Avvo Legal Services – Lawyer Beware
Recently we wrote about the ethics of Pay for Lead marketing business models. To date, these Pay for Lead models have been approved by numerous courts and have been acknowledged in the Comment to Rule 7.2 of the ABA’s Model Rules for Professional Conduct. Earlier this year, attorney marketing juggernaut Avvo created some controversy when it launched a new program called Avvo Legal Services.
Avvo Legal Services is available in 18 states. The way the service works is that clients contract with Avvo for certain legal services at a fixed rate. The client chooses from participating attorneys in their geographic area and when the service is complete Avvo pays the attorney and takes a fee for itself.
Naturally, this model implicates a fee sharing violation in a way that Pay for Lead models avoided. However, Avvo has taken the position that even if the model violates the fee sharing rule, the fee sharing rule is inapplicable because their service causes no harm to the client. Avvo may be right, and this brave new world of attorney marketing ultimately may cause tectonic shifts in the way legal services are marketed and provided, but until the ethical rules change, attorneys must be aware that participation in such programs could subject them to disciplinary sanctions.
On June 16, 2016, the South Carolina Bar Association’s Ethics Advisory Committee issued an opinion stating that the Avvo Legal Services arrangement violates the prohibition of sharing fees with a non-lawyer as described in Rule 5.4(a) and that even if it did not, 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 Ethics Advisory Opinion 16-06)
Avvo may be right, and this brave new world of attorney marketing ultimately may cause tectonic shifts in the way legal services are marketed and provided . . .
In Ohio Opinion 2016-3, the Board of Professional Conduct went a bit further and concluded that this “business model presents multiple, potential ethical issues for lawyers” including “fee-splitting with nonlawyers, advertising and marketing, a lawyer’s responsibility for the actions of nonlawyer assistants, interference with the lawyer’s professional judgment, and facilitating the unauthorized practice of law.”
The Pennsylvania Bar Association, opined in an advisory decision in PA 2016-200, that a “lawyer who participates in a Flat Fee Limited Scope Legal Services referral program such as that described in this Opinion, in which the program operator collects “marketing fees” from that lawyer that vary based upon the legal fees collected by the lawyer, violates RPC 5.4(a)’s prohibition against sharing legal fees with a non-lawyer.” The opinion also states that “a lawyer who participates in such a program violates RPC 1.15(i), which requires advance fees to be deposited in the lawyer’s Trust Account.”
Both Ohio and South Carolina also took issue with Avvo taking a percentage cut of the cost of a legal service which on its face makes is clear that the fee is not about the cost of advertising, but is obviously and impermissibly a “referral fee.”
South Carolina opined that “Presumably, it does not cost the service any more to advertise online for a family law matter than for the preparation of corporate documents. There does not seem to be any rational basis for charging the attorney more for the advertising services of one type of case versus another. For example, a newspaper or radio ad would cost the same whether a lawyer was advertising his services as a criminal defense lawyer or a family law attorney. The cost of the ad may vary from publication to publication, but the ad cost would not be dependent on the type of legal service offered.”
Moreover, Josh King, Avvo Chief Legal Counsel, asserted in a comment to Robert Ambrogi’s blog on this same subject, that “our costs . . . scale with the cost of the underlying service . . .”
Of course, this is not necessarily correct. Whether the rules ever change to allow the Avvo model, South Carolina, at least, does not understand modern marketing. South Carolina states that the ad cost would not be dependent on the type of legal service offered, but that is simply not true in the case of online marketing. Marketing services such as Adwords rely on “bids” for pricing and the cost of marketing for personal injury cases, for example, is much greater than for other areas of law.
Moreover, Josh King, Avvo Chief Legal Counsel, asserted in a comment to Robert Ambrogi’s blog on this same subject, that “our costs -credit card processing, customer care, refunds/voids/re-dos, etc. – scale with the cost of the underlying service (as does the cost of advertising in other media). Finally, attorneys really appreciate the efficiency of having their marketing spend tied directly to the acquisition of new business.” King’s representations that the costs scale with the cost of the service is a little overstated. However, there certainly is some scaling because of the variable cost of Internet advertising, if for no other reason.
With a little tweaking on the part of Avvo and a little growth and temporal awareness on the part of state bar associations, the present gap between the ethics rules and modern marketing realities can be bridged. Many of our ethical rules are based on the appearance of impropriety or the possibility of harm. Rules pertaining to potential and theoretical harm that may have had merit before the advent of the Internet may need to adjust to modern realities. Until then, Caveat Advocatus, unless it is your aspiration to be a professional ethics test case!
Carl P. DeLuca, Esq