*1 concurrent regarding decisions court’s these sentences. service of
consecutive is there-
Trowbridge’s combined sentence ninety-seven ato total of
fore reduced
years. DICKSON, C.J.,
SHEPARD, JJ., BOEHM,
SULLIVAN, and concur. COMPANY INSURANCE
CINCINNATI
(Intervenor Below), (Defendants Group Insurance
Celina Below),
Suters’ Insurer (Defendants Faber Suters’ L.
Keith Below),
Counsel Betty Suter
Robert Suter and
(Defendants Below),
Appellants, Marcia Wills
David J. WILLS
(Plaintiffs Below), (Defendant Mellinger
Elaine
Below), Appellees.
No. 79S00-9808-CV-458.
Supreme of Indiana. Court
Oct. year murder. sixty-five to his sentence for
concurrent
Judy Woods, L. Indiana, Indianapolis, Joseph T. Bumbleburg, Michael J. Staple- ton, Indiana, Lafayette, Funk, Norman T. Keith A. Kinney, Indiana, Indianapolis, At- torneys for Appellants.
Norman P. Metzger, Legal Services Or- ganization Indiana, Falk, Kenneth J. Union, Indiana Civil Liberties Timothy J. O’Connell, Legal Plan, UAW Services Patton, Jr., also find no inherent conflict such George E. T. Elberger, Ronald Inc., arrangement agree but that conflicts Group, Amer- International American reason, others, Association, among ac- National arise. For that Asso- ican Insurance Insurers, Newton, arrangement curate Scott disclosure ciation of Indiana Inc., Advocates, Floreancig, Finally, hold that the use of required. John A. we Child *3 name, Legal Society, Indianapo- specifically Aid law-firm-like “Berlon Indianapolis Timmel,” to lis, Indiana, Attorneys employee-attor- for Amici Curiae. & describe neys prohibited by Professional Conduct Hurst, Ryden, Todd R. Jon William W. it misleadingly suggests Rule 7.2 because Indiana, Krahulik, Indianapolis, Jeffrey D. they that are outside counsel. Cooke, Indiana, Lafayette, Attorneys A. Background Factual and Procedural Appellees. (the “Wills”) Johnson, David and Marcia Wills Trial D. Defense Coun- James Indiana, injury Indiana, Evansville, personal against asserted claims Leon- sel of Betty Eilbacher, Fenton, Mellinger Elaine Suter.1 Suter P. ard E. James Association, by Group, was insured Celina Insurance Bar Fort Indiana State counsel, Indiana, Miller, its Fa- who selected house Keith H. Wayne, Gregory ber, Association, advised to defend Suter. Suter was Lawyers Indiana Trial America, was although employed Faber Lawyers of Trial Craw- Ass’n Celina, obligations his fordsville, Indiana, paid by ethical were Harvey, F. William Smith, owed to alone. After consultation Shockley, L. In- Suter Maggie C. Steven Counsel, attorney, agreed J. another Suter Stephen Pe- House Insurance representation. ters, Marjorie Winegardner, H. Richard Lawyer-Smith, Indiana Chamber Com- disqualify moved Faber as The Wills merce, Legal Education Founda- Indiana on that his ground counsel Suter’s Inc., tion, Corporate American Counsel representation of Suter resulted Celina’s Services, Inc., Association, Cinergy law. Cincinnati Association, Manufacturers Insur- Indiana Company then moved to inter- Insurance Inc., Indiana, Association ance Institute of vene, claiming interest the Wills’ Ronald Companies, of Life Insurance Gif- disqualify motion to Faber based on Cin- ford, Cierzniak, Farm Mu- Elizabeth State providing Indiana cinnati’s Co., Ins. Indianapolis, tual Automobile through its Berlon & counsel for insureds Indiana, Attorneys for Amici Curiae. Timmel, “captive it which described granted law The trial court Cincin- firm.” PETITION FOR EMERGENCY ON intervene, and subse- nati’s motion to TRANSFER that Berlon & quent record established exclusively by employees is staffed Timmel BOEHM, Justice. represent Cincinna- Cincinnati increasingly with the This case deals itself. ti’s and Cincinnati insureds liti- practice of defense of claims common court concluded that Celina house The trial by company coun- gation insurance practice of in the unauthorized engaged company that an insurance sel. We hold in- of its representation necessarily by providing in the unau- engage does counsel, and that through house employs of law when sureds thorized Rule Faber violated Professional Conduct insureds and house counsel to 5.5(b) assisting the unautho- Celina employees who are of an Accordingly, rized do assist the insur- company trial issued an order June of law court er the unauthorized disqual- motion to granting insureds. We Wills’ they represent when Suter, opinion All references in Betty’s also ceased. Robert husband was Betty Suter. Suter is de- as a defendant. Mr. named ify as he long Faber “so continues appearing before the court. McQueen State, employee agent 229, 231, Celina Insurance 272 Ind. Group participation such that his aids and precisely, N.E.2d More abets the unauthorized of law authority court trial is limited to trial court also addressed Celina.” The disqualification in the case before the “captive firm” issue raised Cin- Disqualification court. of Faber in the suit cinnati’s intervention and concluded by Wills against was within Suter Cincinnati, in to the unauthorized addition jurisdiction in trial court’s this case. engaged deceptive also The trial court’s order was not using the practices by name “Berlon & Suter, limited to representation Faber’s Timmel.” Finally, trial court found however. order also directed Celina attorneys employed by that the Cincinnati and Cincinnati to their representa cease *4 in deceptive were participating practices all tion of other Indiana insureds em aiding and the unauthorized of ployee-attorneys perceived on based viola law. The trial court ordered Celina both the tions of Rules of Professional Conduct. stop “any prac- and Cincinnati to and all sweeping remedy This is available could, tices and activities under the through exercise this Court’s original order, findings be of this considered to jurisdiction over all matters reference constitute the unauthorized of law to the of law. Ind ...,” and found Cincinnati “should VII, 4;§ Art. Ind. Admission and Const. Indianapolis close” its office operated as 24; Discipline Rule Ind. Appellate Rule Berlon & Timmel. 4(A)(3). procedural Available to routes After of Appeals stayed the Court the raise this issue include reference orders, trial but court’s before decision Disciplinary Commission and an the appeal, on petitioned Celina Faber original action in pursuant this Court to transfer to immediate this under Court 24, Admission and Discipline Rule but not 4(A)(9), Appellate Rule and transfer was proceeding Moreover, in a trial court. granted. the trial as to court’s order Faber’s dis I. Jurisdiction the Trial Court qualification is moot because Suter’s inter est in this case has been resolved through A may trial court disqualify Despite jurisdictional settlement. these attorney for a violation of the Rules of defects, the issue is within the original Professional Conduct that from arises Court, jurisdiction of this and is fully de attorney’s representation before the court. veloped by parties and amici curiae. Romero, State v. 578 N.E.2d 676-77 importance many Because issue is of (Ind.1991) (disqualifying prosecutor former members of the Bar their clients and attempted represent a defendant in cases, pending affects number of we substantially a matter prior related ato granted transfer Appellate under Rule prosecution without the State’s consent in 4(A)(9) to resolve the on issue its merits.2 violation of Professional Conduct Rule duty 1.11’s to maintain confidences Ability II. House Counsel’s client). State, his former The trial court’s Represent Policyholders authority necessary has been described as prevent gross “insult and violations of Three distinct presented by issues are decorum,” authority and that is limited to the use house liability counsel defend controversy See, State, 2. There is requirement no case or e.g., ment to do so. Price v. 622 limiting jurisdiction (Ind.1993). However, of this Court as Arti- N.E.2d 958 this cle III of the U.S. Constitution invalidating restricts case does not involve an action of Nevertheless, jurisdiction of federal courts. government another branch of or otherwise many circumstances challenging this Court has re- co-equal action of branch. addressing frained issues that indisput Rather addresses that are issues by procedural mooted sues, or other is- ably power threshold within the judiciary require- even if there specifically constitutional power within the of this Court. First, through variety have reached that result some against policyholders. claims issue, the trial as Two have paths.5 disapproved have seen states courts here, of house as whether use focusing court did arrangement, po one prac- the unauthorized counsel constitutes the in tential conflict interest between See, employer-insurer. tice of surer and the insured and second on a Bar, North Carolina State e.g., Gardner statutory against bar S.E.2d 517 Sec- N.C. American Ass’n v. corporation. Ins. ond, problem courts have viewed Ass’n, Bar Kentucky (Ky. 917 S.W.2d there is an inherent turning on whether 1996); Gardner, 341 S.E.2d it is representation such that conflict below, For the stated we now reasons the Rules of Professional a violation of hold, majority consistent with the state proceed. house Conduct issue, courts that have addressed the See, Governing Con- e.g., re Rules (1) companies necessarily insurance do not (Fla.1969). Attorneys, duct 220 So.2d engage in the unauthorized of law Finally, arrangement even if such an when house counsel their in- and Dis- with the Admission be consistent litigation sureds claims attor- Rules, of Professional the Rules cipline statutes, neys employees who are there any applicable Conduct necessarily trigger companies do not repre- whether the question remains *5 of impermissible conflict in violation into in the properly was entered sentation they Rules when case. of Professional Conduct specific claims appear counsel defend company may an insurance Whether against companies’ policyholders. rep- salaried properly employ has litigation claims resent insureds through by ten states
been addressed
A. Disclosure
the American Bar
decisions
court
As a
we address the
preliminary matter
jurisdictions
ten
Association3 and
representa-
that Faber’s
Wills’ contention
ten state
opinions.4 Eight
ethics
improper
because Suter
tion
Suter was
con-
federal circuit have
courts
one
given
not
notice that
could
was
Celina
permissible for an attor-
cluded that it is
appoint
represent
house counsel
her
company
an insurance
ney employed
insureds,
attorney.
