Where Avvo Legal Services left off, Basic Counsel picks up

Regular readers of this blog know I have been writing about Avvo Legal Services for a long time, and that I have expressed serious concerns about possible ethics violations in participating in it.  You also know that those concerns were shared by enough jurisdictions out there that Avvo Legal Services stopped providing services and is no longer in business.

But where it left off, a new platform has taken its place.  I have not reviewed the details on how it functions but from what little I have read so far, it is clear they are trying to address the concerns that made participating in Avvo such a risk for lawyers.

The new platform is called Basic Counsel and it seeks to enable attorneys to offer flat-fee, limited scope services, while complaying with every state’s professional conduct rules.

Bob Ambrogi, of Law Sites, describes the services in some detail here.  In a nutshell, consumers search or browse the site for the service they need in the location they need it. When a consumer buys a service, the fee is sent directly to the lawyer and Basic Counsel collects a separate “platform fee” from the consumer of 5 percent of the service cost (with a $10 minimum).  As the lawyer works on the client's case, the platform offers ways for the attorney to keep the client informed on the tasks progress and ways for attorney and client to communicate and share documents.

As Ambrogi points out, with regard to the potential ethics issues raised by a site such as this, there are clearly some differences between Basic Counsel and Avvo Legal Services.  For example, a concern of ethics bodies was that Avvo set the fee and defined the scope of the service. On Basic Counsel, the lawyer sets the fee and defines the scope.  Also, Avvo Legal Services collected the fee from the client and held it until the service was completed, which some said interfered with the lawyer’s duty to safeguard client funds. On Basic Counsel, the funds go directly to the lawyer.

Still another ethics issue for Avvo Legal Services was that it charged the lawyer a marketing fee, which some ethics bodies saw as fee splitting. Basic Counsel charges the client a platform fee, and Marchbanks says the fee is for the direct benefits the client obtains from using the platform — not for anything the attorney provides.

This sounds good, yet it is not clear to me how calling the fee a "platform fee" distinguishes it from Avvo's marketing fee when both are based on a percentage of the amount charged by the attorney.  It was that fact, which does not seem to be different in Basic Counsel's system, that got Avvo in trouble.  On the other hand, the percentage involved in Avvo was higher than the 5 percent charged by Basic Counsel.  In Avvo's case, the percentage also increased as the price for the services increased.

Why can't they make the platform fee a flat fee itself, not dependent on the value of the services?  It seems to me that would be a safer way to deal with this.  Otherwise, the door is still open for the interpretation that the fee constitutes sharing a fee with a non lawyer.

Having said that, as I have written about before many times, it is possible the rules can and will be changed to welcome this type of interaction because of the obvious benefits it provides to consumers.  But until that time, lawyers should be careful not to engage in conduct that has been interpreted to constitute sharing fees with non lawyers in violation of the rules.

Also, it is not clear whether lawyers should be concerned about confidentiality issues when it uses the platform to communicate and share documents with clients and prospective clients.

Avvo fined by NY Attorney General's Office

As you probably know by now, Avvo Legal Services shut down earlier this year, but Avvo itself did not.  The controversial original directory and rating service is still in operation.  I say "controversial" because since early on there have been lawsuits and claims that its ratings system is misleading and that it favors attorneys that pay to join Avvo in order to build their profile.

Now comes news that Avvo has reached an agreement with the New York Attorney General’s Office according to which Avvo will pay a $50,000 fine and will state on its website that attorneys who "claim" their profile (presumably by paying a fee to Avvo) receive higher rankings, among other things.  Also, Avvo will no longer be able to claim that its ratings are “unbiased.”

The ABA Journal online has more on the story here.

Where Avvo Legal Services left off, Text-a-Lawyer may pick up...

Earlier this month I reported that Avvo Legal Services was shutting down; but I also stated that I was sure ALS' demise would not be the last time we hear about client-lawyer matchmaking services.  Where Avvo left off, someone else will pick up...

And now we have a new participant in the market....  Say hello to Text A Lawyer, ("TaL") a service that will provide a platform for prospective clients to ask lawyers questions via text.  For now, the service is available only in Oregon and Washington but its developer plans to expand the service nationwide if he can find investors to help fund the project.  You can read more about Text a Lawyer here.

