This post is about referral fees, fee-sharing, and Avvo. Before you read it, you should review my primer on referral fees. (Don’t be shocked when you learn that straight referral fees are not allowed in Vermont.)
No time to read the primer? A few quick reminders before we proceed:
- V.R.Pr.C. 7.2(b) prohibits lawyers from giving “anything of value to a person for recommending the lawyer’s services.”
- V.R.Pr.C. 5.4 imposes a general prohibition on sharing fees with non-lawyers.
- $39 gets a consumer a 15 minute phone call for questions and advice from a local, experienced lawyer about estate planning needs;
- $149 gets a consumer a 30 minute phone call with a local, experienced lawyer plus review of a last will and testament; and,
- $249 gets a consumer a 30 minute phone call plus start-to-finish help for a last will and testament drafted by a local, experienced attorney.
In February, the ABA Journal reported on the launch of Avvo Legal Services, describing the service as follows:
- “Avvo sets the menu of services and fees. Clients choose a service and an attorney and make full payment up front through Avvo’s website. Avvo notifies the attorney, who then contacts the client directly and completes the service.”Once a month, Avvo deposits earned fees into the attorney’s operating account. As a separate transaction, it withdraws from the account a per-service marketing fee. The fee varies in amount according to the service provided.”
In its report, the ABA Journal quoted Gregory W. Coleman.
- “Gregory W. Coleman, who as 2014-15 president of the Florida Bar closely studied alternative legal providers, agrees that the program fills a consumer need.’They are reaching a market that we as a profession have been unable to serve, which is not just the indigent but the working middle class,’ says Coleman, a partner in the West Palm Beach firm of Critton, Luttier & Coleman. “They can’t afford a $250-an-hour lawyer, but they can afford a flat fee for a task they need accomplished.””But he and other lawyers are concerned that the program’s fee structure could violate ethical prohibitions against fee sharing and put lawyers who participate in the program at risk.”
Then, the ABA Journal summarized the arguments for and against Avvo Legal Services:
- “Coleman believes that because the marketing fee is tied to the amount of the legal fee, it violates Florida’s prohibition against fee sharing. For it to be acceptable, it would have to be a flat fee across all matters, he says.”New York City ethics lawyer Nicole Hyland takes a similar view, calling the arrangement ‘very, very close to the line.’
“’Most of the ethics opinions I’m aware of say that, if the lawyer is paying a fee to be included in a directory service, that fee should not be tied to the number of clients obtained or the amount of the legal fee earned,’ Hyland says. ‘Here, Avvo’s ‘marketing fee’ appears to be tied to both.’
But that does not mean that the service is inherently unethical or harmful to clients, she adds. ‘This is an area where I would like to see reform in the ethics rules—to give lawyers more options for marketing their services and finding new clients.’
“Northford, Connecticut, lawyer Susan Cartier Liebel, founder and CEO of Solo Practice University, raises a different concern. The unearned fees held by Avvo each month should instead be held in the attorneys’ IOLTA accounts, she believes. By retaining this money in its own accounts, Avvo is diverting interest that would otherwise go to fund legal aid.
“Avvo chief legal officer Josh King defends the fee arrangement as consistent with ethics rules. The critical question, he says, is whether the arrangement harms the client. ‘You can’t apply the ethics rules unless there’s consumer harm,’ he says. ‘We’ve been careful to make this product good for compliance-minded lawyers and especially good for consumers and clients.’
Last month, the South Carolina Bar issued Ethics Advisory Opinion 16-06. The opinion does not mention Avvo by name, but opens by stating that “[a]n attorney directory website released a new fixed-fee legal referral service.” The opinion goes on to describe a fixed-fee legal service that mirrors Avvo’s.
Here’s the summary:
- “The arrangement described herein violates the prohibition of sharing fees with a non- lawyer as described in Rule 5.4(a). In the alternative, assuming, for the purposes of this question only, that the arrangement does not violate Rule 5.4(a), the arrangement would violate the Rule 7.2(c) prohibition of paying for a referral and is not saved by the exceptions found in Rule 7.2(c)(1), (2), or (3).”
South Carolina’s rules are virtually identical to Vermont’s.
Avvo’s response to the South Carolina opinion is HERE.
This is an issue we have to address. Earlier this spring, I posted a series of blogs asking whether Rule 5.4 should be amended to drop the ban on sharing fees with non-lawyers. Links to each post in the series can be found HERE. Nobody seemed terribly interested.
I wonder, though, should we really be thinking twice about offering fixed fee legal services? Or, should we be thinking twice about what our ethics rules should & should not prohibit? To the point: assuming that services like Avvo associate with licensed & competent local counsel, what is the harm?
Last year, first-year study committees of the Vermont Joint Commission on the Future of Legal Services issued reports & recommendations. The Commission was formed in response to Chief Justice Reiber’s call for stakeholders to “come together to study the question of how to ensure that Vermonters can obtain quality, affordable legal representation and efficient dispute resolution . . . [and] to consider that question in light of the stark financial realities faced by the public, new lawyers, and the courts.”
Almost as if anticipating Avvo Legal Services, the Legal Technology Committee wrote:
- “Practices concentrating in the areas of criminal defense, residential real estate, moderately complex civil litigation, and retail services will remain services that cannot easily be provided by someone other than an attorney. Many other services such as business entity formation, basic contract drafting, and simple dispute resolution will likely pass from the smaller firms to larger firms or virtual practices. Due the hourly fee falling into disrepute in much of the country, some firms may also learn the benefits of non-traditional methods of setting fees to better serve the needs of specific clients. For the largest percentage of firms providing retail services to clients other than the most economically challenged, practitioners will have to determine how to provide services at a cost that the average consumer can pay.
“The question is not whether disruptors that have touched other industries and the practice of law in other states will impact the practice of law in Vermont, but how quickly the disruption will occur and how significant the impact of the disruption will be when it does arrive.”
I don’t know whether Avvo plans to operate in Vermont. But LegalZoom is here. So are other disruptors. The disruption has arrived.
What will disciplinary counsel’s response be if & when a complaint is filed against a Vermont attorney who participates in a fixed-fee legal service, provides otherwise competent & conflict-free representation at an affordable fee, but renders a cut unto the service? Should we take it out of disciplinary counsel’s hands by changing our rules?
I wonder, are we serving our younger attorneys, many of them burdened by overwhelming debt, by enforcing rules that may prohibit participation in services similar to Avvo? Are we serving consumers by making it unethical for lawyers to participate in such services? How is banning Avvo consistent with our oft-stated goal — and urgent need — to increase access to justice and access to legal services?
On the other hand, why should we imply that 30-minutes of legal advice, which might be over the phone, on a matter important as estate planning is sufficient?
I don’t know the answers. But we need to raise the questions.
Consider them raised.