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December 2010 - Would a rose by any other word smell as sweet?

by Cameron Smith

In Act II Scene I of Romeo and Juliet, Juliet laments “’Tis but thy name that is my enemy . . . . What’s in a name? That which we call a rose by any other word would smell as sweet.”

Insofar as businesses are concerned, what is in a name? Whether identifying a business or a product, names are important and law firm names are no different in this regard. Although some firms adopt names that are descriptive of their practice, or perhaps include a geographical reference, most lawyers by far, whether practicing alone or with others, use their own name or the names of other attorneys with whom they practice as the name of their firm. Thus, if Frank Smith and Dan Jones decide to start a law practice together, they might consider adopting as the name for their practice “Smith & Jones” or “Jones & Smith.” They might also consider using a trade name descriptive of their practice. (The use of trade names is approved by California State Bar Formal Op. 1982-66). They must also add the appropriate indication if they elect to be a limited liability partnership, (Cal.Corp.Code §16951 et.seq.), or a professional corporation. Cal.Corp.Code §13400 et.seq. In those cases they also need to comply with the registration requirements of the State Bar. Cal.Corp.Code §16953 (LLPs); Rules 3.0 and 4.0 of the Limited Liability Rules and Regulations; or Rules III and IV of the Law Corporation Rules of the Sate Bar of California (Professional Corporations).

Rules of Professional Conduct
The Rules of Professional Conduct impose important restrictions on law firm names. Current Rule 1-400 governs communications, advertising and solicitation by lawyers. The State Bar has proposed new Rules of Professional Conduct that will more closely follow the American Bar Association Model Rules and will be more consistent with the Rules applicable in many other states. Proposed Rule 7.5 governs “Firm Names and Letterheads” and, if adopted as proposed, will largely continue the prescriptions of the current Rule 1-400, with a few modifications.

Current Rule 1-400
Rule 1-400 establishes that the name of a law firm and the use of the name in letterheads, business cards, and the like constitute communications that are subject to scrutiny and, in some cases, discipline. The essence of Rule 1-400 and the Standards promulgated under the Rule is that the name cannot contain any matter that is false or deceptive or that tends to confuse, deceive, or mislead the public. Rule 1-400(D)(2).

A communication is deceptive if it suggests or asserts, as a fact, that which is not true by one who does not believe it to be true or who has no reasonable grounds for believing it to be true. Cal.Civ.Code §1710. Under Rule 1-400, a communication shall not omit to state any fact necessary to make the statements made, in light of the circumstances under which they are made, not misleading to the public. Rule 1-400(D)(3). A communication in the form of a firm name will be determined to be false or misleading if: 1) the name implies that the firm is publically supported; 2) the name is deceptive with respect to the identity of the members who are performing legal services; or 3) the name is misleading as to the types of services being offered. Vapnek, Tuft, Peck and Wiener, Cal.Prac.Guide, Professional Responsibility, ¶2:232 (The Rutter Group 2009).

Under Standard 7 to Rule 1-400, a communication that implies that a member has a relationship to any other lawyer or law firm is presumed to violate the Rule unless such a relationship in fact exists. Thus, the firm name “Smith & Jones” without any further explanation reasonably implies that both Smith and Jones are actively in practice together [California State Bar, Formal Op. 1986–90] and, moreover, that both Smith and Jones are co-owners of the firm, and not associates, contract attorneys, “of counsel,” or any other non-co-owner relationship. Los Angeles County Bar Ass’n. (“LACBA”) Formal Op.No. 421 (1983). That opinion states that the inclusion in the law firm name of the name of an individual who is not a partner of the other persons whose names are included is professionally improper. Presumably the use of the names of one or more co-shareholders of a professional corporation should also be permissible.

The firm name Smith & Jones also may still be used if either or both of Smith and Jones is retired or has died, but only if permissible by local custom, if the name had been used for a lengthy period of time and further, if the actual status of Smith and Jones is clarified in the communication so as to prevent clients or the public from being misled. LACBA Formal Op.No. 310 (1969).

Every year firms that are limited liability partnerships or professional corporations must renew their registrations and identify all attorneys who are partners, employees, and those with other relationships to the firm. Because review of these filings will reveal any improper use of names, the use of the name of an attorney who is not a co-owner of the firm poses a risk of discipline.

Of Counsel
As discussed above, the use of the name of an attorney in a firm name who is not a co-owner but who is “of counsel” to the firm would be risky under the current Rules. Indeed, the LACBA has opined that use of the name of a lawyer who is “of counsel” in the name of the firm name suggests that the relationship is more than an “of counsel” relationship, and therefore is confusing and misleading. LACBA Formal Op. 421 (1983). In contrast, the ABA has permitted use of an “of counsel’s” name in a firm name, where there is no implicit representation that would mislead the public. Thus, the current application of Rule 1-400 may change if proposed Rule 7.5, based on the ABA’s Model Rules, is adopted and if the attorney truly has an actual “of counsel” relationship to the firm.

