Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
|
May a member of the State Bar act as an agent for a corporation in soliciting personal management contracts between the corporation and professional athletes?
Rules 1 and 2 of the Rules of Professional Conduct of the State Bar.1
The opinion of this Committee is sought on the following question: Is it ethical for a member of the State Bar of California to act as an agent for a corporation in soliciting professional athletes to enter into contracts with that corporation under the terms of which the corporation represents and manages the athletes? The attorney requesting the opinion states that his activities for the corporation will be carried on under the following conditions:
1. The attorney will not inform the prospective clients of the corporation that he is a lawyer, will not use his attorney's business card, and will not carry on negotiations with the clients in his law offices.
2. The attorney will not give legal advice to the prospective clients regarding the contract with the corporation or any other matter. He will merely attempt to induce the prospective clients to sign by explaining the value to them of representation by the corporation.
3. The attorney will not at any time give legal advice to the corporation nor render legal services to it or to its clients.
4. The corporation will represent its clients in contract negotiations for the clients' services and, in addition, will retain other attorneys and accountants to work out tax-saving devices for its clients.
Over the years, the question of the propriety of a practicing attorney engaging in another business has been the subject of many, often widely divergent, opinions of committees on legal ethics. A great number of these are noted and discussed in Drinker, Legal Ethics (1953) at pages 221-228. The principal objections raised in this area are that such lay activities may serve as a feeder for law business or that they may be used as a means of indirect solicitation by the attorney, thus involving a violation of rule 2, section (a), of the Rules of Professional Conduct and [former] canon 27 of the Canons of Professional Ethics of the American Bar Association.
Rule 2, section (a), of the Rules of Professional Conduct provides, in part:
"A member of the State Bar shall not solicit professional employment by advertisement or otherwise."
[Former] canon 27 of the Canons of Professional Ethics of the American Bar Association provides in part:
"Advertising, Direct or Indirect. It is unprofessional to solicit professional employment by circulars, advertisements, through touters or by personal communications or interviews not warranted by personal relations . . ."
It is manifest that not every independent business which is carried on by a practicing attorney involves the probability of a violation of these ethical principles. Thus, Henry S. Drinker has stated at page 221 of his treatise, Legal Ethics, supra:
"There is, of course, nothing in the Canons to prevent this as to an occupation entirely distinct from and unrelated to his law practice. Thus, no one would dispute the right of a lawyer to be a teacher, or a violinist or doctor or a farmer, or to sell rare postage stamps, provided he in no way used such occupation to advertise, or as a feeder to his law practice." (Emphasis added.)
However, as stated further, at page 221 of Legal Ethics, supra, the probability of violation becomes greater where:
"The second occupation although theoretically and professedly distinct, is one closely related to the practice of law, and one which normally involves the solution of what are essentially legal problems .... "(Emphasis added.)
Stated slightly differently, the probability of violation is greater in situations where the other business is one which would constitute the practice of law if conducted by a lawyer.
In 1965 the Committee on Professional Ethics of the American Bar Association, in dealing with the difficult problem of an attorney who wished to engage in a real estate brokerage business, reviewed in informal decision No. 775 (1965) the history of the ethics of the "collateral business" and concluded that:
"The Committee's present opinion, developed over the years as outlined above, is that
"(1) If a separate business is clearly not necessarily the practice of law when conducted by a lawyer, and
"(2) If it can be conducted in accordance with and so as not to violate the Canons, and
"(3) If it is not used or engaged in such a manner as to directly or indirectly advertise or solicit legal matters for the lawyer as a lawyer, and
"(4) If it will not "inevitably serve" as a feeder to his law practice, and
"(5) It is not conducted in or from a lawyer's law office, except in cases where the volume of the law practice and business is so small that separate quarters for either is not economically feasible and where, even in such cases, there is no indication on the shingle, office, door, letterhead or otherwise that the lawyer engages in any activity therein except the practice of law.
"It is not necessarily a violation of the Canons for a practicing lawyer to engage in such a business activity. The Committee is of the further opinion that the real estate brokerage business can qualify under these present criteria..."
This Committee agrees with the Committee on Professional Ethics of the American Bar Association in establishing the aforesaid standards of conduct for practicing attorneys engaging in collateral businesses and determines that, on the conditions stipulated, the requesting attorney may act as an agent for the corporation in soliciting personal management contracts from professional athletes. It is the opinion of this Committee that soliciting personal management contracts from professional athletes is basically the same as soliciting contracts of any other type on behalf of a principal, and that requirements 1, 2 and 4 in informal decision No. 775, supra, have been satisfied in the present situation. In addition, the factual conditions stipulated in the request would appear to meet the requirements of conditions 3 and 5 more than adequately.
Nevertheless, it should be pointed out that, in a business involving the solicitation of contracts of any type, the solicitor may be asked by the customer to interpret the conditions and requirements of the contract. Thus, in this factual situation, the athlete is quite likely to ask the attorney's advice as to the legal meaning of the terms of the agreement he is about to sign, thereby presenting the possibility of a conflict of interest between the corporation and the athlete. Such conflicts are violative of [former] canon 6 of the Canons of Professional Ethics of the American Bar Association which provides, in part:
"It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts. Within the meaning of this canon, a lawyer represents conflicting interest when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose."
In this regard, the Supreme Court of California, in Libarian v. State Bar (1944) 25 Cal.2d 314 [153 P.2d 739], has established the rule that:
"One who is licensed to practice as an attorney in this state must conform to the professional standards in whatever capacity he may be acting in a particular matter. (Jacobs v. State Bar 219 Cal. 59 [25 P.2d 401].)"
The requesting attorney here has stipulated that he will not render legal advice to the athletes or to the corporation or its clients, and it is the opinion of the Committee that these conditions must be scrupulously observed to avoid conflict with [former] canon 6 of the Canons of Professional Ethics of the American Bar Association.
The Committee is also concerned that the facts herein indicate that the corporation, in carrying out its functions of conducting contract negotiations and working out tax devices for the athletes, may be approaching the area of unauthorized practice of law. For example, the corporation may not itself employ and pay attorneys to render legal services to its clients, although it would be proper for the corporation, acting as the clients' agent, to employ attorneys whose fees are fixed and paid by the clients themselves. (People v. Merchants Protective Corp. (1922) 189 Cal. 531; Drinker, Legal Ethics (1953) at p. 180.)
The Committee does not have before it sufficient facts to determine the propriety of the corporation's relation to its clients. However, the Committee would admonish the corporation to take care not to extend its activities beyond permissible limits and the attorney to take care not to aid the corporation in any improper extension which would cause him to violate rule 3 of the Rules of Professional Conduct of the State Bar and [former] canon 47 of the [former] Canons of Professional Ethics of the American Bar Association.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
1 [PUBLISHER'S NOTE: A complete revision of the Rules of Professional Conduct was approved by the Supreme Court effective January 1, 1975. (See (1975) 14 Cal.3d Rules 1 and "Cross Reference of Present Rules of Professional Conduct to Former Rules of Professional Conduct," in Part III.D.)]
| . |