You have asked the Professional Guidance Committee to review and render an opinion on your firm's proposed acquisition of another business (not a law firm) that has provided service to Social Security claimants at the administrative hearing level. Based upon your inquiry letter, the firm you are purchasing provides assistance with, and advocacy for, SSI and SSDI claimants through the administrative hearing stage. You state that the firm has been approved to perform such services through an accreditation process of the Social Security Administration. You ask whether the acquisition of this firm for a lump sum of money poses any general ethical problems. In addition, the Committee will also address whether the post acquisition salaried employment by you of the firm's principal, who is not a lawyer but would continue to handle administrative hearings before the Social Security Administration, would constitute either the unauthorized practice of law (by him), or the splitting of fees with a non-lawyer (by you).
The Committee saw no general ethical prohibition against your acquisition of the firm for a lump sum of money. The Committee notes that because this transaction will be an acquisition, and not the formation of a partnership or a new professional corporation, that the prohibitions of Rules 5.4(b) and/or 5.4 (d) are not at issue.
Moreover, in view of the fact that the Social Security Administration has approved the firm's representation of claimants at the administrative level, there is no apparent violation of the Pennsylvania Rule of Professional Conduct 5.5 (engaging in or aiding a non-lawyer in the unauthorized practice of law).
Once the acquisition is complete and the non-attorney continues to render the services before the Social Security Administration, your firm must take measurers to supervise properly his activities under Rule 5.3, because he will be a non-lawyer assistant not unlike a paralegal or a law clerk, (although arguably with broader responsibilities.) You should also ensure that his compensation is structured so as not to violate the prohibition in Rule 5.4(a) against fee-splitting with non-lawyers. This does not mean that his salary should not be performance-based, but it should not be indexed or directly related to the fees derived from his cases, whether they be ones that came with him as a result of the acquisition, or ones that came to your firm independently.
Rules 7.1 through 7.7 generally deal with advertising or other communications about a lawyer's or firm's services. The general tenet of these rules is that such communications must be accurate, and measures must be taken to avoid giving incorrect impressions about the nature of the service to be provided or the result likely to be achieved. In your situation, it is important that the clients of the business you are acquiring be advised of your acquisition and be advised of the choice of becoming a client of your firm or choosing new counsel. For matters to be handled by the former owner of the business as an employee of your firm, it is important that the clients are advised when their matters are being handled by a non-lawyer, and of the distinctions in the nature of the services that could be rendered by an attorney, if such distinctions are relevant to the status of the clients case, i.e. that a non-lawyer will handle administrative proceedings, but further appeal will require direct attorney involvement. This should avoid any confusion or incorrect expectations on the part of the client.
The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.