Chapter 9 Legal Services Plans: An Opportunity for Florida Attorneys to Deliver Legal Services to Floridians in the Post-COVID-19 World
At the outset, although it is now some 50 years since the Florida Supreme Court first created a rule[1] permitting the operation of legal services plans in the state of Florida, this writer would opine that Florida attorneys in private practice have generally been unaware of the existence of Chapter 9 Legal Services Plans, and the benefits resulting therefrom, as a means to expand their overall private client base.
As Florida begins to emerge from the COVID-19 pandemic during 2021, there has never been a better time for Florida attorneys to duly consider the creation of a Chapter 9 plan in order to provide Floridians with the opportunity to better gain access to the legal system.
This article introduces the concept of Chapter 9 plans; provide an overview of Chapter 9 plan regulation in Florida; highlight the benefits of becoming a Chapter 9 plan managing attorney; detail how to successfully complete the “2012 Committee Forms”; and, identify and discuss issues of import for a prospective managing attorney to consider prior to crafting a Chapter 9 plan.
Introduction to Chapter 9 Plans
Simply, a Chapter 9 plan is a legal services plan[2] governed by and under the rules and regulations of Chapter 9.[3] Upon passage of Chapter 9, as amended, effective April 3, 1998, The Florida Bar Board of Governors expressly codified the longstanding public policy position of The Florida Bar in support of the concept of plans upon adopting Rule 9-1.2, which provides, in relevant part:
Every citizen of this state should have access to the legal system….To this end, it is the policy of The Florida Bar to support the concept and to actively encourage the establishment, operation, growth, and development of legal services plans as [one] means of increasing a person’s ability to obtain legal services at an affordable cost in order to have the opportunity to better gain access to the legal system.
Finally, the Prepaid Legal Services Committee[4] is the body expressly entrusted with the responsibility to ensure that plans submitted by members in good standing of the Bar are in full and complete compliance with the rules and regulations of Chapter 9.[5]
Chapter 9 Plan Regulation
In general, the requirements to establish a Chapter 9 plan are described in Rule 9-2. Rule 9-2.1 provides that a managing attorney shall not be permitted to operate a Chapter 9 plan in Florida without first obtaining approval by the board. Rule 9-2.1 further provides that a managing attorney seeking such approval of a Chapter 9 plan must file with the Prepaid Legal Services Committee a plan application pursuant to the requirements of Chapter 9. Rule 9-2.2 provides that a plan application must consist of five items, as follows: assurances by the managing attorney to the Bar[6]; agreement by and between managing attorney and sponsor[7]; agreement by and between managing attorney and plan attorney”[8]; other documents[9]; and the application fee in the amount of $125.[10]
• Committee Review of Plan Application — Rule 9-2.3 provides the plan application described in Rule 9-2.2 must be reviewed by both staff of the Bar and a Plan Review Subcommittee of the Prepaid Legal Services Committee. Upon the conclusion of the review, the Plan Review Subcommittee shall provide a report of its findings to the committee. The committee, in its discretion, may 1) approve the plan application[11]; 2) approve the plan application conditionally upon requiring the managing attorney to file requested additional or corrective information[12]; 3) require the managing attorney to file requested additional or corrective information so that the committee may further review the plan application[13]; or 4) disapprove the plan application.[14]
• Board of Governors Approval of Plan Application — Rule 9-2.4 provides the committee shall request the board to place the committee’s recommendation for approval of a plan on the agenda of a regularly scheduled meeting of the board. The board, in its discretion, may either approve or disapprove the establishment of the plan. Thereupon, the committee, by and through staff of the Bar, shall advise the managing attorney of the board’s action.
In general, the requirements for the annual renewal of Chapter 9 plans are contained in Rule 9-2.5, which includes a renewal fee in the amount of $25.[15] Rule 9-2.6[16] provides that the board may revoke any and all prior approval of a plan if the subject Chapter 9 plan does not comply with any rule or regulation within the Rules Regulating The Florida Bar.
Benefits of Becoming a Chapter 9 Plan Managing Attorney
Upon approval by the board permitting a managing attorney to operate a Chapter 9 plan in Florida, the managing attorney has the opportunity to create, in effect, a “Chapter 9 Plan Built-In” private client base consisting of the plan participants of the sponsor. In addition, if the managing attorney adopts an economic model based upon a per capita payment arrangement, then the managing attorney has the potential to receive recurring monthly income in the nature of a retainer.
