(Inquiry No. 445 )
Referrals to and from attorney-owned medical insurance claims processing company.
Subject to stated limitations and qualifications, an attorney may accept referrals from a business of which he is a shareholder formed for the purpose of providing administrative services for medical insurance claims processing, bill paying services and medicare/medicaid application processing, provided there is full disclosure of the attorney’s interest. The attorney may make referrals to the business as may be appropriate after full disclosure of the attorney’s interest in the business.
Judiciary Law §479
Disciplinary Rule 2-103
An attorney wishes to form a corporation with other attorneys for the purpose of rendering administrative services such as: Medical insurance claims processing, bill paying services and medicare/medicaid application processing. It is anticipated that the need for legal services may arise in connection with the services being provided. In such cases, referrals would be made to the attorney-shareholders of the corporation along with full disclosure of their ownership interest. It is also expected that the attorney-shareholders will refer clients to the business as appropriate, again along with full disclosure of the attorney’s ownership interest.
(1) May the attorney-shareholders accept referrals from the business they own if full disclosure of their ownership interest is made beforehand?
(2) May the attorney-shareholders of the business refer clients as appropriate under the circumstances, to the business after full disclosure?
(1) Yes, subject to stated limitations and qualifications.
(2) Yes, subject to stated limitations and qualifications.
In New York State Bar Association Opinion #536, it was held that a law firm could operate a financial planning corporation from the same offices as the law firm and “[ i] f there was no violation of the statutes or rules against solicitation, it is permissible for the law firm to accept as its clients, persons who were first introduced to the lawyers through their financial planning activities.” In Opinion #89-31, this committee favorably cited N.Y. State Opinion #536 in determining that an attorney was permitted to inform his clients that he was also a licensed health and insurance broker. See also, e.g., Nassau County Opinions #92-24, #92-18 and #91-1. The inquiry before this committee is different from that presented in N. Y. state opinion #536 only in that the business being contemplated will not be in the same premises as the lawyers’ offices.
In N.Y. State Opinion #549, it was held that a lawyer may accept referrals from a collection agency of which he is a principal and may refer clients to the collection agency with informed consent. It was held in N.Y. State Opinion #549 that:
“with the landmark decision in Bates v. State Bar of Arizona, 433 U.S. 350 (1977), many of the ethical strictures against advertising by lawyers were removed. It nevertheless remains a violation of the Lawyers Code of Professional Responsibility for a lawyer to solicit employment in violation of any statute or Court rule. DR2- 103 (A); See Judiciary Law §479; Matter of Koffler, 51 N.Y.2d 140 (1980), cert. denied, 101 S. ct. 1733 (1981); Matter of Greene, 54 N.Y.2d 118 (1981). It is neither the practice nor the province of this Committee to determine matters of law and we, therefore, offer no opinion as to whether proposed conduct would constitute a violation of the law against solicitation. Assuming no such violation and further assuming full disclosure to the clients involved of the relationship between the collection agency and the lawyer, we see no ethical impropriety in a lawyer accepting clients referred to him by a collection agency of which he is a principal, and referring clients to the collection agency.”
This Committee does not determine matters of law and offers no opinion as to whether the proposed conduct would constitute a violation of the law against solicitation. However, assuming in the situation posed no violation of Judiciary Law §479 nor of DR 2-103 (A) and full disclosure to the clients of the business of the attorney shareholders’ interest in the business, and full disclosure to the attorney’s clients of the attorney’s interest in the business, the business may refer its clients to the attorney shareholders as appropriate and the attorneys may refer their clients to the business as appropriate.
It should be noted that N.Y. state opinion #536 and the cited Nassau County opinions all gave their imprimatur to the respective subject arrangements with the proviso that the attorney could not act as attorney in the same transaction in which the nonlegal business in which the attorney was engaged and/or a principal serviced the client. N. Y. state Opinion #549, however, made mention of no such qualification.
It is uncertain whether this omission was a mere oversight, or whether the omission was deliberate, the result of the state Bar’s failure to perceive in the dual roles of collection agency principal and collection attorney any of the “inherent and numerous conflicts” upon which the “same transaction” prohibition has been applied in cases involving, e.g., real estate brokers (Nassau County opinion #84-4).
The inquiry before this Committee provides insufficient facts to make a determination as to whether in the arrangement presented for scrutiny any potential conflicts exist between an attorney’s interests as attorney and as shareholder, and thus this Committee does not opine on whether on these facts the “same transaction” prohibition is applicable.
Finally, this Committee observes that an attorney may not continue as a shareholder and share the profits of the business if the business accepts fees from attorneys in exchange for making referrals to them (Nassau County Opinion #92-24), nor would an attorney be permitted to accept a fee in exchange for referring clients to the business (Nassau County Opinion #92-35).
[Approved by the Executive Subcommittee on 1/12/93] [Approved by the Full Committee on 1/27/93]