out as a partnership or some sort of organized (albeit loosely) practice.

For solo and small firm lawyers, these types of collaborative arrangements have their advantages, including backup, flexibility (the firm gets expertise without making a full time hire), an added revenue stream for the of counsel lawyer who can continue a side practice and the ability to provide clients with a more full service experience.  At the same time, of counsel relationships have drawbacks as well – most significantly, the potential for conflicts.

Late last year, the Virginia Bar addressed the conflicts question in LEO 1866 – a decision worth reading if you’re considering an of counsel relationship.  The opinion opens with a definition of the “of counsel” relationship, which refers to a:

close, continuing, and personal relationship between a lawyer and a firm that is not the relationship of a partner, associate, or outside consultant. The relationship must involve some element of the practice of law, and cannot be limited to a pure business affiliation; the “of counsel” may not simply be a forwarder or receiver of legal business to or from the firm.

Even though an “of counsel” may have very limited information about all of the firm’s cases, Virginia holds that lack of actual knowledge is irrelevant for conflicts purposes. From the opinion:

Once the lawyer and the firm begin to hold the lawyer out as “of counsel” to the firm, conflicts will be imputed between the two regardless of whether the lawyer actually has any information about the clients of the firm or vice versa.

Moreover, the opinion states that once a lawyer hold himself out to potential clients as having a close affiliation with the firm, he won’t avoid conflict of interest by refusing the title of counsel or calling the relationship something else.  However, one way that Virginia lawyers can collaborate and avoid conflicts is for a firm to retain an outside lawyer as an independent contractor or consultant rather than as “of counsel.”

In a recent California case, the court denied an attorneys fees award to a law firm, which was successfully represented by its “of counsel” lawyers in an arbitration.  See Sands & Associates v. Juknavorian, 2012 Cal. App. LEXIS 1058 (October 2012) (discussed by at Freivogel on Conflicts). The court held that a party that represents itself cannot recover attorneys’ fees, and that the “of counsel” lawyers who represented the firm were effectively part of it since they were listed on the letter head.

On the surface, these decisions seem unfair – but at the same time, lawyers can’t have it both ways.  A solo shouldn’t be able to associate with a team of lawyers deemed “of counsel” and gain the competitive advantage of a larger presence over other small firms without the burden of conflicts that come with the territory of a larger organization.

The Virginia decision (as well ABA Op. 90-357, which can be viewed here)  teaches another important lesson as well: the term of counsel is more than a mere marketing label. It refers to a bonafide continuous, ongoing relationship.  Thus,it’s deceptive for lawyers without an ongoing relationship to hold themselves out as of counsel or being closely associated merely to appear more prominent to clients.

I’ve already noticed  sites comprised of a conglomeration of lawyers that give the impression of being an organized law firm or partnership or association without actually being  one.  As these types of website-based arrangements proliferate, I predict an increase in ethics complaints filed by disgruntled competitors (burdened by the cost of full service operations who can’t compete with these new operations)  or disappointed clients (who perhaps contacted one lawyer at the site hoping to get in touch with others and discovering that they hadn’t spoken in years) seeking an investigation of what type of really relationship lies behind the of-counsel veil.

For more information on “of counsel” relationships, visit the MyShingle Of Counsel database. (note, you’ll need to register  to get the password)