Suter’s
but
rather than
outside
company’s
Comm,
Responsi-
prohibiting
practice);
Petition
duct
3. ABA
on Ethics' and Prof'l
(1950).
(Tenn.1995).
bility,
Op.
Youngblood,
282
322
Formal
895 S.W.2d
permissible
Some find the
because
RO-81-533;
Op.
Arizona
4. Alabama Ethics
alignment
insured’s interests
between the
(1975);
Standing
Conduct,
Op.
Ethics
75-4
California
company’s
and the insurance
interests. Kit
Comm,
Responsibility
on
1
Prof
Allstate,
335,
tay
Ill.App.3d
v.
33 Ill.Dec.
78
No.1987-91;
Ass’n,
Op.
Bar
Formal
Colorado
867,
200,
(1979) (corporation
N.E.2d
202
397
(1993);
Op.
Illinois State
Formal Ethics
91
may
its
employ
"in and about
own
Ass'n, Advisory Opinion
Con-
on Prof'l
Bar
affairs”);
Casualty
Strother v. Ohio
immediate
duct,
(1990); Michigan
Op.
Ethics
No. 89-17
Company,
Opinions
14
139
Insurance
Ohio
(1986);
Op.
Jersey Supreme
CI-1146
New
opinion by
Ap
without
Court
aff'd
Comm,
Practice, Op.
Court
on Unauthorized
rely
peals. Others
on a combination of the
Ass’n,
23, (1984);
Bar
No.
New York State
Guiliani,
reasoning.
King
above
See
v.
1993
(1969);
Op.
Texas
Prof’l Ethics Comm.
109
(Conn.Super.1993); Coscia v.
WL 284462
Bar,
(1958);
Op.
Virginia State
Ethics
167
Cunningham,
880
Ga.
299 S.E.2d
250
Op.
Legal Ethics
No. 598
Co.,
(1983);
722 S.W.2d
In Re Allstate Ins.
1987)
(Mo.
(en banc).
Joplin v.
See also
947
employment
5. Several decisions hold that the
Co.,
Denver-Chicago Trucking
F.2d
329
396
relationship
company
between
insurance
(8th Cir.1964);
Ass’n v.
United Services Auto.
attorney
per
se violation of
and the
Zeller,
(Tx.Civ.App.1939);
From general propositions these in con- authorized of law. This section cert agency principles conventional professional corporations authorizes to be Prior to the 1961 American Bar Associa- profession very of their common opinion approving tion cor- and are not to be condemned.” S. Henry form, poration "[t]he traditional stance Legal Ethics 203-04 Drinker, organized incorporate was that to bar a law *8 practice treat was to as a busi- Discipline 11. The Admission and Rules antici- profession, ness rather a than and thus is was pate only that persons natural bewill admit- prohibited.” Charles W. Wolfram, Modern the ted to Bar to law. Rule 13 re- Legal (1986). § 16.2.4 formation Ethics quires applicants graduate to from an ABA partnerships of a did not "treat law as approved complete law school and two cu- apparently business” because law firms legal mulative semester were hours ethics or practition- viewed as collections of sole early § ers. quar- professional Id. 16.2.1. As responsibility; requires as the first Rule 17 century began ter of the nineteenth applicants pass to a Bar examination and the practicing partnerships although in law- most Responsibility Multistate Professional Exami- yers practiced as individuals. nation; James Willard requires and Rule 12 that the Board Law Hurst, The Growth American certify Supreme of Law Examiners (1950). By partnerships well ac- were applicant Court that the has been found to cepted organized by the bar and the American possess necessary good the moral character adopted Bar Association Cannon 33 which and fitness. "[partnerships among stated lawyers for the etc., including supervision, obligations, professional to services. render formed to in legal entity apply a that other forms of for provides it Specifically, practice. proper- “to services that is no that dispute render There that is authorized only by an attor- ly employee-attorneys admitted may legally performed be 23-1.5-2-3(3) representing employer in their and as ney.” Ind.Code to assume that provision subject This seems such are Rules of Profes- by- “rendering Moreover, corporation, as elaborated professional sional Conduct.12 law, just be practicing II.C., will itself services” in Part it is not uncommon for 5.4(b) a as partnership Rule describes as corpo- house counsel to both the is unau- officers, not practicing law. and directors or ration its thorized, professional cor- however. The employees potential in matters where goes provide statute poration preclude not common for conflict does may corporation render professional There, “[a] as insurer representation.13 through individ- services professional case, attorney’s in this situation found services permitted to render such uals run to both clients. Both situ- obligations § 23-1.5-2-5. This statute Indiana.” Id. present possibility conflict ations conclusion that entities reinforces the the interests of the two clients. between legal if the ac- lawfully “render” many cases the Despite possibility, by a licensed attor- are conducted tivities any significant matter is resolved without corpo- It ney. professional also authorizes interests, and in- divergence of those general rations conduct economy simplicity clearly terests however, agree, law. We do not justify practice. of a impliedly prohibits employees an insurance com- corporation or Notwithstanding continuing Rather, it sim- law. pany practicing ban, “practicing indeed criminalization of them, leaves where it found sub- ply them any attorney, “person” law” of other rules but ject the confinements Conduct, statutes of Professional Rules inherently incapable clearly and well forms of accepted entity itself is not unlawful explicitly recog- imply Rules that the Finally, the also long activity law as as ly practicing have house corporations nize that attorneys.14 It through firm” conducted licensed The definition of “law counsel. entity legal course true that can is of “lawyers employed includes actions corporation responsible for department of a other or- agents under preamble. employees R. partners, Prof. ganization.” Cond. superior, respondeat standard doctrines applies 1.13 by Rule its terms engaged as that sense viewed retained” “employed or result, activity. But that does not mean As a em- organization. or other unlawfully practices law more subject entity same are ployee-attorneys Mittower, demnify employee. The interests of Contempt Matter insured, two, contempt Court a disbarred held like those of insurer acting “general for an estate counsel” complication aligned and of mul- the cost (Ind. planning N.E.2d business. 693 unnecessary. tiple attorneys is 1998) (“The practice of law includes ... formalities, negotiations, proceedings” on registration of provision 14.Indiana has others.); supra, see also behalf of Wolfram, lawyers under restricted licenses. house Cf. *9 (house fully subject § are 13.7.3 counsel (permitting § 4 an e.g., Ohio Gov. Bar R. VI powers which disciplinary the of the state in practice of in attorney admitted practice). they “corporate register sta- another state to under solely legal perform in Ohio tus” and against typical a A such situation is claim 13. long nongovernmental employer as as a employee organization and the both the employee that attorney a full-time of is organiza- the the dispute no that where there is financially employer). obligated and able to in- tion is unlawfully air- renders the Express pilots representation than unauthorized Federal the Rather the of makes it planes. or somehow the of law many of activi- piloting airplanes attorney. other than the by someone other Giv- performed by be li- required to attorney’s ties are en that the representation of And, general lawful, as a professionals. censed insurer-employer repre- is li- requires the law proposition, where policyholder sentation of a whose interests cense, permits unli- agency doctrine essentially aligned are with the insurer’s licensed legal entity employ censed inherently not result in does unauthorized perform those acts agents requiring practice by either the insurer the attor- or Agency (second) license. Nor, view, in Restatement of ney. our is this tantamount § each d In case the law- 19 cmt. offering legal services to entity’s of the activities turns fulness public. undoubtedly perceived Suter her- properly is licensed. whether individual buying coverage only self as incidentally acquiring prospect Regardless partner of whether a Indeed, if services. outside counsel were corporation, ship, an insur claim, employed to her defend Celina company, any legal entity ance or other offering would have been her the same practicing be said to be law in some package point services from her view. sense, proper believe of the we focus sum, H.C., practice inquiry is whether in explained unauthorized as Part there challenged in “un activity many why results other reasons em- by the inv authorized” individuals ployee-attorney may concurrently not rep- syllo turning olved.15 Rather than on a both employer resent and someone gism else, of propositions based on a series attorney’s but the as an status em- general validity, the unauthorized dubious ployee an insurance or company issue boils down whether non- is in entity other and of itself no bar. lawyer performing requiring is tasks conclude not We that Celina does neces- lawyer, or a in this admitted sarily engage in the unauthorized practicing State is in Indiana. See Geof employed attorney of law when repre- fRey Hazard, Hodes, W. C. Jr. WilliaM Accordingly, sents its insureds. Faber & Lawyering: A on the Law Handboox in does assist Celina Model Rules of PROFESSIONALConduct when he in- represents (1985 (“Most of the Supp.1998) 5.5:102 & sureds. Our conclusion is the same with law on unauthorized has been de respect employed to Cincinnati and its at- in veloped prosecu the courts criminal torneys on the issue of the unauthorized injunction proceedings against tions and practice of law. a li
