New proposed California rules are now ready for comment

Long time readers of this blog know that I have been following the process of revision of the rules in California.  See here and here, for example.  Here is the latest:  The State Bar of California has authorized public comment on 68 proposed new and amended Rules of Professional Conduct developed by the State Bar’s Commission for the Revision of the Rules of Professional Conduct (“Commission”). The public comment period is 90-days with a deadline of September 27, 2016.

You can access the public comment notice and proposed rule drafts posted at the Bar’s website here. 

The Board also authorized a public hearing on the proposed rules. The public hearing is scheduled for July 26, 2016.  It will be held at the Los Angeles office of the State Bar with a remote audio/video connection to the San Francisco office. Testimony may be given at either location.

North Carolina legislature amends definition of practice of law as part of agreement with Legal Zoom

Last December I reported that the North Carolina Bar and Legal Zoom reached a consent agreement which suspended the litigation between them for two years or until the legislature approved an amendment to the definition of the practice of law.

The amendment was finally approved about a week ago when the House and the Senate both unanimously passed House Bill 436 after a conference committee spent months negotiating the final language in the bill.

The measure now heads to Gov. Pat McCrory.

The bill redefines the term "practice of law" in the state by exempting services that provide blank legal documents. The services must register with the State Bar every year, and each type of document must be reviewed and approved by a licensed North Carolina attorney before going online. The services also must include a disclaimer that the online documents aren't a substitute for seeking legal advice, and any customer satisfaction disputes must be referred to the State Bar.

Is there a duty to disclose to client that co-counsel has committed a significant error?

What should you do when you are co-counsel on a case or in a deal, and you become aware that the other lawyer has made an error?  A new ethics opinion from the New York State Bar Association says that if you reasonably believe that your co-counsel has committed a significant error or omission that may give rise to a malpractice claim, you must disclose the information to the client.  The Law For Lawyers Today has more information here.

Attention Ohio Lawyers: PR Board finds participating in programs like Avvo Legal Services is likely unethical

Just a few weeks ago the Professional Responsibility Board of the Supreme Court of Ohio issued an advisory opinion on whether it is ethical to participate in certain internet programs that "match" prospective clients with available lawyers.  The opinion does not mention any such services specifically by name but given the description of the services, it is clear (at least to me) that one of the programs at issue is Avvo Legal Services.  The opinion concludes that the business model of these types of services present many ethical concerns and that because of at least some of them, participating in them might be unethical.

The opinion starts by explaining the question presented as follows:

A lawyer seeks guidance regarding whether a particular business model involving online lawyer referrals is permissible under the Rules of Professional Conduct and the Rules for the Government of the Bar of Ohio. The proposed business model is an online referral service that matches a prospective client with a lawyer for a particular legal service. Although the client chooses the lawyer, the company defines the types of legal services offered, the scope of the representation, the fees charged, and other parameters of the legal representation. Additionally, the model requires a lawyer to pay a “marketing fee,” for each completed client matter. The “marketing fee” is based on the fee generated from the completed individual legal matter.

Based on this description, the opinion concludes that the business model at issue constitutes a “referral service” regardless of how the company running it describes itself.  I am not sure I agree with this conclusion.

I don’t think that the hypothetical business model described in the Ohio Board’s opinion is a referral service because the consensus on whether online matching services constitute “lawyer referral services” turns on whether such services utilize someone exercising discretion, such as an intake worker answering a telephone, when determining which attorneys to recommend to which clients based upon some stated criteria. See ABA Standing Committee on Lawyer Referral and Information Service, The Regulation of Lawyer Referral Services: A Preliminary State by State Review, page 5.

Thus, if the program at issue simply creates and provides a list of potential lawyers from which potential clients can choose who they want to hire, the argument that the program is a referral service is weaker.  In such a case, the program is more akin to a “lead generator,” a type of business model that is mentioned specifically in the Comment to Model Rule of Professional Conduct 7.2 which bans giving anything of value to a person for recommending the lawyer’s services.

In Ohio, however, the key is not a ban on paying a fee, even if that fee is calculated as a percentage of the legal fee earned on the referred matter.  The key is whether the referral service is registered with the Supreme Court of Ohio.  If the service is not registered with the Court or if it does not follow all the requirements imposed by the Court’s regulations, participating in the service is unethical.

The Board then goes on to discuss other concerns including the duty of a lawyer to supervise non lawyers, the possibility of lawyers facilitating the practice of law by non lawyers, the possible interference with a lawyer's independent professional judgment, the sharing of fees with non lawyers and possible violations of the duty to keep client money in a trust account.  This is not surprising to me since these are some of the issues I have argued create problems for lawyers participating in Avvo's Legal Services.

You can read the Ohio Board's Opinion here.

Judge in trial of police officer charged with murder in the death of Freddie Gray rules that prosecutors withheld exculpatory evidence

According to a story in ABC news, available here, the judge overseeing the trial of a police officer charged with murder in the death of Freddie Gray has determined that prosecutors withheld information that would have been beneficial to the defense.  It seems to me this would be big news, but, oddly, I have not seen this reported anywhere else. 

Thanks to the Legal Ethics Forum for the link.

New York State Bar ethics opinion addresses ethics issues when a lawyer copies a client with communications to opposing counsel

A recent New York State Bar Association Ethics Opinion (available here) addresses whether a lawyer must obtain the consent of opposing counsel before he or she can blind copy the client on correspondence to opposing counsel. The opinion concludes that "[a] lawyer may blind copy a client on e-mail correspondence with opposing counsel, despite the objection of opposing counsel.  Because a lawyer is the agent of the client, sending such a blind copy is not deceptive.  However, there are practical reasons why the lawyer should consider forwarding the e-mail correspondence to the client rather than using “bcc”." 

Lawyer Ethics Alerts Blog has more information here.

New York Times editorial board calls for federal government oversight over DA offices that violate defendants' rights

In a recent Op-ed piece, the NY Times is arguing that because prosecutors are almost never held accountable for misconduct, even when it results in wrongful convictions "it is time for a new approach to ending this behavior: federal oversight of prosecutors’ offices that repeatedly ignore defendants’ legal and constitutional rights." You can read the full article here.

Illinois Appelate court on whether there is a duty to disclose death of client during settlement negotiations -- UPDATED, again

Back in February, 2015 I posted a story about an Illinois appellate court's opinion on whether an attorney has a duty to disclose the death of a client when the attorney is negotiating a settlement in litigation. The case is called Robison v. Orthotic & Prosthetic Lab, Inc and it is available here.  I later updated the story with the news that a disciplinary action had been filed against the attorney.  Today I am updating the story again to report that the Illinois Supreme Court has censured the lawyer. Go to the bottom of the post for the most recent update.


Original Story (February 2015)

About ten days ago, the Illinois appellate court issued a good opinion that deals with several issues we cover in class. The first one is whether an attorney has a duty to disclose the death of his client when the attorney is negotiating a settlement in litigation. The case is called Robison v. Orthotic & Prosthetic Lab, Inc and it is available here.

In this case, the plaintiff, Randy Robison, filed a product liability action against the defendant, Orthotic & Prosthetic Lab, Inc. in 2008.   In January, 2013, while the case was still ongoing, the plaintiff died but the plaintiff’s lawyers did not alert the court or the attorneys for the defendant.

