Can lawyers form a for-profit business trust that performs and financially backs their title-opinion work and markets title services to the public?

Plain-English summary

The committee reviewed a detailed proposal for an "Attorney's Title Opinion Fund," a business trust whose trustees would be attorneys active in title and real property law. Members would deposit money for certificates of participation, pay annual dues and per-opinion deposits, use a uniform title-opinion form, and have their opinions serviced and defended (or paid up to $500) by the Fund. The Fund would check members for competence, develop rules for accepting prior opinions, maintain master opinions for subdivisions, sell "title services" at near cost, advertise its own availability, and distribute any operating profit to members in proportion to opinion deposits.

The committee found that, however laudable the aims, the proposed entity was a commercial venture that would derive profit from the practice of law through supervising members, furnishing title services, and promulgating rules for accepting opinions. It treated the entity as a lay agency operated by lawyers to perform what are essentially legal services for profit, not a partnership or professional corporation for the joint practice of law. The committee concluded a lawyer could not properly participate because doing so would violate Canon 47, which bars a lawyer from permitting his services or name to be used to make possible the unauthorized practice of law by any lay agency.

The committee added that it would be virtually impossible for attorney-trustees to keep the Fund from acting as a feeder for their own private practices, and that the arrangement would necessarily, if indirectly, advertise its members or hold them out as specialists in a field where no specialization had yet been recognized. Quoting ABA Opinion 57, it noted that a lawyer's outside business is improper when it readily lends itself to procuring professional employment or serves as a cloak for indirect solicitation. The committee commended the inquiring attorneys for submitting the plan in advance.

Currency note

This opinion was issued in 1969, under the Canons of Professional Ethics, before Oklahoma adopted the Code of Professional Responsibility (effective January 1, 1970), the Oklahoma Rules of Professional Conduct (1988), and the later Ethics 2000 revisions. Subsequent rule amendments and case law on lawyer advertising, ancillary businesses, and the practice of law through entities may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Why did the committee treat a fund run by lawyers as a "lay agency"?

A: The committee reasoned that the Fund was a commercial business trust organized to earn a profit from legal services through supervising members and furnishing title services, so even though attorneys conducted its operations it functioned as a lay agency under the rule, citing its own Advisory Opinions Nos. 1 and 20.

Q: What rule did participation violate?

A: Canon 47, which provided that no lawyer shall permit his professional services or his name to be used in aid of, or to make possible, the unauthorized practice of law by any lay agency, personal or corporate.

Q: Did the committee object to lawyers earning income from title work generally?

A: No. Quoting ABA Opinion 57, the committee said it is not necessarily improper for an attorney to engage in a business; the impropriety arose because this venture would readily serve as a feeder for the members' practices and would indirectly advertise them as specialists.

Background and rules framework

The opinion applied Canon 47 of the Canons of Professional Ethics, adopted in Oklahoma, which barred a lawyer from lending his services or name to enable the unauthorized practice of law by a lay agency. The opinion also drew on the committee's definition of the practice of law from its Advisory Opinions Nos. 11 and 240 and on ABA Opinion 57 regarding lawyers engaged in outside business. The opinion predates the Model Rules and made no Model Rule citation.

Citations and references

Rules of Professional Conduct:

• Canon 47 (ABA Canons of Professional Ethics, adopted by the Oklahoma Bar): bars a lawyer from lending services or name to enable the unauthorized practice of law by a lay agency.

Other opinions cited:

• ABA Opinion 57: a lawyer's outside business is improper when it serves to procure professional employment or as a cloak for indirect solicitation.
• Oklahoma Bar Association Advisory Opinions Nos. 1, 11, 20, and 240.