[nonlawyers] practicing without attempting Representation cense and civil cases to hold C. is not Inherent- such persons malpractice ly liable for where Problematic out they lawyers.”). held themselves There plainly many are situations where dispute attorney- There is no that representation of both an insured and the employee represents organization insurer inconsistent with the Rules of However, employs attorney Professional Conduct. the issue dispute law. There is potential also this case is whether these con- can repre- are so properly representation case flicts inherent employer sent his connection with the it is a violation Rules Profes- Wills’ claim. The issue is arrange- whether the sional Conduct to enter into the representation place. concurrent of the insured ment think not. first We states, Discipline they employees, As Admission and Rule 1 which owners ''attorneys” Bar this state consists of they relationship. which have some admitted, duly who are not the entities *10 as Company Co- contract subordinated interests as 1. The Insurance Presumably, Client client to those of Suter. this by agreement the priority resolves matter, there is extensive a related As if, obligations example, counsel’s coun- in the literature as to whom the debate sel learns of information affects the in this situation.16 attorney represents the policyholder’s insurer’s and interests attorney is an Specifically, whether differently. lawyer, or an outside debate employee insured on whether or
focuses 2. Rules Specific Con- and the insurer should be both insured Professional it duct as the client. We think unrealis- viewed relationship ignore the client with tic to Rules of Professional Conduct may become representation both. Joint prohibit representing from particularly if problematic, issues disclo- representation client if the of that client example arise. For sure of confidences may materially lawyer’s be limited attorney may gain information from to a responsibilities another client or affect the policyholder-client 1.7(b). Prof. R. In person. third Cond. coverage obligation. But insurer-client’s addition, professional independence prohibiting no the ar- is basis for lawyer not so as the impaired long in all cases. issues rangement Whatever lawyer person “permit does
joint be representation appear raises recommends, employs, pays or attorney’s of the wholly independent status to render another employee of the insurer or a member lawyer’s professional or regulate direct Second, is nothing of a law firm. there 5.4(c). judgment.” Prof. Cond. R. inherently wrong representa- common other than the client “Where someone parties of two where their interests tion pays lawyer’s salary, recom fee Professional Rule aligned. Conduct lawyer, mends of the that ar employment representa- provides “[w]hen 1.7 direction modify lawyer’s rangement does not in a matter multiple single tion of clients ” obligation to the Prof. R. client.” Cond. In this the in- respect, undertaken.... 5.4 cmt. present qualitatively sured and insurer pair from Faber violated any different situation contend that Wills 1.8(f) (no commonly represented clients. Rules each of these as well as who interfere compensation those arises, it have to If a conflict will be 7.3(f) lawyer’s independence); with the handled, variety are a of means there (lawyer compensate those who shall that. a vast of claims to do But number 5.4(a) (no employment); shar- recommend will presumably have been and be handled nonlawyer); fees significant issue between in- with no 5.4(d)(2) (d)(3) (no in an asso- Interests of policyholder. surer if professional corporation ciation or a economy and dictate that this be simplicity interest). Ail holds of these nonlawyer can Any to continue. abuses permitted inappro- inherent contentions relate to the case-by-case handled basis rather The trial priateness arrangement. of the by adoption prohibition of the broad than court’s detailed discussions order includes Although the Wills seek. issues arise they claims and evidence apparent representation, in dual none are Wills’ event, support has offered to those claims.17 None case. Celina Moore, See, e.g., Stephen Pepper, Applying De- L. The Ethical Duties Insurance 16. Lawyers: Special Re- Are Solutions Lawyers’ Ethics to Insurance Fundamentals fense 4 Conn. Ins. L.J. n. quired?, Practice, (1997); 4 Conn. Ins. L.J. 27 Defense articles). (collecting additional Silver, Charles Does Insurance Coun- Defense Insured?, Represent Company sel or the Rules court found no violation of The trial (1994); Nancy J. L.Rev. see also Tex. 1.7(b) 7.3(f). that was "un- It stated *11 162 specific Faber’s
the evidence was to rela- the Code in all cases will be measured itself, tionship against to Rather it focused on Celina. Code than rather some house counsel general issue of as coun- variation of the practice, ‘outside counsel’ which, policyholders. Specifically, sel upon as the depending the circumstances noted, “presented situation, particular may trial court Wills not con- nothing beyond allegation mere that form requirements Celi- to the Code.” regulates na or Mr. Faber’s profes- 322, directs Petition Youngblood, 895 S.W.2d judgment upon (Tenn.1995); the employ- sional based 328 see also In Re Allstate Co., relationship.” 947, (Mo.1987)(en ment The trial court found Ins. 722 S.W.2d 953 banc) (“There employment by that Faber’s Celina did is no basis for a conclusion inherently prac- employed lawyers result unethical less regard have tice conflict of interest. or for the Rules of Professional than Conduct do.”) private practitioners In rejecting Curiae, Trial Amicus Defense Coun- proposed prohibiting conduct rule house Indiana, argued sel of before this Court insured, counsel from representing the Su- are that house counsel less aware of the preme Court of Florida found no basis for Rules of Professional and the Conduct dis- distinguishing between house counsel and cipline matters decided this Court than outside counsel. It observed that all attor- attorneys who in traditional firms. neys engaged represent to pursu- insureds They point support to no evidence in ant to an insurance contract face the same assumption adopt this and we decline to it. ethical decision: attorney, an whether All members of the Bar their accept obli- counsel, house counsel or outside “is em- gations to their clients and the Court un- ployed represent two clients.” In Re der Discipline Admission Rules Rules Governing Conduct Attorneys, and the Rules of Professional Conduct. 220 at 7. So.2d The court concluded that majority The vast owes “undivided loyalty discharge obligations them without com- serve, client whom purports he not to plaint over an entire As career. the third party compensa- source his remainder, state, others, this like all has in tion.” Id. at Supreme 8. The Court of place disciplinary procedures protect Georgia observed that “both [attorneys In public. Groninger Fletcher employed compensated on case Trust, rejected plaintiffs we claims case basis] and staff counsel owe duties to regular attorney “one is the for a represent therefore both the insurer loyal company trust will be more to his and the insured.” v. Cunningham, Coscia than employer to the trust for which he is ” 521, (1983). 880, Ga. 299 S.E.2d rendering legal services.... 220 Ind. N.E.2d Over It course true that conflicts half a we century agree later still with the arise in the representation course of of an “[tjhere trial court’s conclusion that insured house counsel. The same is nothing suggest who are true if the insurer pays for a law firm to house counsel corporations for insurance represent its insured. In either case ignorant expectations or numb to the there be a conflict based on coverage of the Rules of Professional Conduct.” disputes, the risk aof claim in excess of respect join limits, we policy several states acquisition of information that reject the contention that house coun- from the insured that bears coverage, representation sel presents variety insureds or a of other If items. such a inherent conflict in violation of the Rules situation arises retention of new counsel of Professional “Compliance Conduct. policyholder may be ei-
willing to
per
5.4(a)
find a
se violation” based on
claim that Faber violated Rule
was
1.8(0
employment
Faber's
status
Rules
"without merit”
did not address Rule
5.4(c).