In September 2013, the attorneys for both sides began settlement negotiations and reached an agreement on September 24. To finalize it, the attorney for the plaintiff sent an e-mail to the attorney for the defendant in which he stated “My client has instructed me to accept . . . in full and final settlement of this matter. Please provide an appropriate release and I will present it to my client for review and approval.”

The plaintiff's lawyer did not notify the defendant's lawyer of the plaintiff's death until after the defendant had submitted the settlement agreement, and he did so when he sent an amended version of the proposed release in which he asked the defendant's lawyer to agree to substituting the plaintiff's son as plaintiff in the case.  The defendant's lawyer refused and asked how come he had not been informed of the plaintiff's death, to which the plaintiff's lawyer replied that he had researched the issue and determined that he had no affirmative duty to disclose the information because it was against his clients' interests and he had a duty to protect his clients' interests within the bounds of the rules of professional responsibility.

The defendant refused to follow through on the settlement agreement claiming it was not valid, and the plaintiff moved to enforce the settlement.  Eventually, the lower court granted the motion and the defendant appealed.

In a short and well written opinion, the Court of Appeals reversed holding that the agreement was not valid and suggesting that the conduct of the attorney for the plaintiff in not disclosing the death of the client was unethical.  Interestingly, it also suggested that the conduct of the defendant's lawyer was unethical in not reporting the conduct of the plaintiff's lawyer.  Here are the most important paragraphs of the opinion:

... The defendant further argued that the settlement was invalid because the death of the plaintiff was a material fact that had been concealed from the defendant prior to and during settlement negotiations. ...

....

Settlement negotiations commenced in September 2013, and an agreement was ostensibly reached on September 24, 2013. The defendant, however, had no knowledge about the plaintiff's death or the appointment of a personal representative throughout the period of settlement negotiations. [These facts were not disclosed until] weeks after the settlement was reached and months after the plaintiff's death. [The plaintiff's lawyer acknowledged that] the disclosure of the plaintiff's death would have adversely impacted the settlement value of the case. He stated that he believed that the decision to withhold the information was in his clients' best interest and was in keeping with the rules of professional responsibility. We strongly disagree. We find that the arguments expressed by [the plaintiff's lawyer] are specious and incredible, and we are concerned about his professional judgment in this case. In failing to disclose the fact of the plaintiff's death, [the plaintiffs lawyer] intentionally concealed a material fact that would have reduced the overall value of the claim for damages. In addition, and equally troubling, [he] led the defendant to believe that he had authority to negotiate a settlement of the litigation on behalf of the party plaintiff, when the action was without a plaintiff as the plaintiff had died and a representative had not been substituted. Given [these] intentional misrepresentations and material omissions prior to and during the settlement negotiations, we conclude that the settlement agreement is invalid and unenforceable, and that the trial court erred in granting the motion to enforce it. 

In my opinion, this is the correct approach to the issue, but it needs to be explained a bit further.  Although it is well known that a lawyer does not have a general duty to volunteer adverse facts to an opponent in litigation,  Rule 4.1 has been interpreted to imply an exception which requires the disclosure of a client's death.  The most cited case holding this proposition is Virzi v. Grand Trunk, 571 F. Supp. 507 (E.D. Mich. 1983), which approaches the issue from the perspective of a duty to the court because in that case the attorney did not disclose the death of the client until after the court had entered an order. However, the court does go on to say that just as the lawyer owes a duty to the court, he or she also owes the same duty to opposing counsel.  Based on this view, at least two courts (one in Ohio and one in Kentucky) have imposed sanctions on attorneys for failing to disclose their client's death. In Robison, the court did not discuss rule 4.1 but emphasized the attorney's general duty of honesty under rule 8.4, which is presumably owed to everyone.

Interestingly, the court did not stop there and also took up the fact that counsel for the defendant did not report the misconduct under rule 8.3:

Finally, we believe that we have a profound responsibility to comment on the conduct of the attorneys in this case.  ... Rule 8.4(c) of the RPC states that it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation. ...   Rule 8.3 requires a lawyer to report unprivileged knowledge of misconduct involving fraud, dishonesty, or deceit, or misrepresentation by another lawyer to the Illinois Attorney Registration and Disciplinary Commission (ARDC). ...

In this case, we believe that the material omissions and misrepresentations ... constitute serious violations of Rule 8.4. We also believe that defense counsel possessed sufficient knowledge to trigger a duty to report [the plaintiff's lawyer's] misconduct to the ARDC, and that the failure to report the misconduct constitutes a potential violation of Rule 8.3.

UPDATE 10/26/15:  About ten days ago, a formal disciplinary complaint was filed against the lawyer who did not report the death of the client.  You can read the complaint here.  (Thanks to the Legal Profession blog for the update.)  It remains to be seen if there will be a complaint against the lawyer who did not report the misconduct.  Given the language in the opinion, it seems to me it would be inconsistent, to say the least, if the administrator did not do so.

UPDATE 12/14/15:  The attorney has now filed an answer to the disciplinary complaint (available here) in which he argues that he researched the issue and discussed the matter with his partners and concluded that the death of his client was confidential information which he had a duty not to disclose under Rule 1.6(a). 

UPDATE 5/27/16:   The Illinois Supreme Court has imposed a censure on the lawyer for settling the case without informing court or opposing counsel of the client’s death.  The case is In the Matter of: Anthony Patrick Gilbreth, No. 6289576, Commission No. 2015PR00100 (Ill. SC May 18, 2016).   Lawyer Ethics Alert Blog has more information here.

New Podcasts

The Legal Talk Network has just posted a bunch of new podcasts, most of them related to "technology" and innovation.  Here is a list of (and links to) a few of them:

How Artificial Intelligence Will Influence the Future of Legal Practice

How Technology Has, and Will, Impact the Practice of Law

What Lawyers Should Know About Cloud Computing Security Standards

The Limited License Legal Technicians Program

Rocket Lawyer’s Charley Moore sees lawyer collaboration as the future

Prosecutors Coercing Defendants to Contribute to the Prosecutor’s Favorite Charities

Ron Rotunda's most recent column at Verdict  is about prosecutors who force defendants to contribute to charity. His conclusion:  "The best way to avoid the appearance of impropriety is not to engage in the conduct at all. Fines in plea bargains should go to the state or federal treasury, not to friends of the prosecutor."

Puerto Rico adopts statute of limitations for disciplinary proceedings

About two weeks ago, the Governor of Puerto Rico signed into law a bill that creates a 3 year statute of limitations for disciplinary proceedings (subject to a few exceptions).  As you may know, the majority of the states follow the approach suggested by the ABA in Rule 32 of the Model Rules for Disciplinary Enforcement, the comment to which states:

Statutes of limitation are wholly inappropriate in lawyer disciplinary proceedings. Conduct of a lawyer, no matter when it has occurred, is always relevant to the question of fitness to practice. The time between the commission of the alleged misconduct and the filing of a complaint predicated thereon may be pertinent to whether and to what extent discipline should be imposed, but should not limit the agency's power to investigate. . . .

Discipline and disability proceedings serve to protect the public from lawyers who are unfit to practice; they measure the lawyer's qualifications in light of certain conduct, rather than punish for specific transgressions. Misconduct by a lawyer whenever it occurs reflects upon the lawyer's fitness.

