City Bar Says ‘Affiliate’ Firms Must Observe Conflicts Rules

NYPRR Archive

By Lazar Emanuel

[Originally published in NYPRR March 2001]

Formal Opinion 2000-4

In Formal Opinion 2000-4, the Association of the Bar of the City of New York has reviewed the circumstances under which two firms may describe themselves as “affiliates” or “affiliated.” The Opinion was issued in response to the question:

May an attorney or firm list another firm as “affiliated” with or an “affiliate” of the attorney or firm and, if so, would the “affiliated” entities be required to consider all of their clients as one unit for conflicts of interest purposes?

The Opinion of the Association’s Committee on Professional and Judicial Ethics concludes that the answer to both parts of the question is “yes”— but. The designations “affiliated” or “affiliates” may be used only if the relationship between the two entities is “close and regular, continuing and semi permanent.”

The Committee compared the “affiliated” designation to the “Of Counsel” designation. Under DR 2-102(A)(4) of the Code of Professional Responsibility:

A lawyer or law firm may be designated “Of Counsel” on a letterhead if there is a continuing relationship with a lawyer or law firm, other than as a partner or associate.

In construing this language, the Opinion reminds us of EC 2-10’s mandate that a lawyer’s public communications shall not contain “statements or claims that are false, deceptive or misleading.”

Conflicts Rules Apply to Lawyers ‘Of Counsel’

The Committee restated its opinion, first announced in Formal Opinion 1995-8, that a law firm and all lawyers “Of Counsel” to the firm must be treated as a single unit for purposes of analyzing issues of disqualification based upon conflicts of interest.

…In consequence, the effect of two or more firms sharing of an counsel lawyer is to make them all effectively a single firm, for purposes of attribution of disqualifications. [ABA 90-357.]

The Committee rejected any inroad on the single-unit test for controlling conflicts between affiliated law firms.

It has been suggested that, as the variety of lawyer/law firm cooperative arrangements multiplies, a broader use of the term “affiliated” should now be accepted… Some have argued that it may be appropriate to permit the designation of “affiliated” to situations where the relationship between the law firms would not be sufficiently close to require that they be considered one unit for conflict clearing purposes.

We continue to adhere to the view that the relationship between firms must be sufficiently close, personal and continuing to warrant the designation of “affiliated” and that this relationship mandates that we treat the clients of each member as clients of every member of the group. The Committee does not believe any reason exists to justify a change in the position we announced in [Formal Opinion] 1995-8… “affiliated” firms must consider themselves as one unit for conflict clearing purposes. In the end, having decided to obtain the benefits of forming a close, regular, continuing and semi-permanent relationship, the participants should not be excused from the provisions of DR 5-105(D).

The Committee then cited the language of DR 5-105(D), which governs conflicts of interest:

While lawyers are associated in a law firm, none of them shall knowingly accept or continue employment when any of them practicing alone would be prohibited from doing so under DR5-101(A), DR 5-105(A) or (B), DR 5-108(A) or (B), or DR 9-101(B) except as otherwise provided herein.

The opinion concludes:

Attorneys and firms may use the term “affiliated” or “affiliate” in describing a cooperative firm so long as the relationship is “close and regular, continuing and semi-permanent” (the same requirement [as] for the proper use of the more often used phrase “Of Counsel”). When attorneys/firms are thus “affiliated” they must consider all the clients of each constituent entity in determining whether a conflict of interest exists.

Lazar Emanuel is the Publisher of NYPRR.

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Conflicts Lazar Emanuel