The Committee considered your inquiry at its October meeting, and the following is the resulting guidance opinion.
As we understand the facts as presented in your inquiry letter, you are a practitioner who provides legal services to a bank; your letter refers to you as "outside" counsel (quotations yours). The bank has proposed to you an idea in which the bank would promote, to its customers, estate-planning services to be rendered by you. These services would be provided under your firm name, through your offices, with all client meetings held either at your location or at the bank's various offices around Pennsylvania.
The proposal also anticipates that you would invoice the clients directly for fees and that you would be paid by those clients. You plan to use a portion of the fee revenue to reimburse the bank for its out-of-pocket marketing costs. You also plan to pay some amount to the bank as its own "profit" (again, your quotations) arising out of this arrangement.
You pose four (4) questions, and we will answer them in order.
1. May you make the reimbursement and "profit" payments described above? You may not make the "profit" payment, as this would constitute either fee splitting with a non-lawyer (impermissible under Rule of Professional Conduct 5.4(a)); or an improper referral fee under Rule 7.2(c).
You may make the reimbursement payment for the bank's advertising costs, so long as it reflects the actual costs incurred, as paying for such expenses is generally permitted under Rule 7.2(c). We emphasize that such payments must actually reflect the bank's out-of-pocket costs, directly related to the promotion of these services, and not simply a pretext for what is actually an impermissible "profit" payment.
2. Are there any conflict of interest issues raised by the proposed arrangement? Yes, the Committee focused on several potential conflict and professional independence issues that could come up in the context of the plan you propose. We stress that it is impossible to give an exhaustive survey of these issues, and the Rules they implicate, because there are so many possible factual scenarios that could arise. However, there are several general principles and Rules to which the Committee would direct your attention.
First is the general rule of professional independence, set out in Rule 5.4(c), which would prohibit you from allowing the bank to influence your representation of the clients in any way. The Committee felt that there was some likelihood that this might come up in the context of your recommendation of a trustee or other fiduciary to serve those clients' estate or trust administration needs. We assume that the bank is expecting you to recommend its services to the estate clients it refers you, but you are required to exercise independent professional judgment in deciding whether to make such a recommendation at all. If, in your judgment, a client would be better served by choosing another person or institution, or none at all, for such a role, you should so advise the client, and your relationship with the bank may not influence the advice you give on this point.
Second, Rule 1.7, the general rule prohibiting conflicts of interest, requires that you not take any action that is materially adverse to either client. It further prohibits you from limiting your responsibilities to one client because of the competing interests of another (or, because of your own self-interest). In either case, disclosure of the potential conflict is important, and we recommend that you inform each estate client referred by the bank that you represent the bank, and make all the necessary disclosures required by Rule 1.7, at the outset of the representation.
3. Are there any other ethical issues that come to mind? While the Committee generally does not provide guidance on such open-ended questions, there are certain obvious concerns and Rules the Committee considered. First, Rule 1.6 requires confidential treatment of all information relating to a client's representation. This means that you must take care not to disclose to the bank anything you learn in the course of representing the estate clients. The reverse is also true, since the bank is entitled to the same confidentiality protections.
Second, since the bank is undertaking a marketing/advertising effort on your behalf, you must take measures to make sure that the information in these campaigns is not misleading and is conveyed in ways that are permissible under Rules 7.1 through 7.4. We advise you to become very familiar with these rules and to discuss their provisions with the bank before any such marketing and advertising plans are implemented.
4. What measures can be taken to alleviate any other ethical issues? This question is adequately answered by the above information.