## Facts

- The Ohio Supreme Court’s Board of Commissioners on Grievances and Discipline issued a formal advisory opinion addressing ethical questions that can arise when the purchase or sale of a business involves “law-related services” connected to a lawyer or law firm.
- One scenario involved a law firm helping a client locate a buyer or seller for a business and seeking compensation based on a percentage of the transaction price.
- Another scenario asked whether a law firm could share its compensation with a nonlawyer business broker that helped locate a buyer or seller for the firm’s client.
- Another scenario involved a lawyer introducing a buyer or seller to a lender and seeking compensation from the lender based on the loan amount.
- Another scenario involved an investment group asking a lawyer to locate a seller; the lawyer then wanted to represent the seller in the sale while also receiving a percentage-based payment from the investment group.
- A final scenario involved a law firm’s desire to establish an ancillary business to locate buyers and sellers, with the ancillary business charging fees based on transaction prices.
- The Board acted in an advisory capacity, giving ethics guidance rather than resolving a dispute between parties in a litigated case.

## Issues

1. What professional-conduct limits apply when an Ohio lawyer or law firm provides buyer/seller location services connected to a business sale and seeks a fee based on a percentage of the transaction price?
2. May a lawyer or law firm divide or share compensation with a nonlawyer business broker who assists in locating a buyer or seller for the lawyer’s client?
3. May a lawyer accept compensation from a lender, based on the loan amount, when the lawyer introduces a buyer or seller to that lender in connection with the client’s transaction?
4. May a lawyer represent a seller in a business sale while also receiving percentage-based compensation from an investment group that engaged the lawyer to locate the seller?
5. May a law firm form an ancillary business that provides buyer/seller location services and charges transaction-based fees, and what ethics rules govern the lawyer’s involvement in that structure?

## Decision

- The Board addressed the described business-sale scenarios as “law-related services” and analyzed them under the Ohio lawyer-ethics framework governing fee arrangements, lawyer independence, conflicts of interest, third-party involvement, and communications about services.
- The Board explained that Ohio’s restrictions on sharing legal fees with nonlawyers limit arrangements in which a nonlawyer broker receives compensation that is tied to, or functions as, a division of a lawyer’s fee or the value of a legal engagement.
- The Board treated percentage-based compensation in a transaction setting as raising conflict-of-interest concerns because the lawyer’s financial interest in closing the deal or increasing the deal value may affect professional judgment; the lawyer must evaluate whether the representation is materially limited and, if so, whether the conflict can be addressed under the consent rules.
- The Board explained that accepting compensation from a lender (or other third party) in connection with a client’s transaction brings third-party-payor and loyalty concerns into play and requires safeguards to protect client confidentiality and the lawyer’s independent judgment.
- The Board explained that a lawyer’s role in locating a seller for an investment group and then representing that seller while being paid by the investment group presents divided-loyalty risks that require conflict analysis and careful attention to who the lawyer represents and who is paying the lawyer.
- The Board stated that lawyers may be involved in ancillary businesses providing law-related services, but the lawyer must structure the relationship to avoid misleading clients about whether services are legal services and must treat the lawyer’s financial interest in the ancillary business as relevant to conflict and client-protection rules.

## Legal Principles

- A formal ethics opinion issued by the Ohio Supreme Court’s Board of Commissioners on Grievances and Discipline provides advisory guidance; it is not a judgment in an adversarial lawsuit.
- Ohio’s professional-conduct rules restrict sharing legal fees with nonlawyers, and lawyers may not use labels or business structures to disguise a prohibited division of fees or improper payments for recommendations.
- A lawyer’s financial interest in a transaction (including compensation measured by transaction value or financing amount) can create a conflict of interest by materially limiting the lawyer’s independent professional judgment; conflicts must be analyzed under the applicable consent and disclosure standards.
- When a third party pays or offers to pay a lawyer in connection with a client matter, the lawyer must protect the client’s confidentiality and loyalty and must prevent the payor from directing or regulating the lawyer’s professional judgment; client consent may be required depending on the arrangement.
- When a lawyer operates, owns, or participates in a separate business providing law-related services, the lawyer must avoid client confusion about the nature of the services and must evaluate conflicts and other client-protection duties arising from the lawyer’s ownership or financial interest.
- Where a lawyer’s compensation arrangement or side business gives the lawyer a stake in the client’s deal, the lawyer must ensure the arrangement is consistent with lawyer-ethics limits on conflicts, professional independence, and client communications.

## Conclusion

Formal Opinion Number 2003-1 is an Ohio advisory ethics opinion that considers how lawyer-ethics rules apply when lawyers or law firms take on buyer/seller location roles in business transactions, seek transaction-based compensation, interact with brokers and lenders, and consider ancillary businesses; the opinion explains that nonlawyer fee-sharing limits, conflicts rules, third-party-payor safeguards, and clear client communications govern these arrangements.


Formal Opinion Number 2003-1, 2003 WL 1947992 (2003)