Wolfram & Hart and…Legal Ethics?
The inspiration for this month’s column comes from a question from Arthur, who writes:
On Joss Whedon’s show Angel, the law firm Wolfram and Hart hire Angel as CEO. As far as I know, if you incorporate a law firm, it can only be owned by lawyers. Does any rule like this apply to officer positions as well? Would there be any legal ramifications of having Angel as their CEO without any business or legal experience?
There are a few different issues here. First, can a law firm have a CEO? Second, can a non-lawyer be the CEO of a law firm?
I. Law Firms and Business Organization
Traditionally law firms operated as partnerships between lawyers. That approach works okay for a small number of lawyers working as more-or-less equals, but as law firms grew and became more complex, new forms of business organization were required. Two common forms used today are the limited liability partnership (LLP) and the professional corporation (PC). Often both are only available to groups of professionals such as lawyers, doctors, accountants, etc (i.e. professions that carry the risk of malpractice).
In general, an LLP shields the partners from personal liability from contract and tort claims brought against the partnership as a whole. This is very attractive for law firms, since a malpractice claim brought against the firm won’t bankrupt partners that didn’t have anything to do with the alleged malpractice. An LLP is still a kind of partnership, however, and while it may have a managing partner or executive partner, it is unlikely to have a CEO (although theoretically the executive partner could have Chief Executive Officer as a title). So Wolfram & Hart is probably not an LLP.
A professional corporation is like a regular corporation in many ways, but it does not have quite the same limitations on liability that a corporation or limited liability corporation does. In particular, the owners of a professional corporation are still liable for their own personal malpractice, although they are not liable for the malpractice of others. In this way it is similar to an LLP. As a kind of corporation, PCs have directors and officers, including potentially a CEO. And California recognizes professional corporations, which is good, since Angel becomes the CEO of Wolfram & Hart’s Los Angeles branch.
II. Non-Lawyer CEOs
Now we come to the tricky part. Most states have ethical rules that make it difficult or impossible for non-lawyers and lawyers to go into business together, particularly if a non-lawyer is meant to manage lawyers. ABA Model Rule 5.4(d) is the most directly on-point:
(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:
(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;
(2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation ; or
(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.
It’s possible that Angel could be paid an ordinary salary (profit-sharing with non-lawyers is another no-no under 5.4(a)) and not have an ownership stake in the firm. That would take care of subsection (1). And it’s possible that procedures could be put in place such that he would not have the right to direct or control the professional judgment of Wolfram & Hart’s lawyers. For example, his role could be limited to managing marketing, non-lawyer human resources, information technology, investments by the firm, etc, with no control over how the firm handles cases. That could possibly take care of (3). But (2) is a killer. It strictly forbids a non-lawyer from being a corporate director or officer (in a professional corporation) or having a similar position (in a non-corporation). The CEO is such a position.
But, all is not lost. These are only the model rules. What matters is California’s own rules. And as it turns out, California doesn’t have an equivalent of Model Rule 5.4(d). There is California Rule 1-310, which states that “A member shall not form a partnership with a person who is not a lawyer if any of the activities of that partnership consist of the practice of law.” But Angel isn’t forming a partnership with the lawyers of Wolfram & Hart. ”A partnership generally involves a joint ownership and can be evidenced by firm name, declarations of coownership, or sharing of profits.” Los Angeles County Bar Association Ethics Opinion No. 518 (citing Crawford v. State Bar, 54 Cal. 2d 659, 667 (1960)). As long as Angel does not share profits with the firm (i.e. is paid a fixed salary) or have any ownership interest in it, then it doesn’t appear to be a partnership.
While I couldn’t find any examples of California firms with non-lawyer CEOs, there is precedent in Pennsylvania. Pepper Hamilton, a large law firm based in Philadelphia, made headlines earlier this year with the announcement that it was hiring a non-lawyer as its CEO. Interestingly, Pepper Hamilton is an LLP, so the CEO is a management position but (I assume) not actually an officer of the company in the technical sense. In any case, Pepper Hamilton apparently does not regard the position of CEO to occupy a similar responsibility as a corporate director or officer of a corporation.