Aside from the fact that I have serious doubts that texting is a good way to discuss legal matters with a client a lawyer has not even met, the billing process used by TaL has already been criticized as having some of the same problems that got Avvo in trouble in so many jurisdictions.  You can read about it here.  Of course, if jurisdictions decided to change the applicable rules, then things might be different, but until then, the discussion we were having about Avvo Legal Services will continue.

Here is a video that explains the service (taken from its website).  What do you think?

More on the demise of Avvo Legal Services -- UPDATED

A few days ago I reported that the company that recently bought Avvo has decided to discontinue Avvo Legal Services ("ALS"). 

There have been a couple of comments, but I am a little surprised I have not seem much reaction to the news.  Law Sites has a report with some links, but no opinion one way or another.

The only opinion statement I have seen so far is by Professor Milan Markovic, over at the Legal Profession blog, in which he laments ALS's demise, stating that "My personal view is that the ethical concerns regarding Avvo Legal were overblown because Avvo Legal neither recommended one attorney over another nor interfered with attorneys' professional independence of judgment.  ...[T]o address lack of access to justice, the organized bar should embrace Avvo Legal and other companies that promote awareness of the law and the availability of lawyer assistance.  Instead we continue to ignore the demand side of lack of access to justice while regulators experiment with supply-side solutions such as "navigators", "LLLTs," and alike that I fear will prove ineffectual." 

UPDATE 7-26-18:  Faughnan on Ethics has published a comment on Avvo's demise here.

Avvo Legal Services is dead

Whether participating in Avvo Legal Services violates rules of professional conduct was one of the most debated questions in legal ethics recently.  Long time readers of this blog know I have written extensively, both here and in law reviews, on the subject, which is why I was dumbfounded when I saw the news today.

Internet Brands, the company that recently acquired Avvo has announced that Avvo Legal Services will be discontinued by the end of the month.  

That's it. No more explanation. They are not going to continue to argue there are no ethical issues to worry about.  They are not going to continue to try to convince that the rules should be changed. They are not going to continue to argue that the rules are unconstitutional.  They are done. Avvo Legal Services is dead.  

Evidently, whether that is a good thing or a bad thing depends on what your opinion is about the service, the company and the regulations involved.  That, we can debate some other time.  For now, the interesting question is simply "why?"  Why now?  (particularly because it seemed that the position to recognize and allow services like Avvo Legal Services seems to be gathering support.)    Was it the opinions of the bar associations that held it would be unethical to participate in Avvo Legal Services?  Was it that it was not profitable?

I don't know.  Others have concluded that Internet Brands did not want to fight the regulatory agencies, stating that "[f]rom a business perspective, it is understandable that Internet Brands didn’t want to continue this service given the regulatory obstacles it faced." 

But that's not exactly what the spokesperson for the company said in a letter disclosing they are discontinuing the service.  There, all they say is that "[a]s a part of our acquisition of Avvo, we have evaluated the Avvo product offerings, and adjusted the Avvo product roadmap to align more comprehensively with our business and focus. Accordingly, we have decided to discontinue Avvo Legal Services.”

Whether the closing of Avvo Legal Services is "good news" or "bad news" depends on your view of the service itself, and reasonable people can disagree about that (although, as your probably know, almost all the published ethics opinions that addressed it held it would be unethical for lawyers to participate).   

But I am sure that Avvo's demise will not mean the demise of entities trying to do what Avvo was doing, ie, profit by creating ways to connect prospective clients with lawyers.  This may be the last we hear of Avvo Legal Services, but I am sure it won't be the last we will hear of such matchmaking services.

Illinois disciplinary agency publishes comprehensive report recommending changes to the rules and the creation of a new regulatory system to allow lawyers to participate in for profit referral services and other "matching" services

A couple of weeks ago I participated in a panel on the debate over for-profit services that help “match” potential clients with lawyers who are looking for clients such as Avvo Legal Services.  As long time readers of this blog know, this is a topic I have been writing about for some time.  (To see my previous posts on the subject, go here and scroll down.)  To see an article I wrote on the subject go here.  (An update to this article with more recent developments since its publication is forthcoming.)

As I have chronicled here and elsewhere, all of the published opinions, and one proposed opinion have concluded that participating in for profit matching services such as Avvo Legal Services would violate, or likely violate, rules of professional conduct.  Only one proposed opinion has suggested the opposite.  Having said that, it should be noted that the vast majority of jurisdictions have not published any opinions on the subject which may mean that the regulators don’t see the question as a problem that needs to be addressed. Also, California allows for profit referral services, while others may not allow them, but seem to tolerate them.

