Lawyers and Non-Lawyers as Sports Agents: Ethical Considerations Arising from Multi-Disciplinary Practice in California

Oct 7, 2005

By Robert S. Gerber is a partner of Sheppard, Mullin, Richter & Hampton LLP*
Many lawyers are forming sports agencies with non-lawyers. These “multi-disciplinary practices,” or MDPs, provide services that are both legal and non-legal in nature to the athletes/clients. The concept is that the lawyer’s clients may have a need for non-legal services related to the client’s legal needs (e.g., accounting, finance, investments advice), and the provision of both kinds of services to the client may create synergy between the two sides of the business. But there are serious and complicated ethical considerations triggered for California lawyers by their participation in such MDPs. The primary ones are set forth below.
The Unauthorized Practice of Law. Non-lawyers associated with the provision of non-legal services by the sports agency cannot provide legal advice. The definition of what constitutes the “practice of law” is quite broad, and includes the mere preparation of legal instruments and contracts. See People v. Merchants Protective Corp. (1922) 189 Cal. 531, 535. Non-lawyers should be completely separated from these activities within the agency.
Preservation of the Attorney-Client Privilege. Cal. Bus. & Prof. Code Section 6068(e) requires a lawyer to preserve all confidences of his or her client “at every peril to himself or herself.” In an MDP, there is a significant risk that client confidences will be exposed through the operation of the non-legal activities of the agency. Separate records and files for the legal and non-legal activities must be scrupulously maintained to protect against an inadvertent waiver or disclosure of privileged or otherwise confidential information.
Conflict Disclosures/Waivers. As discussed above, the whole reason for the creation of MDP agencies is the hope of synergy and the creation of a more profitable agency. However, the lawyer’s financial interest in the non-legal side of the agency will likely trigger the disclosure and informed consent requirements of Cal. R. Prof. Conduct 3-300 and 3-310. See Cal. State Bar Formal Op. 1999-154. Clients must be adequately apprised of these business interests and their inherent conflicts, and waive them adequately in writing.
No Fee Splitting. Cal. R. Prof. Conduct 1-320(A) provides that a lawyer cannot “directly or indirectly share legal fees with a person who is not a lawyer.” If a sports agent/lawyer partners with a non-lawyer in a sports agency MDP, profits from the law practice may be shared with the non-lawyer in the absence of scrupulous bookkeeping.
No “Running” or “Capping.” Cal. R. Prof. Conduct 1-320(B) provides, “A member shall not compensate, give, or promise anything of value to any person or entity for the purpose of recommending or securing employment of the member or the member’s law firm by a client, or as a reward for having made a recommendation resulting in employment of the member or the member’s law firm by a client.” This is commonly known as “running” or “capping.” Using the non-legal activities or non-lawyer principals involved in the sports agency to solicit legal work for the lawyer is likely to be unlawful. See Bus. & Prof. Code §§ 6151(a) and 6152.
Restrictions on Advertising. Advertising for both legal and non-legal services by a sports agency that involves a lawyer as a principal must still comply with the substantive content and retention requirements Cal. R. Prof. Conduct 1-400(D). See Cal. State Bar Formal Op. 1995-141, n. 11. Rule 1-400(D) is burdensome and its requirements difficult to meet, because of the limited nature of professional advertising allowed to the legal profession.
Heightened Standard of Care. If a lawyer provides non-legal services or advice in a sports agency MDP (such as investment advice), and a dispute arises with the client, the lawyer will be held to a high standard of care. He or she will not be held to a lower standard of a mere investment advisor, for example. “Attorneys must conform to professional standards in whatever capacity they are acting in a particular matter.” Crawford v. State Bar (1960) 54 Cal.2d 659, 667-68.
Maintaining Professional Independence. Cal. R. Prof. Conduct 1-500(A) precludes the non-legal principals in the agency from restricting the legal practice of any attorneys who participate in it. In other words, non-lawyer principals cannot put limits or controls on the provision of legal services or advice provided by the lawyer principal in the MDP.
Providing non-legal services as an adjunct to a lawyer’s legal advice in the context of a sports agency is fraught with ethical issues for California lawyers. Attorneys should take great care before launching or participating in sports agencies with non-lawyer principals.
*Robert S. Gerber is a partner of Sheppard, Mullin, Richter & Hampton LLP and a member of its Entertainment and Media Law Practice Group. He is also an Advisor to, and the former Chair of, the Legal Ethics Committee of the San Diego County Bar Association.


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