This article was published in the American Bar Association’s Law Practice Magazine, Volume 39 Number 4, July/August 2013.
According to the American Bar Foundation, nearly 50 percent of the attorneys in the U.S. are solo practitioners, while studies conducted by the National Association for Law Placement show that slightly more than 6 percent of new law school graduates hang out their own shingle as the alternative to chasing that elusive first job. Those attorneys who choose to establish a traditional office—as opposed to a laptop and cellphone—often opt to share office space with like-minded compatriots. Sharing space offers attorneys an ability to defray expenses, share resources and develop collegial relationships. While sharing space with attorneys offers significant benefits, it also presents real and tangible risks that every attorney considering this alternative should recognize. In addition to the fact that care must be taken to avoid the unintentional creation of an implied partnership, the thorny issues of confidentiality and conflicts of interest expose attorneys to the peccadilloes of their suitemates.
Avoid The Appearance of a Partnership
ABA Model Rule of Professional Conduct 7.5(d) prohibits lawyers from holding themselves out as partners when they are not, in fact, partners. As a result, an attorney making the decision to share office space with other attorneys must ensure that there is no overt statement or implication that the attorneys are practicing law as a single unit, unless they actually are doing so. Separate and apart from the fact that insinuating attorneys in a suite are affiliated when they are not violates the rules of conduct, if a client has reason to believe that the attorneys are practicing together, the suitemates may ultimately be held liable for the torts of their cotenants.
The temptation to refer to a suitemate as a colleague or associate definitely exists. Attorneys want to give clients the impression that they have the resources and expertise to handle any given representation. In addition to the fact that ethical considerations prohibit activity that might result in a misunderstanding by the client, the same confusion can result in a significant source of liability.
Maintaining strict autonomy of the various practices within a suite is important. Each law firm should use separate letterhead, business cards and litigation backs; the building directory should independently list separate lawyers or law firms; any signage in the office should clearly differentiate between the law firms; and engagement letters should acknowledge that only the retained lawyer has a relationship with the client and should specifically mention that other lawyers or law firms within the suite are not related. Ideally, separate telephone lines should be maintained and answered with the individual law firm’s name and not with the generic term law offices. Solo practitioners will also find that maintaining their own telephone number, email address and computers will provide them with flexibility should the office-sharing arrangement not work out.
Physical segregation of different practices within the suite through the use of permanent or moveable screens or cubicles reinforces the independence of the law firms sharing space.
Perform Due Diligence
Before entering into an agreement to share office space, attorneys must look into the background of future suitemates. At the end of the day, attorneys are all measured by their reputations. Sharing space with attorneys who are not well respected in the community will have an adverse impact upon an attorney’s practice. Attorneys with disciplinary histories or who have moved from office to office because of financial issues will not enhance the professional atmosphere of the office.
Whether an attorney intends to sign the lease with the landlord or is one of the sublessees, it is critical to check the economic references of those attorneys within the shared office. Attorneys sharing space need the comfort of knowing that their officemates have the financial ability to shoulder their share of the expenses.
Determining the terms of the master lease governing the space is important. If minimal time is left on the current lease term, there is no guarantee that the space will be available past the expiration date. Along the same lines, the remaining tenure of the other law firms in the suite may also impact the decision to share space.
Ideally, the areas of practice within a suite should complement each other and not directly compete with each other. Diverse practice areas will minimize conflicts and promote thoughtful referrals—another benefit of office sharing. However, also consider whether the clients will feel comfortable sharing the waiting room with the clientele of another firm located within the suite.
The issue of insurance should be squarely addressed. Sound business and risk management practice requires officemates to maintain a certain level of professional liability insurance (perhaps with the same deductible) as well as general liability insurance coverage. The tenants should perform annual reviews of the coverage throughout the life of the relationship. In fact, it is a good idea to hold an annual “housekeeping” day to review the issues affecting the office-sharing arrangement in a collegial atmosphere.
Respect The Confidentiality of Clients
The sanctity of attorney-client communications is one of the cornerstones of our profession. When evaluating prospective office space, the cotenants should consider the Model Rule 1.6 obligations regarding client confidences so that they may be logistically preserved in the shared space.
