Are you a Kentucky lawyer that provides mediation services? Owns a consulting business? Is a certified financial planner? If so, you will want to take a close look at Kentucky’s new professional conduct rule: SCR 3.130(5.8) Responsibilities regarding law-related services. Rule 5.8 (2) defines law-related services as:

services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.

The comments to the Rule provide examples of law-related services. This list is not intended to be exhaustive so lawyers must take care not to assume they are in the clear simply because their law-related service is not included. The list does provide, however, some insight of the types of activities that would be construed as a law-related services:

• providing title insurance
• financial planning
• accounting
• trust services
• real estate counseling
• mediation
• legislative lobbying
• economic analysis
• social work
• psychological counseling
• tax preparation
• patent, medical or environmental consulting

If a lawyer is providing a law-related service, then the lawyer must review Rule 5.8 and determine how the Rule impacts their practice.

Rule 5.8 creates a default: the Kentucky Rules of Professional Conduct (RPC) applies to both your legal work as well as certain nonlegal work you perform.[1] Applying the RPC to services that may otherwise fall outside of your law practice would directly impact how you handle confidentiality, conflicts, fiduciary duties, and more. Additionally, how you handle client payments and other property could be impacted, as well. For example, if a nonlawyer accepts an advance or unearned fee for consulting services, they would not be required to place the funds in a trust account according to the RPC that address fees, safekeeping property, and the IOLTA Fund.[2] However, a lawyer providing consulting services may well have to comply with the requirements of these rules when accepting unearned consultation fees.

Lawyers can take steps to opt-out of this default, which would remove the need to comply with the RPC when performing nonlegal work. To do this, you must ensure the person engaging you for your law-related services understands you are not acting in your capacity as an attorney.

The first step is to have separate legal entities for your legal work and your law-related service and run them separately. For example, you provide business consultant work through A+ Business Consulting LLC but any legal matter is handled through A+ Law Firm PLLC. You would then execute separate agreements for services, track and bill all activity separately, and deliver the invoices separately, even if you have a client that is served by both entities. Then, arguably, your work performed for clients of A+ Business Consulting LLC is not subject to the Kentucky Rules of Professional Conduct.

However, even separating these entities is not enough to guarantee the rules of professional conduct will not be applied to your law-related services. You will also want to include a disclaimer in all agreements to perform the law-related service. Comment 7 provides a starting point for drafting this disclaimer.[3] The comment states a lawyer must take reasonable measures to assure the person using law-related services:

• Understands the practical effect or significance of the inapplicability of the Rules of Professional Conduct; and
• Receives this information in a manner sufficient to assure this person understands:
  • there will be no lawyer-client relationship; and
  • what the significance is of not forming a lawyer-client relationship; and
• This communication about the law-related service is provided;
  • before entering into an agreement for law-related services; and
  • preferably in writing.

The disclaimer must be conspicuous. One approach is to place it in bold at the top of the agreement. Another approach is to include the disclaimer in bold at the end of the document and request a separate signature or initials from the client. For example:

This agreement does not form a lawyer-client relationship. Although I do hold a license to practice law in Kentucky, I am not your attorney. This means our relationship will not be governed by the Kentucky Rules of Professional Conduct, including rules on confidentiality and prohibitions on conflicts of interest. [I am, however, bound by xyz ethical rules.] I will not be providing legal advice during the course of this engagement. If you need legal advice at any time, you will need to obtain your own legal counsel.

I am required to make this disclosure before proceeding with [x] services. If you understand and agree, sign here (or initial here).

Utilizing a disclaimer and separating your law-related services from your law practice are simple ways to proactively mitigate your risk and prevent the inadvertent application of the Kentucky Rules of Professional Conduct to your nonlegal services. A formal ethics opinion is forthcoming and a session at the 2023 Kentucky Bar Association will be dedicated to this topic. We will keep you posted when the opinion is released and continue to share risk mitigation tips! In the meantime, if you have additional questions, please contact Courtney Risk (risk@lmick.com).

[1] That nonlegal work that falls within the definition of law-related services under 5.8(2).

[2] SCR 3.130 (1.5), Fees; (1.15), Safekeeping Property; and SCR 3.830 (Kentucky IOLTA Fund)

[3] SCR 3.130(5.8), Comment 7: In taking the reasonable measures referred to in paragraph (1)(b) to assure that a person using law-related services understands the practical effect or significance of the inapplicability of the Rules of Professional Conduct, the lawyer should communicate to the person receiving the law-related services, in a manner sufficient to assure that the person understands the significance of the fact, that the relationship of the person to the business entity will not be a client-lawyer relationship. The communication should be made before entering into an agreement for provision of or providing law-related services, and preferably should be in writing.