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Opinion spells out how to pay for-profit qualifying providers

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The Board of Governors has unanimously approved an ethics advisory opinion regarding for-profit qualifying providers, otherwise known as lawyer referral services, and related payment methods.

At a December 14 meeting in Naples, the board acted on Proposed Advisory Opinion 18-1, “Payments to Qualifying Providers/Lawyer Referral Services.”

Larry Sellers Board Review Committee on Professional Ethics Chair Larry Sellers reminded board members that they recommended preliminary approval in October, when it was designated “Proposed Advisory Opinion 17-2.”

Summarizing opinions from other states, the opinion prohibits qualifying providers from being paid in a manner that constitutes an impermissible division of fees with a non-lawyer, Sellers said.

“I won’t read them all to you, but one example of a charge that would generally be permissible includes a reasonable, pre-arranged fixed charge per time period, such as weekly, monthly, or yearly,” Sellers said. “An example of a charge that would generally be impermissible includes a charge calculated as a percentage of the fee received by the lawyer.”

Under the new rule, a qualifying provider is, “any person, group, or persons, associations, organizations, or entities that receive any benefit or consideration, monetary or otherwise, for the direct or indirect referral of respective clients to the lawyers or law firm.”

The proposed opinion also cites the comment to Rule 4-7.22, “Qualifying Provider Rule,” that became effective in April.

“A lawyer may not participate with a qualifying provider that receives any legal fee that constitutes a division of legal fees with a non-lawyer unless the qualifying provider is The Florida Bar Lawyer Referral Service or a lawyer referral service approved by The Florida Bar pursuant to Chapter 8 of these rules,” the comment states. “A fee calculated as a percentage of the fee received by a lawyer, or based on the success or perceived value of the case, would be an improper division of legal fees.”

The comment continues: “Additionally, a fee that constitutes an improper division of fees occurs when the qualifying provider directs, regulates, or influences the lawyer’s professional judgment in rendering legal services to the client.”

Proposed Advisory Opinion 18-1 lists the following factors as examples that would “mitigate in favor of a conclusion that the charge is permissible”:

• The charge is reasonably based on the qualifying provider’s costs for marketing and administration plus a reasonable profit; and

• The charge is imposed regardless of whether the lawyer is hired by the prospective client.

The opinion then states that the “following factors may or may not lead to a conclusion that the charge is permissible, depending on the circumstances, and might require further scrutiny”:

• The charge varies and on what basis; and the qualifying provider sets the lawyer’s fee and on what basis.

The opinion goes on to list factors that would “mitigate in favor of a conclusion that the charge is impermissible”:

• The charge is based on the perceived value of the individual matter.

• The qualifying provider collects the lawyers’ fees directly from the consumer, takes a portion of the fee as the charge for the referral or match, then remits the remainder to the lawyer.

• The qualifying provider interferes with the lawyer’s independent professional judgment in representing clients or directs the lawyer’s activities in representing clients.

• There is sufficient incentive for the qualifying provider to improperly solicit prospective clients or improperly market the service.

The opinion then states that “in applying those facts, the board believes the following would be permissible:”

• A reasonable, pre-arranged fixed charge per time period such as weekly, monthly, or yearly;

• A reasonable, pre-arranged fixed charge for each time a consumer views information about a specific lawyer, commonly referred to as “pay-per-click.”

• A reasonable, pre-arranged fixed charge per matter referred to the lawyer that is not contingent on the outcome of the matter and does not vary based on the amount at issue in the matter.

• A reasonable, pre-arranged fixed charge per matter referred to the lawyer that varies based on the type of matter only if the varying charge is based on demonstrably different marketing and administrative costs rather than the perceived value of the case.

The opinion continues, stating, “the board believes the following would generally be impermissible”:

• A charge calculated as a percentage of the fee received by a lawyer.

• A charge calculated as a percentage of the client’s recovery in the matter.

• A charge based on the perceived value of the case referred to or accepted by a participating lawyer.

• A flat charge that differs based on the perceived value of the case referred to or accepted by a participating lawyer.

• A flat charge per case accepted by a participating lawyer.

• A flat charge per case accepted by a participating lawyer that differs based on the type of matter (e.g., personal injury versus family law).

In a “cautionary” note, the opinion states that it is designed solely to address what constitutes impermissible fee splitting, and that lawyers should not “assume that a lawyer may participate with a particular qualifying provider solely because the qualifying provider’s method of charging for its services falls within one of the methods the board concludes generally would be found to be permissible.”

The proposed advisory opinion was published in the November 1 and generated two suggestions, Sellers said.

Bill Wagner of Tampa proposed separating a particular phrase in the comment to Rule 4-7.22, something the committee is not authorized to do in an ethics opinion, Sellers said.

But the BRCPE voted 8-0 to recommend adopting Wagner’s second recommendation that the opinion state more clearly that ethics opinions from other states are not necessarily dispositive of how an issue should be addressed in Florida.

The payment issue first arose from an advertising inquiry that asked whether a referral service could charge a different set fee per referral for different types of cases, for example, $10 per referral for each personal injury case or $15 per referral for each family law case, a structure the inquirer referred to as “pay per lead.” But previous Standing Committee on Advertising and Board of Governors decisions had determined that pay-per-lead is impermissible.
The board voted unanimously, without debate, to approve proposed Advisory Opinion 18-1.

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