Given the state of affairs, in some of my writings about this topic I have suggested that Avvo would be better served by seeking to get jurisdictions to change the rules so it would be allowed to do what it wants to do (rather than argue that what it is doing was not against the rules - a battle it seems to be losing.)

Which brings me to today’s news: the day before I spoke at the conference, the Illinois Attorney Registration and Disciplinary Commission (ARDC) published the most comprehensive report on this issue in which it suggests amendments to the Illinois rules of professional conduct in order to allow attorneys’ participation in for-profit referral services such as Avvo Legal Services.

In doing so, it is the first jurisdiction to publish such a recommendation.  (North Carolina has been considering one, but it has not been officially published yet.)

The report, which you can find here, is very comprehensive (124 pages long) and I have not had a chance to read it all, but I looked at some sections and here is a quick review.

First of all, it should be noted that the report is just that; a report.  It is not a final recommendation or a decision of any sort.  And it is subject to changes since the ARDC is now seeking comments on it.  But it does have suggestions on how to approach the issues.

Second, given those suggestions, it is clear that the report sides with what I have called the “Justice gap” theme in the debate.  [See, "Justice Gap vs. Core Values: The Common Themes in the Innovation Debate" 41 Journal of the Legal Profession 1 (2016)]  This refers to the position that we should do what we can to help provide more access to legal services, even if doing so involves taking innovative approaches that seem to go against tradition.  As the report states, “[p]rohibiting lawyers from participating in or sharing fees with for-profit services that refer clients to or match clients with participating lawyers is not a viable approach, because the prohibition would perpetuate the lack of access to the legal marketplace.”

What is new, and may be controversial, in the report is that it does not only suggest changing the rules that apply to lawyers, it suggests creating a regulatory system to apply to the non-lawyers who want to provide for-profit referral services that would require them to meet certain standards and to register with, and be regulated by, the ARDC.  According to the report, this approach would be better to protect clients and the integrity of the legal profession.

The ARDC will accept comments through at least Aug. 31, 2018. Comments should be sent to information@ardc.org.  More here.

As expected, the report has generated some debate already.  Here are some links to comments about it.

Carolyn Elefant writes that the proposal is a very bad idea, but not for the reasons that the jurisdictions that have published opinions have argued.

Law Sites describes the report here.

Legal Profession blog comments here.

Robert Ambrogi comments on the report at Above the Law.

Finally, here is a podcast discussing the report with its author.  (if you can't see the podcast play button below, you can go here to access it.)

NJ Supreme Court rejects request to review opinion on Avvo legal services -- UPDATED

About year ago, 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 issued an opinion holding, among other things, that it would be unethical for New Jersey lawyers to participate in Avvo Legal Services.

In response, Consumers for a Responsive Legal System, an organization that represents Avvo and other online companies providing lawyer referrals, petitioned the NJ Supreme Court to review the order.  But earlier this month, the court denied the petition.

Responsive Law executive director Tom Gordon said in a statement that, “by summarily declining to review the decision … [the court] has abrogated its responsibility to engage in active supervision of the bar’s anti-competitive conduct.”

This statement is, of course, a reference to the holding of the U.S. Supreme Court's decision in North Carolina State Board of Dental Examiners v. Federal Trade Commision, in which the Court found regulation of a profession is subject to antitrust regulation if it is exercised by market participants unless there is active supervision by a government agency.  In other words, the organization (and Avvo) are gearing up to argue that the system of self regulation used by the legal profession violates antitrust principles.

On the other hand, the NJ State Bar Association issued a statement stating, in part, that “The court’s decision to let stand the joint opinion is an important . . . provides clarity for New Jersey lawyers and protects consumers" and that “[t]he association has increasingly grown concerned about the number of organizations that have sought to open the door to fee sharing, which could interfere with a lawyer’s independent professional judgement, and with the concept of organizations providing legal services when they are not bound by the same ethics rules that guide attorneys.”

I am not sure that both statements are entirely accurate.  The fact that the court denied the petition does not mean it did not exercise supervision.  If it reviewed the petition, it exercised supervision.  Avvo just doesn't like the result.  That does not make the review insufficient; it just makes it unfavorable to its position.

On the other hand, the statement by the Bar Association, is not entirely convincing either.  It suggests that Avvo is "providing legal services," which it does not do.

For more on the court's denial of the petition, go here.