A managing attorney has the potential, as well, to generate income in addition to the income derived directly from a Chapter 9 plan in the following ways:
• Upon the rendering of legal services to plan participants on legal matters not covered by and under the Chapter 9 plan, such legal services may be billed at the managing attorney’s normal and customary rates.
• Upon a plan participant referring a member of the sponsor eligible to receive legal services under the Chapter 9 plan to so join the plan and become a plan participant; and, thus, increase the managing attorney’s Chapter 9 plan built-in private client base.
• Upon an increase in the managing attorney’s personal private client base as a result of the following: A plan participant referring a “non-plan participant member of sponsor” for legal services to be rendered by the managing attorney at the managing attorney’s normal and customary rates; or a plan participant referring a family member or friend for legal services to be rendered by the managing attorney at the managing attorney’s normal and customary rates.
How to Complete the “2012 Committee Forms”[17]
A managing attorney should consider a number of issues in order to successfully complete the 2012 Committee Forms[18]; and, each one of said forms as more particularly described as follows:
• Request for Approval of Chapter 9 Plan Application by Managing Attorney[19] — In brief, this form serves as a “checklist” for the managing attorney in requesting approval of a Chapter 9 plan.
• Chapter 9 Plan Identifying Information — This form requires the managing attorney to furnish relevant identifying information via the 1) managing attorney; 2) sponsor; and 3) Chapter 9 Legal Services Plan.
• Assurances by the Managing Attorney to The Florida Bar[20] — In particular, Rule 9-2.2(a)(1) provides that a managing attorney must exercise every reasonable effort in order to assure that the plan is operated in an ethical manner and is in compliance with the rules.[21] In addition, Rule 9-2.2(a)(2) provides that a managing attorney must have a professional liability insurance policy issued in favor of the managing attorney in an amount not less than $100,000. Further, Rule 9-2.2(a)(3) provides that a managing attorney shall take any and all steps reasonable and necessary in order to assure that there are a sufficient number of plan attorneys available in order to be able to adequately and properly perform the legal services to be provided under the plan. Finally, Rule 9-2.2(a)(5) provides that a managing attorney shall not implement any proposed change to be made in and to that certain “[a]greement by and between managing attorney and sponsor” (as so described in Rule 9-2.2(b)), without first obtaining the approval of the board.
• Agreement by and Between Managing Attorney and Sponsor[22] — This agreement is the essence of a Chapter 9 plan, the overall breadth and scope of which is limited only by the managing attorney’s own creativity and ingenuity. Moreover, the ultimate economic success or failure of a Chapter 9 plan rests upon the ability of the managing attorney to negotiate favorably all of the relevant terms and conditions of the agreement, including, but not limited to, the type and nature of the legal services to be included and the total amount — and who [the sponsor and/or the plan participants] shall be ultimately responsible for the payment of fees to be paid thereunder. There are several provisions and related issues in the agreement any prospective managing attorney should consider and address, including:
Introductory Paragraph [in re managing attorney]:[23] It is permissible under Chapter 9 for a Florida attorney to simultaneously act as a managing attorney of a Chapter 9 plan and render legal services to plan participants thereunder.[24]
Recitals: The third “whereas” clause provides as follows: “WHEREAS, Sponsor is eligible to provide the Plan for the benefit of its members by virtue of the fact that Sponsor meets the definitional requirements of Group for the following reason [provide reason].” In brief, this clause — specifically requiring the managing attorney to provide a reason why the sponsor meets the definitional requirements of group — highlights the core concept of Chapter 9. As such, it is imperative that a managing attorney fully and completely understand and appreciate the interrelationship by and between the terms “sponsor”[25] and “group”[26] prior to 1) embarking upon the identification of a potential sponsor and, then, in turn, 2) crafting a Chapter 9 plan for and on behalf of said sponsor. Further, and most importantly, Rule 9-1.3(d) also provides as follows: “Examples of groups shall include, but not be limited to, the following[27]: (1) churches; (2) educational institutions; (3) credit unions; (4) employing units; and (5) associations.”
Terms and Conditions:
“2. Definition of ‘Plan Participant.’” Because the aggregate number of plan participants shall, in turn, affect the overall usage of the legal services to be so rendered under the Chapter 9 plan, a managing attorney must use great care in fully and completely defining a plan participant; and, consisting of, if so desired, persons in addition to the member.
“3. Legal Services: Included” and “4. Legal Services: Excluded”: It is far easier to describe the legal services to include, rather than exclude, in a plan. As such, for example, a managing attorney may first describe the specific legal services to be included in the Chapter 9 plan and, then, simply make the statement that “all other legal services are hereby excluded.”
