This comes as no surprise to me since I have argued both here and in a law review article (available here), that under the current regulatory system, Avvo Legal Services puts lawyers in positions to violate a number of rules and that Avvo's arguments to the contrary are not convincing. All the opinions addressing the question so far have reached the same conclusion. See here.
The opinion from the New Jersey committees is short and well written and addresses most, if not all, the arguments I have been discussing regarding Avvo's claims. And it reaches pretty much the same conclusions I reached in my article, concluding that New Jersey lawyers may not participate in Avvo legal service programs because the programs improperly require the lawyer to share a legal fee with a non-lawyer in violation of Rule of Professional Conduct 5.4(a), and to pay an impermissible referral fee in violation of Rule of Professional Conduct 7.2(c) and 7.3(d).
Interestingly, Avvo was able to respond to the inquiry addressed by the committees before the opinion was issued and it seems it made the same arguments it has been making elsewhere and that I have discussed before. The opinion rejects them all for pretty much the same reasons I described in my article.
For example, Avvo argued that its fee scheme does not constitute sharing fees with a non-lawyer because it is a "marketing fee." About this, the opinion concludes that the fact that Avvo refers to its fee as a “marketing fee” does not determine the purpose of the fee or negate the fact that paying it constitutes sharing a fee with a non-lawyer.
Similarly, I have argued that the fact that Avvo’s fee varies depending on the value of the legal fee creates the impression that the lawyer is paying Avvo a percentage of the legal fee, which is precisely what the ban on sharing fees with a non lawyer prohibits.
On this, the New Jersey opinion concludes that the fee lawyers pay to Avvo is not for marketing because "it is a fee that varies with the cost of the legal service provided by the lawyer, and is paid only after the lawyer has completed rendering legal services to a client who was referred to the lawyer by Avvo." Further, it states:
Avvo claimed that the “marketing fee” is not a referral fee but an advertising cost, and because the “marketing fee” is a separate transaction, there is no improper fee sharing. The label and timing of the fee does not transform it into an advertising cost. This fee varies depending on the cost of the legal service provided, which is inconsistent with the essential elements of an advertising cost. Avvo defended the varying amounts of its “marketing fees” by stating that in the online market, bigger-ticket services should have bigger-ticket fees. It stated that it spends more to advertise the range of services and takes a bigger payment processing risk for more expensive services. The Committees are not convinced that the sliding scale of fees for legal services rendered bear any relation to marketing.Moreover, as I pointed out in my article, according to the drafters of the Comment to Model Rule 7.2, a fee paid to a non lawyer for a client lead should not be contingent on a person’s use of the lawyer’s service because “[s]uch a fee would constitute an impermissible sharing of fees with non lawyers under Model Rule 5.4(a).” Since a lawyer does not have to pay a fee to Avvo unless a client chooses the lawyer, the fee seems to be “contingent on a person’s use of the lawyer’s service.” Thus, paying the fee to Avvo arguably constitutes a violation of the ban on fee sharing and, as a consequence, of Model Rule 7.2.
Once again, the New Jersey opinion agrees with my analysis when it concludes that "[w]hen the lawyers pay a fee to the company based on the retention of the lawyer by the client or the establishment of an attorney-client relationship, the answer to the inquiry is simple: the company operates an impermissible referral service."
Finally, the opinion addressed Avvo's contention that fee sharing with non-lawyers is not inherently unethical. According to this argument it is unethical only if it results in an interference with the lawyer's independent professional judgment.
In my article I explained that Avvo's argument is wrong because, at least as far as the text of the Model Rule is concerned, unless allowed by one of the specific exceptions, splitting fees with a non lawyer is inherently unethical. The rule does not say that sharing a fee with a non lawyer is unethical only if it interferes with the attorney’s independent professional judgment; it says sharing a fee is unethical because it is a threat to an attorney’s independent professional judgment. Clearly, part of the policy behind the rule is to protect the attorney’s independent professional judgment, but that does not mean that the interference needs to be shown in order for the rule to apply.
And, again, the New Jersey opinion agrees:
Avvo further asserted that fee sharing is only unethical if it compromises the lawyer’s professional judgment. The Committees acknowledge that concerns about independent professional judgment undergird the prohibition on sharing legal fees with nonlawyers. But the precedent in New Jersey, in case law, opinions, and the language of the Rule of Professional Conduct itself, do not restrict the prohibition to situations where there is a clear connection between the fee sharing and the lawyer’s professional judgment. . . . Sharing fees with a nonlawyer is prohibited, without qualification.The opinion also addressed certain services offered by LegalZoom and Rocket Lawyer. It found they also violate the rules, but for other, easy to address, reasons. The opinion held that these programs are different than Avvo's because they operate as legal service plans and that, therefore, New Jersey lawyers may not participate in the plans until they are registered with the Administrative Office of the Courts. This is a setback for LegalZoom and Rocket Lawyer, but one that should be easy to solve by registering the programs accordingly.
Simple Justice has a comment on the New Jersey opinion here. (He agrees with me.)
My Shingle has a comment here. (She does not.)
Above the Law comments here.
The Law for Lawyers today comments here.
Now back to the issues related to Avvo Legal Services, I want to reiterate something else I have stated in the past. Saying that participating in Avvo Legal Services would violate the rules is not the end of the debate. The more interesting question is whether the rules should be changed to accommodate what Avvo wants to do. That is not addressed by the New Jersey opinion. As I reported recently, though, it is under review in North Carolina and, perhaps in Oregon.
In other words, I think Avvo is going at this all wrong. It should not be arguing that participating in its services does not constitute a violation of the rules. Given the current rules, that argument is weak. What it should be doing is arguing that the rules should be changed to allow it to do what it wants to do and to allow lawyers to participate. That is a better approach, which may yield better results for Avvo. What happens in North Carolina will tell.