5.4(d)(2)
(d)(3).
It further stated
that Wills'
by an
cor-
necessary.
po-
employed
But this
preferred
ther
*12
any
the
require
poration
not
abandonment
is
violation of
of the Rules
tential does
in-
of
business that the
doing
solely
employment
of a mode
based
that
relation-
effective,
and cost
finds efficient
surer
full
ship.
range
disciplinary
sanc-
knowingly
Pre-
accepts.
the insured
and
and civil
are
to
tions
remedies
available
ultimately
marketplaces
the
sumably
hopefully
isolated instances of
deal
charges will sort
premium
and
ideas
attorney
This is
whether
trouble.
true
the
a
claimed
balance between
out and strike
a
employee
company,
is an
of an insurance
desirability
advantages
perceived
cost
partner
significantly dependent
in a firm
counsel.
find
wholly independent
We
insurer’s
or a
rela-
on the
in our
of Professional Con-
nothing
Rules
free of
tively
pressure.
direct economic
from continu-
prevent
parties
to
the
duct
sum,
In
we hold that an insurance com-
mar-
duke this issue out
those
ing not
in the unauthorized
pany
engage
does
the
without
interference from
ketplaces
employs attorneys
of law
it
when
per-
If
are
judiciary.
and when abuses
attorneys
and that
represent
insureds
they
seek the
by policyholders
may
ceived
may
employed
companies
insurance
the courts or the insurance commis-
aid of
under
insureds
circumstances
not,
Dick-
point is
as Justice
sioner. Our
ethi-
permitted by
and to
extent
their
concludes,
wrongs
that
two
make
son
obligations
the Admission
cal
defined
it is
at 183. Rather
right.
N.E.2d
and the Rules of Pro-
Discipline
Rules
for conflict is inherent
potential
that the
not,
This
does
holding
fessional Conduct.
regard-
relationship
insurer-insured
suggests,
Dickson
turn on
as Justice
is' house
less of whether
is
employer
that
an insurance
fact
counsel, and the em-
counsel or outside
commonality
it
on the
company;
depends
not
relationship
qualitatively
is
ployment
jointly represented
of interests of the
respect.
in this
different
III. The Use of “Berlon & Timmel” “not adequate negate the deceptiveness resulting from the independence indicated
The trial court found that the use by name, the firm the description of the on the name Berlon & Timmel by Cincinna door, office and the attorneys phone ti’s was book deceptive listing.” violation of Professional Conduct Rule 7.2 The court because also found that the disclaimer implied “that name independence.” That “susceptible was interpretation that provides: Rule lawyer shall not prac “[a] [Cincinnati] was not Berlon & Timmel’s tice under a misleading name that is as to only employer” because it stated that the identity, responsibility, or status of “Berlon & Timmel is ... employed by The thereunder, those or is other Cincinnati Insurance Company for ex- ” false, fraudulent, wise misleading, decep clusive purpose .... not that “Berlon & tive. ...” Timmel is ... exclusively employed by attorneys who work at Berlon & The Cincinnati Insurance Company....” Timmel employed by are Cincinnati and Although similar disclosure language only handle matters for Cincinnati or its may be sufficient permit practition- sole policyholders. No one contends that the ers who space share office adopt a name attorneys perform legal services for the that may firm,18 appear as a law it is not general public. All Berlon & Timmel sufficient in this case. The use of a firm- clients are informed that the by like name a “captive firm” differs from employed by Cincinnati at the beginning practitioners sole sharing the representation. expenses in Berlon two & Timmel’s respects. First, letterhead it following includes the language imply read to printed along a separate bottom of the page: legal entity but also an “Berlon & Timmel is an unincorporated independent status that enjoyed is not association, not a partnership, of individual employees. insurer’s greater There is licensed attorneys employed by The Cin- danger for the public to be misled in per- cinnati Insurance Company for the exclu- mitting an company pass off purpose sive representing the Cincinnati department as an independent Insurance Companies their policyhold- entity. Second, there is at least some ers.” practical sense permitting groups of fi- agree nancially
We independent with the trial court that the to benefit use of the name from the implies Berlon & Timmel economies of a shared name such independence and ordinary person that the as the sign convenience of one on shared would assume “Berlon & Timmel” to be offices or the savings cost of one advertise- Comm, 18. See Standing (each California on Prof'l affirmatively must discloses that Conduct, Responsibility is, fact, Op. 1986-90 he or she practitioner). a sole company. the insurance We also no rationale provides ment. Cincinnati designation & Timmel” as hold that use of a name as “Ber- using “Berlon such Perhaps the name counsel. for its house employed by lon & Timmel” reflection. without much adopted was company an insurance violates Profession- event, up come with a it is difficult to al Rule 7.2. The Conduct order designation and we reason for this proper trial court vacated. to create the improper conclude least partially of a firm at perception SHEPARD, C.J., and SULLIVAN of Cincinnati. independent SELBY, JJ., concur. agree these we with the For reasons DICKSON, J., with opinion. dissents of Tennessee the use Supreme Court permissi captive law firm names is J., DICKSON, dissenting under the Rules of Professional Con ble The privilege law in Indiana rep “[t]he court duct. That reasoned *14 persons extends to natural who satis- attorney-employee that the resentation fy certain and qualifications. Corporations from em separate independent organizational entities is, false, pro- other are thus least, misleading at ployer fraudulent, majority hibited law. depend practicing It deceptive. may be today under which the prohibition, specifical- on the circumstances redefines this made.” Petition representation companies ly exempting insurance from its of (Tenn. 322, Youngblood, 895 331 S.W.2d application holding insurance Ohio, 1995); Supreme also Court of see companies necessarily engage in the do of and Dis Board Comm’rs Grievances unauthorized of law when house (1995) (attorneys em Op. 95-14 cipline, liability counsel insureds represent ’ company may an insurance ployed further litigation. majority claims outside themselves to be counsel representation provided holds that the counsel). they when are house From companies house to both insurance counsel us, that Berlon & appears record before inherently and their insureds is not so aggregate identifies as an of Timmel itself so inher- problematic and interests not the first contact employee-attorneys ently conflict-laden as to violate the Rules so, If policyholder. with the fraud I dis- strongly of Conduct. Professional inappropriate here. conclusion well be agree holdings. of these both Although agree that the use of we Court has exclu- Supreme The Indiana improper, a law-firm-like name is the trial jurisdiction involving in matters sive finding should close court’s that Cincinnati discipline attorneys. admission and of Ind. Indianapolis too broad. It is office was Const, Fletcher, VII, 4;§ Matter art. prac the Indiana sufficient Kesler, 58, (Ind.1995); re 655 N.E.2d 59 In Berlon & Timmel ticing under name 161, 163, 574, Ind. 575 272 397 N.E.2d take immediate action to discontinue use of (1979). jurisdic- original has This Court sug other Berlon & Timmel or name unautho- relating tion in matters than Cincinnati legal entity gesting Const, VII, art. rized Ind. employees their to describe Mittower, 4; Contempt 693 Matter Cincinnati. Fletcher, (Ind.1998); 555, 655 N.E.2d 558 responsibili- hold these N.E.2d at 59. We Conclusion bar, for the ties not the sake of but attorneys employed by We hold Id. at 60. public. sake of the companies may represent in- explained that “[t]he This Court has under and to the ex- sureds circumstances per- of law is restricted to natural permitted by obligations tent their ethical upon sons who have been licensed that their does not neces- employment compe- character and sarily constitute basis established 166 protection public against service,
tence as a public of a constantly curbs the skill, urge of that knowledge, integrity, lack of fi instinct. Co., delity.” Groninger Fletcher Trust Pound, Dean Roscoe Address Before the 207, 202, 140,
