Over the years, some attorneys have created of counsel relationships to generate additional business.  After all, the increased exposure coupled with the presentation of close ties with another firm can be an effective marketing tool, right?  Well perhaps, but there are risks that come into play and these risks should not be taken lightly.

What is an “Of Counsel” Attorney?

The “of counsel” designation as envisioned by the authors of various ethics opinions refers to something altogether different from a traditional attorney within a firm.  These opinions generally define an of counsel attorney as an attorney who is not a partner, associate, shareholder, or member of a firm, and they further state that the attorney may only be designated “of counsel” to the firm if the attorney has a close and continuing relationship with the firm.  So, if an attorney that works with the firm has a significant degree of shared liability with the firm or managerial responsibilities to the firm and/or its staff, that attorney should not be designated as “of counsel,” because those roles are more closely associated with members of the firm.

The relationship with the firm requirement for of counsel attorneys has been defined as providing for close, ongoing, regular and frequent contact for the purpose of consultation and advice.  Given their role as trusted advisors, of counsel attorneys have an ongoing obligation to stay current on the law through regular attendance at CLE programs and staying current with the appropriate journals. 

Further, the of counsel attorney must be more than an advisor on only one case or just a forwarder or receiver of legal business.  Attorney’s can get into serious disciplinary trouble  by designating someone who is merely a referral attorney as “of counsel” because that is usually considered misleading client communication in violation of the ethical rules. 

Who Can Properly Be Designated “Of Counsel?”

The number one rule you can follow when considering how you hold your firm out to others in any and all of your communications is this.  Do not mislead the public. 

Evaluating the appropriateness of the designation in the light of what a disciplinary committee could perceive as misleading will help you tremendously in avoiding some of the common “of counsel” pitfalls.  The average person will take the term at face value, so come at the decision from the perspective of the average person’s expectations.  If the of counsel attorney is not readily available and actually does not provide counsel to the firm and their clients, don’t use the term.  If you are going to be listed on another firm’s letterhead, include the of counsel designation on the letterhead.  Disclose jurisdictional limitations on your practice. Always keep in mind the necessity of providing clear information. 

Examples of acceptable relationships for “of counsel” designation have included, but are not limited to: 1) retired lawyers, 2) withdrawing partner or associate, 3) part-time practitioner, 4) permanent non-partner/non-associate, 5) partner on leave and 6) probationary partner-to-be. 

Examples of unacceptable relationships for “of counsel” designation have included, but are not limited to: 1)outside consultants, 2) suspended lawyers, 3) when the affiliation involves only a single case, 4) those who merely share office space and nothing more, and 5) public officials who are not engaged in active practice with their former firm.

Can a law firm be of counsel to another firm?  Can an attorney be of counsel to more than one firm?  Can an attorney be of counsel to an out-of-state firm?  The answers to these questions and a number of others differ depending upon the jurisdiction you practice in. 

Given the numerous state specific rules regarding the “of counsel” designation, I always recommend that prior to establishing of counsel relationships you review any relevant ethics opinions and/or contact bar counsel in your jurisdiction.

What Are the Risks?

There are a few generally applicable issues that take on special significance in an of counsel affiliation.  In particular, imputed disqualification, vicarious liability, and insurance coverage disputes warrant special attention.

Imputed Disqualification.  For conflict purposes, the of counsel affiliation means that the affiliated firm and the of counsel attorney will often be treated as one entity.  The conflicts that the of counsel attorney bring to the table may prevent the affiliated firm from continuing to represent current or future clients.  Likewise, the of counsel attorney has to be concerned about apparent or actual conflicts between his own clients and those of the affiliated firm.  The imputed disqualification rule is a two-way street and there is little that can be done to correct the problem once it has arisen.  Conflict checks can be burdensome and the potential cost in lost business if a conflict was missed can be substantial.  Always address the conflict issue prior to establishing of counsel relationships so that everyone understands what the additional burden will be and can agree that the benefits outweigh the costs.

Vicarious Liability.  While the affiliated firm is not going to be liable for the independent acts and omissions of the of counsel attorney that were outside of the apparent scope of the of counsel’s involvement with the affiliated firm, this doesn’t prevent claims from arising.  Problems can and will arise based upon any given client’s perspective of the affiliation.  Unrestrictive use of letterhead listing the of counsel attorney by the affiliated firm or the of counsel attorney sends the message that all participants are involved on any and all matters, even if this isn’t the case.  To help avoid becoming a named co-defendant in each others suits, use different versions of your firm letterhead.   Include the of-counsel attorney on the letterhead only for those times she will be involved in the case. Likewise, make sure that the of counsel attorney only uses your letterhead for your clients.  By doing so, you each reduce the risk of becoming a co-defendant in a matter you had nothing to do with.

Insurance Coverage Disputes.  In the unfortunate event of a claim, coverage problems can arise when an affiliated firm has done work on a matter that the of counsel attorney had no involvement in, or awareness of.  Unfortunately, his name was listed on the letterhead so he is named as a defendant.  If the of counsel attorney is not covered by the affiliated firm’s malpractice policy there may be a significant problem because the of counsel attorney’s own policy will often not afford coverage either.  Why?  His policy only covers work done on behalf of clients of the named insured which in many instances is not the affiliated firm.  These sorts of “who is the client,” “who is the attorney of record,” and “who is the named insured” are common challenges that underscore the necessity of investigating and addressing the insurance coverage issues early on. Appropriate coverage for the exposures of both the affiliated firm and the of counsel attorney can usually be obtained, so long as the issue is addressed at the outset.

Closing Thoughts

Beyond the above, the best risk management advice that I can give regarding of counsel relationships is to encourage you to always keep in mind joint accountability.  Of counsel relationships can be quite valuable but clients will rightly respond to these affiliations as if they represent a single “entity,” which in fact is often the case.  Mutual accountability will be in play, particularly when a client is directly involved with both parties to the of counsel affiliation.  I think of counsel relationships can bring significant benefits to both firms and their clients so long as these relationships are entered into with client interests in mind.  Overlook this, and problems may lie just around the corner.