A Best Practices Guide for the Compliance Lawyer in an Alternative Business Structure (ABS)

Every licensed Alternative Business Structure (ABS) in Arizona must designate a Compliance Lawyer—an active State Bar of Arizona member in good standing—responsible for ensuring that the ABS complies with the Arizona Rules of Professional Conduct, the Arizona Code of Judicial Administration (ACJA) § 7-209, and all applicable Supreme Court orders.

Compliance Lawyer Qualifications

• An active member in good standing of the State Bar of Arizona or authorized to practice law.
• Be a manager, employee, or independent contractor of the ABS with Decision-making Authority;
• Possess credentials and experience in the legal field to ensure that ethical obligations, protection of the public, and standards of professionalism are adhered to.
• Not have been reprimanded or admonished in any jurisdiction, or be subject to the foreign jurisdiction’s equivalent of such, in the past 5 years;
• Not have been disbarred or subject to disciplinary suspension in any jurisdiction during the past 10 years;
• Consent to designation as Compliance Lawyer

Compliance Lawyer Core Duties

1. Oversight
• Ensure all lawyers maintain independent professional judgment and protect client confidentiality.
• Safeguard against conflicts of interest and ensure client matters are handled diligently and competently.
• Ensure compliance by lawyers, Authorized Persons and others employed, associated with, or engaged by the ABS with regulatory requirements and the ethical and professional responsibilities of lawyers.
• Mandatory reporting to the State Bar of Arizona of any facts or matters reasonably believed to be a substantial breach of the regulatory requirements of this code or the ethical and professional obligations of lawyers
2. Policy & Procedure Development
• Implement documented systems for:
• Conflict checks.
• Client intake with signed engagement agreements before opening files or billing.
• Trust accounting safeguards.
• Advertising and marketing review for compliance with ER 7.1 and 7.3.
• Clear calendaring and deadline controls.
• Regular staff and nonlawyer owner training
• Fee reasonability reviews in compliance with ER 1.5
3. Semi-Annual Compliance Audits
• Conduct and document audits in accordance with ACJA § 7-209(K), reviewing operations in file management, communications, financial integrity, and advertising.
• Retain records of audit results and corrective actions.
4. Advertising & Client Communication Review
• Do not run ads that conflate trade names, misstate experience, or obscure who will actually handle a client’s case.
• Disclose in all advertising and engagement agreements if work will be performed by co-counsel, the nature of that arrangement, and the division of fees and responsibilities.
• Avoid exaggerated or unverifiable claims (“we will win your case,” “decades of experience” if not accurate).
• Ensure websites, TV spots, and online platforms are consistent, accurate, and approved before use.
5. Co-Counsel & Fee Sharing Transparency
• Engagement letters must clearly explain who will perform the substantive legal work, each firm’s responsibilities, and how fees will be divided in compliance with ER 1.5(e).
• Verify that all co-counsel arrangements meet the requirements of each jurisdiction in which clients are served.
6. Responding to Oversight
• Act as the ABS’s primary point of contact for the Arizona Supreme Court Certification & Licensing Division, the ABS Committee, and the State Bar.
• Respond fully and on time to audit requests, investigations, and any follow-up inquiries.
• Take immediate corrective action when violations or gaps are identified.

Lessons Learned

To date, two Alternative Business Structures have been subject to public disciplinary action:  https://www.azcourts.gov/Portals/0/101/2024/Legal%20Help%20Partners%20PLLC%20PDJ%202024-9035.pdf

https://www.azcourts.gov/LinkClick.aspx?link=101%2f2024%2fEsquire+Law%2c+LLC+PDJ+2024-9078__.pdf

The lessons learned from these actions give us some best practices guidance for Compliance Lawyers of an Alternative Business Structure :

• Avoid national or multi-state advertising that could mislead Arizona consumers about the firm’s identity or the location of its lawyers. Ensure the accuracy and completeness of advertising disclosures.
• Do not delegate Arizona client matters to lawyers lacking Arizona licensure or supervision by Arizona-licensed attorneys.
• Prohibit the use of outside vendors to run advertising without strict oversight and content approval.
• Be aware of the contents of the engagement letter or fee agreement and who is responsible for signing it, including the required co-counsel details. Include in your fee agreement the name and contact information of the compliance lawyer.
• Be familiar with fee distribution processes and ensure the necessary look back under ER 1.5.
• Ensure that and know how conflict checks are performed
• Understand the legal operations of the ABS including all aspects from intake, billing and distribution of funds. Create clear guidelines on the necessity for intake representatives to offer potential clients to speak with an attorney before signing and/or failure to understand
• Understand the processes regarding referring cases out to other lawyers, including whether those lawyers are licensed and check their discipline records.
• Don’t allow non-attorney staff to make legal determinations beyond the scope of their role. Engage in adequate supervision of inexperienced attorneys and staff.
• Supervise the timeliness and adequacy of client communications and file handling. Ensure that non-attorney staff are not mistaken for attorneys in communications with clients.
• Ensure that all lawyers are making decisions in the best interest of clients.
• Train all personnel to maintain confidentiality

Keep in mind the ABS objectives of : (A) protecting and promoting the public interest; (B) promoting access to legal services; (C) advancing the administration of justice and the rule of law; (D) encouraging an independent, strong, diverse, and effective legal profession; and (E) promoting and maintaining adherence to professional principles.

The above information is not meant to be an exhaustive list of responsibilities for Compliance Counsel.  Choosing to be the designated Compliance Lawyer for an Alternative Business Structure should not be undertaken lightly.

Practice 2.0 Helpline – For guidance on best practices in ABS compliance or law practice management, call the State Bar of Arizona Practice 2.0 Helpline at (602) 340-7332.