In this article, we review Formal Opinion 499 just issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association. The title of the review is Passive investment in alternative business structures, and it specifies whether and under what circumstances lawyers can be involved in Alternative Business Structures (ABS). We will examine the Opinion from two angles: what (limited) progress it represents in meeting the need to reform the regulatory system governing lawyers; and what he leaves unfinished, hopefully will be dealt with another day.
What does opinion say 499
The summary of the opinion reads as follows:
A lawyer may passively invest in a law firm that includes lay owners (“alternative business structures” or “ABS”) operating in a jurisdiction that allows ABS entities, even if the lawyer is licensed to practice law in a jurisdiction that does not allow non-lawyers to own law firms. [footnote omitted]. To avoid transgressing Model Rule 5.4 or other Model Rules and to avoid the imputation of conflicts under Model Rule 1.10, a lawyer who is passively investing should not practice law through ABS or be present as an attorney associated with ABS and may not have access to protected information. by Model Rule 1.6 without the informed consent of the ABS customer or compliance with an applicable exception to Rule 1.6 adopted by the ABS jurisdiction. The fact that a conflict may arise in the future between the practice of the investor lawyer and the work of ABS for its clients does not mean that the lawyer cannot passively invest in ABS. If, however, at the time of the investment, the lawyer’s investment creates a personal conflict of interest under Model Rule 1.7 (a) (2), the lawyer must refrain from the investment. or appropriately deal with the conflict under Model Rule 1.7 (b).