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April 15, 2016
Changes would link lawyers with clients

‘We have to have a level playing field for all groups who wish to be part of the matching world’

By Jan Pudlow
Senior Editor

Here’s the paradox playing out in Florida: Lawyers, especially young lawyers, complain they don’t have enough business, but at the same time too many citizens don’t have access to legal services.

Carl Schwait Aimed at helping remedy that paradox are proposed new lawyer referral service rules that are less restrictive and designed to open up more opportunities for lawyers to participate, while promoting access to the civil justice system.

Proposed amendments to Rule 4-7.22 (Lawyer Referral Services) and 4-7.23 (Lawyer Directories) were presented at first reading to The Florida Bar Board of Governors in March.

Among the proposed changes are eliminating the requirement for $100,000 malpractice insurance coverage by either participating lawyers or the service; and no longer requiring advertisements to state that the entity is a lawyer referral service and that lawyers pay for referrals. Something the Florida Supreme Court asked the Bar to consider is that the lawyer referral service be owned or operated by a Florida Bar member. The proposed amendments are not recommending that requirement.

Another change is that the words “lawyer referral service” and “lawyer directories” have been replaced by “qualifying provider” because for-profit lawyer referral services are banned in 22 states and not every group that links consumers with lawyers considers itself a lawyer referral service. A qualifying provider could be a for-profit company or a nonprofit referral service.

“We did away with many of the restrictions. I know that is going to be bothersome for a lot of you,” Carl Schwait, chair of the Board Review Committee on Professional Ethics, told the BOG.

“I want you to understand what our goal is: to make it easier for referral services, matching services, or online providers — which are now called ‘qualifying providers’ — to make it easier for them to participate in Florida; to make it easier for the lawyers of Florida to participate in these groups; and to make it easier for the public to find legal assistance.”

After hearing oral arguments on May 5, 2015, the Florida Supreme Court gave the Bar until May 24, 2016, to complete a new set of rules. Schwait described how his committee and the board’s Technology Committee have been working feverishly to meet the deadline.

Their work is complete, Schwait said, but in order to have enough time to publish information about the proposed amendments in The Florida Bar News and invite Florida lawyers to weigh in with their comments, he asked the court for an extension until August 15.

The Supreme Court granted that request, and that means the Board of Governors will vote at its July meeting in Miami.

Level Playing Field
“We have to have a level playing field for all groups who wish to be part of the matching world; that means matching lawyers with clients and matching clients with lawyers,” Schwait said.

While the Bar had contentious relationships with some lawyer referral services in the past, some have worked hard to comply with Bar rules.

“We understand their input is somewhat self-serving because they are for-profit referral services,” Schwait said, but “it helped make sure that our goal was reached, which was to take lawyers and make sure that they have as many clients as they could, but at the same time performing as the Supreme Court directed us to do, which is to ensure that clients have the ability to avail themselves of good legal services.”

Schwait described how during the years he has worked on this issue, “online services have just poured into not only Florida, but into the United States.”

“We all agreed at the very beginning of our task that we were no longer allowing The Florida Bar to be behind what was going on. We wanted to have foresight in going forward and be futuristic in our thought process. Not futuristic because we read a book. Not futuristic because some technological guru told us.

“We want to be ahead, because that makes every single lawyer have the ability to reach clients. And they come from all segments of our community. And consumers will have access to legal services.”

Who Needs Help?
Young lawyers, he said, are the most vulnerable group.

“They have absolutely nowhere to go if they don’t join a law firm. And if they join a law firm and leave that law firm within a few years, they have no way to connect with clients,” Schwait said.

Government lawyers who leave the offices of public defenders and state attorneys are in the same boat, he said, because “they have been in a world where they never had to worry about connecting with a client, and suddenly they have no ability.”

The third group of lawyers that needs help, he said, is law school graduates who want to return to their hometowns to practice.

