BAR ASSOCIATION OF NASSAU COUNTY
COMMITTEE ON PROFESSIONAL ETHICS

Opinion No. 2002-13

(Inquiry No. 2013-2 )

Topic:
Accepting Compensation For Representation From Someone Other Than Client; Professional Independence of Lawyer; Conflict of Interest; Payment for Referrals

Digest:
Inquiring counsel may undertake the representation or counseling of a family of a prospective student in a proceeding to have the student’s school district pay the student’s tuition at a private school at which the attorney is employed as in-house counselor a consultant, provided that (a) the school does not direct or regulate the lawyer’s professional judgment in rendering such legal services or cause the lawyer to compromise the lawyer’s duty to maintain confidential information, and (b) the school and the family give their informed consent, in writing, to the representation.

Inquiring counsel may also accept referrals from a private special education school for representation or counseling families of prospective students in proceedings to have the students’ school district pay the students’ tuition at a private school provided that (a) counsel gives no compensation or anything of value to the school for the referral, and (b) the school does not direct or regulate the lawyer’s professional judgment in rendering such legal services or cause the lawyer to compromise the lawyer’s duty to maintain confidential information.

Provisions of the Rules of Professional Conduct:
Rule 1.0(j)
Rule 1.7
Rule 1.8(t)
Rule 5.4(c)
Rule 7.2

Statutes:
Judiciary Law Sec. 495

Facts Presented:
Pursuant to the Individuals with Disabilities Education Act (“IDEA”), children with disabilities are entitled to a free and appropriate public education. If a child’s public school district cannot provide an appropriate public education, the district may be required to pay tuition for the child to attend an appropriate private special education school.

Many parents interested in the private school option for their special needs child hire an attorney to bring an administrative hearing or negotiate a settlement with the school district. If a settlement agreement is reached, the private school, although not a party to the agreement, will be listed as the provider of the educational services and will benefit financially from the district paying the tuition.

A private special education school would like to provide parents with access to an attorney to help with the legal process. Towards that end, the school has offered the inquiring attorney a position as in house counsel. The attorney’s role as in house counsel would involve counseling the parents of prospective students with regard to their rights under the IDEA and, when necessary, representing them in proceedings against the School District. The inquiring attorney has inquired about the propriety of such an arrangement.

The inquiring attorney has also inquired about the propriety of an alternative arrangement, under which the attorney would remain with her firm, and through the firm, act as a consultant to the school and assist parents in pursuing their rights under the IDEA.

Finally, in the event that the inquiring attorney could not act as in house counsel for, or a consultant to, the school, she has inquired as to whether she could represent clients referred to her by the school, either on a pro bono basis or for compensation paid by the clients.

Question:
Is it permissible for an attorney to represent the families of prospective students of a private special education school regarding their rights under the Individuals with Disabilities Education Act while serving as in house counselor a paid consultant for that school?

Is it permissible for an attorney to accept referrals from a private special education school to represent the families of prospective students of the school regarding their rights under the Individuals with Disabilities Education Act to have the student’s school district pay the student’s tuition at the referring school?

Analysis:
This inquiry involves several alternative factual scenarios, each of which is discussed below.

Scenario Number 1:

Attorney, as School Employee, Representing Families Seeking Admission to the School:

The first scenario presented by the inquiring attorney involves the attorney, employed by the School as its in-house attorney, representing the families of children seeking admission to the school.

New York Judiciary Law § 495 prohibits corporations and voluntary associations from practicing law, but nonprofit organizations that furnish legal services as an “incidental activity” in furtherance of some other “primary purpose” are excepted from the prohibition. See judiciary Law § 495 (7). Therefore, a not-for-profit school, whether incorporated or unincorporated, that is “organized and operating primarily for a purpose other than the provision of legal services” and that offers legal services “as an incidental activity in furtherance of their primary purpose,” would not be prohibited from furnishing legal services to the families of prospective students. 1

Thus, Judiciary Law § 495 does not, on its face, prohibit the first scenario presented by the inquiring attorney.

The inquiry then turns to the applicable Rules of Professional Conduct, beginning with Rule 5.4 (c), which provides: “Unless authorized by law, a lawyer shall not permit a person who recommends, employs or pays the lawyer to render legal service for another to direct or regulate the lawyer’s professional judgment in rendering such legal services or to cause the lawyer to compromise the lawyer’s duty to maintain the confidential information of the client under Rule 1.6.” The Rule implicitly authorizes an attorney employed by a school to render legal services for the families of prospective students, provided that the school does not “direct or regulate the lawyer’s professional judgment in rendering such legal services or … cause the lawyer to compromise the lawyer’s duty to maintain … confidential information.”

In addition to complying with Rule 5.4(c), the in-house attorney must comply with the additional requirement, found in Rule 1.8(f), that the client (in this case, the family of the prospective student), give “informed consent.” Rule 1.8(f) provides

A lawyer shall not accept compensation for representing a client, or anything of value related to the lawyer’s representation of the client, from one other than the client unless: (1) the client gives informed consent;
(2) there is no interference with the lawyer’s independent professional judgment or with the client-lawyer relationship; and
(3) the client’s confidential information is protected as required by Rule 1.6.