If you can read Spanish, you can read my comment on the newly adopted statute in Puerto Rico here.  In that article I argue that adopting the new statute does not make much sense for a number of reasons:

1.  There is no need to adopt a statute of limitations because there is precedent that holds that a disciplinary action should be dismissed if the amount of time the state has taken to file the complaint has placed the attorney in question at a disadvantage.  Under that approach, cases are decided on a case by case basis depending on whether the passage of time has had a detrimental effect on the attorney's ability to defend himself or herself against the allegations.

2.  There is no logic in placing the statute in the Puerto Rico Civil Code.  The statute of limitations should be in the rules for disciplinary enforcement.  In fact, the Puerto Rico Supreme Court is currently considering a proposal to establish new rules.  The Legislature should have deferred to the Supreme Court at least until it finished its revision of the rules.

3.  The majority of American jurisdictions do not have a statute of limitations for disciplinary actions, and the time period adopted in Puerto Rico is shorter than almost all of those adopted in the few jurisdictions that have adopted one.

4.  Although the statute does recognize an exception for conduct that constitutes a crime, it does not recognize an exception for cases of non-criminal intentional conduct.  In fact, the statute makes no distinction among different types of conduct.

5.  The Puerto Rico Supreme Court is currently considering new rules for disciplinary procedures and new rules of professional conduct.  The proposal for disciplinary proceedings has two options as to a possible statute of limitations.  The first one is not to adopt a statute; the second one is to adopt a 5 year statute of limitations with a series of exceptions.  The drafters wanted to give the Supreme Court the alternatives and let it decide.  The Legislature has now taken that decision from the Court.  Some have argued this is a violation of the principle of the separation of powers.

Two days ago I lamented the lack of action against prosecutors who present false testimony; here is an example of the opposite

A couple of days ago, I commented on a news story about possible perjury by prosecutors’ witnesses and complained about the lack of action against prosecutors who present false testimony.

In response, one of the readers of the blog sent me a copy of Grievance Administrator v. Plants (March 20, 2012) in which the Michigan Attorney Disciplinary Board disbarred a prosecutor for presenting perjured testimony. In its opinion, the Board stated that "knowing submission of false testimony is among the most serious of ethical violations and the presumptive sanction for such misconduct is disbarment."

Thank you very much to Cynthia for the link!

ABA Journal on perjury by prosecutors' witnesses, but no comment on the conduct of the prosecutors -- UPDATED

The ABA Journal has a story today on how courts are not doing much about a little kept secret in Chicago courts:  that police officers sometimes lie on the stand.  I wrote "sometimes" but the tone of the story clearly implies this is a much bigger problem than that.

In any case, the story and the comments are all about how there are little consequences for the officers who lie on the stand, which is likely true.  But what is not discussed in the story is the role of the prosecutors who present the testimony.  How come they get a pass too?  If it is true that "everyone knows" the witnesses are lying, can you really say the prosecutors didn't know?  And if that is the case, shouldn't they be disciplined for it?

Obviously, part of the problem is proving the allegations of "knowledge" but the rules clearly hold that knowledge "can be inferred from the circumstances."   I have said it a million times and will continue to say it.  If you want to do something about prosecutorial misconduct, judges have to start taking it seriously.

For more comments on prosecutorial misconduct go here and scroll down.

UPDATE 10:30pm:  So, a few hours after I posted this comment and my complaint about judges not taking prosecutorial misconduct seriously, I came across this story in Simple Justice about what appears to be the very first ever attempt to impose sanctions on a prosecutor in Utah.

Ohio's Board on Professional Conduct issues opinion on duty to report misconduct, which is different under Ohio rules

Back in February I wrote a comment on the first ethics opinion of the year by the Ohio Board on Professional Conduct in which I argued the opinion was based on faulty analysis.  As I looked more into the issue, I realized the problem was not with the opinion but with the text of the Ohio rules which is different than that of the Model Rules.  I later wrote an article about it.

Just about a month ago, the Board issued its second opinion of the year and it again illustrates that another of Ohio's rules is different from the text adopted in most jurisdictions.  The opinion (available here) attempts to clarify an attorney's duty to report misconduct under rule 8.3.

Ohio's version of Rule 8.3 states (in relevant part) that "A lawyer who possesses unprivileged knowledge of a violation of the Ohio Rules of Professional Conduct that raises a question as to any lawyer's honesty, trustworthiness, or fitness as a lawyer in other respects, shall inform a disciplinary authority empowered to investigate or act upon such a violation."

So here is my first question:  what is "unprivileged knowledge"?  Knowledge can't be privileged or unprivileged.  What is privileged is the information about which one has knowledge.  But that's just a matter of language.  It seems to me it is clear that what the rule means to say is "a lawyer who has knowledge of privileged information.."

The Board appears to read the text this way too since it states in the opinion that in order to determine if there is a duty to disclose lawyers should consult rule 1.6 to determine whether information is privileged or unprivileged.

Yet, this statement does not make much sense since Rule 1.6 does not address that question.  Rule 1.6 defines the duty of confidentiality, not the extent of the privilege, which is a matter of the law of evidence.  The Board seems to confuse the important distinction between confidentiality and privilege.

For this reason, it is not entirely clear that the Board realizes that, as it is drafted, Ohio's Rule 8.3 (on reporting misconduct) requires attorneys to disclose misconduct even if the misconduct is discovered as a result of a confidential communication as long as the information is not privileged.

Model Rule 8.3 states that a lawyer is not obligated to disclose misconduct if it would require disclosure of confidential information (protected under MR 1.6).  In contrast, in Ohio a lawyer is obligated to disclose the misconduct even if doing so would require disclosure of information protected by the duty of confidentiality under Rule 1.6, as long as the information is not privileged.

In addition, the Rule in Ohio applies if the information raises a question as to a lawyer's honesty, trustworthiness or fitness to practice, while according to the Model Rules, the duty to report only applies if the information raises a substantial question as to those same elements.

In other words, for these reasons, the duty to disclose misconduct is much broader in Ohio than in other jurisdictions that have adopted the language of the Model Rules.

Podcast: interview with Legal Zoom

Last year I posted a link to a podcast on LegalZoom with its CEO, John Suh (see here).  The Legal Talk Network has a new one here.  You can listen to is by clicking the play button below or by going to the link.

ABA issues new ethics opinion on splitting fees under Model Rule 1.5(e)

EThe Standing Committee on Ethics and Professional Responsibility of the ABA recently issued a new ethics opinion reviewing the details on splitting fees under Model Rule 1.5(e).  You can read and download the opinion here.  (Remember the the opinions are available free for a limited time.)

The opinion is fine.  I don't think there is really anything in it that we didn't know already.  Here is the summary:  "Rule 1.5(e) allows lawyers who are not in the same firm to divide a fee under certain circumstances. A lawyer who refers a matter to another lawyer outside of the first lawyer’s firm and divides a fee from the matter with the lawyer to whom the matter has been referred, has undertaken representation of the client. Fee arrangements under Model Rule 1.5(e) are subject to Rule 1.7. Unless a client gives informed consent confirmed in writing, a lawyer may not accept a fee when the lawyer has a conflict of interest that prohibits the lawyer from either performing legal services in connection with or assuming joint responsibility for the matter. When one lawyer refers a matter to a second lawyer outside of the firm and the first lawyer either performs legal services in connection with or assumes joint responsibility for the matter and accepts a referral fee, the agreement regarding the division of fees, including client consent confirmed in writing, must be completed before or within a reasonable time after the commencement of the representation."

