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October 15, 2015
Court orders private LRS overhaul

Gary Blankenship
Senior Editor

Lawyers who belong to private, for-profit lawyer referral services, such as 411-PAIN, 1-800-ASK-GARY, Injury Helpline, and Total Help, may have to leave those companies following a September 24 ruling by the Florida Supreme Court.

The court in that case rejected proposed rule changes regarding for-profit lawyer referral services submitted by the Bar Board of Governors and instead ordered the board to submit a rule by May 24, 2016, that prohibits lawyers from belonging to referral services that are not “owned or operated” by Bar members.

The board, in preparing its amendments for referral rules, had rejected a recommendation from a special committee that lawyers be barred from using referral services that also provided referrals for callers for other professional services, such as medical care. Instead, the board proposed that lawyers still be able to belong to such services as long as disclosures were made to potential clients and lawyers took steps to ensure there were no conflicts.

The court emphatically rejected that approach and said the board ignored evidence of bad conduct that harmed clients that was cited by the Special Committee on Lawyer Referral Services in its final report (which may be found at (www.floridabar.org/cmdocs/cd001.nsf/WDOCS).

“The dangers that nonlawyer-owned, for-profit referral services pose to members of the public — who may be especially vulnerable after they suffer an injury, or when they face a legal matter that they never anticipated — leads us to conclude that much stricter regulations upon lawyer referral services are required than those proposed by the Bar,” the court said in its per curiam opinion.

The court specifically ordered, “The Florida Bar to propose amendments to rule 4-7.22 that preclude Florida lawyers from accepting referrals from any lawyer referral service that is not owned or operated by a member of the Bar. We further instruct the Bar to review any other rules or regulations that address lawyer referral services to determine whether new rules are necessary to implement our direction today. Based upon this review, the Bar may conclude that amendments to, or repeal of, other rules are required.”

The court continued: “While the action we take today may be viewed by some as severe, we conclude it is absolutely necessary to protect the public from referral services that improperly utilize lawyers to direct clients to undesired, unnecessary, or even harmful treatment or services. Our action today will also prevent conflicts of interest, such as where a lawyer feels compelled or pressured to refer a client to another business operated or controlled by the owner of the referral service so that the lawyer may continue to receive referrals from that service.”

The only slight split in the court came from Justice Charles Canady. In a separate opinion, he said he agreed with the court majority in rejecting the Bar’s proposed amendments but, instead of issuing the order to the Board of Governors, he would have simply approved the special committee’s proposal barring an attorney from belonging to a referral service that also refers the client to another professional service stemming from the same incident.

Board of Governors member Carl Schwait, who represented the Bar at the May 5 oral arguments, chaired the Board Review Committee on Professional Ethics, which recommended changing the special committee’s proposed ban, although Schwait dissented from that view.

“I was pleased to be a minority voice on the Board of Governors which the Supreme Court has now validated as to eliminating the conflicts of interest when lawyers are using for-profit lawyer referral services to procure clients,” he said. “It is to be remembered that the ruling still allows lawyers to use for-profit referral services as a means to get clients, but limits ownership of the services and prohibits the services’ referral of clients to other businesses.”

Tim Chinaris, who represented 411-PAIN at the oral argument, said the court relied on sketchy evidence from the special committee in making its ruling.

“Private referral services have been allowed to operate since 1986 and there’s really no record of any problems,” he said.

Chinaris noted the court mentioned a case involving a firm that operates in Kentucky and Florida and although the firm participates in a privately owned referral service, in the case cited by the court, the client called the firm directly and did not go through a referral service. In that case, the court said the client was sent by the firm to a Florida clinic that was owned by the referral service for surgery that was ultimately deemed to be unnecessary and which may have worsened the client’s ailments.

“We filed videotaped testimonies of customers who had gotten lawyers through referral services and there were about twice as many of those in the record as there were complaints,” Chinaris said. “That was not reflected in the final report.”

In the opinion, the court cited several incidents included in the final report by the special committee, which began work in 2011 and issued its report in 2013. Those included that callers to referral services were to medical clinics which signed them up for legal representation without an explanation of the documents they were signing; clients often had significant medical bills they were responsible for after the clinic finished its treatment usually under personal injury protection coverage; when clients complained to their lawyers the lawyers replied they were working for the clinic not the clients; and some ads were targeted to unsophisticated citizens who were then exploited.

Additionally, some law firms that are affiliated with for-profit lawyer referral services steer clients toward other businesses operated by the owner of the referral service, sometimes to the detriment of the health and well-being of the client, the court said.

The special committee made seven recommendations, including unanimously proposing that “a lawyer shall not accept client referrals from any person, entity or service that also refers or attempts to refer clients to any other type of professional service for the same incident, transaction or circumstance. . . .” Lawyers were also prohibited from making a referral for other professional services “in consideration of the lawyer’s receipt of referrals from any lawyer referral service.”

The special committee’s final report went to the board’s BRCPE, which spent more than a year reviewing it. The BRCPE initially voted 8-0 to approved the ban recommended by the special committee, but after further consideration voted 7-1 (with Schwait dissenting) to reject it. Instead, the BRCPE proposed three conditions, which were ultimately accepted by the Board of Governors:

• The attorney cannot accept a referral from an entity that directly or indirectly requires the lawyer to refer the client to that entity for other services, or pressures the lawyer to make such a referral.

• The lawyer cannot accept a referral that interferes with the lawyer’s best judgment in representing the client, including referring the client to other services which may be provided by the referral entity.

• The lawyer may not refer the client to another service provided by the referral agency unless the requirements of Rules 4-1.7 and 4-1.8 (which govern conflicts of interest) are met and the lawyer provides in writing a statement of his or her relationship with the referral agency to the client and the client gives informed consent in writing.

The court was not satisfied with that.

“We have carefully reviewed the final report of the special committee and conclude that the public is at significant risk from for-profit lawyer referral services that also refer clients to other businesses. We recognize that the anecdotes presented in the final report do not represent every nonlawyer-owned, for-profit referral service; however, the potential harm is too great for us to approve the amendments proposed by The Florida Bar,” the court said.

The court’s ruling marks the first significant change to lawyer referral services since 1986 when the court, at the Bar’s request, first enacted rules allowing lawyers to join for-profit referral services. Bar rules acknowledge that the Bar cannot directly regulate private services owned by nonlawyers, but do say that lawyers can be disciplined if they join services that do not follow Bar rules on such things as advertising and improper direct solicitation of clients.

The ruling also comes as the Bar is looking for new ways to match lawyers with people seeking legal assistance. One mentioned possibility is potential partnerships with private companies offering that service. The Board of Governors is scheduled to discuss online matching services at its October 16 meeting.

[Revised: 07-16-2018]