UPDATE 7/6/18:  Lawyer Ethics Alert Blogs has an update here.

Indiana Supreme Court Disciplinary Commission announces it will begin to publish advisory opinions; and uses first opinion to find that participating in Avvo creates the risk of violating the rules

The Indiana Supreme Court announced today that it will begin offering ethical guidance to Indiana lawyers and judges via the Supreme Court’s Disciplinary Commission.  The opinions, which will be available online at the Indiana Courts Portal (here), will be non-binding and will be issued in response to prospective or hypothetical questions regarding the application of the ethics rules applicable to Indiana judges and lawyers. (By saying "prospective" there, the court means that it will not offer advice on past conduct.)

The commission made the announcement at the same time it release its first opinion which is on a topic I have written about extensively: whether participating in Avvo Legal Services (and other similar services) would constitute a violation of the rules of professional conduct. 

In the opinion, which is only three pages long, the Commission does not answer the question definitively, but concludes that participating in such programs raises the risk of violation of certain rules, including Rules 1.2(c), 5.4(a), 5.4(c), 7.2(b), 7.3(d) and 7.3(e).

The opinion essentially expresses the conclusions of the Commission rather than explain the analysis it used to reach those conclusions.  However, the conclusions are in accord with opinions published so far in other jurisdictions, all of which so far have reached essentially the same conclusions.  North Carolina is considering a proposed opinion that would conclude the opposite but it has not been adopted yet.  If adopted, it would be the first one to find that participating in Avvo Legal Services would not violate the rules, although it has been reported that North Carolina is also considering amending the rules, which suggests that it would violate the current rules. 

For all my posts on Avvo, go here, scroll down and then read up in chronological order... (ie, the most recent posts will appear at the top of the page.)

Florida amends rules regarding lawyer referrals to include online for-profit services

Earlier this month the Florida Supreme Court amended the state’s lawyer referral rules to include for-profit “matching” sites and lawyer directories,, such as Avvo Legal Services, Rocket Lawyer and LegalZoom.  You can find the amendments here.

According to the court the amendments create a single regulatory scheme that includes for-profit lawyer referral services, pooled advertising programs, lawyer directories, internet “matching” sites and lead generation services.

However, the rule did not change some of the current requirements to which some of the online services object.  For example, the rule still bans fee-sharing with non-lawyers which is the main reason ethics opinions in other jurisdictions have held that participating in services like Avvo Legal Services would be unethical.

Read more about the new rules here.

Short summary of the ABA proposed changes to advertising rules (and some questions left unanswered)

Over at The Law for Lawyers Today, Karen Rubin has posted a short but informative comment on the ABA proposed changes to the Model Rules on advertising and solicitation.  You should go take a look at it here.

As she explains, the proposed changes are not that bold and do leave some of the most controversial issues untouched.  However, I do like the proposal that eases the approach to the ban on advertising as "specializing in" a particular area of law which I have criticized many times in the past.  (See here, and here for example.)

Avvo is acquired by Legal Brands, a company that already owns a series of law related websites -- UPDATED

Breaking news:  Avvo has been acquired by Internet Brands which already owns legal sites Nolo, Martindale-Hubbell, Ngage and Total Attorneys.  You can read the first announcement here.  Also, go here for comments by Avvo's CEO and here for more information.

This came as a surprise and I have not seen any information on the deal other than what is being reported in the links above.  As of now, it seems Avvo's services will remain unchanged, but it will be interesting to see if the new company eventually introduces changes in response to the continuing resistance by many jurisdictions to allowing attorneys to participate in Avvo's "Avvo Legal Services."  For more on that controversy go here and scroll down.

UPDATE (1/24/18):  Now that Avvo has been acquired, what should we expect?  Above the Law has a short article on that.

Stories to look out for in 2018

The Law For Lawyers Today has a short post on a few of the top stories to watch out for in 2018 and a couple of them are things I have been commenting about for a while:  the issues related to participating in services like Avvo Legal Services and whether states will adopt Model Rule 8.4(g).  On this last topic, I posted recently here and here.

Another important story relates to the claim that an online service that claims to help people resolve claims related to driving tickets is engaged in the unauthorized practice of law in Florida.  This, I think, will be a big story this year because it may have significant implications on the notion of what constitutes the practice of law, and the authority of a state to regulate that practice.  Bloomberg has a very good summary of the issues related to that story here.