See also

• Okla. Bar Ethics Op. 232: Lawyer interest in an abstract company
• Okla. Bar Ethics Op. 251: Representing a credit bureau on delinquent accounts
• Okla. Bar Ethics Op. 230: Bar association lawyer referral service and advertising

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-258/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Adopted October 17, 1969

INQUIRY

The Committee has been asked for an opinion as to the propriety under the Canons of Ethics of a proposed "Attorney's Title Opinion Fund." A proposed Trust Agreement and other material has been submitted. The reasons stated for the proposed organization of the Fund are the increasing concern over the continuing loss of title and real property law practice and the belief that its causes are the hostility of real estate brokers, competition of lenders and title insurers, reluctance of laymen to seek legal services, and failure of attorneys to provide insurable title opinions and adequate title service. Proponents of the Fund state that its operation will eliminate or combat these factors and convince attorneys that better opinions and title service are needed.

As the Committee understands it, the Fund would be organized as a business trust, the trustees to be attorneys who are "active in titles or real property law." The trustees would appoint officers and employees and would possess usual business powers as well as the right to appoint additional trustees, create subsidiaries and convert to corporate form on approval of certificate holders.

"Membership" in the Fund would be limited to attorneys who are, or desire to become, active in the practice of real estate law, and would be accorded by majority vote of the trustees. Trustees would periodically check members to see that a satisfactory quality of professional competence and service is being maintained. Members could be suspended or removed by the trustees for negligence, incompetence or other cause under rules established by the trustees.

A prerequisite to membership is the deposit with the Fund of a minimum of $100 for which the member is issued a "certificate of participation", but a certificate owner is not necessarily a "member." The certificates evidence the owner's beneficial interest in the Fund, are personal property and entitle the owner thereof to participate in all dividends and distributions of principal, interest, or other trust property in the proportion which the number of certificates owned bears to the total number issued and outstanding. No certificate owner, as such, has any voice in the management or control of the property or business of the Fund, or any power of control over the trustees in that respect. Acquisition of a certificate by an attorney does not entitle such attorney to membership in the Fund, to attend meetings of members or to vote therein unless he becomes a member.

Except for the trustees' discretion, there is apparently no limitation on the number of certificates which a member may acquire by making the necessary "deposit." The trustees would be authorized to issue certificates or options to purchase certificates for services rendered in organizing the Fund or subsequently rendered to the Fund on such terms as they deem fair and reasonable.

The certificates are freely transferable upon compliance with designated procedures. There is no requirement limiting ownership of the certificates to "members" of the Fund or to attorneys. On the death or "retirement" of a member, the trustees would have the option to purchase certificates owned by the deceased or "retired" member on such terms and conditions as may seem reasonable to the trustees.

Liability of certificate owners, including members, would be limited to their interest in the Fund and notice of such limitation would be included in all agreements, obligations, instruments, correspondence, etc., issued by the Fund.

Trustees would be paid such compensation as they deem reasonable and proper and are exculpated from liability for all acts or omissions of other trustees and agents of the Fund. Trustees would be indemnified and reimbursed by the trust estate for any personal liability or loss incurred in connection with the business or operation of the Fund except any arising from his own willful breach of trust.

The Committee is advised that the Fund is not to be operated as a "referral" type organization. The individual members would service their own client's title problems and when writing an opinion will use a uniform title opinion form which is similar to those now in use by attorneys examining titles for title insurers. Capital funds will be accumulated from the sale of certificates, annual dues of members of $25 and opinion deposits of $1.00 per opinion from members. It is believed that these sources will provide sufficient revenue to meet operating expenses. Deposits will be invested and the income used by the Fund, if needed, or distributed to certificate holders.

The attorney writing an opinion will be paid by the Fund to service and defend it if he is active, has not been negligent and incompetency is not indicated, or the Fund will pay up to $500 in lieu thereof at the option of the Fund and the owner, lender or title insurer. This is to provide visible financial support for the opinions of its members. Errors and omissions coverage or conventional title insurance will also be available at the option and cost of the client, from commercial or bar-related title insurance companies. It is believed that a group contract can be negotiated with the Fund which will provide this additional coverage at favorable rates.

Rules for the acceptance of prior opinions of members and other approved attorneys as starting points for current examinations are to be developed, and master opinions for subdivisions and condominia will be provided, possibly on a fee or royalty basis to the attorney or attorneys writing the opinion. The Fund would assist members in making studies of particular client groups' requirements for services and forms.

