“State Bar Ethics Opinion Determines Texas Lawyers Can’t Join a Firm With Non-Lawyer Partners” —

• “Texas-licensed lawyers practicing in Texas cannot join a firm with a non-lawyer partner or owner, even if that arrangement is allowed in that jurisdiction, a State Bar of Texas ethics committee found in a new opinion.”
• “The opinion dealt with the question of whether a Texas lawyer practicing in Texas could join a Washington, D.C., firm partnership that lawfully in that jurisdiction includes a non-lawyer partner. As outlined in the statement of facts in the opinion, the firm would have offices in Texas and Washington, D.C., the Texas lawyer would office in Texas and provide legal services to clients in Texas, and revenue generated by the Texas lawyer would be shared with the firm’s partners.”
• “The opinion from the Professional Ethics Committee for the State Bar of Texas found that Texas’ prohibition against non-lawyer-owned firms applies in that situation.”
• “In Texas, the applicable rule is Texas Disciplinary Rule of Professional Conduct Rule 5.04(b), which provides that ‘[a] lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law.’ According to the ethics opinion, Rule 5.04(d) extends the prohibition against non-lawyer law firm ownership to professional corporations or associations.”
• “In Washington, D.C., it is allowed under District of Columbia Rule of Professional Conduct 5.4(b).”

“Insurer Tried To ‘Embarrass’ Cadwalader, NC Court Told” —

• “Cadwalader Wickersham & Taft LLP has accused a Lloyd’s of London syndicate of attempting to ’embarrass’ the firm by publicly revealing the firm’s data breach recoveries amid the insurer’s bid to toss a coverage suit stemming from a 2022 hack.”
• “On Thursday, in response to a motion to dismiss by Lloyd syndicate Beazley, Cadwalader accused the insurer of breaching its confidentiality obligations to its insured by disclosing policy information publicly, including the amount Cadwalader received from other insurance carriers stemming from the hack.”
• “According to Cadwalader, the public disclosure of such financial information, which the response notes was later published in a Law360 article, establishes claims for bad faith denial of insurance coverage and unfair and deceptive trade practices.”
• “‘An insured should not need to anticipate that its insurer will use confidential information to publicly disparage it when the insured seeks to secure the very coverage it bargained and paid for,’ the firm said Thursday. ‘Suffice to say, the law must hold to account the insurer that treats its insured as Beazley has treated Cadwalader here.'”
• “Cadwalader filed suit against Beazley in July in a North Carolina state court, alleging the company failed to reimburse the law firm for expenses related to a November 2022 data breach.”
• “Beazley subsequently urged the North Carolina Business Court to toss the suit, saying the law firm failed to include three other carriers included on the insurance policy at issue.”
• “During the back-and-forth, Cadwalader sought to seal the complaint to shield details regarding its finances and insurance coverages, while Beazley fought to unseal the filings. In its July motion, Beazley included the amount of Cadwalader’s insurance recoveries under other policies for the data risk event at issue.”
• “‘Beazley trumpeted the confidential information in the opening sentences of its first submission to this court — a submission, moreover, that had nothing to do with the confidential information that Beazley gratuitously and improperly disclosed,’ the firm said. ‘Beazley’s disclosure was an obvious and intentional act of bad faith.'”
• “The firm previously contended that unsealing the information would make it more difficult to negotiate insurance rates in the future and act as an incentive to infiltrate its systems. In an amended complaint, the firm added claims for breach of the confidentiality agreement, bad faith and violation of North Carolina’s Unfair and Deceptive Trade Practices.”

“Accountant-Owned Law Firms Could Blur Ethical Lines” —

• “In a novel move, Big Four accounting firm KPMG LLP has taken the first step in seeking to own and operate a law firm in the U.S.”
• “A far cry from regulating attorneys, enforcing and supervising the practice of law by nonattorneys could prove challenging.”
• “Attorney oversight or, more to the point, the supervision of the practice of law, is of paramount concern not only to control and guide the practice of law, but the governing rules also help foster a sense of trust and transparency between practitioners and the public.”
• “Whether it be an accountant, an attorney, or anyone — or anything — in between, we must collectively ensure that the ethical and procedural rules governing the practice of law apply uniformly and fairly, and with an eye toward the client’s best interests.”
• “Rule 5.4, titled ‘Professional Independence of a Lawyer,’ generally prohibits an attorney or firm from sharing fees with a nonlawyer, and it prohibits an attorney from forming ‘a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.'[2]”
• “The stated goal of the rule is to ‘protect the lawyer’s professional independence of judgment.'[3]”
• “The regulation of educated and trained attorneys is no easy task, but it may ultimately prove less demanding than enforcing those rules against those without that level of legal training and experience.”
• “On the other hand, proponents of the recent reforms disagree with the traditional restrictions of Rule 5.4. In 2020, amid its efforts to abandon Rule 5.4, the Arizona task force responsible for the amendments said in a statement that it was driven by ‘an ethical obligation to assure that legal services are available to the public and that if the rules stand in the way of making those services available, the rules should change.'[6]”
• “According to recent studies, a disproportionate number of Americans cannot effectively engage the legal profession. Reportedly, nearly 80% of the 20 million civil cases filed in state courts each year involve at least one unrepresented party,[7] and more than half of small businesses facing a legal issue cannot engage counsel.[8]”
• “Reportedly, KPMG Law US’ recent application to the Arizona Supreme Court comprised the first overture by an accounting firm to take advantage of these laws. A court committee is considering the application and whether to provide the required licensure.”
• “According to a Reuters article, KPMG said it would lean ‘on [its] network and technology to provide compliance and contract-related services and other outsourced legal work in the United States.'”
• “We can expect considerable debate and potential pushback. Notably, the ABA House of Delegates reaffirmed its commitment to Rule 5.4 and overwhelmingly passed a resolution stating that any modification to the rule, as drafted, is ‘inconsistent with the core values of the legal profession.'”
• “There is room for cooperation and competition among the practice of law and accounting. This overlap is perhaps inevitable, as most business and financial activity triggers legal implications, and vice versa.”
• “The traditional model of tax, audit and advisory services has expanded in most accounting firms to include litigation support services and nearly every aspect of consulting, which historically may have been handled by an attorney. Likewise, attorneys often provide counsel on tax and other accounting issues.”
• “Outside of the U.S., where Rule 5.4 had been a nonissue, accounting firms have greatly expanded their staff to include attorneys poised to address the growing list of available services.”
• “Critically, however, while there is some overlap, the practice of law and accounting are different, particularly with regard to the distinct ideologies that come into play.”
• “Client confidentiality and the attorney-client privilege serve as cornerstones of an attorney’s ethical and professional obligations, as set forth in the model rules.”
• “In contrast, accounting is based on independence and objectivity. When it comes to an audit, for example, the responsibility to the public is the auditor’s primary concern, with an emphasis on supervision and peer review.”
• “Against this backdrop, when considering the potential differences in professional ethics between the two professions, the CPA Journal once pondered the difficulty for an attorney ‘to envision practicing in the diverse environment of the CPA firm while retaining their client-based ethical system.'[12]”
• “If change is imminent, the distinction between the practice of law and accounting may continue to blur. It follows that professionals in either field may find it more difficult to maintain and set client expectations.”