Virginia might soon become the next state to hold participating in Avvo Legal Services is unethical

Readers of this blog know that I have written extensively on the issues related to Avvo Legal Services.  You can go here and scroll down to see all my posts and links to some of my articles.  And, it is no secret that I have been critical of Avvo's model from the beginning, arguing that it places attorneys in a position to violate several rules of professional conduct.

For this reason, I have not been surprised to see that ethics committees in Ohio, Pennsylvania, South Carolina, New Jersey, New York and, most recently, Utah have issued opinions holding that it would be unethical to participate in Avvo Legal Services.  Florida, and North Carolina are considering the question. Of these, only North Carolina is reportedly considering holding that participating in Avvo Legal Services would be OK, but it is also considering amending the rules -- which begs the question, if is OK to participate why would you need to amend the rules to allow it?  But that is a different conversation...

Today's post is to announce the latest addition to the list of opinions holding that participating in Avvo Legal Services would violate current rules.

As reported in the Lawyer Ethics Alert Blog, just over a week ago, the Virginia State Bar voted to approve a draft ethics opinion holding that a lawyer’s participation in services such as Avvo's would violate the Virginia Rules of Professional Conduct.  Like most other opinions on the subject, it does not refer to Avvo by name but given the description of the services it addresses it is pretty clear the opinion relates to Avvo Legal Services.

Not surprisingly, the opinion reaches the same conclusions reached in the literature and other opinions, namely that participating in Avvo Legal Services violates rules related to sharing fees with non-lawyers, paying for referrals, duties to safeguard client property, and duties related to trust accounts including the duty to refund unearned portions of a fee.

Having said that, the opinion states lawyers could participate in the service if some of the conditions are changed.  Doing so, however, would change Avvo's terms and it is not clear that Avvo would want to agree to change its business model.

The opinion (which is available here) will now go before the Virginia Supreme Court for approval.

In light of so many opinions holding against Avvo's service, I have often suggested Avvo is going about its plan the wrong way.  Rather than arguing that the rules should be interpreted to say something they don't, or, worse, that they should be ignored, or continue to advance weak legal arguments, Avvo should advocate for changes in the rules.

Take a look at the position Avvo took in relation to the Virginia opinion (here) and note what they don't do.  They don't even try to address the substantive/legal arguments related to the violations of the rules.  They essentially say the opinion is bad because it does not allow Avvo to do what it wants.  The argument is essentially that what Avvo wants is good, and, thus, preventing it is bad.  Yet, the problem is that even if what Avvo wants is good, it leads to violations of the rules.  The solution can't be to ignore the rules.  The solution has to be to change the way Avvo wants to do what it wants to do so it does not violate the rules or to change the rules. 

What Avvo does now puts lawyers in a position to violate the rules.  Arguing that it doesn't is going nowhere fast.  So, why doesn't Avvo change course and try to present arguments for changing the rules to suggest a new approach would be better for the profession, for consumers and for society in general?  To its credit, Avvo seems to be trying this approach in North Carolina and maybe it is just waiting to see if it works there as a "test case" before trying it elsewhere.

I have argued for this change in tactics before and I am happy to report I am not alone in this view.  Brian Faughnan (of Faughnan on Ethics) has recently published "an open letter" to Avvo arguing the same point.

Utah State Bar has issued yet another ethics opinion stating that participating in Avvo Legal Services would be unethical

As long time readers of this blog know, I have been following the developments related to Avvo Legal Services for a while.  You can read all my comments by going here and scrolling down. 

Not too long ago, I commented on the fact that ethics committees in Ohio, Pennsylvania, South Carolina, New Jersey and New York had issued opinions holding that it would be unethical to participate in Avvo Legal Services.

Now comes news that about three weeks ago the Utah State Bar Association issued a similar opinion.  Although it does not mention Avvo by name, it concludes that participating in a program whose description is just like Avvo Legal Services would violate Utah’s Professional Conduct Rule 5.4 which bans splitting fees with a non-lawyer and Rule 7.2 which regulates restrictions on payment for recommending a lawyer’s services.  

In addition, it finds that the fee paid by the lawyer does not appear to be a fee for the reasonable costs of advertising and discusses how participating in the service may violate a number of other rules related to client confidentiality, lawyer independence, and safekeeping of client property.  Finally, the opinion states that participating in the program raises serious concerns about a lawyer’s ability to comply with Rule 1.15 since “[i]t is difficult to see how a lawyer can protect client funds “with the care required of a professional fiduciary” when trust fund account information is provided to a third party over which the lawyer has no control.”

