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June 1, 2015
Court reviews lawyer referral service rules

By Gary Blankenship
Senior Editor

Should The Florida Bar have recommended that lawyers not be allowed to join referral services that also refer callers to non-legal professional services, such as medical care or title insurance?

That question was raised as the Bar presented its recommendations for amending lawyer referral service rules in the Rules Regulating The Florida Bar during oral arguments at the Supreme Court on May 5.

The Bar had presented several amendments to Bar Rule 4-7.22, which resulted from recommendations from a special committee formed to study practices of for-profit lawyer referral services.

Carl Schwait The Special Committee on Lawyer Referral Services had proposed that lawyers should not be able to join referral agencies that also referred callers for other services. But the Bar Board of Governors, at the recommendation of its Board Review Committee on Professional Ethics, said lawyers could join those services as long as there was no requirement or pressure to send clients to the other services offered by the referral agency.

Other amendments require that the potential client make the initial contact after being referred by a service, that a lawyer in a law firm be designated as the primary contact for cases received from a referral service, that lawyers report quarterly to the Bar which referral services they belong to and also notify the Bar when they leave a service, and that a lawyer not refer a client to the other services offered by the referral agency unless the lawyer is satisfied it is in the client’s best interest and the client gives written confirmation he or she has been told about the potential conflict.

In response to a question from Justice Barbara Pariente, Bar Board of Governors member Carl Schwait, representing the Bar, explained that the amendments don’t change much from existing rules but rather consolidate in one place regulations that affect lawyers belonging to referral services.

“What we’re talking about is ensuring that those lawyers who make a decision to do their advertising and the procurement of their clients [through referral services] that in fact they understand . . . we have placed all our rules in one area,” he said. “The Florida Bar cannot regulate lawyer referral services. We can only regulate and make sure the lawyers follow the specific rules.”

He also said that most, if not all, of the 42 lawyer referral services that are currently providing quarterly reports to the Bar are owned by nonlawyers, and many make referrals for other professional services that included medical and loan and mortgage foreclosure work.

Justices wondered if consolidating the rules was enough.

“Why can’t we regulate that and say you cannot have a referral service that is both lawyer [and] doctor, accountant, mortgage foreclosure?” Pariente asked. “At the same time, The Florida Bar may be looking at the future and saying, ‘Oh, no, you can do all this stuff’ . . . . Maybe this is the wave of the future.”

Schwait said the Bar seriously considered banning lawyers from belonging to such combined services.

“The 14 men and women who made up the Special Committee on Lawyer Referral Services, which included both lawyers and nonlawyers, in fact, as their No. 1 recommendation said the following: ‘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, and shall furthermore be prohibited from referring a client to any other professional service in consideration of the lawyer’s receipt of referrals from any lawyer referral service,” he said.

But when that recommendation went to the Board of Governors, its Board Review Committee on Professional Ethics, which Schwait chairs, decided to drop the prohibition in favor of rules clarifying that lawyers could not have a quid pro quo with referral services, or refer clients to the services of other professional offerings unless lawyers were satisfied it was in their clients’ best interest.

Schwait noted he dissented from the BRCPE action and supported the special committee’s recommended prohibition. He said he was concerned about potential conflicts, such as when the lawyer in a personal injury case seeks to negotiate a reduction of medical liens for services provided by a health-care provider that owns or is linked to the referral service that provided the client.

“However, the Bar Board of Governors has not passed that,” he added. “They…stated the lawyer should use his or her own professional judgment in representing clients.”

Justice Peggy Quince asked if a client referred to a lawyer by a medical/legal referral service could be required to use the medical services tied to the service.

“There is anecdotal information that in fact there have been lawyers who have been pressured to continue to use a certain expert in the field as the result of a relationship between a lawyer referral service and someone else,” Schwait replied. “This may not only be in the medical field; we’re concerned it may be in the real estate [field], where if someone gets work through a real estate referral service but then are told they have to use a specific title insurance company that may also be owned by the referral service company.”

“Obviously, the lawyer is going to feel hostage too if it’s [the referral service] owned by the medical services [provider], to make sure if they’re going to get referrals in the future, they better use those doctors,” Pariente said.

Schwait replied that while the special committee was concerned with that, the board balanced that against the right of lawyers to join referral services and run their practices. “They chose a less restrictive method for trying to separate the two referral services the way you have just stated,” he said.

“This may be the precursor for Sears operating lawyers in Florida,” Justice Fred Lewis observed.

Tim Chinaris, representing 411-PAIN, and Bruce Rogow, representing 1-800-ASK-GARY, both referral services that also send callers to medical clinics, argued most of the Bar’s rule amendments aren’t needed because they merely echo other provisions already in the rules.

Chinaris said the amendments are intended to “scare lawyers away from participating in a lawful group advertising program.” Rogow argued against a rule amendment that required the client sign a document that he or she has been informed by the lawyer if the client is referred to a clinic owned by the referral service. He said that could be seen as waiving any conflict that might arise from that referral.

Justices grilled both Chinaris and Rogow who acknowledged that their referral services are owned by chiropractors who also own the medical clinics affiliated with the services. Chinaris said 411-PAIN began by advertising medical services, but many of those who came to its clinics had been in accidents and asked about hiring lawyers. So the company branched out into doing lawyer referrals as well.

Pariente asked why the company didn’t have separate referral services for medical and legal needs.

“When the lawyer goes through group advertising, for your client who owns these chiropractic clinics, isn’t there an implicit idea that that client is going to continue to go to the clinic owned by your client?” she asked.

“That’s what the referral service committee tried to suggest. Quite frankly, we think there’s no evidence of that,” Chinaris replied.

Pariente continued: “It’s just common sense that that is what is going on. Chiropractors from day one have had relationships with lawyers and maybe there are unduly cozy relationships. PIP claims get eaten up by chiropractors and there are a lot of abuses in this area.”

“We would not disagree there can be abuses in this area,” Chinaris said. “But we think the existing rules already cover that; the rules against trading referrals, and anything exchanged for referrals, there are rules against conflicts. The lawyer sending a client to someone because of the lawyer’s interest, that’s already prohibited by the rules.”

He added that special conflict rules aren’t needed because most lawyers belonging to referral services get only a small portion of their business from the services.

Pariente asked Rogow what was wrong with informing clients that the entity that was treating their medical condition also made the referral to the lawyer.

“It allows the lawyer to hide behind the disclosure and consent,” Rogow said.

“Why do we have this then, to protect the lawyer?”

In Schwait’s rebuttal, Lewis asked him why the Board of Governors rejected the special committee’s recommendation to ban lawyers from participating in referral services that also handle other professional services.

“The board thought this was the less restrictive way to go forward,” he replied. “We can only regulate lawyers and tell how lawyer referral services should act.”

Schwait argued the codification of the rules, with some additions, was justified by the special circumstances when advertising for clients is done by a for-profit entity.

[Revised: 07-19-2018]