The State Bar of Texas, Austin. (Photo: ALM)

A controversial measure that would allow law firms to use trade names in Texas is moving forward.

On Wednesday, the State Bar of Texas Committee on Disciplinary Rules and Referenda approved a revision of Rule 7.01(c) of the Texas Disciplinary Rules of Professional Conduct that explicitly allows firms to use trade names and sent it to the bar's board of directors. The committee's decision means lawyers in the state may be able to vote on the issue next year.

"Lawyers may practice under a trade name that is not false or misleading," the proposed rule change reads. The prior rule did not permit the use of trade names.

Lewis Kinard, the chair of the CDRR, said the committee unanimously agreed to tweak the language in the rule to allow trade names that are not false or misleading. Progress of the measure is now up to the bar's board.

"If they like it, then they will send it to the Supreme Court, then petition the court to [set] a vote of the membership," said Kinard, who is also general counsel for the American Heart Association in Dallas.

According to Texas rules, the board has 120 days from submission of the proposal to approve or reject the rule change, or return it to the committee for further consideration.

Randall Sorrels, president of the State Bar of Texas, said a referendum on the trade names rule change, and other proposed rule changes, is unlikely to be scheduled until 2021 due to logistics and the disruption caused by the coronavirus pandemic. Kinard also said he does not expect a vote until next year.

Sorrels, a partner at Abraham, Watkins, Nichols, Sorrels, Agosto & Aziz in Houston, said the proposal to allow trade names is consistent with other rules governing ethical obligations.

"It can't be misleading. That's the most important thing," Sorrels said.

The use of trade names for firms has been a controversial issue in Texas and elsewhere around the country.

In January, a Utah firm known as LawHQ filed lawsuits against Texas and eight other states, alleging that wholesale prohibitions on the use of trade names for firms is unconstitutional and should be abolished.

The Texas suit, filed in U.S. District Court for the Western District of Texas, is on hold. On March 20, U.S. District Judge Robert Pitman granted a joint motion putting the litigation in abeyance because Texas is considering the rule amendment that would make the lawsuit moot.

Rebecca Evans, general counsel of LawHQ in Salt Lake City, did not immediately respond to a call seeking comment.

The proposed revisions to Rule VII, which regulates communications lawyers make to obtain professional employment, have been years in the making.

The CDRR has been working on a package of proposed changed to Rule VII since 2018, and a few months ago it sent a recommendation to the bar board, which included a rule maintaining the prohibition against trade names.

But in January, the bar board voted to return the proposal to the committee for additional consideration, specifically related to the possibility of amending the proposed rules to "be consistent" with the majority of other states in connection with trade names.

That reconsideration led to Wednesday's amendment, which explicitly allows trade names.

Texas lawyers are divided about the use of trade names, Kinard said, although he said "most people at least realize it can't be stopped." A number of lawyers on either side of the issue submitted written comments to the CDRR.

Houston trial lawyer Steve Waldman of Sandoval & Waldman expressed his support for trade names in a comment he submitted March 5. He wrote that the extensive use of domain names and inroads into the Texas legal market by national and international law firms has "reformatted" the practice of law.

"We can operate on the same principles as banks and other financial institutions. There is nothing misleading about a trade name per se. And a law firm name that incorporates the names of lawyers from others states or countries is a trade name," Waldman wrote.

But Houston lawyer Michael Sanders, of Sanders LLP, expressed strong concern in a written comment March 2, arguing that the use of trade names "cheapens the profession" and is misleading.

"We do not need the people choosing lawyers based upon who came up with the best trade name," Sanders wrote.

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Do Trade Names 'Cheapen' the Profession? Texas Lawyers to Debate Rule Change