By Cynthia Courtney, Esq., VP, Advisory and Engineering Group

A new opinion issued by the D.C. Bar Ethics Committee (Opinion 362) holds that discovery service providers cannot engage in the practice of law in D.C. and also be partially or wholly owned by passive non-lawyer investors.  This ruling may not surprise you, but you are strongly advised to read and understand its critical predecessor, an opinion issued by the Committee on the Unauthorized Practice of Law on January 12, 2012 (UPL Opinion 21-12), detailing what activities performed by discovery service providers may constitute the unauthorized practice of law under D.C. Bar Rule 49.

Simply put, you do not want to be an e-discovery services provider that is viewed to be engaged in the unauthorized practice of law.

Background:  Opinions 6-99 and 16-05

In 1999 and 2005, the UPL Committee considered whether “legal staffing services” and “contract attorneys” engage in the unauthorized practice of law.  In Opinion 6-99, the UPL Committee concluded that legal staffing companies do not practice law as long as (1) a retained attorney selects the temporary attorney; (2) the temporary attorney is supervised by a retained attorney; and (3) the staffing company does not otherwise engage in the practice of law or supervise the practice of law by the attorneys it places.

In Opinion 16-05, the UPL Committee looked at “contract attorneys” who fulfill temporary assignments in law firms and corporations.  Such attorneys regularly practicing in D.C. must be members of the D.C. Bar; in addition, contract attorneys who review documents for responsiveness or privilege, where the ultimate decision is made by a licensed D.C. lawyer, must be licensed in D.C. if they are “held out, and billed out, as…lawyer[s].”  If they are not “held out,” then they need not be members of the D.C. Bar, and in fact, need not be lawyers at all.

Opinion 21-12:  Pay attention to this.

By 2012, discovery companies had expanded their scope to include staffing, consulting, and database management in addition to the traditional e-discovery service offerings of data processing and hosting.  Accordingly, the UPL Committee issued Opinion 21-12 to expand the prior guidance.  The Committee focused on two developments, both relating to marketing language:

•The expansive terms used to describe services such as “one stop shopping, “comprehensive review and project management” and “fully managed document review.”

•The employment of lawyers on staff who have impressive practice experience and credentials and the glowing descriptions of their pedigrees:  “Significant in-house corporate legal experience,” “led by seasoned attorneys, our competitive advantage is our subject matter expertise.…”

Opinion 21-12 asks two questions:  First, are these companies practicing law?  Second, do the promotional statements about either the company or their staff constitute “holding out”?

•The Committee asked around, and not surprisingly, e-discovery services companies report that their services do not cross the line into legal practice.  Opinion 21-12 holds that the “unauthorized practice” rules apply to activities in D.C., that is, to companies located in D.C. or conducting reviews in D.C.; and the “holding out” rules apply to all companies which advertise that they can help with D.C. projects.  Companies that provide review attorneys must abide by Opinion 6-99 regarding selection and supervision.  Administrative services may be performed as long as lawyers are not exercising professional legal judgment.  No surprises here.

•Regarding promotional statements, the Committee noted that language may describe services that do not constitute legal practice.  Likewise, statements about the experience or expertise of staff members may not be “holding out,” because the staff member offers technical and administrative expertise in addition to subject matter experience that is valuable in running a discovery project.

However, these statements may be “holding out” at worst and misleading at best.  Therefore, discovery companies can only use promotional descriptions such as “soup to nuts” if they put a prominent disclaimer in a similar font size close to the promotional statement.  A disclaimer must also be placed next to statements about lawyer staff describing their experience and expertise.

What does Opinion 362 add?

Law firms that provide e-discovery services in D.C. (and most other jurisdictions) can’t have passive investor/owners without violating ethical rules, but they know how to configure themselves to be compliant with ethical rules.  As with law firms, e-discovery companies know, or should know, whether they want to practice law and if so, how to be compliant with state law and legal ethical rules.  The key question is whether the activity under scrutiny constitutes the practice of law under Opinion 21-12.  If the answer is no, that is the end of the inquiry.  If the answer is yes, then under Opinion 362, there can be no passive investor ownership without a rule violation.

What next?

To me, the single most interesting and important question is what constitutes acceptable disclaimer language regarding a company’s services or a staff person’s qualifications.  If you have thoughts or opinions about what is or is not acceptable, I would love to hear about it—please leave a comment to this post.