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.
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What ethical issues arise when attorneys enter into arrangements to share office space or services, such as reception and library facilities, maintenance staff, secretarial staff, or paralegal staff, without forming a law firm?
Attorneys sharing space or staff must take reasonable steps under the circumstances to ensure that their clients and potential clients are not deceived, misled or confused regarding the nature of their relationship. Attorneys who share office space or services also must take reasonable steps under the circumstances to protect each client's confidence and secrets. If attorneys do not address these issues sufficiently, they may violate their obligation to maintain clients' confidential information.
Rules 1-400 and 3-110 of the California Rules of Professional Conduct.
Business and Professions Code sections 6068(e) and 6106.
The Committee has been requested to opine on the following facts. Attorney A and Attorney B enter into a space-sharing agreement. They have not formed a law firm,1 but they share a receptionist and reception area, and common library and conference room facilitates. Their names are listed separately in the building directory and each has her own stationery, business cards, retainer agreements and bank accounts. Each attorney only works on matters for her own clients. They are considering hiring a paralegal and a secretary.
Many attorneys practice law in shared office suites, and many attorneys share office staff. These arrangements vary greatly with respect to the kind of space or staff shared by the attorneys. Some attorneys locate their practices in "executive suite" complexes; some attorneys and smaller law firms share office suites; many law firms sublease unused offices within their office suites to reduce their overhead. The attorneys can thereby manage their offices with greater economy or obtain library or other shared resources that individual attorneys or small firms could not afford alone. Such arrangements, however, must be planned carefully and designed in such a manner to avoid any interference with each attorney's obligations to her clients and potential clients. Two main areas in which problems may arise are: (1) communications by attorneys to the public; and (2) protection of client confidential information.
Attorneys who share facilities or staff must take reasonable steps under the circumstances to ensure that the public is not confused, deceived or mislead concerning their relationships with one another. Rule 1-400(D)(2) of the California Rules of Professional Conduct provides that a communication made by an attorney shall not "[c]ontain any matter, or present or arrange any matter in a manner or format which is false, deceptive, or which tends to confuse, deceive, or mislead the public."2 A communication includes a firm name, written material, advertisements and correspondence made by or on behalf of a member concerning the availability for employment of a member or law firm directed to any former, present, or prospective client. (Rule 1-400(A).) Attorneys must ensure that in any communications they make, the public is not confused, deceived or misled that there is any law firm, partnership, corporate, "of counsel," or other relationship between the attorneys when no such relationship exists. For example, attorneys sharing space are well advised to have separate business cards and letterhead or otherwise clearly identify their separate practices in order to avoid any confusion that they are affiliated when they are not. (Compare Cal. State Bar Formal Opn. No. 1986-90.) It can be a violation of Business and Professions Code section 6106 for an attorney to mislead his or her client purposely. (See Stevens v. State Bar (1990) 51 Cal. 3d 283, 289 [272 Cal. Rptr. 167] (attorney misled his client about the status of her case).)
The terms used to describe the sharing arrangement also should be carefully considered. Attorneys sharing space who use a firm name, trade name, fictitious name or other professional designation which states or implies that they have a professional relationship with one another such as associate, partner, officer, shareholder or "of counsel," when they do not, will be presumed to be in violation of rule 1-400. (See rule 1-400(E), stds. (7) and (8).) Consistent with this presumption, this Committee previously has opined that separate sole practitioners are not allowed to use a group trade name to advertise their sole practices jointly unless, in each usage, each attorney discloses affirmatively that he or she is a sole practitioner. As stated in California State Bar Formal Opinion Number 1986-90 at page 3, "[t]he crucial concern, both as a matter of legal ethics and of professional liability, is what a client knows or reasonably should know, not what the lawyers privately intend or agree among themselves but fail to communicate."
