Concept
Unrelated Business Activities
Law-related services and when the Rules of Professional Conduct apply (Rule 5.7(a))
Unrelated Business Activities
Holding a law license does not make every venture a lawyer undertakes a professional one. Rule 5.7 reaches a lawyer's conduct through the provision of law-related services, as defined in paragraph (b), and a business that never qualifies as a law-related service stays outside it.1 Lawyer activity therefore falls into three groups: the practice of law itself, law-related services, whose coverage turns on how closely the lawyer ties them to the practice, and unrelated businesses. The last group is so plainly disassociated from the practice of law that any reasonable observer would regard it as ordinary commerce, to which professional ethics standards have no logical or direct application.2 The earlier sections drew the inner boundary of Rule 5.7 by asking what counts as a law-related service. The unrelated business marks the outer boundary.
The test looks at what the business is and also at how the lawyer runs it. When a lawyer owns or operates a business that is wholly unrelated to the practice of law, by its nature and by its operation, the ethics rules that apply only to a lawyer in a professional capacity have no application to that business.3 A lawyer who owns a restaurant therefore extends no confidentiality protection to dinnertime conversations, owes diners no duty of loyalty, and need not bring the restaurant's advertising within the restrictions on lawyer advertising. The same is true of a hotel, a clothing store, a car dealership, or a construction company. A consumer who patronizes any of them does not expect professional ethics standards to govern the transaction.4
Those results follow from the reason lawyer-specific duties exist. Confidentiality, loyalty, and the limits on advertising protect people who deal with a lawyer as a lawyer. A diner buying dinner has confided nothing to the owner in a professional capacity, has sought no legal counsel, and chose the restaurant for its menu. Applying lawyer-specific rules there would burden the owner without protecting anyone's reasonable expectations. If a lawyer owns or operates an independent non-legal business and keeps it scrupulously separate from the legal practice, the customers of that business are not the beneficiaries of an attorney-client relationship.5 Separateness has to be real, because a second storefront with a different name does not do the work by itself. A lawyer who keeps one office labeled 'law office' and another labeled 'tax preparation service' is still regarded as practicing law in both places.6 The next section takes up that problem.
Suppose the lawyer stops serving the public and runs the same restaurant as the in-house cafeteria for the lawyer's own law firm. Professional responsibilities return, because the lawyer has taken an ordinarily unrelated activity and connected it directly to the law practice.7 The lawyer must now ensure that the people employed in the restaurant understand the need to maintain confidentiality about the legal subjects the firm's lawyers discuss while eating there.8 The exemption rested on the absence of any link between the business and legal work. Once client matters are discussed on the premises, the duty of confidentiality has something to protect. The kitchen, the owner, and the menu are unchanged, and the connection to the practice is the only fact that moved. An exam stem that ties an ordinary business directly to the law practice, as the cafeteria does, signals that 'unrelated business' no longer fits.
The homeowner stands where the restaurant's diners stand. No attorney-client relationship exists, and the lawyer owes that customer none of the lawyer-specific duties. The gutter business is not a law-related service, so Rule 5.7 does not apply to it either.
The estate-planning client stands elsewhere. Even when the matter is wholly unrelated to the practice of law, a lawyer who enters a business transaction with a person who is also a legal client must satisfy the business-transaction rule, Rule 1.8(a).9 The lawyer must ensure that:
- the transaction and its terms are fair to the client;
- the client is fully informed of the terms in writing;
- the client has an opportunity to obtain independent legal counsel; and
- the client consents in writing.
The client's trust in the lawyer, built in the legal relationship, travels into the deal. The lawyer who sells an interest in a business holds an interest that can diverge from the buyer's. The non-legal subject matter does nothing to remove that exposure. The usual exam error is to reason that because the business is unrelated, the lawyer owes nothing to a client who deals with it.
The third customer shows the floor beneath all of this. A lawyer remains bound whether acting in a professional, business, or personal capacity, and Rule 8.4 prohibits conduct involving dishonesty, fraud, deceit, or misrepresentation, and criminal acts that reflect adversely on honesty, trustworthiness, or fitness as a lawyer.10 The false bill is a misrepresentation, so the lawyer faces discipline even though no attorney-client relationship exists with that customer. Confidentiality and loyalty depend on someone's reliance on the lawyer's professional role, which is why they stay at the law office when the business is unrelated. The prohibitions on dishonesty and on criminal acts reflecting on fitness protect everyone, and they rest on the lawyer's fitness to practice, which does not change when the lawyer changes hats.