III. Conclusion
True to form, Wolfram & Hart seems to be on slightly ethically shaky but technically legal grounds. Although I don’t think this arrangement would work in many other states, it’s possible that it would work in California. If I were Wolfram & Hart I would probably ask the State Bar of California for an advisory opinion before I hired Angel, though.
Not sure Wolfram & Hart is really going to care. They may give the appearance of playing by the rules in their appearances in California courts, but they also routinely draft and enforce for themselves contracts that would be void on their face according to California or Federal law (just think of the standard perpetuity clause in their partners’ contracts), require illegal acts of their employees including human sacrifice, hire contract hitters, engage in bribery, jury tampering, spying on prosecutors, and so on.
Making Angel CEO is a public-facing issue. Wolfram & Hart is hardly above criminality, but they try to keep up the appearance of propriety, so it’s interesting that this fits that mold.
Are the Senior Partners of W&H members of the California Bar?
I don’t see why they couldn’t be. California is one of the few states that still allows people to take the bar after a period of law office study, so the senior partners wouldn’t even have to go to law school. Alternatively, since they’re probably immortal, they might have been grandfathered in by being admitted to the bar before the formal admissions requirements were instituted.
Not sure how this works in practice, but if the California bar keeps tabs on when people were admitted, wouldn’t it be a kind of dead giveaway if the partners have been members of the bar since its inception in 1850, or however long ago it happened to be? And I’m sure a 150 year bar membership would raise at least a few eyebrows, no?
Given that this is the Buffyverse, it’s entirely possible that the bar has noticed a 150 year membership and simply doesn’t care.
While the Buffyverse does assume something of a masquerade is going on, at several points it is made clear that those with a reason to know do know about what’s going on. Professional associations for professions where a century-plus long career is feasible, (such as law), likely know that there are non-humans/not quite humans with extremely long lifespans, (even if they don’t know the details).
If the Senior Partners have been practicing law longer than the California Bar Association has existed, they most likely sit on some of the rule making committees to prevent anyone from questioning how long they’ve been practicing.
I don’t think the Senior Partners ever actually took the bar; they are immortal Demon Lords who are very skilled at drafting contracts with tiny fine print, finding loopholes in laws and contracts and getting people to do what they want. Given that their law firm has been operating in California before it was a U.S. state (and possibly before Mexican independence), they are skilled at faking the paperwork needed to keep themselves in good standing. They certainly had no problem giving Gunn fake legal credentials. to go along with his artificially implanted legal knowledge.
If Wolfram & Hart wanted the CA Bar Association’s advisory opinion, I’m sure W&H would have given it to them.
This is Wolfram and Hart, they could create fraud documentation for him if needed. Additionally, I think it acted more like a PR firm than anything, which hired lawyers to work out the legal aspects of the services they provided their clients. That’s why they also had an entertainment division and sciences division. In that case, it would have a CEO and he wouldn’t need to be certified. Just a theory.
I don’t recall Gunn taking and passing the bar when he was ‘uplifted’ to Super Attorney status. But my main answer to this is that W&H KNOW that the apocalypse is here now, therefore it really doesn’t matter so why go to the trouble?
Does W&H count as a law firm. It makes more sense if its an organisation which is mainly just known for its legal department(?) sine it has other departments, that I wouldn’t think are part of law firms, like entertainment (Lorne) science (Fred) History/mysticism (Wesley)
Pretty much any organization that offers legal services counts as a law firm. From the Model Rules: “Firm” or “law firm” denotes a lawyer or lawyers in a law partnership, professional corporation, sole proprietorship or other association authorized to practice law; or lawyers employed in a legal services organization or the legal department of a corporation or other organization.
Offering other services delivered by non-lawyers (e.g. accounting, consulting) is difficult to do in the US. Many other countries don’t have that limitation, and so multi-disciplinary partnerships (MDPs) can legally exist there. So those other services that Wolfram & Hart offers would (in reality) probably actually be offered by a separate organization that had a referral agreement with W&H rather than everything being under one roof.
Alternative theory: Wolfram & Hart’s legal department is actually just in-house counsel for a more diverse corporation.
After reading this, a thought struck me. Perhaps the Senior Partners are the Bar in California. If so, then they could allow anyone they wanted. They could also draw up any document needed anytime.