One of the primary reasons for entering into office-sharing agreements is to defray the cost of certain personnel. However, care must be taken not to share staff members who may be privy to confidential client information. Shared receptionists should not engage in substantive message taking but rather should direct callers to the appropriate attorney, dedicated staff person or voicemail. Mail, faxes and files often contain confidential client information. Accounting functions similarly involve sensitive client information. As a result, these tasks are not appropriately handled by shared employees. Some states may advise against sharing of staff in these circumstances or require that the impact of shared personnel be fully explained to the client. Lawyers must thoroughly review the individual state ethical requirements before entering into an office-sharing arrangement.
Attorneys must segregate client files in such a manner that third parties to the attorney-client relationship cannot gain access. File cabinets should be locked and staff should be advised that files that are not being worked on must be returned to the locked cabinets. Clearly, escrow and operating accounts of the separate law firms must be independently maintained and kept in such a way that no other law firm within the shared space may gain access to the accounts.
Similarly, computers, servers, scanners and copiers owned by the various law firms in a suite should not be networked together and should be password-protected so that passing users cannot access client documents. Cotenants must take care to avoid talking about client matters in communal areas of the office, even to the extent of prohibiting the use of speakerphones for client calls or voicemail in areas where they can be overheard. Staff must be periodically counseled on the importance of client confidences and the need to protect client documents from inadvertent disclosure.
Consider The Effects of Conflicts
Before any new tenant in a suite is considered, a conflict check should be run against the existing matters handled by the prospective tenant and those already ensconced in the space.
While sharing space with attorneys having complementary instead of competing practice areas would likely minimize the incidence of conflicts, the representation of adverse parties by two law firms within a single suite exacerbates client confidentiality concerns. While cumbersome in its initial phase, suitemates should agree to search conflicts on their independent conflict systems for each engagement that enters the suite. If a conflict is identified, the law firms involved can make reasoned decisions on how to address the issue. While there is no blanket prohibition against independent law firms in a single suite representing adversaries, the pitfalls are significant and increase if there is any incidence of shared staff. Some jurisdictions prohibit waivers in the event of shared staff in light of confidentiality concerns. Other jurisdictions require disclosure to the client and informed consent to the continued engagement.
While it may be theoretically possible to screen conflicts that do exist, the better practice is to secure the mutual agreement of suitemates not to accept engagements that would involve representing adverse parties in the same litigation.
One of the perceived benefits of office sharing among attorneys with differing practice areas is the opportunity to cross-refer matters and thereby generate business. Under Model Rule 1.5, an attorney may share fees with another attorney outside the referring attorney’s law firm if the fee is reasonable, is proportionate to the work performed, and the client’s agreement to the arrangement is confirmed in writing, including the split of the fee. In this scenario, attorneys sharing office space and working on the same client representation must take extra care to ensure the client is aware that the attorneys are not practicing in the same law firm.
Attorneys more commonly refer matters with the expectation that no services need be performed in order to share in the fee. In that instance, the referring attorney must assume joint responsibility for the engagement with the attorney, the fee must be reasonable, and the client’s agreement to the arrangement and fee split must again be confirmed in writing. Assuming joint responsibility for the legal work of another is not an obligation that should be assumed lightly.
Before assuming joint responsibility for the work in such a situation, an attorney must make certain that the attorney performing the work is qualified in the area of practice and is adequately insured in the event an error is committed during the course of the representation. Assuming the recommendations in this article have been adopted within the suite, attorneys will hopefully have already vetted the qualifications of their suitemates and ensured that adequate professional liability insurance is in place.
Enter Into a Written Office-Sharing Agreement
The terms upon which attorneys share office space should always be recorded in writing so as to reduce possible misunderstandings. At a minimum, the agreement should address
- the terms of the intended occupation,
- the definition of the space to be occupied and the common areas to be shared,
- a strict prohibition against any attorney representing that the attorneys in the shared space practice as a single law firm,
- a requirement that the attorneys maintain a certain level of professional liability insurance and business office coverage,
- an agreement as to the mandatory use of engagement letters specifying the nature of the shared space arrangement and indicating that the retention is just with the individual attorney or law firm,
- any agreement on the use and cost sharing of office supplies and equipment,
- the extent to which office staff will be shared,
- a delineation of how client confidences will be protected,
- the extent to which any sublets will be permitted, and
- the policy on mutual conflict-checking procedures or representation of adverse parties by law firms within the same suite.
Office sharing provides an affordable alternative for solo practitioners and small law firms to enjoy some of the benefits of operating in the collegial atmosphere of a larger office. Addressing the issues outlined in this column will help minimize the pitfalls that might otherwise arise.
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