What does “of counsel” mean? ABA Formal Op. 90-357 provides a thoughtful and extensive answer to this question. Among other things, it specifically approves the designation for part time practitioners, retired partners, probationary partners, and senior attorneys. The California State Bar’s Standard 8 for Rule 1-400 indicates that communications describing a lawyer as “of counsel” are presumed to violate Rule 1-400 unless the lawyer described as “of counsel” has a relationship with the law firm, other than as a partner or associate, officer or shareholder, which is “close, personal, continuous, and regular.”

The status of the “of counsel” lawyer as a former partner or shareholder is also relevant to the use of the “of counsel’s” name in the firm name. It appears to be generally accepted that had the “of counsel” attorney formerly been a partner or shareholder in the firm before becoming “of counsel,” and if his or her name had been used in the firm name, then the name can continue to be used in the firm name provided the “of counsel” designation appears elsewhere on the letterhead. Cal.Prac.Guide, Professional Responsibility, ¶2.

Non-Equity Partners
Another question that may come up is whether the name of a person who is not a full partner, but who is “a non-equity partner” can be used in the firm name. In many firms “non-equity partners” are in fact associate employees, but are held out to firm clients and to the public as “partners.” This may create other issues under Rule 1-400, but that discussion is outside the scope of this article. Insofar as the name of the firm is concerned, however, because the attorney is an employee and not a partner, without a clarifying explanation of the true relationship, and perhaps even with such a clarifying explanation, it is likely that the use of his or her name in the firm name would be a violation of Rule 1-400.

“Associates” and “Group”
In view of the foregoing, it would seem to be a clear violation of Rule 1-400 if the name of an associate (non-owner) attorney were to be used in the name of the firm. It also would seem to be a violation if the use of the words “and Associates” or “Group” followed the name of the owner (or owners) in the firm name if the words are misleading, i.e., if there were not in fact associates or other attorneys working at the firm. Thus, if Dan Smith in our example were to start a firm which is in fact a sole proprietorship and where he is the sole practicing attorney, it would be misleading and a violation of Rule 1-400 if he were to use the name “Smith & Associates” or “Smith Law Group” as the name of his firm.

Conclusions
There do appear to be indications that older Rules applicable to law firm names are loosening. And, perhaps the assumptions behind the strict interpretations and proscriptions for firm names adopted in earlier ethics opinions are no longer completely valid. For example, until the latter 1990s most law firms practiced as general partnerships and the names used in the firm name clearly indicated those partners who stood to be personally responsible for the professional services the firms provided. Since the enactment of the LLP statutes, however, a vast number of law firms now practice as LLPs and this in itself should require a new look at the firm name issues. An LLP must indicate that status on its letterhead. ABA Formal Op. 96-401 (1996). As long as the firm name indicates that it is an LLP, the personal responsibilities of the named partners for the obligations of the firm are limited and the implications for the firm’s clients and the public are different from what they were in the 1980s and before.

Similarly, because of the size and geographic expansion of many firms, a firm name may become established and well recognized in more than one area or region and have substantial good will, even nationally or worldwide. Regardless of the names that are used in a firm’s name, the name of the firm and the good will associated with that name will be identified by the public and by clients or potential clients as the identity of a collection of attorneys having a reputation for certain skills and quality of work, and not simply as the identification of the individually named attorneys. Indeed, it is likely that in some areas where a firm might practice, no one will know all of the named owners individually, and perhaps not any of them. In such cases the firm name is more likely a communication from (and the property of) the entire firm rather than just those persons whose names are included in the firm name. In that situation the name of the firm takes on a separate meaning and should be viewed primarily as a brand and not (as suggested by LACBA Formal Op. 421 for example) as a determinative representation of the legal relationship among the named individuals.

In summary, there remains some risk that the use of a non-owner’s name in the law firm name can be a violation of Rule 1-400, especially if there is an implication that the person is an owner and there is not a sufficient clarification elsewhere in the same communication. However, the ultimate question is whether a firm’s name is false, deceptive or misleading, and lawyers must take all steps necessary to insure that the adoption of a name for their practice does not violate those standards.

 


The author is a partner of Smith, Silbar & Parker, LLP where he practices general business and transactional law, with experience representing law firms and individual lawyers, both in formation and in break up situations. Mr. Smith is Co-Chairman of the OCBA Client Relations Committee and a member of the Professionalism and Ethics Committee.