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For-profit referral services draw Bar scrutiny

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For-profit referral services draw Bar scrutiny

Are private, for-profit lawyer referral services harming the public?

With legislation being introduced in the Florida House and the Florida attorney general conducting an investigation, a special Florida Bar committee is opening its inquiry into private, for-profit lawyer referral services.

“As I’ve traveled around the state for the past six months, the pitch at which this issue is discussed by lawyers and nonlawyers has increased significantly, as the industry of for-profit lawyer referral services has increased,” Bar President Mayanne Downs told the Special Committee on Lawyer Referral Services, which held its first meeting via teleconference on February 23.

Wells “We undertake this work without any preconceived notion of what should be done, except that it is incumbent on us to look at the amount of economic activity that is flowing through this new form of lawyer referral services to ensure we don’t have consumer harm and ensure we don’t undertake regulation that we shouldn’t,” Downs said. “We need to understand its impact on the practice of law and its impact on the public.”

Board of Governors member Grier Wells, chair of the special committee, laid out a tentative schedule for the panel. That includes meeting again on March 9 (after this News went to press) and likely having meetings to take public comment at the Bar’s Annual Convention in June and Midyear Meeting in September.

“That will be our first opportunity to take public comment on what we are doing,” Wells said of the Annual Convention public forum. “We will invite those who are interested and involved and those who are impacted by referral services.”

He added all materials for the committee will be posted on the Bar’s website and available to the public.

In the current difficult economy, Wells said, many lawyers are turning to referral services, as well as other marketing techniques to drum up business.

Bar Ethics Counsel Elizabeth Tarbert said the Bar does not directly regulate private referral services, but it can — and does — prohibit Bar members from joining private services that don’t follow Bar rules. Those include following Bar advertising and other rules and making a quarterly report of lawyers who use the service.

But the problem, she added, can come when a service violates Bar rules, then refuses to give the names of Bar members using the service. That thwarts the Bar in taking any disciplinary action against those attorneys, she said.

In response to questions, she said regulating private referral services raises both commercial free speech and separation of powers questions. Government can only regulate commercial speech that is misleading or proposes an illegal action, and then any regulation must be narrowly tailored to the legitimate interest the government has in that area, Tarbert said.

The separation of powers issue arises, she said, because while the Supreme Court regulates the practice of law, it’s not clear if that power extends to private referral services.

Committee member Scott McMillen, a member of the Board of Governors, said referral service advertising has concerned many lawyers and that prosecuting service members can be difficult even when the Bar knows who they are.

“I’ve heard a lot of complaints from my colleagues about for-profit lawyer referral services that advertise a lot and violate the advertising rules,” he said. “In order to prosecute the lawyer for taking cases from that violating referral service, that lawyer would have to know or should have known about the advertising.

“That’s a tough, if not impossible, burden for a lawyer who’s taking cases from a large commercial referral service that changes advertising regularly.”

The separation of powers issue may be settled elsewhere. Committee members were presented with information that Rep. Rick Kriseman, D-St. Petersburg, plans to introduce legislation on private legal and medical referral services. Bar General Counsel Paul Hill, who serves as staff for the special committee, said the Bar does not have a position on the bill but has provided technical assistance to Kriseman, similar to what it has done for other lawmakers on other legislation.

Although the bill has not been introduced, a draft was provided to committee members. Among other provisions, it requires that legal referral services comply with Florida Bar advertising regulations, including submitting ads for review by the Bar, and that clients may not be referred to any entity which the referral owner has an interest, unless the potential client is informed.

Ads also would have to contain a disclaimer that attorneys pay to belong to the service and the service itself does not perform legal work. Member attorneys would be prohibited from recommending to the potential clients “the services of a particular medical provider or other particular professional as a condition of participation in the referral service.”

Other information provided to the committee included:

• Complaints at least one lawyer referral service is primarily owned by medical professionals, which creates a real or perceived tendency to refer clients needing medical care to businesses or practices where the service owners have an interest. Members were also provided with a Kentucky lawsuit where a client claimed that a referral service operating there and in Florida erroneously told her that her medical insurance would not cover injuries from an accident and instead had her treated at a Florida facility with ties to the referral service.

• That the Attorney General’s Economic Crimes Office is investigating several lawyer referral services, both those registered and not registered with the Bar. The cases involve credit card debt, loan modification, and time share fee recovery services. Some of the services do “cold call” or direct solicitation, which is prohibited in Bar rules. According to information from the AG’s office, “An attorney is usually connected to the agency and gives his/her name to the agency for use in ‘referring’ the consumer to the attorney. Once a consumer ‘retains’ the attorney, the attorney takes an up-front fee and bills on a monthly basis for supposed legal work. Whatever work is done in trying to eliminate the consumer’s debt is usually done by supposed paralegals. From what we have heard, little work is actually done by an attorney. The money that the consumer pays to the attorney is called a legal fee to circumvent the fee restrictions of [F.S.] sec. 501.1377 and secs. 817.802 and 817.803 that exempt attorneys in the practice of law. Moreover, we are finding that a substantial portion of the legal fee (perhaps up to 80-90%) is remitted by the attorney to the referral agency in contravention of fee splitting ethics and the terms of sec. 877.02.”

All the information provided to the committee is available on the Bar’s website, Click on Inside the Bar on the left hand menu, then select Special Committees and choose the Special Committee on Lawyer Referral Services from the resulting list. A link to committee materials is on the bottom of that page.

T he special committee is interested in hearing from Bar members on private, for-profit referral services. Information can be sent to [email protected].

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