Can a company employ a lawyer on a straight salary to handle its legal work and house him in the company's building?

Plain-English summary

The inquiry described two arrangements: a national insurance company employing several attorneys on regular salary to defend lawsuits and prosecute subrogation cases, with offices at the company's branch and no listing under the attorneys' section of the telephone directory; and a retail merchandising company employing a salaried attorney who writes collection letters on attorney-at-law letterhead, files and tries suits to collect delinquent accounts, and has an office in the company's building. The questions were whether this violated Canon 11 (fixing the amount of fees) or Canon 32 (lay exploitation of professional services).

The Committee concluded there is no violation under either situation (9-0). It said companies have the right to employ attorneys on a salary basis, and such attorneys may accept the employment and maintain offices in the employing company's building, and that there is no violation of Canon 11 when an attorney agrees to perform services for a client on a straight salary basis. As to Canon 32, the Committee explained that the Canon merely prohibits a lawyer from permitting his professional services to be exploited by a lay agency that intervenes between the client and the lawyer, and that performing this legal work for the employing companies is not evidence of being controlled or exploited by a lay agency in the manner Canon 32 addresses.

Currency note

This opinion was issued in 1958, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. Subsequent rule amendments or later opinions 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 Treat this page as historical context, not current guidance.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: Can a company hire a lawyer on salary to handle its legal matters?

A: The Committee concluded that companies may employ attorneys on a straight salary basis and that the attorneys may accept such employment, with no violation of Canon 11 or Canon 32.

Q: Can the salaried attorney keep his office in the company's building?

A: Yes. The Committee said such attorneys may maintain offices in the building of the employing company.

Q: Does salaried employment by a lay company exploit the lawyer's services under Canon 32?

A: The Committee concluded it does not, explaining that Canon 32 prohibits a lay agency intervening between the client and the lawyer, and that doing the company's own legal work is not evidence of that kind of control or exploitation.

Background and rules framework

The opinion interprets former Texas Canon 11 (fixing the amount of fees) and Canon 32 (professional services not to be controlled or exploited by a lay agency), as applied to lawyers employed directly by a company on salary. The modern analogs are ABA Model Rule 5.4 (professional independence of a lawyer) and Model Rule 1.5 (fees), which together recognize in-house and salaried practice while protecting the lawyer's independent judgment.

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence of a lawyer), as the modern analog
• MR 1.5 (fees), as the modern analog
• Texas Canons 11 and 32 (former canons on fixing fees and lay control of professional services)

See also

• TX Ethics Op. 178: Lawyers Taking Work Through a Lay Intermediary
• TX Ethics Op. 211: Firm Owning Stock in a Client Loan Company
• TX Ethics Op. 160: Providing a Bank or Loan Company Legal Forms

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-167/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_167.pdf

Original opinion text

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

QUESTION PRESENTED

A national insurance company employs several attorneys on a regular salary basis to defend lawsuits and to prosecute subrogation cases. These attorneys maintain their offices with the branch office of the insurance company in a Texas city and such attorneys are not listed under the Attorney's section of the classified pages of the telephone directory in such city.

A company engaged in the retail merchandising business employs an attorney on a salary who writes collection letters for the company on a letterhead showing that he is an Attorney-at- Law. He also files suits to collect delinquent accounts and tries them for the company. He has an office in the company's building.

Is there a violation of Canon 11 of the State Bar because the charges of such attorneys for services rendered by them are not determined according to the provisions of said Canon? Is there a violation of Canon 32?

18 Baylor L. Rev. 268 (1966)

FIXING THE AMOUNT OF FEES - EMPLOYMENT ON SALARY BASIS
An attorney may accept employment by a company on a straight salary basis and may maintain offices in the building of the employing company.

INTERMEDIARIES
An attorney may accept employment by insurance company, mercantile business or other lay agency to write collection letters, defend them in lawsuits, prosecute their claims, or perform other legal services which show no evidence of the employing company improperly controlling or exploiting the attorney.

Canons 11, 32.

The committee is of the opinion that there is no violation of the Canons of Ethics of the State Bar by the attorneys under the situations presented in the question. The companies have the right to employ attorneys on a salary basis and such attorneys may accept such employment and maintain offices in the building of the employing company. There is no violation of Canon 11 if an attorney agrees to perform services for a client on a straight salary basis. The defending of lawsuits, prosecution of subrogation cases, filing of suits for the collection of debts owing to his clients and the trying thereof, as well as the writing of collection letters do not in any way come within any prohibition of Canon 32. That Canon merely prohibits any attorney from permitting his professional services to be exploited by a lay agency, personal or corporate, which intervenes between the client and a member of the State Bar. The performing of the legal service referred to above by the attorneys for the companies employing them is not any evidence of their being controlled or exploited by a lay agency in the manner referred to in Canon 32. (9-0)

Tex. Comm. On Professional Ethics, Op. 167 (1958)