Inquiry is made whether the trust accounts of law related ventures operated by lawyers are subject to the trust overdraft notification and audit provisions of Rule 9, Section 29 and the trust account provisions of Disciplinary Rule 9-102.
Lawyers have historically engaged in law related activities by operating non-lawyer entities. Some of the law related ventures or ancillary businesses operated, and law related services provided, by lawyers are real estate title companies/agencies, real estate closing companies/agencies, trust/escrow services, brokerage firms, lending institutions, collection companies/agencies, arbitration/mediation services, management/business consulting, tax/financial planning, lobbying, real estate development, environmental consulting, etc.
Rule 5.7 of the American Bar Association (ABA) Model Rules of Professional Conduct makes it unethical for lawyers or law firms to offer non-legal services functionally connected or ancillary to the practice of law (law related services) to anyone except clients.
There is no counterpart to ABA Model Rule 5.7 in the Tennessee Code of Professional Responsibility. Tennessee Formal Ethics Opinions 82-F-34 and 82-F-36, citing ABA Formal Opinions 54, 57, 233, 234, 297, 305 and 328 and Disciplinary Rules 2-101 through 2-105,permit lawyers or law firms to engage in law related activities provided they are performed in compliance with the Code of Professional Responsibility. All the Canons, Ethical Considerations and Disciplinary Rules of the Code are fully applicable to the delivery of law related services by lawyers. Lawyers or law firms which provide law related services or operate, own or control law related business ventures or which provide law related services,are ethically required to comply with all applicable ethical rules. The trust overdraft notification and audit provisions of Rule 9, Section 29 are fully applicable. The requirements of Disciplinary Rule 9-102 on preserving and maintaining trust accounts and the provisions for the IOLTA program are fully applicable as well as Formal Ethics Opinion 89-F-121, on the mechanics of trust accounting. All the provisions of the Code of Professional Responsibility embodied in Tennessee Supreme Court Rule 8 and the disciplinary enforcement provisions of Tennessee Supreme Court Rule 9 are fully applicable to law related activities by lawyers or law firms.
Lawyers are ethically required to disassociate from any law related entity operated, owned or controlled by lawyers or law firm, and to report the activity pursuant to Disciplinary Rule 1-103, if they reasonably should know that the law related activity is not conducted in compliance with the ethical and professional responsibilities of lawyers.
This 9th day of December, 1994.
Brenda Y. Hall
Donna Simpson Massa
C. Richard Dietzen
APPROVED AND ADOPTED BY THE BOARD