Monday Morning Answers #81

Nothing like a little Jay-Z to get people to enter the quiz!

Friday’s questions are HERE.  Today, the answers are below the Honor Roll.

Honor Roll

Answers

Question 1

Not all rules were created equal.  If an attorney’s duties under the rules conflict, which duty is usually viewed as trumping all others?

  • A.   Duty of zealous advocacy to clients
  • B.   Duty of fairness to opposing counsel & opposing parties
  • C.   Duty to provide competent, conflict-free representation
  • D.   Duty of candor to the courts; See generally, V.R.Pr.C. 3.4 Per the Reporter’s Notes, “if the interests of client and tribunal conflict with regard to candor, the interest of the tribunal prevail.”  Also, Comment 11 makes it clear that the duty of candor to the court prevails even in the face of causing “grave consequences” to a client by disclosing the client’s false testimony.

Question 2

Competence.  Conflicts.  Candor.  There’s another word that begins with “C” that is a serious violation of the rules.  However, the word doesn’t appear in any of the rules, notable in its absence from the trust accounting rules and the rule on safekeeping client property.

What’s the word?

Commingling

Question 3

This comes up in approximately 30% of the inquiries I receive. So, about 330 times per year.

Imagine I’m speaking at CLE.  You hear me say “the idea is that we’re not going to put a client to the ‘Hobson’s Choice’ of having to disclose a confidence in order to protect it.”

What general topic am I discussing?

Conflicts/Withdrawal

It is not uncommon for lawyers who encounter former client conflicts to tell me “but Mike, I don’t remember anything about the prior case.”  That may be true, but it’s not the standard under Rule 1.9(a).  As the Vermont Supreme Court has explained, if the new client’s matter is the same as or substantially related to the former client’s matter, the Court will presume that the former client shared confidential information with the attorney.  Why? 

  • “[t]he purpose of the presumption is to avoid “ ‘putting theformer client to the Hobson’s choice of either having to disclose his privileged information in order to disqualify his former attorney or having to refrain from the disqualification motion altogether.’ ” In re Crepault, 167 Vt. 209, 216-17 (citations omitted).

Question 4

Lawyer called me with an inquiry. I listened, then said,

  • “Okay.  Since you and Attorney don’t work in the same firm, it is only allowed if  you  do one of two things.  And, since it sounds like Attorney doesn’t want to do any work on Client’s matter, that means that the first option is out. So, your only option is that you each assume joint responsibility for the representation of Client. Otherwise, the rule prohibits it.“

What is “it” that Lawyer called to discuss, and that Lawyer and Attorney propose to do.

Fee Sharing.   See, this post.

Question 5

As another school year approaches, imagine an aspiring 1L heading to law school.  Law student is cruising down the highway with the tunes blaring.  All of sudden, there are blue lights in the rear view. In the ensuing encounter with police, the law student says to the officer:

  • “Well my glove compartment is locked, so is the trunk in the back
    And I know my rights, so you gon’ need a warrant for that.”

Problem 1:  The situation at hand for our erstwhile law student.

Problem 2:  Future issues with the Character & Fitness committee upon applying for admission?

Problem 3: If law student’s statement is based on advice from a lawyer, the lawyer didn’t exactly provide competent & ethical advice.

Your problem: Name the artist & song that was blaring just before law student was pulled over.

Jay-Z, 99 Problems.

Jay Z

 

Referral Fee? Think twice.

Vermont’s Rules of Professional Conduct do not allow straight referral fees.

If you didn’t know that, don’t worry, you’re not alone.

About a year ago, I blogged on referral fees.  The post is HERE.  A quick summary:

  • Scenario: Client asks Lawyer for help in an area that Lawyer doesn’t practice.  Lawyer refers Client to Attorney.  Lawyer and Attorney do not work in the same firm. Lawyer wants to be paid for the referral.  Under what circumstances, if any, can Attorney ethically pay Lawyer for the referral?
  • Conclusion: Rule 1.5(e) is Vermont’s rule on dividing fees between lawyers who do not work together. The rule authorizes a division of fees Lawyer and Attorney if:
    1. the division is in proportion to the services performed by both Lawyer & Attorney, or, both Lawyer & Attorney assume joint responsibility for the representation;
    2. Client agrees to the arrangement, including the share that both Lawyer and Attorney will receive, and the agreement is confirmed in writing; and
    3. the total fee is reasonable.

The original post goes into much more detail.

The question that often arises is “what does joint responsibility for the representation mean?”  Comment [7] to Rule 1.5(e) makes it clear that lawyers can divide fees based on “the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole.”  It goes on to indicate that “[j]oint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership.” (emphasis added).

In April, the ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 474.  The opinion reaches the same conclusion as my original post. It also endeavors to shed some light on “joint responsibility for the representation.”  Finally, the ABA opinion reminds us that the referring lawyer is subject to the conflict rules and must avoid conflicts of interest as if representing the client.

The ABA Journal summarized Formal Opinion 474 here.

Caution

 

Fixed Fee Legal Services: a Conversation Starter

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.

The website for Avvo Legal Services is here.  Avvo provides fixed-fee legal services. For example, as you can see here,

  • $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.

The ABA Journal called the SC Opinion “bad news for Avvo Legal Services.”  FindLaw’s Casey Sullivan noted that the SC Opinion should make lawyers “think twice about fixed fee legal services.”

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.

 

 

Referral Fees

Last week’s Five For Friday included a question on referral fees. It generated several emails and calls, so I thought I’d post on the topic.

Vermont’s rules do not authorize straight referral fees.

Here’s the scenario: Client asks Lawyer for help in an area that Lawyer doesn’t practice.  Lawyer refers Client to Attorney.  Lawyer wants to be paid for the referral.  Under what circumstances, if any, can Attorney ethically pay Lawyer for the referral?

Believe it or not, we start with the advertising rule – Rule 7.2.

Rule 7.2(b) prohibits lawyers from giving “anything of value to a person for recommending the lawyer’s services.”  There are four exceptions.

One of the exceptions allows a lawyer to:

“refer clients to another lawyer or a nonlawyer professional pursuant to an agreement not otherwise prohibited under these rules that provides for the other person to refer clients or customers to the lawyer if:

  • (i) the reciprocal agreement is not exclusive; and
  • (ii) the client is informed of the existence and nature of the agreement.”  Rule 7.2(b)(4).

A comment to the rule is instructive.

Comment [8] states that “[e]xcept as provided in Rule 1.5(e), a lawyer who receives referrals from a lawyer or nonlawyer professional must not pay anything solely for the referral,” but may enter into reciprocal referral agreements that comply with Rule 7.2(b)(4).

So, then, what does Rule 1.5(e) provide?

Rule 1.5(e) is Vermont’s rule on dividing fees between lawyers who do not work together. The rule authorizes a division of fees between lawyers who are not in the same firm only if:

  1. the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;
  2. the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and
  3. the total fee is reasonable.

I’m most often asked about paragraph 1.  Again, the Comment is helpful.

Comment [7] makes it clear that lawyers can divide fees based on “the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole.”  It goes on to indicate that “[j]oint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership.

Back to our scenario: it seems to me that Attorney cannot pay Lawyer solely for the referral.  Attorney and Lawyer may divide the fee if:

  • the total fee is reasonable
  • Client confirms the agreement in writing, AND,
  • the division is either
  • in proportion to the services each performs, OR,
  • Lawyer accepts ethical and financial responsibility for Attorney’s representation of Client.