You can read more on the Opinion at Lawyer Ethics Alerts Blog, Professional Liability Matters, The ABA Journal, and Lawyers for the Profession.

Interestingly, the Court of Appeals in Illinois recently issued an opinion on the splitting fees that illustrates how the ABA's opinion could be applied.  In Naughton v. Pfaff,  a referring attorney sought to recover under an oral fee-sharing agreement with another attorney, alleging that the receiving attorney breached his fiduciary duty by failing to obtain the client's signed consent. The Court held that both attorneys have a non-delegable ethical obligation to ensure that the client agrees in writing to a fee division. Absent the client's signed consent, the attorneys' agreement violated the Rules of Professional Conduct and thereby precluded recovery.  These are the consequences of not getting client consent, which the ABA Opinion explains should be done before the beginning of the representation.  Go here for a discussion of the case.

I just posted a short article on SSRN on Indiana's opinion regarding confidentiality and reporting child abuse

Last year, the Ethics Committee of the Indiana Bar Association issued an opinion on whether an attorney has to comply with the state's mandatory child abuse disclosure statute.  I did not like the opinion and wrote about it here and here.  I looked further into it and wrote a short article.  If you are interested, you can read it on SSRN.  Feel free to send me your comments.

Alcoholics and the Profession of Law

Professor Ronald Rotunda's most recent column is available here.

Is it ethical for a firm to pay Uber to provide transportation for clients

Over at My Shingle (a blog I recommend, by the way), Carolyn Elefant discusses whether it is ethical for a law firm to pay a client's transportation costs via Uber.  Does paying for a taxi (or a rental car) for a client constitute a violation of the rule that bars attorneys from providing financial assistance to clients?  (This is assuming the client is involved in litigation because the rule does not apply if the attorney-client relationship relates to transactional matters.)  If so, why would using Uber be different?   Carolyn argues Uber is different.  You can read her comment here.

Avvo now offers free legal forms

A few days ago, Avvo announced it has started yet another new law practice related service:  Avvo Legal Forms, which offers free legal forms.  According to one report, Avvo describes the forms as “a selection of no-cost, high-quality legal forms for family, business, estate planning and real estate.” So far, Avvo Legal Forms lists just 20 available forms. But Avvo says that it expects to have more than 200 forms available by the end of the year. The forms include a “wizard” feature to assist in filling them out, as well as e-signature capability."  

This new venture places Avvo in competition with LegalZoom and Rocket Lawyer, both of whom have been offering legal forms for some time.  Only, and big, difference is that Avvo is offering the forms for free.

And free is good, right?  Well, yes and no.  Free is good if you are only thinking about the initial cost.  But cost also must take into account quality because if the product is lousy it may end up costing the consumer more in the long run.

I have not looked at the Avvo website carefully nor at the forms so I can't comment on the quality, but the first review I saw (Adams on Contract Drafting) calls it "a real stinker."  You should read the review to get the details.  One part of the argument is that the forms are sloppy, imprecise, confusing, etc - in other words that they are not very good.  The other part of the argument is that Avvo's business model creates a race to the bottom where lawyers are willing to give up quality of service in general, which in the end is bad for consumers.  [Interestingly, this was part of the argument originally made against allowing attorneys to advertise (remember Bates?).]

Avvo, on the other hand, as it has done in the past, claims that what it is doing is providing avenues for people to get better access to legal representation.  But I find the way Avvo explains its position curious.  In an interview in Law Sites, Avvo's CEO states that "By providing free legal forms, Avvo Legal Forms is an attempt to get in front of consumers who would otherwise go to paid form sites such as LegalZoom and RocketLawyer and bring them to Avvo, where they can be introduced to Avvo’s various services for connecting consumers with lawyers."  Also, in the comments to the review itself, Avvo's general counsel wrote:  "While our forms are designed to cover a wide range of basic situations . . . they’re not – or at least, shouldn’t be – comparable to a lawyer’s custom work product. And that’s where your post misses the larger point: we believe that many consumers who are currently trying to go it alone would benefit from counseling with an experienced attorney. The purpose of our forms is to give those do-it-yourselfers a frictionless starting point, while also making it as easy as possible for them to step up to a paid legal check-up of what they’re doing (or full-on legal representation if they find their situation is more complex)."

So, am I reading too much between the lines here or does this sound like they are admitting that the free forms are just bait so the prospective clients feel they actually need to consult a lawyer after all, and to get the consumers to pay Avvo to connect them with the lawyer?   Here's how Avvo's CEO put it, after all:  "Our belief is if we can get in front of these consumers at the time that they think they need DIY and get them — I guess the term is upsold — but introduce them to our directory or our Q&A or Avvo Advisor, then we can start tapping into this market of people who wouldn’t mind having a lawyer involved."

Looked at this way, the free legal forms is just a way to attract prospective clients to Avvo's other services where Avvo operates as a lead generator for lawyers who pay Avvo's fees.  For my comments on Avvo's other services go here and here.

You should also read the comment posted by Matthew Kreitzer below the review in Adams on Contract Drafting in which he argues that there is “a disconnect between the ideal of what websites like Avvo are trying to accomplish, and what the likely end result will be.”  Go read the comment to see his full argument. 

Supreme Court decides Luis v United States, upholding right to attorney of choice -- UPDATED

Today the US Supreme Court announced its decision in an important case involving the right to an attorney.  As explained in a story in Slate, the case involves a defendant (Sila Luis) accused of criminal fraud of some sort.  Understandably, the defendant wanted to to hire the best lawyer she could afford.  However, the government froze all her assets, including those completely untainted by the alleged fraud. The defendant argued that the asset freeze violates her Sixth Amendment right “to have the assistance of counsel for [her] defense.” The government replied that there is no violation because the defendant can still hire counsel; she just has to find one who’ll represent her for free.  You can see the issue, right?

So, today the Supreme Court announced its decision in which it vacated the judgment and remanded the case, siding with the defendant. Justice Breyer wrote a plurality opinion in which he wrote that the Sixth Amendment grants a defendant “a fair opportunity to secure counsel of his own choice" and that the government “would undermine the value of that right by taking from Luis the ability to use the funds she needs to pay for her chosen attorney.” In short, the defendant must be permitted to pay her preferred lawyer with untainted funds.

You can read the Slate story here.  You can also read the SCotUS blog analysis of the case here.  You can access all the documents filed in the case here.

UPDATE 3/31:  Amy Howe, of the SCOTUS blog, has published an analysis of the opinion here. Bloomberg Law has a 3 minute clip on the case here. 