Not only should attorneys who share space be concerned about verbal or written communications that may mislead clients concerning their relationship, they must also monitor their own conduct to ensure that they are not indirectly misleading their clients. In many instances actions can speak louder than words. For example, attorneys should be careful when interacting in front of clients so that clients are not led to believe that the attorneys are in the same firm.
Attorneys sharing facilities or staff must affirmatively disclose to the public and to clients the nature of their shared arrangement when the arrangement tends to confuse, deceive, or mislead the public. (Rule 1-400(D)(2).) This disclosure should include the fact that they maintain separate practices and whatever other disclosures are necessary to avoid any implication that a relationship exists between the attorneys when it does not.3
Each attorney who shares facilities or staff with other attorneys must remain aware of the obligation to "maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client." (Bus. & Prof. Code, § 6068 (e).) This duty forms the basis of the attorney client relationship. As previously stated by this Committee in California State Bar Formal Opinion Number 1979-50 at page 1:
A primary obligation in the attorney-client relationship is the duty to preserve the confidences and secrets of one's client. This obligation is mandated by California Business and Professions Code section 6068, subdivision (e), and Canon 4 of the American Bar Association Code of Professional Responsibility. Disciplinary Rule 4-101(D) specifically extends this duty by requiring that the attorney "exercise reasonable care to prevent his employees, associates, and others whose services are utilized by him from disclosing or using confidences or secrets of a client . . . ."
This duty continues even after termination of employment. (See Yorn v. Superior Court (1979) 90 Cal App.3d 669 [153 Cal. Rptr. 295].)
The nature of the protective steps which must be undertaken to maintain the clients' confidential information will depend on all of the circumstances including, for example: the identity of the client and the nature of the confidential information; the ease of access others would have to that information; the experience and apparent professionalism of the other attorneys and staff and their demonstrated sensitivity to the confidence and secrets of their own clients; the need to communicate particular information to shared personnel; and the existence of known conflicts between clients of different attorneys. (See generally In re Complex Asbestos Litigation (1991) 232 Cal. App. 3d 572, 587-596 [283 Cal. Rptr. 732] (discussing protection of confidentiality).)
If the attorneys do not implement safeguards and structure their practices in a way that under the circumstances reasonably ensures the maintenance of their clients' confidential information, they may violate not only their duty to protect their clients' confidential information, but also their obligation to perform their duties competently. Under rule 3-110(A), "[a] member shall not intentionally, recklessly, or repeatedly fail to perform legal services with competence." Serious and inexcusable lapses in office procedure resulting in fiduciary violations may be deemed wilful for disciplinary purposes. (Compare Palomo v. State Bar (1984) 36 Cal.3d 785, 795 [205 Cal. Rptr. 834] and Trousil v. State Bar (1985) 38 Cal.3d 337, 342 [211 Cal. Rptr. 525] (both involving misapplication of client funds).)
As in any law office, careful supervision of office personnel and maintenance of proper office procedures help fulfill the attorney's obligation to maintain the clients' confidential information and duty to represent the client competently. Attorneys who share personnel or space should agree upon a clear delineation of responsibility for tracking correspondence, calendaring, filing, client communications and the handling of funds -- separately, and with due regard for clients' confidential information. Each attorney has the obligation to supervise his or her subordinates and employees. "The duties set forth in rule 3-110 include the duty to supervise the work of subordinate attorneys and non- attorney employees or agents" (rule 3-110, Discussion). (See Gadda v. State Bar (1990) 50 Cal. 3d 344, 354-356 [267 Cal. Rptr. 114] (dealing with confidence issues), In re Complex Asbestos Litigation, supra, 232 Cal. App. 3d at p. 588 ("The obligation to maintain the client's confidences traditionally and properly has been placed on the attorney representing the client.").)
Attorneys may ethically share space and staff so long as they take reasonable steps under the circumstances to protect against: (1) misleading the public or clients regarding the nature of their relationship; and (2) the disclosure of clients' confidential information to other attorneys or staff in the office.4
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.
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