As I have stated before, given the current regulatory structure, I am not surprised.  You can read the full opinion here.

Florida Bar to consider whether it is ethical to participate in Avvo Legal Services

A few days ago, I reported that the NY state bar association issued an opinion holding it would be unethical to participate in Avvo Legal Services. See here.  Now comes news that the Florida Bar’s Board of Governors has decided to prepare an advisory opinion on whether lawyers could participate with a private lawyer referral service which charges a different set fee depending upon the type of case referred.  Without mentioning it, of course, this description refers to the Avvo Legal Services scheme which has now been rejected in every ethics opinion that has considered the question. 

The Florida Bar has in the past attempted to change the state rules to allow lawyers to participate in private referral services, but the Florida Supreme Court rejected the idea.  In fact, it published an opinion on September 24, 2015 which instructed the Bar to draft rules that “preclude Florida lawyers from accepting referrals from any lawyer referral service that is not owned or operated by a member of the Bar.”  Given this background it will be interesting to see if the Board of Governors attempts to revise its position or follows the lead of the Court.  For more on the news from Florida go here.

For some of my previous posts on Avvo go here and scroll down.

NY State Bar Association issues opinion holding participating in Avvo Legal Services is unethical

The New York State Bar Association’s Committee on Professional Ethics has issued a new opinion holding that participating in Avvo Legal Services violates the state’s rules of professional conduct.  In particular, the opinion holds that a lawyer paying Avvo’s current marketing fee for Avvo Legal Services is the equivalent of making an improper payment for a recommendation in violation of Rule 7.2(a). 

As long time readers of this blog know, the opinion is similar to opinions in Ohio, Pennsylvania, South Carolina and New Jersey.  And, as I have argued many times, no one should be surprised by the conclusions reached in these opinions because the analysis is consistent with the text of the rules.  You can read my article on the subject here, which was published just after the first couple of those opinions were issued. 

In that article, I pointed out that because the comment to rule 7.2 states that lawyers are banned from paying a lead generator “if the lead generator states, implies, or creates a reasonable impression that it is recommending the lawyer,”  lawyers paying Avvo should be concerned with the possibility that their state disciplinary authority might argue that by providing Avvo’s own “ratings,” as opposed to client ratings, Avvo creates the impression that Avvo is recommending some lawyers more than others. 

That question had not been approached back when I wrote that.  Now it has.  While the other opinions have mostly emphasized the issue of whether paying Avvo’s fees constitutes sharing fees with a non-lawyer, the NYSBA opinion focuses on that precise point.  You can read the full opinion of the New York State Bar Association’s Committee (Opinion 1132 (8/8/17))  here. 

As the Committee explains “[i]f the lawyer is paying [Avvo’s] fee solely to obtain advertising and marketing services from Avvo, then the lawyer is not giving Avvo something “of value” to recommend the lawyer, but is instead paying Avvo for marketing services, which does not violate Rule 7.2(a).  If, however, the marketing fee also includes a payment to Avvo for recommending the lawyer, then the payment constitutes giving something “of value” for a recommendation, which does violate Rule 7.2(a).”

After discussing Avvo’s business model, the Committee concluded that Avvo does seem be recommending lawyers and, thus, lawyers who pay Avvo’s fee would be in violation of the rule.  This is so, according to the opinion, because Avvo does more than merely list lawyers, their profiles, and their contact information. Avvo also gives each lawyer an Avvo rating, on a scale from 1 to 10 in a way that suggests mathematical precision.  Also, some of Avvo’s ads expressly state that the Avvo Rating enables a potential client to find “the right” lawyer or “the right lawyer for their needs.”

Based on this, the committee found that “[t]hrough these statements and through Avvo’s description of its rating system, Avvo is giving potential clients the impression that a lawyer with a rating of “10” is “superb,” and is thus a better lawyer for the client’s matter than a lawyer with a lower rating.”  Thus, the opinion concludes that “the way Avvo describes in its advertising material the ratings of participating lawyers either expressly states or at least implies or creates the reasonable impression that Avvo is “recommending” those lawyers.”

In addition, the opinion pointed out (but did not resolve) more issues raised by participation in Avvo Legal Services, including:

(1) the fact that Avvo sets the amount of the legal fee for each service raises questions about whether a participating lawyer can deliver competent legal services for Avvo’s chosen price and whether a lawyer is allowing Avvo to interfere in the lawyer’s independent professional judgment regarding how much time to spend on a matter.