Another podcast on artificial inteligence and the practice of law

Back in August of last year, I posted a podcast on artificial intelligence and the practice of law (see here).  My intro was as follows:  "Have you seen the newest commercial for LegalZoom in which lawyers say "I am definitely not a robot!"?   This line is a reference to recent debates as to whether lawyers can (or will be) replaced by robots or computers in the future.  Interestingly, some lawyers have been replaced by computers already by a computer program that allows parties to resolve disputes without the need for lawyers, mediators or arbitrators.  But I don't think we need to worry about all lawyers being replaced ....yet, at least"

The issue of artificial intelligence is back in the news and here is a new podcast courtesy of the Legal Talk Network:  "Artificial intelligence has long been a tool for lawyers to perform their tasks more efficiently. However, the technology has advanced to the point where computers can now perform many of the tasks that were once the exclusive domain of humans. In this month’s Asked and Answered, the ABA Journal’s Victor Li talks to freelance writer Julie Sobowale about how artificial intelligence is revolutionizing the practice of law." 

You can listen to the podcast by pressing the play button below or by going here.

Ron Rotunda on judges who impose unusual punishment

A few years ago, I commented on judges who impose sentencing by creating their own type of punishment, like public shaming, or ordering someone to go to church.  See here and here for previous posts on this.

Professor Ronald Rotunda's most recent column at Verdict (available here) offers an update on the issue addressing the practice of forcing lawyers to donate money to charity as a form of sanction. He notes that although there are a host of ethics opinions and laws that say it is improper because it is an abuse of judicial power, many judges continue to think they have the power to impose such a sanction.  He proposes that, just like the court did in In re Merritt, 432 N.W.2d 170 (Mich 1988), courts should start enforcing the rules by requiring judges to pay, out of their own pockets, the money they ordered the defendants to pay.  

I recently wrote a short essay on flat fees; here is the link

Last month, the Board of Professional Conduct of the Ohio Supreme Court released an advisory ethics opinion discussing the propriety of flat fee agreements. In it, the Board reiterates the principles contained in the Ohio Rules of Professional Conduct on whether a lawyer may enter into an agreement requiring a client to pay a flat fee in advance of representation and whether a lawyer must deposit such a fee into a client trust account.

I did not like the opinion when I first read it, so I decided to look at it more carefully.  Go here for my original post.  As I looked more into it I realized that the problem was not with the opinion but with the Ohio Rules of Professional Conduct, and, in particular with a paragraph in the comment to Rule 1.5 which does not appear in the Model Rules but was added by the drafters of the Ohio rules.  So I decided to write a short comment on the opinion and the rule/comment upon which it is based.  I recently posted a draft in SSRN.  You can take a look at it here.  The abstract reads:

Last month, the Board of Professional Conduct of the Ohio Supreme Court released an advisory ethics opinion discussing the propriety of flat fee agreements. In it, the Board reiterates the principles contained in the Ohio Rules of Professional Conduct on whether a lawyer may enter into an agreement requiring a client to pay a flat fee in advance of representation and whether a lawyer must deposit such a fee into a client trust account. Because these questions are addressed in the applicable Rules of Professional Conduct or their comments, the Opinion does not actually add much to the current state of the law. Unfortunately, however, that state of the law is based on a confusing and indefensible inherent contradiction within the applicable rules. By simply repeating that confused doctrine without criticizing it, the Board missed the opportunity to take a stand against the wrongheaded state of the law and to propose a much needed change in the applicable rules. As a result, the Board’s opinion merely reiterates a faulty analysis that leads to confusion and defeats the purpose of providing clear guidance to lawyers. This short essay will discuss the issues and will provide an alternative approach to help Ohio lawyers better understand the issues they face when handling flat fees paid in advance.

Podcast on technology and competence

There has been a lot of discussion on whether lawyers meet their duty of competence when it comes to "technology."  For some of my recent posts, and links, on the subject go here, here and here.

Adding to the list, the most recent podcast in the Legal Talk Network is features lawyer and legal technology blogger Bob Ambrogi talking about the lawyer’s duty of technology competence, how it applies to discovery and confidentiality, and how technology can really benefit lawyers too. You can listen to the program by hitting the play button below or by going here.

Federal District Judge enjoins Florida Bar from enforcing rule prohibiting truthful claims of expertise -- UPDATED

(You may remember this story from October 2015; skip to the bottom for the latest update.)

I have often criticized jurisdictions that impose sanctions when attorneys advertise that they specialize in a particular area of the law based on the notion that such a claim is either "misleading" or in violation of a rule that prohibits lawyers from advertising that they are “a specialist" unless the lawyer is actually so certified by a certifying agency, the state or the ABA.   I made my case against this view back in 2011 in reaction to a case from Indiana (here) and then again to the news about the case in Louisiana (here) and was happy to see a court reaching what I believe to be the correct result here.

Florida, one of those states that is very aggressive when it comes to enforcing rules related to advertising, was among those states that held that claiming to specialize in an area of the law should be considered to be unethical.  Until now.  Last week, District Court Judge Robert L. Hinkle (Northern District of Florida) found unconstitutional Florida’s rule.

The Bar had argued that potential clients would be misled into assuming that lawyers who advertise that they “specialize” or have “expertise” are board certified, but the Court found no evidence to support this argument.

Because the rule essentially bans attorneys from making true statements that describe their areas of practice, the judge concluded the rule was unconstitutional under the test used to determine the constitutionality of restrictions on commercial speech under the First Amendment.  Accordingly, the court enjoined the bar from prohibiting the plaintiffs from making truthful statements on websites, blogs or social media about their specialty and expertise.

This, in my opinion, is the correct approach to the issue -- as I have argued before in other cases (see links above).  The case is Searcy v Florida Bar, and you can read the Court's order here.

The ABA/BNA Lawyers' Manual on Professional Conduct has more on the story at 31 Law. Man. Prof. Conduct 566.

UPDATE 10/18/15:  The Lawyer Ethics Alert Blog has a comment here.

UPDATE 3/13/16:  The ABA Journal has a story on this in its February issue here.

Supreme Court orders new trial for death-row inmate because of prosecution failure to disclose evidence

The U.S. Supreme Court has ruled in a summary disposition that a death-row inmate’s due-process rights were violated when the prosecution failed to turn over material evidence.  You can read the opinion here (scroll down to page 33 of the document).  The ABA Journal.com has more here.

Ohio Board of Professional Conduct issues opinion on flat fees

Over the past couple of years many jurisdictions have issued opinions on whether flat fees can be non-refundable and the result of these opinions is a mixed bag of approaches.  By my non-scientific count (ie, what I have seen and written about here), the most common approach seems to be that flat fees are not earned upon receipt, and therefore must be deposited in a trust account until earned.  That means that the client owns the money until earned.  The advantage of this approach is that it makes sense to say that if the lawyer does not complete the task the fee is supposed to pay for, the lawyer is obligated to refund the client the portion of the fee that was not earned.

Some jurisdictions, however, have taken a different approach which, quite frankly I don't understand.   The Board of Professional Responsibility of Ohio just issued an opinion that illustrates this alternative approach.

The opinion (available here) concludes, first, that a lawyer is required to deposit flat fees paid in advance into an IOLTA trust account, unless designated as “earned upon receipt” and only may withdraw the fees as they are earned.

