(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:
(1) an agreement by a lawyer with the lawyer’s firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer’s death, to the lawyer’s estate or to one or more specified persons;
(2) a lawyer who undertakes to complete unfinished legal business of a deceased lawyer may pay to the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer;
(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement; and
(5) a lawyer may share legal fees as otherwise provided in Rule 7.2(c)(13).
(b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.
(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.
(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for 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.
The Louisiana Supreme Court adopted this rule on January 21, 2004. It became effective on March 1, 2004. The Louisiana Supreme Court amended this Rule effective September 30, 2011, to change the cross-referenced rule to 7.2(c)(13).
This rule differs from ABA Model Rule of Professional Conduct 5.4 (2002) in two respects. First, paragraph (a)(2) omits any reference to ABA Model Rule 1.17, which addresses the sale of a law practice. Because the Louisiana Rules of Professional Conduct do not permit the sale of a law practice, the use of different language was necessary.
Second, paragraph (a)(4) of this rule is “Reserved.” The corresponding paragraph of Model Rule 5.4, in contrast, provides that “a lawyer may share court-awarded legal fees with a nonprofit organization that employed, retained or recommended employment of the lawyer in the matter.” Compare Model Rules of Prof’l Conduct R. 5.4(a)(4) (2002) with La. Rules of Prof’l Conduct R. 5.4(a)(4) (2004) (“Reserved”). The ABA included this language in the corresponding Model Rule largely because such fee-sharing arrangements were upheld in Formal Opinion 93-374 of the ABA Standing Committee on Ethics and Professional Responsibility. The ABA adopted this rule because some state ethics committees, while agreeing with the policy underlying the ABA Opinion, found violations of state versions of Model Rule 5.4 because the text of the Rule appeared to prohibit such fee-sharing. In adopting this paragraph, the ABA agreed with its Standing Committee on Ethics that the threat to independent professional judgment was less than in circumstances involving for-profit organizations. See ABA Ethics 2000 Commission Revision Notes to Model Rule 5.4 (2002).
For these same reasons, the LSBA recommended adoption of ABA Model Rule 5.4(a)(4). The Louisiana Supreme Court, however, declined to adopt this paragraph. The court’s decision should have little effect on local bar association lawyer-referral services because Louisiana Rule of Professional Conduct 7.2 permits Louisiana lawyers to pay the “usual, reasonable and customary charges of a lawyer referral service operated by the Louisiana State Bar Association, any local bar association, or any other not-for-profit organization,” provided that the lawyer referral service: (1) refers all persons who request legal services to a participating lawyer; (2) prohibits lawyers from increasing their fee to a client to compensate for the referral service charges; and, (3) fairly and equitably distributes referral cases among the participating lawyers, within their area of practice, by random allotment or by rotation. La. Rules of Prof’l Conduct R. 7.2(b) (2004); see also Model Rules of Prof’l Conduct R. 7.2(b)(2) (2002).
Comments to ABA Model Rule 5.4
 The provisions of this Rule express traditional limitations on sharing fees. These limitations are to protect the lawyer’s professional independence of judgment. Where someone other than the client pays the lawyer’s fee or salary, or recommends employment of the lawyer, that arrangement does not modify the lawyer’s obligation to the client. As stated in paragraph (c), such arrangements should not interfere with the lawyer’s professional judgment.
 This Rule also expresses traditional limitations on permitting a third party to direct or regulate the lawyer’s professional judgment in rendering legal services to another. See also Rule 1.8(f) (lawyer may accept compensation from a third party as long as there is no interference with the lawyer’s independent professional judgment and the client gives informed consent).
Fee Sharing and Business Associations With Nonlawyers
This rule exists to ensure that the independent judgment a lawyer exercises as a loyal professional is not affected by relationships with nonlawyers. See, e.g., ABA Comm. on Ethics and Prof’l Responsibility, Formal Op. 87-355 (1987). To this end, paragraph (a) prohibits a lawyer from sharing fees with nonlawyers except under limited circumstances. See La. Rules of Prof’l Conduct Rule 5.4(a) (2004); see also Restatement (Third) of the Law Governing Lawyers § 10(3) (2000). For example, this rule prohibits a lawyer from sharing with a paralegal firm 40% of the legal fees earned in a personal injury matter. See In re Watley, 802 So. 2d 593 (La. 2001); see also In re Garrett, 12 So.3d 332 (La. 2009); In re Jackson, 1 So.3d 454 (La. 2009);. Likewise, in the matter of In re Guirard & Pittinger, 11 So. 3d 1017, 1026 (La. 2009), the Louisiana Supreme Court imposed the sanction of disbarment because nonlawyers:
were paid by a commission method of compensation based upon the gross attorney’s fees of a particular file and not the firm’s net profits. The record also indicate[d] that the firm’s office manager and at least one secretary of the firm were paid commissions on the firm’s gross legal fees collected on various cases.
Paragraph (b) prohibits a lawyer from forming a business association with nonlawyers for purposes of practicing law. See La. Rules of Prof’l Conduct Rule 5.4(b) (2004); see also Restatement (Third) of the Law Governing Lawyers § 10(2) (2000). Lawyers are, of course, free to enter into business associations with nonlawyers for purposes other than practicing law. As to what constitutes the “unauthorized practice of law” in Louisiana, see infra Annotations to Louisiana Rule 5.5.