“5. Geographic Area”: The nature of the “detailed description” required in order to comply with this “geographic area” requirement of the agreement may negatively impact the managing attorney’s bottom line. The risk is greater if the legal services to be included in the Chapter 9 plan are likely to be performed in a location other than the managing attorney’s office and/or home city/county. For instance, this issue would be of greater significance in the litigation context (wherein, e.g., venue may be in a county 200 miles away from the managing attorney’s office) rather than in the transactional context (wherein, in general, services are performed at or near the managing attorney’s office).
“6. Payment of Fees: Sponsor to Managing Attorney” and “7. Payment of Fees: Plan Participants to Managing Attorney”: For obvious reasons — not the least of which is the reasonable likelihood that the fees agreed to be paid by and under the Chapter 9 plan shall actually be in hand received by the managing attorney — a managing attorney must use great care in, and give due consideration to, the impact and effect these particular requirements shall have upon the ability of the managing attorney to, ultimately, craft a successful Chapter 9 plan.
“8. Method of Review and Resolution of Disputes” and “9. Method of Termination”: Although these provisions may not, upon first impression, appear to be as important as the previously described provisions of the agreement, they are very important in the creation of a successful Chapter 9 plan. Therefore, a managing attorney must use great care in negotiating both of these provisions with the sponsor, especially with respect to the methodology by which the agreement may be terminated by either the managing attorney or the sponsor.
“10. – 18. Furnish additional ‘Term and Condition,’ if desired”: In brief, these nine blank provisions have been made available in order to easily permit the managing attorney to include in the agreement any additional contractual provision that may be agreed upon with the sponsor.[28]
“23. Chapter 9, Rules Regulating The Florida Bar”: This provision has been included in the agreement to serve as a reference guide to a managing attorney with respect to the requirements of Rule 9-2.2(a)(1) providing that a managing attorney shall “exercise every reasonable effort in order to assure that the plan is operated in an ethical manner and is in compliance with the Rules Regulating The Florida Bar.”
• Affirmative Statement by Managing Attorney[29] — “The Managing Attorney shall complete any and all legal services undertaken for and on behalf of a Plan Participant to the extent of the benefits provided under the Plan in the event of the termination of the Plan.”
• Affirmation and Verification by the Managing Attorney[30] — If the plan attorney(s) and the managing attorney are all in the managing attorney’s law firm and only they shall be the sole plan attorneys under the plan, then, 1) this form is required to be filed with the committee; and 2) the filing requirement of that certain “Agreement by and between Managing Attorney and Plan Attorney”[31] shall — by virtue of the last paragraph of said Rule 9-2.2(a)(8) — be waived.
• Assurance by Specified Member of the Managing Attorney’s Law Firm to The Florida Bar[32] — Notwithstanding the fact that the filing requirement of the above “Agreement by and between Managing Attorney and Plan Attorney” shall be waived, each said “specified attorney” must still assure the Bar that a professional liability insurance policy has been issued in favor of said “specified attorney” in an amount not less than $100,000.
• Affirmative Statement by Specified Member of the Managing Attorney’s Law Firm[33] —“The Specified Attorney shall complete any and all legal services undertaken for and on behalf of a Plan Participant to the extent of the benefits provided under the Plan in the event of the termination of the Plan.”
• Assurance by Plan Attorney to The Florida Bar[34] — The plan attorney gives this assurance — identical in nature to the assurance given by both the managing attorney and the specified attorney [if applicable] — to the Bar that a professional liability insurance policy has been issued in favor of said plan attorney in an amount not less than $100,000.
• Affirmative Statement by Plan Attorney[35] — “The Plan Attorney shall complete any and all legal services undertaken for and on behalf of a Plan Participant to the extent of the benefits provided under the Plan in the event of the termination of the Plan.”
Relevant Marketing Issues
With respect to the marketing of a Chapter 9 plan,[36] a prospective managing attorney should consider the following:
• Marketing to Prospective Sponsors — Rule 9-3.1, Activities of Managing Attorneys,[37] provides, in relevant part: “Managing attorneys and their employees or agents may: (a) directly contact representatives or fiduciaries of groups for the purpose of informing them of the availability of a plan offered by the managing attorney.” This rule is, at once, the single most important provision contained in Chapter 9 and, notwithstanding the express language of said rule, the least understood or appreciated.[38]
• Marketing to Prospective Plan Participants — Rule 9-3.1, Activities of Managing Attorneys, provides, in relevant part:
Managing attorneys and their employees or agents may: (b) upon board approval of a plan, provide any written form of communication to members of the sponsor for the purpose of informing them of the availability of said plan and inviting them to become plan participants therein but only in accordance with the advertising and solicitation provisions of these Rules Regulating The Florida Bar.