This is the generally accepted view I described above with the added caveat that the client may agree to say the fee is earned upon receipt.  This is an important alternative for the attorney, because if the fee is earned upon receipt the attorney would be allowed to deposit the money in the attorney's general account.  Since the fee has been earned, the money belongs to the lawyer and the lawyer can do with it as the lawyer pleases except leaving it in the trust account.  Since the money belongs to the attorney - because it has been earned - leaving it in the trust account would mean the lawyer is commingling funds.  The Board explains this in the opinion.

OK, so far, so good; but then the opinion goes on to say that "even if a flat fee paid in advance of representation is deemed “earned upon receipt,” “nonrefundable ,” or similarly, Prof.Cond.R. 1.5 requires a lawyer to return any unearned portion of the fee if the lawyer does not complete the representation for any reason."

Here is what I don't understand:  How can the fee be earned and unearned at the same time?  If the fee is deemed earned, then it is earned. No?  Or is the Board saying that "designating" a fee as earned does not mean that it "is" earned?  That doesn't make sense to me.  What would be the purpose of "designating" a fee as earned if the lawyer could not handle the money as if it had been earned?

Which brings me to the question:  how is a lawyer going to handle the money?  According to the opinion itself, if the fee is deemed earned upon receipt then the attorney can't leave the funds in the trust account.  Doing so would be a violation of the rules against commingling.  But once the money is deposited in the general account, if there is a refund to pay, where is the refund going to come from?  It has to be from the general account where the money was placed, right?  And if that's the case, doesn't that mean that the attorney had been commingling client money (the unearned amount to be refunded) and attorney money in the same account?

Thus, the Board's conclusion inevitably results in a violation of the rules.  If the fee is earned but some of it has to be refunded, it means that some part of the fee was in reality not earned and by placing the full amount in the general account the lawyer commingled.  On the other hand, if the fee is earned but the lawyer leaves even part of the amount in the trust account just in case maybe a portion of the fee will have to refunded, the lawyer has also commingled.

I understand the Board is trying to protect the client, but the only way to do that and still make sense of the other rules at issue is to say that a fee paid in advance has to be kept in the trust account until it is earned.  In other words, I would eliminate the possibility of allowing the fee to be "designated" as earned upon receipt. OR you could say that the flat fee can be deemed earned upon receipt, but that meant that it can be non refundable.  But you can't do both.


Thanks to the Legal Profession blog for the link.

ABA issues new ethics opinion on what to do when lawyers received a subpoena for client's documents

 The ABA Standing Committee on Ethics and Professional Responsibility recently issued a new opinion which provides some guidance to lawyers receiving subpoenas for client documents or information. You can download Formal Opinion 473 here but do so soon because once the opinion goes into the "archive" it will be available for free only to members of the Center for Professional Responsibility.

For comments on the opinion go here and here.

ABA abandons its partnership with Rocket Lawyer!

Lawyerist and The American Lawyer are reporting that the ABA has abandoned its partnership with Rocket Lawyer.  This is an embarrassing turn of events for the ABA, but I have to say that I am not terribly surprised by it.

But first here is the background in case you don't know what it is this is all about.  Last October, to much fanfare, the ABA announced the creation of a pilot program that provides on-demand legal advice for small businesses called ABA Law Connect.   The program was part of the ABA's efforts to improve access to legal services, but also to respond to criticism that it has been slow to allow "innovation" in the legal market.  (In 2015, the ABA held a Summit on Innovation and one of the most reported sessions during the meeting of the House of Delegates was a speech by Avvo's CEO in which he called for the elimination of rules regarding unauthorized practice of law in the name of innovation to open the legal market to innovators like, you guessed it, Avvo, of course.)

Yet, as I have argued here before, "innovation" has become a buzzword and we shouldn't rush to try to be innovative at the risk of creating other problems.  There is no point in being innovative for innovation's sake.  It reminds me of the Direct TV commercial in which a group of executives are meeting to discuss "new ideas."  One of the executives throws shrimp on the conference table at breakfast and the CEO says "... not the way I would have gone, but it is innovative.  And that's what we want around here..."

When I first wrote about the RocketLawyer program here, I pointed out a few concerns I had.  I have also written about my concerns regarding Avvo.  And, well, I hate to say it, but ...  there you have it.  As BB King would say, "the thrill is gone."

To be clear, I don't know exactly why the ABA decided to back out -- probably a combination of reasons--  but whatever the reason was, ABA Connect is no more.   And as Lawyerist writes, "this may be . . .  another example of innovation getting ahead of regulation. The ABA did try to innovate boldly, but it got ahead of its own regulations in doing so."  Just what I have been saying all along...

Now the more interesting question becomes, if the regulation is not ready to support the innovators, are the lawyers who are signed up with RocketLawyer, ABA Connect and Avvo in violation of the rules?...  Stay tuned...

Is an attorney's LinkedIn profile an advertisement?

Legal Ethics in Motion is reporting that the Association of the Bar of the City of New York Committee on Professional Ethics'  Formal Opinion 2015-7 concludes that if the primary purpose of an attorney’s LinkedIn profile is not to attract new clients, it is not advertising.  I understand the idea, but I am not sure I understand how it applies in reality.  If the profile is about a lawyer and his or her practice, is there really any other purpose for having a profile in LinkedIn?

Iowa Supreme Court rejects notion that malpractice plaintiff has to show actual innocence in order to support claim against former criminal defense lawyer

In a many jurisdictions, a convicted criminal defendant who wants to recover for malpractice against his or her former lawyer has to obtain post conviction relief and prove that he or she was actually innocent of the crime for which they were convicted.  This view has been criticized but still appears to be the majority view.  Yet, I have read recent cases where a few courts have abandoned this view in favor of the minority approach which does not require the convicted defendant (plaintiff in the malpractice claim) to show actual innocence.  The most recent court to so hold was the Kansas Supreme Court, something I reported about a month ago here.

Now comes news (via the Legal Profession blog) that the Iowa Supreme Court has taken the same step.  Actual innocence is no longer required as an element of the cause of action.  The case is called Barker v Capotosto, and it is available here.

UPDATE (7/21/16): The Chicago Legal Malpractice Blog has a story on the case here.

Another comment on lack of accountability for prosecutorial misconduct

Long time readers of this blog know I often complain about the fact that courts do not seem to take prosecutorial misconduct too seriously.  You can go to the prosecutors tag and scroll down for lots of stories, and links on the topic.  Here is the latest from the blog a public defender.

ABA Adopts Regulatory Objectives Resolution

Back in December I reported that the ABA Commission on the Future of Legal Services had issued its final Resolution and Report on Regulatory Objectives and that I found it essentially bland and neither innovative nor controversial.

Yet, something happened between then and now,  and two days ago the ABA House of Delegates adopted a revised and amended version of the Regulatory Objectives Resolution which is more interesting.  You can find it here.

But first a bit of background.  As I have said many times recently, the big buzzword in Professional Responsibility these days is "innovation."   Although the word has been used to refer to many different things, they all have in common the notion that we should be open to the idea of fundamentally changing the way we think about the legal services marketplace.  This also ties in with the idea that we should think of how to change the existing regulatory schemes to allow for the innovation in the marketplace of legal services.

Some of this type of thinking has been traced back to the events that resulted in the adoption of the 2007 Legal Services Act, which fundamentally changed the legal marketplace in the UK.  Since then, many in the US have been discussing whether it would be a good idea to follow their example.  And one big first step in that direction is to reflect on why it is that we regulate, how we regulate and whether our regulatory system works well to uphold the goals we meant to achieve by enacting the regulation in the first place.