220 41 N.E.2d 141 Ind. (Oct. 20, Nebraska State Bar Association (1942). Adjusters, 1949), See also quoted in Edwin M. OtteRboüRG, A Professional Study op Tandon, (Ind. 779, 433 Inc. v. N.E.2d 783 of Law 2 UNAUTHORIZEDPractice (1951). 1982). The license to law “is a privilege rather than natural or vested It province is the of this Court to deter Holovachka, 483, In right.” re 245 Ind. mine what the practice of law is and what (1964) 510, 381, N.E.2d 394 (citing 198 acts constitute the of law. Mit Harrison, 665, 667, tower, re 231 Ind. 109 N.E.2d 558; 693 N.E.2d at Matter Per (1958)). 722, Thus, rello, Judge 390, 398, as Chief 174, Ind. 386 N.E.2d “ wrote, Benjamin ‘Membership Cardozo We have indicated: privilege is a bar burdened with The core element law is the ” People giving' conditions.’ ex rel. Karlin v. Cul advice to a client and the kin, 465, 470, 487, placing of very 248 N.Y. 162 N.E. oneself sensitive Rouss, relationship wherein the confidence (quoting In re 221 N.Y. client, (1917)). management and the of his 116 N.E. We have affairs, is left totally the hands of the long noted the conditional nature of this attorney. The undertaking to minister privilege: problems of another creates *15 privilege contingent The upon the an attorney-client relationship without faithful performance of the duties im- regard to whether the services are actu- posed attorney upon by the society ally performed by the one so undertak- grants which him the privilege. The ing the responsibility or are delegated or first and continuing requirement of an subcontracted to another.... [M]erely good is that he be of moral entering into such relationship consti- Being good character. of moral charac- practice tutes the of law. necessarily ter implies he will con- Id. The Court explained: also form to the moral pro- standards of his do recognize [W]e a division of the (1) (2) law, provided by fession as by his practice of law practice into a side and a oath of by office and the code of business side. To manage any profes- legal ethics of the profession. sion, there are incidental business ele- Keisker, 617, 620, Baker et al. v. 236 Ind. ments that are a part of the pro- total (1957) (internal 432, 142 N.E.2d 434 cita- cess. The of performing these business omitted). tion Dean Roscoe Pound re- processes part are a of process the total flected a similar sentiment: certainly separated cannot be [W]hat we mean profession term isolated from the total transaction. The when speak we of the recognized old conducting of the management (medicine, professions ministry). of a practice, in conjunction with We mean an organized calling in which that practice, practice constitutes the of pursue men a learned art and are united in the pursuit of it as a public serviee-as Id. We have person observed that “a said, I have a public less service gives legal advice to clients and transacts they because make livelihood business for them in matters connected Here, thereby. from the professional settlement, with the law in the adjustment, standpoint there are three essential and compromise of claims is in engaged ideas-organization, learning, and a spirit Peden, of law.” Fink v. 214 of public service. gaining of a 584, liveli- 593, 17 95, Ind. N.E.2d 99 See professional hood is not a consideration. Gould, also State ex rel. Pearson v. 437 Indeed, (Ind.1982). spirit, spirit “Thus, N.E.2d 42 prac-
167
place
giving
ed and authorized to act
defined
or
tice of law is not
one
agent,
acting
in
stead of another. An
or
acting
representative
or
advice
another.”
on behalf of
had
extended
also
been
capacity. —it
Black’s
Law DICTIO-
(6th ed.1990) (citation omitted).
NARY 128
man-
conducting the business
this Court to
Matter
practice.”
a law
agement of
A. Violation
the Unauthorized
(Ind.1998)
Thonert,
N.E.2d
Practice of Law Statute
curiam).1
(per
majority
holds that an insurance
concept
“the
Basic to
engage
company
necessarily
does
“attorney”
term
law” and to the
the unauthorized
of law when
person acting
agent
as an
element of one
represents
house counsel
insureds
liabil-
is,
another,
as a
or
and,
substitute
litigation.
claims
I
ity
disagree
like
regard to
mat
representative
court,
am
the trial
convinced that an insur-
Nardi v.
does,
fact,
out of
ters
in or
court.2
company
engage
whether
ance
.Ind.1931)
Poinsatte,
(N.D
when
46 F.2d
of law
its
(“The
represents
counsel
sense
house
its insureds.
‘attorney’
its broadest
word
or
agent.”).
means a substitute
an
Statutory
1.
Law
Proscribes
Unau-
Law
“attorney,”
the term
Black’s
defining
thorized
Law
Practice of
Dictionary acknowledges
“[i]n
general
Anglo-American
long
most
sense this term denotes
has a
history,
substitute,
more
appoint-
dating
or one who is
back
than seven hundred
agent or
following
represented
attorney,
provided
has also
for individuals
con
This Court
Mittower,
law);
of the
law:
stitutes the
definition
(acting
plan
of estate
N.E.2d
on behalf
term,
meaning
‘practice
"The
law);
ning
service constitutes
Tan
law,'
'practice
law’
is of common
don,
(negotiating
It B misdemeanor per- is Class for a criminalizes conduct natural and out a son to hold himself persons subject who are not to this Court’s lawyer, to conduct the trial of a ease in authority under rules and state, any court of this or to engage thereby protects public from the prac- a practicing lawyer, the business of with- tice of law individuals and entities not having duly out first been admitted as qualified attorney-at-law by supreme court The majority departs from statutory of this state. proscription prohibiting the practice of law (1998). § 33-1-5-1 Another Ind.Code by legal entities not admitted as attorneys provides: statute “The of law by a Instead, at law. it creates and announces person who is not an attorney prohibited judicial a new exemption, henceforth per- § under IC 33-1-5.” Ind.Code 33-21-2-1 mitting “an legal entity unlicensed to em- corporation. “Person” includes a ploy agents perform licensed those acts (1998) § 35^41-1-22 (defining Ind.Code (citation requiring a Op. license.” at 160 “person”); 35-41-1-3 Ind.Code omitted). The then majority recognizes (applying definition to all statutes relating that “[i]n each case the lawfulness of the offenses). penal entity’s activities turns on in- whether the The Indiana Rules of Professional Con- dividual properly Op. licensed.” at 160. apply only persons duct to those who are majority continues: admitted to the bar in Indiana. Rule 5.5 Regardless of whether a partnership, relates to the unauthorized of law a professional corporation, an insurance “(a) prohibits lawyers prac- company, legal entity tie[ing] jurisdiction in a where doing so *17 be said to be practicing law in some regulation
violates the legal profes- of the sense, we proper believe the focus of the (b) jurisdiction; sion of that or assisting] a practice unauthorized inquiry is whether person who is not a member of the in bar challenged activity results in the performance of activity that constitutes practice “unauthorized” by the individu- practice Thus, unauthorized of law.”3 als involved. 5.5(b), Rule in regulating conduct, attorney (footnote omitted). Op. at 160 prohibits attorneys assisting from a per- son, which would include corporations and The majority thus reshapes the law re- organizational entities, other in the perfor- garding law, practice unauthorized of mance of activities that constitute the un- even referring to it as the “unlicensed practice authorized of law. law,” practice Op. at and limits
Thus, important an distinction exists be- practice unauthorized of law inquiry to the application tween the professional of the qualification activity and of the individuals application rules and the statute (impliedly persons) involved, natural 3. 