OBA Ethics Counsel
Ethics Opinion No. 213
Adopted December 14, 1961
Since the passage of the "Professional Corporation Act" (Senate Bill No. 399), this Committee, both directly and through the State Bar Association, has received numerous requests for an advisory opinion as to whether or not a lawyer or firm of lawyers may form a professional corporation and practice law as such without violating the existing Canons of Professional Ethics as the same have been heretofore construed.
Some time ago the Executive Council specifically requested such an opinion of this Committee, but it was called to its attention that several of the states had adopted similar acts and the Standing Committee on Professional Ethics of the American Bar Association had been asked to express its opinion and, pending such expression, any opinion of this Committee should be withheld. However, no opinion from the American Bar Association's Committee has been forthcoming and it is felt that if lawyers are to be permitted to have the advantages of the Professional Corporation Act, it would be highly desirable to remove any doubt on the ethical question prior to the end of the calendar year.
Do the Canons of Professional Ethics prohibit a lawyer or a firm of lawyers from forming a corporation under the Professional Corporation Act of the State of Oklahoma and practicing law in such form?
Historically, the general practice of law by corporations, like the practice of medicine, has been prohibited by the ethical concepts of the so-called learned professions, and even in certain instances, by law. The reported cases, however, and the opinions of the various grievance committees of the bar associations almost without exception involve the practice of law by lawyers in the employ of a lay corporation; and in these opinions the serious objection resulted from the insertion of the lay agency between the lawyer and his client or the physician and his patient, both in the control of his professional opinion and the control of his monetary reward. The existing Canons of Professional Ethics of the American Bar Association which, of course, are, by rule of the Supreme Court of Oklahoma, the rules of conduct for the Members of the Bar of this State, clearly reveal that a professional service type corporation was not contemplated by either Canons 33, 35, or 47. For that reason, we see no need to dwell further in this opinion upon the numerous prior opinions of courts and association committees dealing with the corporate practice of law or medicine. A study of the Professional Corporation Act reveals that the safeguards inherent within the Act itself are such that a compliance with the Act eliminates the possibility of conflict with Canons 35 and 47, in that the time-honored relationship between the professional man and his client is fully protected, the liability of the individual lawyer is not limited, and there is no possibility of laymen or lay agencies controlling the individual practitioner.
It is further apparent from the wording of the Act that the professional corporation will not as such "practice law." It will simply be composed of qualified Members of the Bar who do in the same manner that they presently practice in partnership form. The corporate form will simply be utilized as a method of business organization by a group of lawyers and will, of course, make available to them the advantages now available to corporate officials and personnel under the Internal Revenue Code.
We are, therefore, of the opinion that the practice of law in the corporate form. as permitted by the Professional Corporation Act, does not in itself involve a violation of any existing canon of professional ethics.
We are further of the opinion, however, that nothing in the existing canons of ethics specifically permits such practice, and that while the Legislature of the State has full authority to enact legislation making provision for this type of corporation, it has no authority to permit the corporate practice of law. Under the laws and constitution of this State, that is a prerogative of the Supreme Court. Therefore, in view of the traditional objections to corporate practice, we are of the opinion that until such time as the Supreme Court of this State has made known its approval of lawyers' utilizing the provisions of the Professional Corporation Act, the lawyers of this State should refrain from so organizing.
It is suggested that the Executive Council immediately seek an order from the Supreme Court authorizing lawyers to utilize the provisions of the Professional Corporation Act.
It is also suggested that the Supreme Court be asked to find that all of the provisions and restrictions contained in Canon 33 relative to partnerships apply with equal force to professional corporations and, further, to authorize the Executive Council to prescribe such rules concerning corporate names as it sees fit, pursuant to Section 7 of said Act.
Nothing in this opinion should be construed to in any way relieve the individual lawyer from complying with both the letter and spirit of all of the existing canons of professional ethics and, by the same token, he must not permit the corporation of which he is a member to be a cloak for conduct which would otherwise be in violation of the canons.
We feel that some reference should be made to Opinion No. 283 rendered by the American Bar Committee on Professional Ethics in 1950, which might be construed to be at variance with this opinion. In that instance, the inquiry made to that Committee involved the practice of law in the form of a business or Massachusetts-type trust. While some of the language used by the Committee in that opinion would appear to be contrary to the views herein expressed, we believe that the statutory authority of the Professional Corporation Act together with the safeguards inherent in the Act itself creates a factual situation so different from that under consideration in Opinion 283 that the two opinions can be clearly distinguished even if the American Bar Association Committee opinion were binding.