Avvo, RocketLawyer, LegalZoom programs raise questions
By Gary Blankenship
An expansive report on lawyer referral services may include guidance for Bar members on dealing with nonlawyer, for-profit legal services companies that are seeking to match lawyers and consumers outside of the existing referral service model.
At a joint meeting of the Board Review Committee on Professional Ethics and the Board of Governors Technology Committee on February 25, members ordered a variety of potential rule and comment amendments to consider at its March 3 meeting (as this News went to press).
At issue is Bar Rule 4-5.4, which prohibits splitting legal fees with nonlawyers, and Rule 4-7.22, which regulates lawyer referral services. The Bar has defined fee splitting in those rules and proposed comments pending at the Supreme Court as anytime there is a fee-per-case arrangement or a fixed charge per accepted case with a private company. Fee splitting is allowed with the Bar’s and local bar nonprofit referral services.
Private companies say they are not splitting fees but rather are levying marketing, advertising, or matching charges.
Bar Ethics Counsel Elizabeth Tarbert told the two committees that fee splitting rules date back to 1928 ABA canons and have been part of Florida Bar rules since its inception. The impetus behind the rules is to prohibit any activity that could impinge a lawyer’s independent professional judgment and loyalty to the client. The prohibition also limits incentives for nonlawyers to improperly solicit cases or engage in the unlicensed practice of law.
John Stewart, chair of the Technology Committee, said he worked on one rule amendment that would modify the absolute prohibition in Rule 4-5.4. “It would basically say it would be a prohibition only to the extent there was a direction or regulation or influence on the lawyer’s professional judgment, which would be improper,” he said.
Board member Scott Westheimer said the Bar has to answer the “threshold” question of whether paying a marketing or matching charge to one of the new companies actually constitutes a splitting of fees.
“If you decide it’s not, it’s sort of irrelevant,” he said. But he noted, “Don’t we start down the slippery slope when we start the discussion on what is affecting someone’s professional judgment? It’s not an easy solution and there may not be a good solution.”
BRCPE Chair Carl Schwait asked if the Bar decides that it’s OK to pay marketing or matching fees to a private company, would the owner of a neighborhood convenience store also be allowed to go into the business?
“If I own the 7-11 down the street and I know a lot of people and I can send them to lawyers,” he said. “If I’m not influencing the lawyer, can I split the fee with them?”
YLD President Gordon Glover said, “I think that if we can formulate the comment in a way that a graduated scale that is not fee splitting, that’s best. . . . I think the overreaching goal is we want lawyers to get work, and we want the public to have access to attorneys. The easier we can make that happen, the better for everyone.”
But other members of the committees said while the present plans by private legal service companies may be relatively modest in their “matching” charges, that could change with high-dollar fees for sending a high-value personal injury case to an attorney. Another problem is such high fees could encourage the companies to engage in solicitation banned by Bar rules or to engage in the unlicensed practice of law.
“If I have a personal injury case that will settle for $100,000, and the person who referred it says, ‘No, go for $120,000’ and the case falls apart, what happens?” asked board member Dennis Kainen. While he said small fixed fees for routine legal services might not be a problem, in higher value cases “the corrupting effect of fee splitting is that it influences your independent judgment on how to handle a case.”
The committees decided to have several different rule amendments and comments drafted for its March 3 meeting. They will meet again on March 10 before presenting their recommendations to the Board of Governors the following day.
The board must report to the Supreme Court by May 24 on lawyer referral service rules that the court ordered redrafted last September. But it has also been discussing broader related issues, including how to approach private companies offering legal forms and other legal services.
Recent events have lent some urgency to that discussion. The ABA entered a partnership with RocketLawyer, that is owned by a subsidiary of Google, for a low-cost matching service which began test operations in California, Pennsylvania, and Illinois. The ABA withdrew from that partnership in January after bar officials in Illinois and Pennsylvania complained it undercut their lawyer referral programs, which already offered low-cost ways for consumers to confer with lawyers.
LegalZoom, in addition to offering legal do-it-yourself forms for consumers, has begun marketing a matching service for consumers and clients. Avvo in February announced a fixed-fee service for basic business, immigration, and family law services where the consumer would pay a fixed fee for document review or preparation or a simple service, and Avvo would get about 25 percent of the charge as a marketing fee. Avvo already offered a service where a consumer could pay $39 for a 15-minute consultation with a lawyer, with Avvo getting $10 of that. Avvo prepared a white paper on the new service, saying it was not fee splitting because the entire payment would be passed through the company to the lawyer who would then pay back to the company its fee. The company noted that some state bars have found that arrangement is ethical and not in violation of fee-splitting rules.