5.5(b) The trial court found that Celina's house Conduct representing when Celina's in- counsel violated Indiana Rule of Professional sureds. practice The unauthorized law attorney prac- quences. a disbarred as when such (1) tices, practices, or person an unlicensed statute is violated when either unli- without a practices engages practice out-of-state censed individual new un- (2) This proper approval. law, or license or person entity, through or function of the derstanding obliterates lawyers non-lawyers, engages its use of or conduct both criminalizing statute in the of law.5 Under this inter- practice who are not legal persons and natural may be taken pretation, recourse under authority under the subject to this Court’s this Court’s Rules of Professional Conduct majority’s rules. Under professional against attorneys practice who improperly only limited and indirect re- interpretation, law, and recourse be taken under the general busi- against available course4 is practice of law statute unauthorized corporations organizational and other ness legal, real against persons, both and who attorneys employ licensed entities engage unauthorized law. I am con- public. them out hold in- This second means of recourse would intended a legislature vinced that corporations clude other entities that statute than the application of the broader hold employ them out I believe majority’s interpretation allows. I public providing legal as services.6 be- presently proscribes entities the statute Celina, through lieve that its use of a undertaking such activities. from attorney-employee, engaged licensed law, unau- statutory Under Indiana practice of law in violation of unauthorized when a practice of law occurs thorized statutory Indiana law. (whether not au- legal) natural or person law Indiana holds thorized to Practice Law Corporate 2. The himself, herself, practic- out itself long-settled Anglo-American Under court, trial lawyer, conducts a corporations organizational enti- practicing in the of a engages prohibited ties have been represents another lawyer, or otherwise governed having law.7 This black-letter has in a matter eonse- person against majority prohibiting at identifying or- 6. The seems favor recourse available entities, by corporations, least activities ganizational majority refers to the some these but, statute, the disciplinary against under its construction of the possibility of action indi- ability do majority undermines its that. rules vidual under the statutory prosecution, and the law, under Indiana Attorneys persons engage Law at 7. See 7 Am.Jur.2d at of unlicensed (“With (1997) exceptions, accomplices certain limited law and their perform legal employing majority corporation Under the those them. others, through indirectly opinion, appears there would little against perform organizational employment ser- or no direct recourse omitted); others.”) (footnotes attorneys in an vices for entities who use licensed un- Corporations § 201-02 way. authorized C.J.S. ("Generally, a cannot else, 5. One author has stated: law, and, anyone prohibited from like engaging in Unauthorized law can occur in *18 perform Accordingly, corporation a cannot ways. person is admitted to two A who not others, legal employ practition- jurisdiction may legal for a render the bar of practic- carry of jurisdiction. Alternatively, ers law to on of services in it, through entity ing if it acts licensed person to even that is authorized law of the may attorneys who are themselves members practice law a licensed and hire Gelber, omitted); bar.”) (footnotes David to In offer his or her services another. Note, situation, repre- Attorney Prac- is the client at least Client—Unauthorized second 289, Law, counsel, 13 289- by neverthe- tice o sented but restrictions Lawyer Dame Notre f (1938) (“The general rule that a presumed threat 90 & n. 1 apply less because of a of corporation practice seems cannot to lay rela- interference with today.... well United States tionship. settled prohibition original common Regulation Stephen Lawyers: Gillers, of Prob- ed.1992). (3d corporation in recent practice law a has of of lems Law Ethics Indiana, presumably of law in practice quate special qualifications as to learn- the law to good since the state was founded.8 Just over be of moral character.... A dual imposed trust is years ago, eleven Chief Justice Shepard, on Court, they law: must act with stated: writing for good fidelity all to both the courts and to A corporation is a creature of statute They their clients. are bound canons practice and can neither law nor act in of ethics which growth have been the of person. court it act Out of must long experience and which are enforced through agents, and in court it must by the courts. generally only through agent act Practice of law under modern condi attorney. is a licensed The fundamental part tions consists no small of work principles regarding authority of an performed outside of court and hav agent corporation are substantially of ing no immediate proceedings relation to applicable agents the same as those to in court.... Although these transac generally. may tions have no direct connection with Dep’t Indiana Public v. Chair Welfare proceedings, they court always are sub Service, Inc., 1373, Lance 523 N.E.2d ject to become involved in litigation. (Ind.1988). This Court has also said: They require many aspects high practice “The of the law personal. is skill, degree legal a wide experience It open proved to individuals to affairs, with men and and great capacity possess the satisfaction of the court to adaptation complex to difficult and general knowledge sufficient and ade- situations. ‘customary These functions years (b) by many Corporations been embodied in statute Cannot Practice Law. A corporation states. Most these statutes make it a crime appear must in courts corporation engage for a law, to in the attorney. ... merely profes- while others forbid it for Clearly, corporation ... may hire an cases); purposes.”) (citing Right sional Cor- employee give legal as its to it poration to or to Hold out as perform legal advice and Perform services for it in Itself Ready to Functions in the Nature party. Perform transactions in which it is Services, 1364, Legal 105 A.L.R. 1365-66 Supreme While the Court of Indiana has (1936) ("The general corpora- rule ... that a upon never been called ques- to decide the practise tion cannot law ... is of course ... tion, this corpo- Committee believes that a well settled.... have been enacted [SJtatutes people ration not use who are not prohibiting expressly corpora- in some states perform legal services. The law, or, practising tions from in some instanc- corpora- Committee likewise believes that a es, professions generally. part, For the most charge tion others a fee for merely these embody statutes seem by persons advice or services rendered rule.”) (discussing common-law statutes and employ. in its cases); Right Corporation to or to Comm, Perfom ISBA on Unauthorized Practice of Ready Hold out as Functions Itself Perform 1, Law, Op. at 12-14 See also 7 I.L.E. Services, Legal in the Nature 73 A.L.R. 173, (1958) ("A Corporations § corpora- at 11 ("[T]here judicial is no general practice tion fession, pro- cannot in a learned proposition corpora- dissent from that a prohibiting and statutes such law.”). practise tion cannot valid.”); Peters, Bootleggers Glen D. Law, (1931) ("It 7 Ind. LJ. has been Standing Committee on the suggested proposed legislature in the Unauthorized Practice of Law of the Indiana that there making [Indiana] be enacted a opinion State Bar Association issued an corporation it unlawful for a law. the unauthorized of law. It stated: Now, utterly it seems to me that that is ridicu- course, lous. Of it corpora- is unlawful for a From time to time situations arise in unlawful, tion It is now person, performing which a certain a cer- service, always engaged has been unlawful for a tain yet very law and is not law. The licensed to do so. That statement of the *19 person engaged proposition prac- just is in the unauthorized is its answer. It is as sensi- ble, me, tice of law. repeal it seems to to the law of (a) People May gravitation pass Certain making not Practice or to a law it unlaw- Law.... objects ground.”). ful for to fall to the
171
Fink,
590-91,
...
at
attorney or counsellor at law1
214 Ind.
17 N.E.2d at
of an
97-
Justices,
In re
Opinion
the
(quoting
98
relation to the adminis
bear an intimate
of
607, 612,
289 Mass.
194 N.E.
316-17
by
courts. No
justice
of
the
tration
(1935)) (internal
omitted) (empha-
citations
... can be drawn be
valid distinction
added).
sis
of the law
part
tween that
work
corporate
Simply put,
organi-
and other
in
yer
appearance
involves
court
which
satisfy
entities are
zational
unable to
the
which
advice and
part
and that
involves
requirements
admission
and thus are un-
instruments
in his office.
drafting of
...
“duly
to be
admitted as
attor-
able
The
of the office
is the
work
by the
court of
ney[s]-at-law
supreme
groundwork
for
future
contests
state.”9 See Ind.Code
33-1-5-1. Nu-
The
reasons
underlying
courts....
merous reasons have
offered in sup-
been
corporations,
prevent
which
associa
law,
port
body
including primari-
of this
of
tions
than mem
and individuals other
ly the
would come
concern
harm
to
bers
bar
appearing
the
from
before
of
public
corporate
the
as
business interests
the
apply
equal
with
to
courts
force
attorney-client
invade the
relationship, as
performance
customary
these
independence
judgment
of professional
of
func
tions
and
counsellors
eroded,
and as
the trust and confidence
of
law
courts.”
outside of
placed
is threatened.10
See,
by
e.g.,
indirectly
employing competent lawyers
so
Divine
9.
courts have
held.
Other
it,
Watauga Hospital,
F.Supp.
practice
to
that would be an eva-
as
(M.D.N.C.1956); Arkansas Bar Ass'n v. Union
which the law will
sion
not tolerate....