“When they want to go to Milton, when they want to go to Madison, when they want to go to High Springs, when they want to go to Bonita Springs — the problem is when they move, they have no ability but to hang up their own shingle. And 33 percent of all lawyers in Florida are single practitioners, and more than 67 percent of all lawyers work in law firms that are five persons or less.”

Qualifying Providers
In the past, he said, lawyer referral services catered to those lawyers who could afford to be part of the services.

“Suddenly, these online providers have come forward and said ‘We have the ability to help you. We have the ability to help clients.’”

Lawyer referral services are not regulated by either the Bar or the Supreme Court. Regulation is through the lawyer, who is prohibited from accepting referrals unless a service meets specific requirements.

“So, therefore, we say what a lawyer referral service — which is now called a qualifying provider — has to do, but at the same time it’s the lawyer who has to make sure that their qualified provider is doing it. It’s the lawyer who would ultimately be sanctioned,” Schwait said.

“Let’s talk about sanctions for a second. We’re not interested in sanctioning anyone. We’re interested in compliance. And the less restrictions we have the more compliance that we will get.”

What is still not allowed, Schwait explained, is division of fees.

“A lawyer may not register with a qualifying provider that receives any fee that would constitute a division of fees with a lawyer,” Schwait said, as he read from the third paragraph of the comment section of the proposed new rules.

“The Florida Supreme Court discussed division of fees at length with me,” Schwait said, recalling oral argument. “They are very concerned about it. However, we rely on the rules of ethics and the other rules to ensure that lawyers cannot have a division of fees, but to pay a certain amount to be part of a qualifying group, that would not be a division of fees.”

Sandra Diamond, Board of Governors member from the Sixth Circuit, said, “I just received my first solicitation to join this qualifying provider. And I was reading the fine print of what I would do and what I would get paid as a lawyer. This is a big qualifying provider. . . .

“I can charge my client X and I pay the provider Y. It specifically says I am entering into a separate contract with that qualifying provider to pay them for services,” Diamond continued.

“But why is the fixed fee that I am paying to the provider either somehow different than simply a percentage? If I am paying them a percentage, that’s bad. But if I’m paying them that fixed fee, that’s OK.”

Schwait answered: “Because they were concerned that the larger the case, the higher the percentage would go. Somewhere down the road, in a personal injury case that someone might charge much more for a leg off, as opposed to a whiplash case.

“The second thing is that this isn’t an attorneys’ fee; it is a marketing or a tech fee. It’s not based on the larger the trust, the more you get. The trust would have one charge. The real estate would have another. There are different kinds of divorces. What we are worried about is we still do not allow the larger the case, the more you get. It’s a fixed fee, but within that bounds.”

The Rules Still Apply
Fee-splitting and solicitation are still prohibited, Schwait emphasized.

Florida Bar President Ramón Abadin asked: “How are we going to think about the Internet-based providers that are not Florida-based, that are not going to be qualifying providers, who are going to have enormous amounts of consumers on their platforms? How are we going to deal with that?”

John Stewart, chair of the Tech Committee, answered: “We make the assumption that is not going to happen. Their ability to comply with this current draft of the rule, as opposed to the rule that is currently pending, is going to be, frankly, a lot easier....There’s no guarantee in the process, but at some point in time, we do have certain rules that we can’t abandon.”

Schwait expanded: “We’re not giving up our rules of conflict. We’re not giving up our rules of solicitation. We’re saying to lawyers, ‘If you want to participate in these matching groups or online providers, read the rules. Be clear about what you need to do and make sure you understand what a provider has to do.’

“And that’s why [Bar employees in the disciplinary area] attended all our meetings. We continue to ask them: ‘What would happen if? What would happen if?’

“When we say we are making these rules less restrictive, we are doing so only to certain details,” Schwait said.

“But the basic rules of lawyering, professionalism, ethics, and conflict are still in our rules. We are not abandoning them one iota.”

[Revised: 07-14-2018]