This rule is problematic at best and fatal at worst for any managing attorney pursuing the creation of a successful Chapter 9 plan.[39]
Administration Issues
Rule 9-3.1, Activities of Managing Attorneys, provides:
Managing attorneys and their employees or agents may: (c) do any and all things necessary and proper in order to fully and completely administer the plan….Notwithstanding any other provision herein to the contrary, the managing attorney is expressly prohibited from contracting with any third party of whatsoever type or kind to perform any administrative activities regarding the plan whatsoever.
This rule, by default — by virtue of the last paragraph — requires the managing attorney to maintain “in-house” any and all such administrative activities with respect to a Chapter 9 plan.
Make Chapter 9 Work for You
• What Comes First: Creation of a Chapter 9 Plan or a Sponsor? — Obviously, without the creation of a Chapter 9 plan, there is no need for the prospective managing attorney to reach out to a potential sponsor. Likewise, without having identified a potential sponsor, there is no need for a managing attorney to create a Chapter 9 plan. So how is this dilemma reconciled?
The solution is one of “degree.” The managing attorney should first create the general framework of the Chapter 9 plan (e.g., legal services to be included and the amount of, and who pays, the fees). Then, once a sponsor is identified, negotiate the particular provisions of the Chapter 9 plan to be incorporated into the agreement.
• Use Rule 9-3.1(a) to Gain Access to Prospective Sponsors — In light of the fact that the Chapter 9 plan arena is one that tests the “entrepreneurial spirit” of a managing attorney, a prospective managing attorney should take full advantage of Rule 9-3.1(a) in order to reach out to prospective sponsors for the purpose of informing them of the availability of a Chapter 9 plan.
• Embrace the Concept: “Less is More” — Just because a Chapter 9 plan may limit the legal services to be included thereunder to only one area of law, does not mean that the plan will not be economically viable and successful.
Indeed, based upon the historical records of the committee, some of the most successful Chapter 9 plans have been those that have focused on a single area of law (e.g., the preparation of only simple wills) or a niche area of practice (e.g., defense of traffic citations issued to cab drivers).
• Consider a “Springing Chapter 9 Plan” — In order to make the Chapter 9 plan as economically viable as possible, the managing attorney may consider the crafting of a “springing Chapter 9 plan.” For example, an employer[40] has 1,000 employees and membership in the Chapter 9 plan is voluntary (i.e., an employee chooses to join the Chapter 9 plan). After a cost/benefit analysis of the plan, the managing attorney determines that a minimum of 100 employees would be required to join the plan in order to be economically viable for the managing attorney. The managing attorney would then negotiate with the sponsor to include a contractual provision in the agreement fully detailing that the plan shall commence operations at a time certain in the future (thus, “spring to life”) when the required 100 employees have joined the Chapter 9 plan.
Conclusion
Although Chapter 9 plans have been permitted to operate in Florida for the past half century, few attorneys have taken advantage of the benefits afforded thereunder in order to, at once, expand their overall private client base and afford Floridians the opportunity to better gain access in and to the legal system.
As such, in the advent of the post-COVID-19 world, Florida attorneys in private practice should give due and serious consideration to creating a Chapter 9 plan and incorporating same into their practice as part of their law firm’s overall global business plan.
[1] Upon so approving, in 1970, art. XIX of the Integration Rule (now known as Chapter 9 of the Rules Regulating The Florida Bar).
[2] In brief, a plan, by its very nature, serves as a conduit by and between plan members and plan attorneys whereby plan members, by virtue of the existence of the plan, have an increased ability to obtain legal services in order to, in turn, have the opportunity to better gain access to the legal system.
[3] A discussion relative to other methodologies serving to permit Floridians to have an increased ability to obtain legal services in Florida — i.e., “lawyer referral services” as authorized under Chapter 8; “qualifying providers” as authorized under Rule 4-7.22; and, “legal expense insurance corporations” as governed under Fla. Stat. Ch. 642 — is beyond the scope of this article.
[4] A public service standing committee first created by the board in 1974.
[5] As of January 1, 2021, the committee had oversight responsibility of some 15 approved Chapter 9 plans.
[6] Rul. Reg. Fla. Bar 9-2.2(a).
[7] Rul. Reg. Fla. Bar 9-2.2(b).
[8] Rul. Reg. Fla. Bar 9-2.2(c).
[9] Rul. Reg. Fla. Bar 9-2.2(d).