(2) the marketing fee raises questions about whether lawyers who participate in Avvo Legal Services are improperly sharing legal fees with a nonlawyer.

(3) Avvo’s satisfaction guarantee raises questions about confidentiality. If clients call Avvo to complain, does the “documentation” that Avvo asks for or receives include “confidential information” within the meaning of Rule 1.6(a)?

As in the past, Avvo’s chief legal officer, has posted a short response to the opinion, but, also as in the past, it is weak and again bases part of the argument on the wrong the constitutional standard.

Yet, Avvo can count one small "victory" in the NYSBA opinion.  Avvo always refers to its fee as "marketing fee" -- not as just "fee" -- perhaps thinking that if you repeat something enough times people will begin to believe it.  And it works.  While other opinions have held that merely because Avvo says the fee is for "marketing" (by which they really mean "advertising"), it does not make it so, the NYSBA opinion states explicitly that Avvo’s website is an “advertisement.”  According to the opinion, "[t]he Avvo website is a public communication on behalf of each participating lawyer, about that lawyer, for the primary purpose of helping the participating lawyers obtain employment by potential clients who use the Avvo website."

Avvo responds to NJ Opinion

Last month I reported (here) that three committees of the New Jersey Supreme Court issued a joint opinion concluding that it would be unethical to participate in Avvo Legal Services.  A few days ago, Avvo's Chief Legal Officer posted a reply to the opinion in the blog Socially Awkward.  The reply is short and, in my opinion, weak.  All it does is repeat some of the arguments the opinion rejected.  It also gets the constitutional standard that applies to the commercial speech doctrine wrong (as I have pointed out in the past).

For some of my previous posts on Avvo go here, here, here, here, here, here, here, here, here, and here.

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.

North Carolina is considering amending its rules to make it easier for lawyers to participate in Avvo Legal Services

Long time readers of this blog know that I have been following and writing about the debates related to Avvo Legal Services for some time now.  For an article on my position on the subject go here. 

As you may remember Avvo has attempted to argue that lawyers should not worry about participating in Avvo Legal Services because doing so does not violate rules of professional conduct, or, if it does, because the rules are unconstitutional.  Yet, all the opinions issued so far have concluded that Avvo is wrong.  And that is because under the current regulatory scheme in pretty much all states, Avvo’s arguments are weak. 

Having said that, however, note that the key to the previous statement is “under the current regulatory scheme.”  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.

Today’s update on this story is that instead of continuing to argue that the rules don't apply or that they should be ignored, Avvo apparently has been trying to convince the North Carolina regulators to change the rules.  As a result, North Carolina may soon become the first state to change the regulatory approach in order to formally make it acceptable for lawyers to participate in services like Avvo Legal Services.  (Interestingly, as you might remember, North Carolina also amended its definition of the “practice of law” as part of an agreement with LegalZoom.)

According to documents I have reviewed, as a result of meetings between Avvo and a committee of the State Bar Association, the committee has drafted a proposal to amend several rules of professional conduct, including Rule 5.4, which bans splitting fees with non-lawyers.  The proposal would add a new paragraph to the rule to state that “a lawyer may pay a portion of a legal fee to a credit card processor, group advertising provider or online platform for identifying and hiring a lawyer if the amount paid is a reasonable charge for administrative or marketing services and there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship.”

Adoption of this new rule would be good news for Avvo, but would not necessarily clear the way entirely.  One point of contention within the committee was whether Avvo’s rating system operates as a recommendation to consumers which would result in a violation of rule 7.1 if lawyers were to pay Avvo for recommending them, particularly since Avvo does not disclose the basis of the rating system.  Within the committee, this created a concern over whether Avvo is providing recommendations that are not based on legitimate criteria because the rating system is not transparent since it does not provide information on the factors used to create the rating.

To address this concern, there is now a proposal to add a new paragraph to the comment of Rule 7.1 to state (in part) that “A lawyer may participate in online directories and other rating systems that allow the lawyer to “claim” the lawyer’s profile and to provide information for inclusion in the profile or to be used to rate the lawyer.  The information provided by the lawyer must be truthful and not misleading.  No money may be paid by the lawyer for a rating and, before voluntarily providing information to an online rating system, the lawyer must determine that the rating system uses objective standards that are verifiable and would be recognized by a reasonable lawyer as establishing a legitimate basis for evaluating the lawyer’s services. . . .”

