Summary courtesy of FreelanceLaw member Shawn Jamail, Attorney, Austin, TX

Texas State Bar Professional Ethics Committee, Opinion 577, March 2007

Texas Ethics Opinion No. 577 (March 2007) addresses the question of whether a law firm may hire a lawyer who is not an associate, partner or shareholder of the law firm to provide legal services for a client of the firm and then charge the client a higher rate than that charged the firm by the lawyer performing the work.  The answer depends on the relationship between the law firm and the lawyer.  The opinion distinguishes between "in-firm lawyers" and "non-firm lawyers".

 "In-firm lawyers" are lawyers practicing in a traditional law firm structure with partners, shareholders, members and associates, and lawyers reasonably considered to be "in" the firm. Whether a lawyer is  reasonably considered "in" the firm requires an analysis of various factors, such as, whether the attorney  receives client files and confidential client communication, whether the lawyer is included in firm events, the work location of the lawyer, utilization of firm resources by the lawyer, the length and history of association with the firm, and whether the lawyer is held out as being in the firm to clients and to the public. Examples include contract and staff attorneys employed by the firm and of-counsel arrangements. A law firm may bill in-firm lawyers at a higher rate than the law firm is paying those lawyers to perform the work.

 "Non-firm lawyers" are lawyers that practice separately from the law firm and bill the firm directly for their services. Examples of "non-firm lawyers" include outside specialty counsel, local counsel, and lawyers hired directly by the firm or through a temporary agency to provide temporary staffing.   A law firm may charge a client a higher amount than billed by a non-firm lawyer to the law firm provided certain requirements for division of fees are met: either the billing is proportionate to services performed or the lawyers assume joint responsibility for the representation, the client consents in writing to the division of fee arrangement, and the total fee for legal services is not unconscionable. Otherwise, the opinion concludes a law firm may not bill a non-firm lawyer at a higher rate than that charged by the lawyer to the law firm. This is contrary to the ABA interpretation of similar disciplinary rules (American Bar Association Standing Committee on Ethics and Professional Responsibility Formal Opinion 00-420 issued November 29, 2000).