“Informed consent” is defined in Rule 1.0(j) as follows: ”’Informed consent’ denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated information adequate for the person to make an informed decision, and after the lawyer has adequately explained to the person the material risks of the proposed course of conduct and reasonably available alternatives.” In order to obtain the informed consent of the family of the prospective student, the school’s in house attorney would need to disclose, at a minimum, (1) his or her role as an employee of the school, (2) the benefit which the school would receive if the student attended, (3) the attorney’s fiduciary obligations to the school, and (4) the possibility that another school may be a better alternative for the family.

Because there is a risk that the in-house attorney would be inclined to favor the school by which he or she is employed, Rule 1.7 of the Rules of Professional Conduct is implicated. Rule 1.7 provides as follows:

Conflict of Interest: Current Clients.

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if a reasonable lawyer would conclude that either:

(1) the representation will involve the lawyer in representing differing interests; or (2) there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against
another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.

In accordance with Rule 1. 7(b), the informed consent of both the school and the family must be given, and the consent must be confirmed in writing.

The factual scenario presented here is similar to one previously addressed by this Committee. In Nassau County Bar Op. 03-2 (2003), we concluded that an attorney may accept payment of fees from a private school to represent parents and students in a dispute with local school districts over the placement of students in appropriate schools where it is possible that the clients’ interests may require the attorney to advocate for the placement of clients in schools other than the private school paying the attorney’s fees. Although, in the inquiry at hand, the inquiring attorney would be an employee of the school, rather than outside counsel, the analysis is the same.

The primary danger in both the present inquiry and the one addressed in Op. 03-2 is that the best interests of the prospective student and his family may diverge from those of the school. For example, the attorney may realize during the course of the representation that the student might be better served by being placed in a school other that the school that employs the attorney. In that case, the attorney would be in a conflicted position: his or her employer would stand to gain economically by the placement of the student at the school, but it may be in the student’s best interests to be placed in a different school. Despite the conflict, the attorney could, with the school’s consent, continue to represent the interests of the student by seeking to have the school district pay for the student’s tuition at another school. Additionally, as we pointed out in our earlier opinion, if the divergence of interests occurs, the attorney could withdraw from the representation of the family of the prospective student. See Op. 03-2, at 6. However, as we did in our earlier opinion, we decline to adopt a per se rule prohibiting the representation in the first instance because of a potential divergence of interests. See id.

Scenario Number 2:

Attorney, as Independent Consultant to the School, Representing Families Seeking Admission to the School:

The second scenario set forth by the inquiring attorney involves the attorney representing the families of the prospective students while also acting as a paid consultant for the school. Under this scenario, Judiciary Law § 495 is not implicated, nor is Rule 5.4(c), unless the attorney is being paid by the school to represent the family, in which case the same considerations discussed above apply.

Rule 1.7 applies under this scenario. The family must be informed regarding the nature and extent of the consulting relationship between the school and the attorney, and both the school and the family must confirm their informed consent, in writing, in accordance with Rule 1.7(b)(4).

Scenario Number 3:

Attorney, as Private Lawyer, Accepting Referrals, from School, of Families of Prospective Students

The final scenario involves the attorney receiving referrals from the private school, while not employed by the private school either as in-house counselor a consultant.

The analysis with regard to this scenario begins with Rule 7.2 of the Rules of Professional Conduct, which provides that, subject to certain exceptions not applicable here, “a lawyer shall not compensate or give anything of value to a person or organization to recommend or obtain employment by a client.” Assuming that there are no payments or anything of value given to the school for the referrals, there is nothing improper about the referrals.

The attorney should be careful to confirm with the family that the referring school is the best placement for the student. If the referring school is not the best placement for the student, then the attorney should not undertake any efforts to have the student placed there.

Rule 5.4(c) still applies, however. The Rule not only prohibits one who employs the attorney from interfering with the attorney’s professional judgment, it also prohibits one who recommends the attorney from interfering with the attorney’s judgment.

Conclusion:
Inquiring counsel may represent the family of a prospective student in a proceeding to have the student’s school district pay the student’s tuitions at a private school at which the attorney is employed as in-house counsel, provided that (a) the school is not-for-profit and complies with Judiciary Law 495 and 496, (b) the school does not direct or regulate the lawyer’s professional judgment in rendering such legal services or cause the lawyer to compromise the lawyer’s duty to maintain confidential information, and (b) the school and the family give their informed consent, as defined in Rule 1.0(j) of the Rules of Professional Conduct, in writing, to the representation, in accordance with Rule 1.8 of the Rules of Professional Conduct. Before undertaking the representation, inquiring counsel, if employed as the school’s in-house counsel, would need to disclose, at a minimum, (l) his or her role as an employee of the school, (2) the benefit which the school would receive if the student attended, (3) the attorney’s fiduciary obligations to the school, and (4) the possibility that another school may be a better alternative for the family.

Inquiring counsel may also represent the family of a prospective student in a proceeding to have the student’s school district pay the student’s tuitions at a private school while serving as a consultant to that private school, provided that the family is informed regarding the nature and extent of the consulting relationship between the private school and the attorney, and both the school and the family give their informed consent, in writing, in accordance with Rule 1.7(b)(4).

Finally, inquiring counsel may receive referrals of the families of prospective students from the private school, provided that counsel (a) complies with Rule 7.2 of the Rules of Professional Conduct and gives no compensation or anything of value to the school for the referrals and (b) complies with Rule 5.4(c) and does not permit the school to direct or regulate counsel’s professional judgment in rendering such legal services or cause counsel to compromise hislher duty to maintain confidential information

[Approved by the full Committee on May 8, 2013]