Three committees of the New Jersey Supreme Court issue opinion holding that it is unethical to participate in Avvo Legal Services; also affects Legal Zoom and Rocket Lawyer but for different reasons

The Advisory Committee on Professional Ethics, the Committee on Attorney Advertising, and the Committee on the Unauthorized Practice of Law of the Supreme Court of New Jersey recently issued an opinion holding, among other things, that it would be unethical to participate in Avvo Legal Services.  You can read the opinion here.

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.

Professional Responsibility Committee of the California Bar issues opinion on whether a blog should be subject to advertising rules

The Standing Committee on Professional Responsibility of the State Bar of California recently issued an advisory opinion on whether “blogging” by an attorney is, or should be, subject to the requirements and restrictions of the Rules of Professional Conduct and related provisions of the State Bar Act regulating attorney advertising.  The answer, summarized below, is pretty straight forward and are pretty much what I suggested would be the logical answer to the question when I first blogged about it a few years ago (here).

The opinion is available here and the summary is as follows:

1. Blogging by an attorney is subject to the requirements and restrictions of the Rules of Professional Conduct and the State Bar Act relating to lawyer advertising if the blog expresses the attorney’s availability for professional employment directly through words of invitation or offer to provide legal services , or implicitly through its description of the type and character of legal services offered by the attorney, detailed descriptions of case results, or both.

2. A blog that is a part of an attorney’s or law firm’s professional website will be subject to the rules regulating attorney advertising to the same extent as the website of which it is a part.

3. A stand-alone blog by an attorney that does not relate to the practice of law or [that] otherwise express[es] the attorney’s availability for professional employment will not become subject to the rules regulating attorney advertising simply [even if] the blog contains a link to the attorney or law firm’s professional website.

Nevada may become the first jurisdiction to adopt controversial ABA Model Rule 8.4(g)

Back in January I wrote a long post on a proposal to amend Model Rule 8.4 to make it a sanctionable offense to engage in harassment or discrimination.  I thought that the original proposal was problematic for a number of reasons.  Some of the problems I thought of originally were addressed (and fixed) in subsequent versions of the proposal, but I still have some concerns. Go here for some of my comments. 

The ABA eventually adopted the amendment and enacted a Model Rule 8.4(g).  Despite strong support for it within the ABA, not everyone agreed it was a good idea.  See here for example.  The Texas Attorney General issued an opinion concluding it is unconstitutional.  So did the Montana legislature in a resolution.  Pennsylvania rejected it and instead adopted the approach used in Illinois, which is different from the one suggested by the ABA.  Illinois rejected adopting the new rule too.  So did the Professional Responsibility Committee of the South Carolina Bar.

So far, no jurisdiction has adopted the Model Rule.  It is still too early to say that it has been a failure but at least some within the ABA are frustrated the reaction has not been more positive.

Now comes news that Nevada may become the first state to adopt the new rule, although according to this commentator, the state is being misled by the rules proponents.

Virginia Supreme Court makes revisions to lawyer advertising rules which streamline the rules and reduce their number

Back in May I reported that the Virginia Supreme Court announced it was going to adopt new lawyer advertising rules.  See here.  The new rules are now in place.  You can find a copy of the new rules here.

Illinois decision provides good test for discussion of Constitutionality of new ABA Rule 8.4(g) -- UPDATED

As I am sure you know by now, the ABA recently approved an amendment to Model Rule 8.4 to make it misconduct to use discriminatory or biased speech.  The amendment is now Model Rule 8.4(g) which you can find here.  Back in January I wrote a long comment on the original proposal, which was changed before it was approved last month.  The approved version improved some of the issues I had originally objected to, but I still have reservations about the approved language. My main concern is that the language seems to punish protected, even if offensive speech.  You can read my most recent comments on it here and here. 

In one of my comments I posed asked rhetorically whether the new rule could survive a Constitutional attack.  So to pursue the question with some real facts, here is a good example.

The Legal Profession blog is reporting that a recent Illinois Hearing Board report recommended sanctions on an attorney who, among other things, “used demeaning and insulting language” toward the father of a client.  The father, by the way, was supposed to pay for the client’s representation which courts in Illinois have found makes him a client too.  The report lists some of the statements in question as follows: 

You are a piece of garbage. All black people are alike. You're slovenly, ignorant. [...]

I'm sick of you, you piece of shit.

I don't know who's the biggest bitch. You or [___]. I'm going to lock you up.

Low class n#!*s. I'm going to have you all locked up. [...]

You are such a pussy. ...

You're ugly, low class, ignorant. I'll finish with you when he gets off. You're demeaning your son.

Help your son. Pay. Stop delaying case.

Given those statements, the attorney was charged with a violation of Illinois Rule 4.4, which states that “[i]n representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person, or use methods of obtaining evidence that violate the legal rights of such a person.”

Personally, I don’t think that Rule 4.4 was meant to address this type of conduct; it is not meant to address the use of offensive speech directed at client.  It seems to me a better rule to use in a case like this would be the section of Illinois Rule 8.4(d) that talks about engaging in conduct that is prejudicial to the administration of justice. 

However, since 8.4 is also not squarely on point, it can be argued that the fact that the lawyer was charged under 4.4 rather than under another rule that may be more “on point” shows the need to adopt a new rule that would address this type of conduct. 

But what if that rule is adopted?  What if Illinois had adopted the new Model Rule 8.4(g)?  It seems to me this would be a good case to have a court decide the issue I have been writing about all along.  The conduct is deplorable and the speech is offensive; but the First Amendment protects against the state imposing sanctions on speech merely because some might find it offensive.

In the end, I think the issue comes down to deciding whether the state can support the argument that regulating offensive speech by lawyers outweighs the lawyer’s constitutional right to utter offensive statements.  If the answer is yes, the facts of this case are a good example to use in support of the adopting the new rule.  If the answer is no, then the facts of the case can be used as an example of the consequences of the Constitutional protection of what some might believe to be offensive speech. 

UPDATE 6/10/17: The Illinois Review Board has recommended a 60 day suspension. The Legal Profession blog has an update here. 

Magistrate imposes sanctions on lawyer for making too many improper objections during deposition -- UPDATED

I have often complained that judges don't do enough to discourage misconduct by lawyers during discovery in civil trials, which I think is very important because most civil trials settle on the basis of what happens during discovery. 

For this reason, I was glad to read a story in the ABA Journal about a recent case in which a federal magistrate imposed sanctions on New York City because of the conduct of one of its lawyers during a deposition.  The lawyer reportedly made more than 600 improper objections which lengthened the deposition, may have influenced the answers of the witness and prevented the witness from answering questions even though there was no basis to do so.  The lawyer's conduct was so improper that the lawyer taking the deposition had to interrupt the deposition in order to call the judge’s chambers to seek guidance.

The conduct was clearly improper, and I am glad the magistrate imposed sanctions.  I wish, however, that the sanctions could have been harsher.   Unfortunately, given the recent US Supreme Court decision in Goodyear v Haeger, the power to impose sanctions for discovery misconduct is now more limited.  I did not like the result in that case, which I think eliminates one of the few ways in which courts can try control discovery abuse, but that is a different and longer topic.

UPDATE 6/4/17:  The Law for Lawyers Today has a comment here.