Printed forms and "title services" would be provided to members at "about cost to enable them to compete more effectively for title law business". It is said that although the Fund is not planned primarily as a profit-making organization, an expanded title practice and better professional fees for all members should result, and "if an operating profit should develop, it should be distributed to members in proportion to the number of opinion deposits paid the fund."

The Committee is advised that the Fund would advertise its availability and services, but that it would not advertise any individual attorneys or members of the Fund. The proposed entity would, if successful initially, do business in various Oklahoma cities and towns.

OPINION

While the Committee recognizes and deplores the encroachment of lay agencies into various areas of the law practice, it is noted at the outset that the proposed entity would be a commercial venture composed of practicing attorneys whose operations its proponents hope and expect will earn a profit for its investors, to be derived from the practice of law through supervision or "checking" of its members to see that "satisfactory quality of professional competence and service is being maintained", the furnishing of "title services", the promulgation of rules by the trustees for the acceptance of prior opinions of members, and the maintenance and providing of master opinions on subdivisions and the like, seems clear to the Committee. The "practice of law" consists of any service involving legal knowledge whether of representation, counsel, or advocacy, in or out of court, rendered in respect of the rights, duties, obligations, liabilities or business relations of the one requesting it, or for whom the service is rendered. Advisory Opinion No. 11, Oklahoma Bar Association. The fact that a layman can lawfully render certain service does not necessarily mean that the same service would not be a "legal service" when rendered by a lawyer. Advisory Opinion No. 240, Oklahoma Bar Association.

The proposed entity is not one for the joint practice of law such as a partnership or a professional corporation, but rather would be a lay agency operated by lawyers to perform what are essentially legal services for the purpose of earning a profit therefrom with the avowed hope that its operations will result in "an expanded title practice and better professional fees for all Fund members".

While these are laudable aims for a Bar Association, they cannot be approved by the Bar Association as proper aims for a commercial venture involving attorneys, particularly where membership in, and the benefits to be derived therefrom, are regulated by what is a "lay agency." The proposed entity in the opinion of the Committee is a "lay agency" even though its operations are essentially conducted by attorneys. See Advisory Opinions Nos. 1 and 20 of the Oklahoma Bar Association.

Accordingly, it is the opinion of the Committee that a lawyer could not properly participate in the activities of the proposed Fund because to do so would violate the provisions of Canon 47 of the Canons of Professional Ethics:

"No lawyer shall permit his professional services, or his name, to be used in aid of, or to make possible, the unauthorized practice of law by any lay agency, personal or corporate."

In addition to the foregoing, the Committee is of the opinion that it would be virtually impossible as a practical matter for atorneys [sic] serving as trustees, or otherwise closely connected with the operation of the Fund, to prevent the Fund from acting as a "feeder" for his own private law practice.

In Opinion 57, the American Bar Association said:

"It is not necessarily improper for an attorney to engage in a business; but impropriety arises when the business is of such a nature or is conducted in such a manner as to be inconsistent with the lawyer's duties as a member of the bar. Such an inconsistency arises when the business is one that will readily lend itself as a means for procuring professional employment for him, is such that it can be used as a cloak for indirect solicitation on his behalf, or is of a nature that, if handled by a lawyer, would be regarded as the practice of law. To avoid such inconsistencies it is always desirable and usually necessary that the lawyer keep any business in which he is engaged, entirely separate and apart from his practice of the law and he must, in any event, conduct it with due observance of the standards of conduct required of him as a lawyer."

The Committee wants to state clearly that it entertains no doubt whatever as to the respect for the Canons of Ethics held by the attorneys who have submitted the plan for consideration in advance of its implementation. We commend their circumspection in doing so. We are constrained to hold, however, that the Oklahoma Bar Association cannot approve as ethical a commercial venture founded and operated by attorneys active in private practice the operation of which would, in our opinion, inevitably act as a "feeder" for their individual law practices and which would necessarily, although indirectly, advertise them or hold them out to the public as "specialists" in a particular field of the law as to which no specialization has as yet been recognized.