A non-lawyer friend's out-of-state collection agency wants to send demand letters on my firm's letterhead, handle debtor responses, and split what it collects, with my firm supervising. Is that allowed?

Plain-English summary

The inquiring attorney is a member of a Rhode Island professional corporation practicing law. A non-lawyer friend planned to establish a collection agency in State X and wanted a relationship with the Rhode Island firm in which (i) the State X agency would send debtors demand letters on the firm's letterhead, (ii) debtor responses would be directed to a State X post office box or telephone number, and (iii) the agency would follow up with debtors. The firm would supervise the collection process and would be compensated from all collections the agency made.

The opinion cautions that the agency's activities would constitute the practice of law, subject to State X's laws on law practice. It finds the arrangement would violate, among other things: Rule 5.4(b) (a lawyer shall not form a partnership with a non-lawyer if any of the partnership's activities consist of the practice of law); Rule 5.4 (a firm shall not share legal fees with a non-lawyer, with exceptions not applicable here); Rule 5.5 (a lawyer shall not assist a non-lawyer in the unauthorized practice of law); and Rule 7.1 (a lawyer shall not make false or misleading communications about the lawyer or the lawyer's services). It adds that the agency's use of the firm's letterhead would be a material misrepresentation giving the impression that the writer is a member of the firm, violating Rule 4.1 (a lawyer shall not knowingly make a false statement of material fact to a third person). The opinion limits itself to the Rules of Professional Conduct and does not reach the State Ethics Code.

In practice

Under this opinion, each structural feature of the deal maps to a violation: shared fees and a de facto partnership with a non-lawyer engaged in law practice (Rule 5.4 and 5.4(b)), assisting non-lawyers in the unauthorized practice of law (Rule 5.5), and letting the agency send demand letters on firm letterhead, which the opinion treats as a false or misleading communication (Rule 7.1) and a false statement of material fact to the debtors (Rule 4.1).

Common questions

Q: Can a law firm let an outside collection agency send demand letters on the firm's letterhead?

A: No. The opinion concludes that use of the firm's letterhead would misrepresent who wrote the letters, violating Rules 7.1 and 4.1.

Q: Can the firm share the money the agency collects?

A: No. The opinion finds the fee-sharing and partnership with a non-lawyer engaged in law practice violate Rule 5.4 and Rule 5.4(b).

Q: Why is the agency's work treated as the practice of law?

A: The opinion cautions that the agency's collection activities would constitute the practice of law, so having the firm enable them would assist the unauthorized practice of law under Rule 5.5.

Background and rules framework

The opinion interprets Rhode Island Rules of Professional Conduct 5.4 (professional independence; partnership and fee sharing with non-lawyers), 5.5 (unauthorized practice of law), 7.1 (communications concerning a lawyer's services), and 4.1 (truthfulness in statements to others), analogs of the corresponding Model Rules. Rule 5.4(b) bars a non-lawyer partnership where any activity is the practice of law; Rule 5.4 bars sharing legal fees with a non-lawyer; Rule 5.5 bars assisting the unauthorized practice of law; Rules 7.1 and 4.1 bar false or misleading communications and false statements of material fact.

Citations and references

Rules of Professional Conduct:

• MR 5.4 / RI RPC 5.4, 5.4(b) (fee sharing and partnership with a non-lawyer)
• MR 5.5 / RI RPC 5.5 (unauthorized practice of law)
• MR 7.1 / RI RPC 7.1 (false or misleading communications)
• MR 4.1 / RI RPC 4.1 (false statement of material fact to a third person)

See also

• RI EAP Opinion 95-47: nonlawyer selling collection forms and referring clients for a fee
• RI EAP Opinion 93-25: a lawyer serving a nonprofit arts-consulting corporation under 5.4/6.3

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2093-52.pdf

Original opinion text

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

(FINAL)
ETHICS ADVISORY PANEL
OPINION #93-52, REQUEST #391
Issued August 25, 1993

The inquiring attorney is a member of a Rhode Island Professional Corporation engaged in the practice of law. A non-lawyer friend of the inquiring attorney will establish a collection agency in State X and desires a relationship with the Rhode Island law firm which, among other things, would include (i) the State X based collection agency's sending out letters to debtors on the Rhode Island law firm's letterhead; (ii) directing debtor responses to such demand letters to a State X post office box or telephone number; and (iii) the based collection agency's follow up contact with such debtors. The Rhode Island law firm would be responsible for the supervision of the collection process and would receive compensation from all collections successfully made by the State X based collection agency.

Under the facts as presented, the Panel cautions that the activities of the State X based collection agency would constitute the practice of law and accordingly would be subject to State X laws, rules and regulations regarding law practice. Further, the Panel finds that the proposed arrangement would violate, among other things, (i) Rule 5.4(b) (a lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consists of the practice of law); (ii) Rule 5.4 (a law firm shall not share legal fees with a non-lawyer with certain exceptions not applicable here); (iii) Rule 5.5 (a lawyer shall not assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law); (iv) Rule 7.1 (a lawyer shall not make false or misleading communication about the lawyer or the lawyer's services). The allowed use of the Rhode Island firm's letterhead by the State X collection agency would constitute a material misrepresentation of fact giving the impression that the writer of the letter is a member of the Rhode Island law firm and would constitute a violation of Rule 4.1 (a lawyer shall not knowingly make a false statement of material fact to a third person).

The Panel's guidance is restricted to interpretations of the Rules of Professional Conduct and does not extend to issues under the State Ethics Code or any other rules, regulations or laws that may have bearing on the issues raised by this inquiry.