Bank,
Nat’l
224 Ark.
Corporations
right,
possessed
This
only by
with matters that arise in the
who are
parties
connection
those
business,
226,
but
Id. at
scope
course of
of their
transaction.
upon the basis of established character explained: We have also as a competence protection a corporation party When becomes a skill, against lack of public knowledge, a civil action its to represent status itself fidelity. integrity, pro- Disbarment in proceeding differs from that of available in the case of cedure is those per- individual. individual has a proper practice. do conform to sonal stake in the outcome litiga- of the advising involves or tion can readily be identified as both A rendering services for another. natu- party litigant a and an person. individual person may plead ral his own case in however, A corporation, although per- any things court or do of the for himself eyes in son of the cannot be if which done for another would consti- identified with wholly any per- individual may tute law. He discuss the thus, by necessity, rep- son and must be legal aspects of his affairs with other by resented agents. agents Those parties strangers. interested or with only can have an indirect stake person corporation Either natural or a corporation case for the reason that a may employ lawyers things. to do these independent exists as an legal entity, separate and distinct from its sharehold-
A at- corporation choose its own ers, any agents.... officers or torney freely person may as as a natural do so. Where the services of an attor- Parks, rel. Inc. State ex Western v. Bar- ney necessary the execution of a Court, 41, 44, County tholomew 270 Ind. trust, charged the trustee is with the 383 N.E.2d 292-93 To this responsibility selecting an attorney rule, single, we have created a with duty to exercise reasonable exception presently applies limited selection, in the corporate care and a arising claims out of the business of the fiduciary duty has the same and the $1,500 corporation that do not exceed right person. claims, same as a natural A natu- that are filed as small but then executor, person acting ral adminis- corporation designated after has trator, trustee, guardian, employee specified or choose re- filing and satisfied attorney, employed by his own personal quirements. Ind. Small Claims Rule 8(C).12 basis, salary him an annual per- 8(C), originally adopted unassigned exceeding
12. Small Claims Rule
claims not
one
Paries,
($1,500),
provides
part:
after Western
now
thousand five hundred dollars
proprietor
partnership may appear
or
(C)
sole
Appearance.
person may
A natural
designated
employee
full-time
appear pro
any
se or
counsel in
small
presentation
or defense of
proceeding.
corporation
ap-
claims
A
must
or,
arising
claims
out of the business.
pear by
unassigned
counsel
claims
exceeding
one thousand five hundred
($1,500),
person
suspended
employee
No
who is disbarred or
dollars
full-time
corporation designated by
from the
of law in Indiana or
the Board of
jurisdiction may appear
corpo-
appear
Directors to
as the
for a
presentation
proprietor
or defense of claims aris-
ration or on behalf of a sole
corporation.
partnership
out of the business of the
under this rule.
rector, officer,
of a
employee,
agent
House
Authorization
Scope
S. The
§ 23-
corporation.” Ind.Code
professional
Counsel
2—5(b).Also,
legal service
group
1.5—
by this
promulgated
rules
Under
require
our
rules
plans,
*22
practice,
forms of
accepted
and
Court
conditions be-
group plans to meet certain
authorized
Indiana bar are
members
attorney may
pur-
an
render services
fore
at-
individually or with other
practice,
to
file an initial
plan
suant
to the
and to
firms,
legal
in
torneys,
private
statement,
and a
reports,
annual
disclosure
pub-
or other
corporations
departments
report upon
final
the discontinuation
in group
organizations,
private
lic or
in these mandated fil-
operation;
included
Prof. Cond. R.
plans. See
legal service
ren-
attorneys
are the names of the
ings
1.13;
Preamble;
R.
Ind. Ad-
Prof. Cond.
plan.
under the
See Ad-
dering services
In addi-
Discipline Rule 26.
mission and
Disc. R.
mis.
partnerships, corpo-
in
tion to
legal
departments,
group
legal
rate
majority correctly
*23
attorney employed
that an
in the le-
idea
organizational entity
of an
gal department
propositions
These
are well-established
in
organization
the
those trans-
represents
First,
in
principles
Indiana law.
the
organization
in which
has a
actions
the
trial court states its conclusion that Celina
the under-
primary interest. This was
engaged
is
of law when its
standing
provides
at common
represent
house counsel
its
insureds.
and context for our statute
background
Next, the trial court recites the established
rules.
professional
and our
only
that a
can
legal principles
corporation
through
agents
act
its
and that the acts of
Ip.
Holdings
The Trial Comi’s
corporation’s agents
are the acts of the
Chevrolet,
corporation. See Bud
Inc.
correctly
trial court
held that
Wolf
Celina
,
(Ind.
135,
v.
519 N.E.2d
137
law,
Robertson
in the
that its
engaged
was
1988) (“Actions
employees
agents
unauthorized,
was
and that
its
corporation,
scope
when done
house counsel assisted
this unauthorized
employment,
their
are attributable to the
practice.
engaging
As to Celina’s
Pontiac,
corporation.”);
Inc.
Hibschman
practice of
it held:
Batchelor,
310, 315,
v.
266 Ind.
362 N.E.2d
engage
in fact
in the prac-
Celina does
(1977) (“A
845,
corporation
848
can act
attorneys
of law when
salaried
tice
its
acts,
only through
agents,
its
and their
corporation
its insureds. A
scope
when done within the
of their au
through
agents
acts
its
and the acts of
thority,
corpora
are attributable to the
corporation.
acts of the
agent
Utilities,
tion.”);
Water
Inc. v. Le
Soft
attorneys
Because Celina’s
are its
Fevre,
529, 539,
Ind.App.
159
308 N.E.2d
agents,
attorneys
and the acts of those
(“A
(1974)
395,
corporation
acts
Celina,
is
are therefore those
Celina
through
agents
its
and the acts of the
of law
engaged
corporate practice
agent
corporation.”)
are the acts of the
it assigns
attorneys
when
its salaried
(3d
Baker,
(citing
v.
tial issues are the same: are material placed representation; by guarding attorneys’ limitations on the clients protects responsibility” may "materially 24. Hazard and Hodes have discussed the rela- "other representation.” 1.8(f) 1.7(b): Both rules ac- limit tionship between Rule and Rule cordingly representation upon condition the 1.8(0 largely superfluous, Rule for its after client consent consultation. Obvious- party treatment of situations in which one client, ly, lawyer loyal must be pays provide services for anoth- footing not the one who is the bill. already required by er adds little to what is supra, 1 Hazard & at 276. Further- Hodes, rule, 1.7(b). more, Rule In the words of that substantive difference was intend- "[n]o lawyer’s relationship pro- third-party to a wording. ed” the difference in Id. at plainly vider of constitutes an 276.1. *29 if a profit thorized to law for non- independence judgment.25 professional therein, lawyer any R. 5.4 cmt. This Rule is owns interest Rule Prof. See Cond. 5.4(d)(1); a “series of protect against non-lawyer corporate if a is a designed to thereof, 5.4(d)(2); ... that can arise when nonlaw- problems Rule director or officer lawyers provide legal with yers combine non-lawyer right or if a has the to direct or thought Problems services.... professional judgment control the of a law- nonlawyers invest in either 5.4(d)(3).30 arise when yer, Rule authority in business positions of assume prompted The same concerns that than the traditional arrangements other Rule lead me adoption provisions of these 2 HazaRD firm.” partnership law & company’s to believe that an insurance 5.4(a) prohibits Rule supra at 796. Hodes, house counsel should not be allowed to sharing attorney legal or law firm from an I company’s insureds. be- 5.4(b) non-lawyer.27 pro- with a Rule fees that, counsel represents lieve when house a lawyer forming partnership a from hibits fees, insureds, improper sharing non-lawyer any a if of the activities of with profits, and losses occurs.31 Under this consist of the partnership arrangement, the threat of interference 5.4(c) attorney prohibits Rule law.28 lawyer’s professional judgment with a recom- person from a permitting remote,32 by contract the even when mends, pays attorney employs, or parties agree lawyer will retain attorney’s profes- regulate direct or 5.4(d)29 independent judg- control and exercise prohibits sional Rule judgment. Anthony ment.33 As Dean Kronman has with or from or association au- noted: professional corporation designed prevent relationships (regarding the unau- "is 25. Rule 5.4 and Rule 5.5 law) nonlawyers compromising with a law- practice of “are intended to from thorized lawyers, yer's independence thought practice of law to on the and action.” restrict the qualifica- theory only lawyers have the Id. at 808.1. competently and accord- tions discipline.” 2 to the rules of 5.4(a), Regarding Rule Hazard and Hodes 31. supra, at 766. Hodes, Hazard & phrase have noted that "the 'shall not share legal fees’ is intended to bar financial dangers posed by lay intermediaries 26. The arrangement nonlawyer’s profit in which a non-lawyers following: who are include directly loss related to successfulness of arrangement may engage part of the business lawyer's legal business.” Id. at 801. law; non-lawyers may learn clients; attorney's and an the confidences of explain Hazard and Hodes that in situa- 32. independent professional judgment bill, party pays tions where a third a client's impaired. Id. at 797-98. lawyer serving "the must be sure he is currying with the client and not favor non- 5.4(a) splitting fee 27. Rule "assumes that all They identify Id. at 807. an insur- client.” nonlawyers the unauthorized with .is company's hiring ance for their very excep- except three narrow typical insureds as a situation in which this tions.” Id. at 799. They by discussing issue arises. Id. continue firm, noting "captive” the utilization of 5.4(b) lawyer "flatly prohibits a 28. Rule that, "[pjlainly, arrangement such an carries prac- sharing profits and losses of a law danger with it enhanced of a violation of Rule nonlawyer. applies though tice It even with 5.4(c).” Id. at 807-08 n. 0.1. as- retains control over all pects Id. at of the business.” 799. majority’s recognition "many [im- 33. plicit explicit] ... restrictions