Independent Professional Judgment and Nonlawyer Payers and Employers
Paragraph (c) of this rule admonishes a lawyer to ensure that a person who “recommends, employs, or pays” the lawyer does not “direct or regulate the lawyer’s professional judgment” in rendering legal services on behalf of a client. La. Rules of Prof’l Conduct R. 5.4(c) (2004). This paragraph, in conjunction with Rule 1.8(f) (which prohibits lawyers from accepting compensation from a nonclient when doing so would interfere with the lawyer’s independent judgment), prohibits a lawyer from, for example, relegating to an insurance company adjuster the task of deciding how the lawyer is to defend an insured under a liability insurance policy. Rule 5.4(c) also prevents a lawyer from reducing a criminal defendant’s bond at the direction of a bail bonding company without defendant’s consent. See In re Fazande, 23 So. 3d 247, 252 (La. 2009).
Fee Sharing With Unlicensed Lawyers
Rule 5.4 prohibits the sharing of legal fees with unlicensed lawyers. For example, a lawyer who has resigned from the practice of law is not a “lawyer” eligible to share legal fees under this rule and Rule 1.5(e). See Phillips v. Rowe, 499 So. 2d 208 (La. Ct. App. 2d Cir. 1986).
Sharing Office Space with Nonlawyers
Technological improvements have allowed lawyers to practice in nontraditional settings. From homes to beaches to shared office suites, lawyers can get more and more work done without secretaries, dictaphones and law libraries. As to shared office suites, choices in Louisiana are ever increasing (Regus Virtual Office and LaunchPad are just two examples).
What ethical issues arise when lawyers take advantage of shared office space? The Louisiana State Bar Association Rules of Professional Conduct Committee addressed these issues in a public advisory opinion entitled “Sharing Office Space with Non-Lawyers.” LSBA Public Op. 08-RPCC-017 (2008). The take away is this: lawyers may share office space with nonlawyers, but must (1) assure confidentiality, professional independence, and (2) must avoid assisting in the unauthorized practice of law, avoid improper business transactions with clients and avoid solicitation and paid referrals.
As to confidentiality, a lawyer must avoid disclosure of confidential information at “leak points” such as shared printers, copiers and fax machines. Lawyers should avoid using shared paper file storage areas (they should probably avoid paper file storage). Lawyers should use great care employing, and then must adequately train, any support staff as to handling confidential information. See Louisiana Rule 5.3.
As to professional independence, a lawyer who exchanges legal services for “free” office space must avoid providing “free” legal services to clients of the landlord/lessor, and must not allow the landlord/lessor to offer “included” legal services to other tenants. Also, the lawyer must not take client- or case-related instructions from the lawyer’s landlord/lessor. This conduct also could be construed as assisting the unauthorized practice of law.
As to solicitation and paid referrals, a lawyer must not offer services in-person to other tenants. Moreover, a lawyer must not “kick back” some portion of fees received from clients referred by the landlord/lessor or co-tenants in the space.
Finally, as to engaging in business transactions with clients, a lawyer must be mindful that there are particular hoops through which the lawyer must jump if the lawyer decides to engage in business transactions with any co-tenants or with the landlord/lessor who are also the lawyer’s clients. See Louisiana Rule 1.8(a). The term “business transactions” could include loans, service exchanges or partnerships, among other transactions.
Assuming the lawyer is mindful of these issues, office sharing with nonlawyers is permissible.
In cases involving violations of Rule 5.4(a), 5.4(b) and 5.4(d), absent aggravating or mitigating circumstances, the following sanctions are generally appropriate: disbarment, when the lawyer knowingly engages in conduct that is a violation of a duty owed to the profession with the intent to obtain a benefit for the lawyer or another, and causes serious or potentially serious injury to a client, the public, or the legal system; suspension, when the lawyer knowingly engages in conduct that is a violation of a duty owed to the profession, and causes injury or potential injury to a client, the public, or the legal system; reprimand, when the lawyer negligently engages in conduct that is a violation of a duty owed to the profession, and causes injury or potential injury to a client, the public, or the legal system; and, admonition, when the lawyer engages in an isolated instance of negligence that is a violation of a duty owed to the profession, and causes little or no actual or potential injury to a client, the public or the legal system. See ABA Stds. for Imposing Lawyer Sanctions stds. 7.0-7.4 (1986).
In cases involving violations of 5.4(c), absent aggravating or mitigating circumstances, the following sanctions are generally appropriate: disbarment, when the lawyer without informed consent undertakes representation of a client when he knows that doing so presents a conflict of interest, the lawyer intends to benefit himself or another, and the lawyer causes serious or potentially serious injury to the client; suspension, when the lawyer knows of a conflict of interest, does not fully consult with the client about it, and the lawyer causes injury or potential injury to the client; reprimand, when the lawyer is negligent in determining whether a conflict exists, and the lawyer causes injury or potential injury to the client; and, admonition, when the lawyer engages in an isolated instance of negligence in determining whether the representation may present a conflict of interest, and the lawyer’s conduct causes little or no actual or potential injury to the client. See ABA Stds. for Imposing Lawyer Sanctions std. 4.3 (1992).
This page was updated on August 6, 2013.
 Note also that a fee-sharing contract made in violation of Rule 5.4 is null and void. See In re Watley, 802 So. 2d 593, 594 n.2 (La. 2001); “We the People” Paralegal Servs., LLC v. Watley, 766 So. 2d 744 (La. Ct. App. 2d Cir. 2000).
 Similarly, paragraph (d) prohibits a lawyer from entering into a for-profit business enterprise with nonlawyers if any nonlawyer is an owner, director, or officer of the enterprise or otherwise has the right to “direct or control the professional judgment of a lawyer.” La. Rules of Prof’l Conduct R. 5.4(d) (2004); see also Restatement (Third) of the Law Governing Lawyers § 10(2) (2000); id. § 10(1) (“[A] non-lawyer may not be empowered to or actually exercise the right to direct or control the professional activities of a lawyer in the firm.”).