It is never a bad thing to reflect on how we do our jobs and on ways we could do it better etc.  I do it all the time as it relates to my teaching.  But, obviously, there is more to it that that at issue here.

The underlying issue is the question of whether it would be a good idea to open the legal services market to non-lawyers, to change the rules that ban non-lawyers from owning law firms or sharing fees with non-lawyers, among other things.  In other words, all the types of things we usually refer to under the umbrella of "innovation."

We know some states are already moving in that direction by allowing non lawyers to provide limited legal services; we know non lawyers want states to open the legal services market so they can share in the profits, etc.

Yet, it wasn't clear whether the ABA would welcome this type of change.  And, interestingly, the resolution approved last Monday does not provide a clear answer.

In one paragraph it states that "the American Bar Association urges that [all jurisdictions] be guided by the ABA Model Regulatory Objectives for the Provision of Legal Services when they assess the ... existing regulatory framework and any other regulations they may choose to develop concerning non-traditional legal service providers."

But in the next paragraph, the Resolution makes clear that it does not endorse that much innovation by stating that "nothing contained in this Resolution abrogates in any manner existing ABA policy prohibiting non lawyer ownership of law firms or the core values adopted by the House of Delegates."

So, if the idea was to open the door to the type of innovation that resulted in fundamental changes in the UK, the exercise failed.

On the other hand, if it was just an exercise in reiterating the core values of the profession and the public policies upon which its regulation are based, then the Resolution is useful.

It seems the ABA is accepting the fact that some innovative change is coming (in fact, some of it is already in place), but it is urging that this change be regulated and that it be regulated according to the traditional principles upon which we have always based the regulation of the profession.

The irony is that some of those principles are, precisely, what may prevent the most innovative ideas from getting implemented.  ...  So, the debate continues.

For more on the adoption of the resolution go to the Legal Ethics Forum, Lawyer's Ethics Alert Blog, Professional Responsibility, A Contemporary Approach, Lawyerist.

For a critical view of the notion of innovation in general and the ABA's approach in particular go to Simple Justice.

D.C. District Court Proposes New Rules on Prosecutors Disclosure Obligations

The United States District Court for the District of Columbia has released a proposed rule which would codify the government’s discovery obligation set out by the Supreme Court. Most significantly, it imposes specific timelines on prosecutors.  The Legal Profession Blog has more details (and the text of the proposed rule) here.

Avvo expands its Legal Services program to 18 states; Should attorneys be concerned? (part 2)

A few days ago, I posted a long comment expressing my concern over the new Avvo Legal Services, which it describes as an online legal services marketplace now offering fixed-fee, limited-scope legal services through a network of attorneys.  Many others have raised similar concerns.  See, among many others, Solo Practice University; Simple Justice and the comments to stories in the ABA Journal.com here, here and here.

Coincidentally, yesterday Avvo announced it has now expanded the service to 18 states, covering about 70 percent of the US population.  I first read the story in Law Sites, which describes the news and the service and quotes Avvo's general counsel and CEO.  I left a comment expressing my opinion about one of their claims and asking for an explanation, and the General Counsel for Avvo was kind enough to reply.  You can read our exchange in the comments below the story here and judge for yourself as to whether Avvo's explanation makes sense to you.

I find it interesting that when challenged on whether lawyers paying for the service could be found to be in violation of the rule against sharing fees with non-lawyers, Avvo's GC claimed the rule is unconstitutional as applied under the First Amendment.  (Is Avvo arguing that because it calls the fee a "marketing fee," paying the fee makes it advertising?  I don't know.)  This means that in the last couple of days I have read of Avvo claiming that the transaction is not fee sharing because it is a separate transaction, that the transaction is not fee sharing because it is paying for advertising, that if the transaction is fee sharing, it is allowed by the rules, and that if it is not allowed by the rule, the rule in unconstitutional.

Also, I don't understand why Avvo doesn't instead argue that it is covered by comment [5] to Rule 7.2 which says that "a lawyer may pay others for generating client leads, such as Internet-based client leads, as long as the lead generator does not recommend the lawyer, any payment to the lead generator is consistent with Rules 1.5(e) (division of fees) and 5.4 (professional independence of the lawyer), and the lead generator’s communications are consistent with Rule 7.1 (communications concerning a lawyer’s services)."

This is an interesting relatively new comment that I have not seen interpreted in any cases.  (If you know of one, please send it my way - I'd like to see it.)  My sense is that this comment was adopted precisely to be more lenient with respect to the ban to pay others for referring clients, by opening the door to online services that connect clients with lawyers -- which is precisely what Avvo does.  The problem is that there are a few things in the comment that have not been tested (at least to my knowledge).  What is a "client lead"?  Does that refer to information or to an actual client?  If the intent is to allow payment for information but not for an actual client, then the comment won't help Avvo.  Again, I have not done the research to know how "leads" has been interpreted (or is meant to be interpreted).

Also, and more importantly, what does it mean when it says that the payment won't violate Rule 7.2 as long as it is "consistent with" Rules 1.5 and 5.4.  Is "consistent with" the same as "complies with" or is there a difference?  If it means that in order for the payment not to violate 7.2 the lawyer also has to comply with 1.5(e) and 5.4, that means that payment to a non-lawyer will be in violation of 7.2 because sharing a fee with a non lawyer is by definition a violation of 5.4 and irrelevant to 1.5(e) which is about sharing fees with other lawyers.  Since internet "lead generators" are not likely to be lawyers, I think that "consistent with" means something other than "complies with."

Viewed that way, the question becomes whether allowing payment to a non-lawyer for finding and sending a client to the lawyer threatens the policies and concerns for which we decided to adopt the requirements in 1.5(e) and the ban in 5.4.   And I think Avvo can make a case that allowing this type of payment does not.  I don't know how convincing the argument will be before the authorities, but you can make the argument.   Which is why I don't understand why not go for this argument rather than the strange argument based on the First Amendment (which appears to be based on a forced interpretation of what the speech in question is and an incorrect reading of the constitutional standard that applies (note that Avvo's GC argues the state has to show harm, an argument the Supreme Court dismissed in Ohralik).  

Having said all that, it seems Avvo is here to stay and that at least for now states are tolerating it.  However, it will be interesting to see what happens in the near future.  It will be interesting to see if attorneys ask their local Ethics Commissions to issue opinions on whether sharing fees with Avvo is ethical.  Hopefully some will and we will begin to see the responses in different states. 

It will also be interesting to see if states will then create regulations to apply to the non lawyers in the legal marketplace.  The ABA just adopted a resolution urging jurisdictions to regulate the non lawyers in the legal services marketplace according to the policies and values of the legal profession.  Ironically, this may lead to a finding that it is not a good idea to abandon the ban related to sharing fees with a non-lawyer. 

Is it ethical to finance your law practice through "crowdfunding"? Opinions from New York and now Philadelphia address the issue -- UPDATED

I am updating this story with a new note (with links) about a recent opinion from Philadelphia at the end.  