If it is true that Avvo does not disclose the basis of its ratings, I am not clear how a lawyer can meet these requirements. 

Finally, as one would expect, another concern is whether allowing Avvo to retain the consumer’s payment until the lawyer finishes providing the legal services constitutes a violation of the lawyer’s duty to safeguard client’s funds in a trust account and to contribute the interest generated by that account to the state’s IOLTA program.

To address this concern, Avvo has suggested an amendment to the comment of the rule on safeguarding property, but it is not clear that the committee of the State Bar has adopted it.  Avvo’s proposal is to add a new paragraph to the comment to read: “Client or third person funds sometimes pass through, or are originated by, intermediaries before reaching the lawyer’s account.  Such intermediaries have traditionally included banks, credit card processors, or litigation funding entities, and have been chosen unilaterally by the client.  However, newer intermediaries include attorney marketing programs, chosen by the attorney, that collect payments directly from clients and pass them through to the attorney.  Attorneys have an affirmative obligation to ensure that such intermediaries 1) adequately protect client funds and 2) do not retain client funds for a period [of time] that materially impacts i) the client’s opportunity to earn interest on the funds, or ii) the availability of interest earnings for [state legal services organization that receives IOLTA interest, if applicable].  Absent other indicia of fraud (such as the use of non-industry standard methods for collecting credit card information), an attorney’s diligence obligation will be deemed met with respect to intermediaries that collect client funds using credit or debit cards and remit such funds to attorney accounts within [ ] days.”

As of now, I don’t know if the State Bar proposal will include this suggested language.  It is not included in the copy I have, but there may be more documents I have not seen yet.  Clearly, Avvo's goal is to exempt lawyers from having to deposit client money in a trust account, at least for some, as of yet not determined, period of time.  For those who have argued the rules about trust accounts should be abandoned or relaxed, this would not be a problem.  But for those who think they need to be followed strictly in order to protect clients, this proposal might be a problem.  The North Carolina rules regarding trust accounts can be found here.

The documents I have seen about these proposals are all from within the last three months, but I do not know what is the current status of the proposals.  It remains to be seen if they will be adopted by the State Bar Ethics Committee.

Stay tuned.

Florida Supreme Court dismisses Florida Bar’s petition proposing substantial revisions to lawyer referral service rules

Back in 2015, the Florida Supreme Court rejected amendments to state regulations on referral services and directed the State Bar to instead draft amendments that would “preclude Florida lawyers from accepting referrals from any lawyer referral service that is not owned or operated by a member of the Bar.”  See, In re Amend. to Rule Reg. The Fla. Bar 4-7.22—Lawyer Referral Services, 175 So. 3d 779, 781 (Fla. 2015).

The State Bar went back to work and adopted a new proposal in 2016, but this new proposal was recently rejected again by the Supreme Court because it still allowed attorneys to accept referrals from entities owned and operated by non-lawyers. 

What is interesting about this story is that the new proposal was adopted to make it easy for entities like LegalZoom, RocketLawyer and Avvo to participate in the state’s legal market.  To this end, under the new proposed amendments any private entities that connect consumers looking for legal services with lawyers would have been called “qualifying providers” regardless of whether they were “traditional” referral services or a technology-based “lead generator” (like Avvo, RocketLawyer or LegalZoom).

The Court however, rejected the proposal stating that the proposed amendments “do not comply with the Court’s direction concerning lawyer referral services that are not owned or operated by a member of the Bar” and it objected that the proposed amendments “seek to expand the scope of the rule to include “matching services” and other similar services not currently regulated by the Bar.”  This last reference, obviously, is directed at services like RocketLawyer, Avvo and LegalZoom.

Having said all that, however, the debate is not over.  The Court again sent the issue back to the State Bar stating that “the Bar’s petition in this case is . . . dismissed without prejudice to allow the members of this Court to engage in informed discussions with the Bar and those who are in favor or against the proposed regulation of matching and other similar services. The Court lacks sufficient background information on such services and their regulation at this time.”

In other words, it is still possible that the Court will adopt the proposed amendments; it just won’t do it at this time.

The Court’s order is officially called In Re: Amendments to the Rules Regulating The Florida Bar-Subchapter 4-7 and you can read it here.

Thanks to Lawyer Ethics Alerts Blog for the update.