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June 1, 2017
Court dismisses Bar’s overhaul of LRS rules

Opts instead for discussions with the Bar and matching service providers

By Gary Blankenship
Senior Editor

The Supreme Court has dismissed without prejudice The Florida Bar’s proposed massive rewriting of lawyer referral service rules and instead said it wants to have “informed discussions” with the Bar and other interested parties.

Quote The court heard oral arguments on April 5 on the Bar’s amendments seeking to broaden the definition of lawyer referral services to “qualifying providers,” which would include any for-profit entity that seeks to link consumers with lawyers for legal services.

The board had not included in its submission a rule requiring that all for-profit referral services be owned or managed by Bar members, something the court had ordered the Bar to do in September 2015 when it rejected an earlier rewrite of referral service rules.

The court issued its new order on May 3, noting that it had “directed the Bar to propose [rule] amendments that ‘preclude Florida lawyers from accepting referrals from any lawyer referral service that is not owned or operated by a member of the Bar.’ In this case, the Bar proposed amendments to Rule 4-7.22 that do not comply with the court’s direction concerning lawyer referral services that are not owned or operated by a member of the Bar and that seek to expand the scope of the rule to include ‘matching services’ and other similar services not currently regulated by the Bar.

“The court having considered the Bar’s prior petition, the amendments proposed in this case, the comments filed, the Bar’s response, and having had the benefit of oral argument, the Bar’s petition in this case is hereby dismissed without prejudice to allow the members of this court to engage in informed discussions with the Bar and those who are in favor or against the proposed regulation of matching and other similar services. The court lacks sufficient background information on such services and their regulation at this time.”

The court’s action was welcomed by Board of Governors member Carl Schwait, chair of the Board Review Committee on Professional Ethics, who oversaw the writing of the Bar’s proposed rules and represented the Bar in the April oral arguments.

“I’m pleased,” he said. “Having participated in the oral argument, it was obvious that there were many questions to be answered that could not be done in the realm of 15 minutes for the Bar.

“I take it as a very positive step that the Supreme Court and the participants in the oral argument will have a fruitful conversation on the many and diverse issues.”

He said by dismissing the case, the justices can now talk with interested parties in a less formal setting than an oral argument and with more time to explore the issues.

“It’s a good outcome because it gives us a free conversation outside the stilted appellate process,” Schwait said.

Josh King, general counsel for Avvo who argued against the proposed Bar rule during oral arguments, also praised the court’s action.

“We’re happy with the order; the Bar was attempting to address something other than the issue presented, and the court rightly rejected it,” King said. “And as I told the Supreme Court at oral argument, we are happy to provide input on developments in online legal marketing, what we’ve seen regulators do in other states, and anything else that would be helpful to ensuring that The Florida Bar Rules of Professional Conduct enable robust access to information and innovative legal services, while still protecting the public.”

Tim Chinaris, who appeared at the oral arguments on behalf of the referral service 1-800-411-PAIN, welcomed the proposed discussion.

“The court’s willingness to study this matter more closely is a positive step,” he said. “Although we continue to believe that the current rules do apply to online services that connect potential clients with lawyers, we are not opposed to reasonable amendments designed to clear up any confusion. We also support reasonable rule amendments that would benefit the public by encouraging competition among legal service providers while protecting against deceptive advertising practices. We look forward to participating in the discussion with the court.”

“On behalf of the Broward County Bar Association, we were very pleased with the court’s order. They did exactly what they should have done, which is refuse any change to the rules until they have adequate facts and presentations before them,” said BCBA President Charles Morehead, who argued against the amendments at oral arguments and said the Bar should have followed the court’s direction to require lawyer ownership or management of private referral services.

“They obviously decided they wanted to vet this issue themselves and start over,” he added. “We’ve already written the Bar and asked to be included in the committee that’s set up to do this in accordance with the order.”

Schwait explained the drastic revisions in the Bar’s proposed rules in the year after the court’s September 2015 order, as the Bar realized the legal marketplace was dramatically changing.

In addition to traditional for-profit lawyer referral services, such as 1-800-ASK-GARY and 1-800-411-PAIN, typically advertising on TV, radio, and billboards, companies such as LegalZoom, RocketLawyer, and Avvo, among others, were using the internet to connect lawyers with consumers.

“By the time this year came, the 2015 oral argument [that led to the court’s order in September 2015] was outmoded, because in 2015, no one talked about online providers,” Schwait said.

The court’s action also frees the Bar through the BRCPE to address two questions related to referral operations, including by Avvo. One question was posed by a lawyer asking whether a referral service can charge a fee for each case referred — sometimes called a “pay-per-lead” system — and whether that fee can vary depending on the type of case referred. The lawyer has asked the Bar whether the service complies with Bar rules about fee-splitting. The BRCPE had postponed considering the issue at the March Board of Governors meeting because of the case pending before the Supreme Court.

The committee will also consider a question posed by Chinaris, on behalf of a Bar member, on whether the Avvo Advisor program is a lawyer referral service under Bar rules and must therefore comply with Bar rules. The service offers a 15-minute consultation for $39, of which the company receives $10 as a “marketing fee.” Inquiring consumers get a list of participating lawyers from which they can choose or they can “have Avvo choose the lawyer for them.”

At the oral argument, Avvo’s King argued that the company’s matching services are not a referral service but rather a directory that allows consumers to identify lawyers who can help them with their problems. He said the $10 that Avvo gets from a $39 charge is not a fee split prohibited by Bar rules, but rather a marketing fee, and paying it does not in any way compromise the independent judgment of the lawyer, which is the intent of the fee-splitting prohibition.

[Revised: 01-10-2018]