Washington OKs Fee Sharing and Joint Ownership Between Lawyers and LLLTs

The Supreme Court of Washington has approved revisions to the Rules of Professional Conduct governing lawyers in that state that allow lawyers and limited license legal technicians to form partnerships and share fees. To my knowledge, this makes Washington the first state to allow fee sharing and joint ownership of a law practice between a lawyer and nonlawyer. (The District of Columbia also allows ownership and fee sharing by nonlawyers in limited circumstances.)

The new Washington rule was part of a package of changes to the Rules of Professional Conduct (RPC) proposed by the Washington State Bar Association to bring the rules into alignment with the LLLT program and to provide guidance to lawyers concerning their interactions with LLLTs and the clients of LLLTs. LLLTs are subject to a separate set of professional conduct rules.

(I’ve previously covered the LLLT program in in articles in the ABA Journal and The Washington Post.)

New RPC 5.9, titled “Business Structures Involving LLLT and Lawyer Ownership,” provides that a lawyer may:

  1. share fees with an LLLT who is in the same firm as the lawyer;
  2. form a partnership with an LLLT where the activities of the partnership consist of the practice of law; or
  3. practice with or in the form of a professional corporation, association, or other business structure authorized to practice law for a profit in which an LLLT owns an interest or serves as a corporate director or officer or occupies a position of similar responsibility.

The rules specify that a lawyer may not share fees with an LLLT who is not part of the same firm. Rule 5.9 goes on to say that joint ownership is permitted only if:

  1. LLLTs do not direct or regulate any lawyer’s professional judgment in rendering legal services;
  2. LLLTs have no direct supervisory authority over any lawyer;
  3. LLLTs do not possess a majority ownership interest or exercise controlling managerial authority in the firm; and
  4. lawyers with managerial authority in the firm expressly undertake responsibility for the conduct of LLLT partners or owners to the same extent they are responsible for the conduct of lawyers in the firm.

The comment to the new rule explains:

This Rule authorizes lawyers to enter into some fee-sharing arrangements and for-profit business relationships with LLLTs. It is designed as an exception to the general prohibition stated in Rule 5.4 that lawyers may not share fees or enter into business relationships with individuals other than lawyers.

Other approved changes to the RPC address additional aspects of the relationship between lawyers and LLLCs. In the RPC’s preamble, a new comment 24 explains:

In addition to providing standards governing lawyer conduct in the lawyer’s own practice of law, these Rules encompass a lawyer’s duties related to individuals who provide legal services under a limited license. A lawyer should remember that these providers also engage in the limited practice of law and are part of the legal profession, albeit with strict limitations on the nature and scope of the legal services they provide.

New rule 5.10 addresses the obligation of lawyers to supervise LLLTs who they employ or retain. It provide that lawyers must make reasonable efforts to ensure that LLLTs in the firm will act in ways that are comparable with the professional conduct rules and with the professional obligations of the lawyer.

The Supreme Court of Washington approved the changes in an order issued on March 23. I have not been able to find the order online. The packet of changes that was submitted to the court can be found here and the WSBA’s cover sheet explaining its proposed changes can be found here.