[10] Rul. Reg. Fla. Bar 9-2.2(e).
[11] Rul. Reg. Fla. Bar 9-2.3(a).
[12] Rul. Reg. Fla. Bar 9-2.3(b) (emphasis added).
[13] Rul. Reg. Fla. Bar 9-2.3(c).
[14] Rul. Reg. Fla. Bar 9-2.3(d).
[15] Id.
[16] To the best knowledge of this writer [who first began service on the committee in 1985], the board has never once revoked the authority to operate an approved Chapter 9 plan.
[17] These forms may easily be accessed on The Florida Bar website, www.floridabar.org. Go to the “Public” tab in the banner at the top; click on “Prepaid Legal Services”; and scroll down to “Chapter 9 Plan Application Forms.” Each one of the 10 forms are listed, as well as the “Chapter 9 Plan Application Packet Introduction” and “Application Packet Operating Rules.”
[18] These forms went live on the committee’s website on April 2, 2012.
[19] As authorized by and under Rul. Reg. Fla. Bar 9-2.1.
[20] As required to be included in the plan application by and under Rul. Reg. Fla. Bar 9-2.2(a).
[21] E.g., all the rules, and not simply the Chapter 9 rules.
[22] As required to be included in the plan application by and under Rule 9-2.2(b).
[23] In response to a frequently asked question, it is permissible under Chapter 9 only for a “member in good standing of The Florida Bar” (i.e., an individual, not a law firm) to act and accept the responsibility as a managing attorney of a Chapter 9 plan.
[24] Based upon the historical records of the committee, there have been a number of Chapter 9 plans approved throughout the years wherein the managing attorney was the sole attorney involved in the operation of the approved Chapter 9 Plan.
[25] See Rul. Reg. Fla. Bar 9-1.3, Definitions, which provides: “(i) Sponsor. Sponsor shall mean a group that provides a plan for the benefit of its members.”
[26] See Rul. Reg. Fla. Bar 9-1.3, Definitions, which provides: “(d) Group. Group shall mean an organization of 2 or more persons whose individual members are identifiable in terms of some common interest or affinity.”
[27] Generally referred to historically as the “traditional groups.”
[28] Including provisions relating to, e.g., “Indemnification” and “Governing Law and Venue.”
[29] As required by Rul. Reg. Fla. Bar 9-2.2(a)(8).
[30] As required by Rul. Reg. Fla. Bar 9-2.2(a)(8), if applicable.
[31] As required to be included in the plan application by Rul. Reg. Fla. Bar 9-2.2(c).
[32] As required, by implication, by Rul. Reg. Fla. Bar 9-2.2(c)(1).
[33] As required by Rul. Reg. Fla. Bar 9-2.2(a)(8).
[34] As required by Rul. Reg. Fla. Bar 9-2.2(c)(1).
[35] As required by Reg. Fla. Bar 9-2.2(c)(2).
[36] Which said marketing is not permissible to the “public at large.”
[37] Rul. Reg. Fla. Bar 9-3.1 provides to managing attorneys — and their employees or agents — notice of, and guidance on, the scope and extent of various marketing and administrative activities ethically permissible to be undertaken in the operation of a Chapter 9 plan.
[38] The heading, “Group or Prepaid Legal Services Plans,” under the Comment to Rul. Reg. Fla. Bar 4-7.18 should allay any concerns a prospective managing attorney may have with respect to the ethical propriety of the type of permissible contact so described in this Rul. Reg. Fla. Bar 9-3.1(a).
[39] In order to not run afoul of the Bar’s advertising rules, a managing attorney may consider having the sponsor simply provide any such written form of communication directly to its members.
[40] One of the “traditional groups” defined in Rul. Reg. Fla. Bar 9-1.3(d)(4).
John Schaefer received his B.A., magna cum laude, in mathematics, from Niagara University in 1977 and his J.D. from Stetson University College of Law in 1980. He was admitted to The Florida Bar in 1980 and is a founding partner and the managing general partner of Schaefer, Wirth & Wirth, Safety Harbor. Since 1985, Schaefer’s firm has concentrated in the delivery of telephone access legal services to members of a number of legal services plans. He has held several leadership roles in the Prepaid Legal Services Committee since 1985, including being a nine-time chair; chair of the Chapter 9 Plan Application Packet Subcommittee (2010-2012); and co-chair of the Chapter 9 Rules Revision Subcommittee (1996-1998).
This column is submitted on behalf of the Prepaid Legal Services Committee, John P. Joseph, chair, and John P. Joseph and Kelli E. Lueckert, editors.