29. court’s order did not address trial 5.4(d). business entities available to an at- forms of Indiana Professional Conduct Rule law,” op. torney for the 5.4(d) suggests arrangements by their possibility that some Rule addresses "the allow, edge judgment very lawyer's professional will be com- nature are too close though promised relationships even in individual cases the as a result of business Also, between lines. nonlawyers.” Id. at 800. this Rule be able to steer *30 defini- prevent negative law office is minimize these influ- [E]very in-house ences, of the business embracing expand- to the interests rather than and tion tied tie that part it forms a them. of which —a the law- independence of constrains majority urges that the parties can in it yers working compromises and “to continue duke this issue out those imaginative capacity to hold the their marketplaces premium ideas and [of employs of the business that interests charges] ju- without interference from the length, them at arm’s diciary.” I Op. at 163. that this believe give the best advice about the wish Court should not abandon to the market- important matters must. most place duty responsibility regu- our and T. THE LOST LAWYER: KrONMAN, ANTHONY against late the of law. The laws Legal Failing Ideals Profession the unauthorized of law are de- only non-lawyers Not do own signed protect public by requiring also, companies, interests but licensed, qualified, regulated repre- once house counsel are allowed to professionals provide legal representa- will insureds, non-lawyers, particularly sent tion, and professional rules seek to officers, corporate inevitably directors and professionals uphold ensure that these cer- may control and decide matters related to prac- tain standards and values in their legal practice attorneys. of the salaried tices, including uncompromised loyalty to majority opinion I to acknowl- clients, read regardless conflicting their in- independence is to edge terests, uncompromised independence compromised employed some extent when all, judgment. of professional After staff counsel insureds. The ma- business, practice of law is not a but a jority marketplaces states that “the profession, participation profes- premium charges ideas and will sort this open only qualified sion a privilege out and strike a balance between claimed by prescribed individuals who abide ethical advantages perceived desirability cost standards. wholly independent Op. counsel.”
163. majority attempts to minimize these following: “Employee-at-
concerns
'tomeys may subject pressures from But it also employer. their unrealistic suggest that an outside is im- client,
mune the blandishments TRACY, Appellant-Respondent, Dennis particularly high volume client significant portion be the source (em- Op. revenues.” at 163 firm’s TRACY, Appellee-Petitioner. Suzanne added). Here, phasis majority relies No. 45A03-9808-CV-369. suspect practices pressures on two — by em- placed upon employee-attorneys Appeals of Indiana. Court ployers upon and blandishments showered justify Aug. outside counsel clients—to 1999. Certainly, even more suspect practice. Sept. Publication Ordered pressures employers and blandish- co-clients, resulting
ments of and the ero- loyalty independence
sion of client
professional judgment represented there-
by, distressing pro- encroachments on judgment.
fessional should seek to We notes are authorized attorneys also plans, service of Professional Preamble to our Rules organizational con- in other to “firm” and “law firm” to Conduct defines corporations, limited li- professional texts: legal in de- “lawyers include employed partner- and limited ability companies, organi- or other partment of a 23-1.5-1; § ships. See Ind.Code Ind.Code R. Preamble. The zation.” Prof. Cond. 23-^l-l; 23-18-1; § Admis. § Ind.Code majority correctly recognizes that at- also Nevertheless, all members of Disc. R. 27. may employed by or torneys be retained bar, regardless of the nature the Indiana legal in may work their corporations subject are practices, or context of their applies and that Rule 1.13 departments un- legal obligations ethical and the same attorneys “employed by or retained” cor- rules. professional der the Indeed, organization. poration other in attorneys practice organization- When members of the Indiana bar serve contexts, apply limitations to the al certain subject profes- counsel are house instance, For organizations themselves. arising obligations sional rules and the lia- corporations, limited professional therefrom, like all other bility partnerships, and limited companies, Indiana. place specific and court rules statutory law However, statutory none of these requirements organizations on these provisions rule constitutes authorization activities, purpose, organizational terms of companies employ house control, § liability. See Ind.Code 23- their insureds. As represent counsel 23-18-1; 1.5-1; § Ind.Code Ind.Code noted, already organi- and other corporate 23-4-1; § Disc. R. 27. In the Admis. employ house coun- zational entities often corporations, case of our stat- professional legal departments represent sel in their authorized to form utes have legal in their matters and the entities corporations “to render ser- professional Indeed, to an transactions. when comes may legally performed only vices that entity’s own matters transac- § attorney.” an 23-1.5-2- Ind.Code tions, difference between there is real 3(3). However, professional corpo- these entity employing attorneys an as house “may professional render rations counsel or as outside counsel. both permitted to ren- only through individuals cases, entity-client attorney hires an der such services Indiana.” Ind.Code 23-1.5-2-5(a). services. Like And, provide licensed indi- “[a] coun- person, organization may an secure acting vidual in his individual capacity services, company its own though even sel to render shareholder, attorney is a salaried the individual be a di- affairs-whether 8(C). Ind. Small Claims Rule engaged agents prac- or outside counsel is Celina attorney-employee (2) law; Celina, tice of a corporation, can unimportant. (3) only through agents; act the acts of the Rule 1.13 Indiana Professional Conduct Celina; attorneys are those of therefore or re- employed that “[a] states engaged Celina is organization represents tained Op. majority law.” at 156.13 While the acting through duly autho- organization dismissively syllo- characterized this as “a Thus, rized constituents.” Rule 1.13 con- gism propositions based on a series of templates that an retained or em- general validity,” dubious I op. am organization represents ployed persuaded that the propo- trial court’s in this rule is the organization. Implicit sitions are false or even dubious.
Notes
The
notes
Act, and the relevant court rules were
that the trial court concluded that “Celi-
adopted against the backdrop of the com-
unauthorized
practice
na’s
was
be-
statutory prohibitions against
mon law and
professional corporation
cause Indiana’s
practice
the unauthorized
of law and the
implicitly prohibits general
statute
busi-
corporate practice
Together,
of law.
these
corporations
companies
ness
and insurance
support
considerations
the trial court’s
law.”
The
practicing
Op.
from
general
business
reasonable inference
statutes were enacted and the rules were
practice
law.
corporations
adopted
organizational
because
entities
prohibited
practicing
majority
support
were
from
The
finds
in its asser-
prohibited
practicing
statutory
were
from
express
tion that Indiana has no
specifi- prohibition against corporations practicing
law such contexts. The statutes
view, however,
cally
corporations
my
only
authorize
law.17 In
because
professional
actually represented
by
significant
15. This
but
the activities are conducted
a licensed at-
time,
change
torney.” Op.
generally
limited
in the law. Prior to that
at 159. Rather than
legal
significantly
granting
power
were
to render
restricted in their
entities
organiza-
by
are
abilities to form and work within
services when the activities
conducted
attorneys,
tional entities.
licensed
I understand this statute to
power only
grant
to certain authorized
majority
professional
16. states that the
they may lawfully
entities so that
"render”
statute,
corporation
authorizing
entity
legal
conducted
services if the activities are
may legally
to exist "to render services that
attorney.
a licensed
performed
attorney,”
an
Ind.Code
23-1.5-2-3(3),
profession-
majority
points
§
assumes that the
17.The
here
to North Carolina
corporation, by "rendering
example
jurisdiction
al
services” will
as an
of a
in which the
law,
5.4(b)
practicing
just
governing legal principles
itself be
as Rule
established
partnership
statutory
Op. at 156
describes a
and decisional law.
n.
(1985);
Op.
majority
(citing
State v.
at 159. The
then concludes that
N.C. Gen.
84-5
Stat.
"[tjhis
(1962)).
Pledger,
statute
257 N.C.