Back in March of last year I wrote about the differences of opinion as to whether it would ethical to finance the practice of law through "crowdfunding".  See here.   But there are different types of crowdfunding.  In one type, the person seeking funds essentially is asking others to contribute out of the goodness of their hearts and promises nothing in return, other than the feeling of satisfaction they would get from contributing to a good cause.  In the other, the person seeking funds raises capital in exchange for a portion of future income. In other words, through this type of crowdfunding websites, you can ask people to give you money and then promise to give them a share of your earnings.

The first type of crowdfunding is no different than asking a relative to give you money to start your practice; only instead of the relative you are asking strangers.  In the second type of case, you would be sharing earnings with a stranger.  And that would be a problem.

One of the most debated questions in Professional Responsibility circles today is whether to relax or eliminate the rules that ban lawyers from forming partnerships with non-lawyers or from sharing fees with non lawyers.

Because of these rules, it is not too surprising that the New York State Bar Association has decided that crowdfunding would be allowed only in instances where the result of the crowdfunding does not include sharing of fees with non lawyers.  According to the opinion, available here,

A law firm may engage in certain types of crowdfunding but not others. Any form of fundraising that gives the investor an interest in a law firm or a share of its revenue would be prohibited. However, in some circumstances a law firm may give the funding source some kind of reward. For example, a law firm may send a funder non-confidential memoranda discussing legal issues (provided the law firm complies with any applicable advertising rules), or may agree that the law firm will provide pro bono legal services to certain charitable organizations, provided that the lawyer complies with Rule 1.1 regarding competence and the representation does not involve conflicts in violation of Rule 1.7 or Rule 1.9.

For a more detailed discussion of the opinion go here.

UPDATE 8/20/15:  Professional Liability Matters just posted a comment on the issue here.

UPDATE 2/8/16: Legal Ethics in Motion has a short comment on a recent Philadelphia Bar Association opinion on the same subject here.   The opinion itself is available here.  It raises a few interesting questions but I don't think it addresses the key issue: whether the people contribute to the fund acquire an interest in the litigation.  The opinion seems to assume that the people who will fund the litigation do so out of the generosity of their hearts and will expect nothing in return.  This is the type of crowdfunding that the NY opinion would allow because it does not involve any type of fee sharing.  Thus, the Philadelphia Opinion does address a few important issues about that type of agreement, including whether the fund can be non-refundable, and whether it has to be kept in a trust account until earned.

Does the requirement of a "certificate of merit" in a malpractice case apply to a claim under a different theory of liability?

Some states require an “affidavit of merit” in order for a plaintiff to bring a malpractice claim.  The blog Professional Liability Matters has prepared this 50 state survey-table with the relevant information.

It is my understanding that typically these statutes refer to claims for "malpractice" while others mention the word "negligence."  For this reason, there may some doubt as to whether a plaintiff bringing a claim  for a different cause of action, such as a breach of fiduciary duty or an intentional tort, would be required to use of a certificate of merit.

The question is right now being litigated in New Jersey.  Just a few days ago, in Perez v. Zagami, LLC, 2016 BL 7198, N.J. Super. Ct. App. Div., No. A-3268-14T2, 1/12/16, the court held that the New Jersey statute that requires malpractice plaintiffs to file an affidavit of merit attesting to the viability of the complaint doesn't apply to a lawsuit accusing an attorney of malicious use of process.  Keep an eye on the case to see if the issue reaches the NJ Supreme Court.  For more on the case go here.

California Bar Ethics Committee issues opinion on acceptable "puffing" during negotiations

The California Bar's Ethics Committee recently issued an opinion on whether an attorney negotiating for a client can engage in some forms of “exaggeration, posturing or puffing,” such as overstating the client's “bottom line” settlement number.  See Formal Op. 2015-194.

The Committee concluded that exaggeration, posturing and ‘puffing’ are acceptable but that  statements that constitute misrepresentations of material fact upon which the opposing party is intended to rely are impermissible.

According to a report in the BNA/ABA Lawyer’s Manual on Professional Conduct, the committee generally embraced the analysis the ABA ethics committee used in its 2006 opinion on the subject, ABA Formal Ethics Op. 06-439.  You can read the report here.

Avvo joins the legal market; now offers legal services through network of attorneys; should attorneys be concerned?

Avvo, the somewhat controversial (here and here) online rating company, has evolved into what it calls an online legal services marketplace now offering fixed-fee, limited-scope legal services through a network of attorneys.  This is not surprising since the company's CEO has participated in a number of events calling for the opening of the legal market to outsiders and the elimination of regulation on the unauthorized practice of law to open the way for Avvo itself to join the market.  (You can see a video of one of these events here.)

Finding new ways to provide access to legal representation, including by relaxing some regulations, is not necessarily a bad thing.  But one must be careful not to make mistakes since the regulations have not been relaxed yet.

As I have argued before, the new buzzword in Legal Ethics these days is the notion of "innovation" and states and the ABA are trying to find ways to encourage innovation.  Yet we shouldn't rush to try to be innovative at the risk of creating other problems.  I have no problem with innovation, or change or new initiatives, and I most certainly don't have a problem in trying to find ways to provide access to legal services for people who can't afford them, but whatever is done should be done with a full understanding of the professional responsibility principles involved and of the possible consequences for possible mistakes.

Not too long ago, I made that observation when commenting on the ABA initiative with a company called Rocket Lawyer (another one of those so called online legal services marketplaces).  You can read my comment here.

I am repeating it now in light of the announcement that Avvo is now offering "legal services through a network of attorneys."

Avvo first got into the business of offering legal advice last year when it launched Avvo Advisor, a service that provides on-demand legal advice by phone for a fixed fee of $39 for 15 minutes.  Just a couple of weeks ago, however, the ABA Journal.com reported that Avvo has begun testing a service that offers fixed-fee, limited-scope legal services through a network of attorneys, and plans to roll out the service more broadly over the next few months.  (You should also read the comments posted at  the end of the ABA Journal story.)

That's a whole different ballgame and one that deserves a closer look.

As described elsewhere, attorneys can sign up with Avvo to offer services by agreeing to pay a "marketing fee" the value of which will depend on the services rendered.  Clients would choose an attorney from those registered with Avvo and form an attorney-client relationship with the attorney (not with Avvo).  Avvo essentially serves as a means for the client to find an attorney.

Viewed this way, Avvo is essentially helping people find a lawyer who can serve their needs. Yet, Avvo claims it is not a referral service.  Why?  Maybe because lawyers have to pay Avvo a fee to get Avvo to connect them with clients, and the rules in most, if not all, jurisdictions say it is unethical to pay a third party for recommendations or referrals except under certain circumstances.  Thus, ABA Model Rule 7.2(b), which has been adopted in the vast majority of jurisdictions, states that “[a] lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may . . . pay the usual charges of a legal service plan or a not-for-profit or qualified lawyer referral service. A qualified lawyer referral service is a lawyer referral service that has been approved by an appropriate regulatory authority. . . .”  Avvo is a for profit business.  Whether it is "a qualified referral service" depends on the law of each jurisdiction.

But, as long as you are willing to take Avvo's word for it, the is question moot anyway because Avvo clearly states in its website that it is not a referral service.  So, there.

This brings us to the issues that arise when we start to look at how money is exchanged and what the money pays for. 

Here is what Avvo itself says about this in the FAQ section of its website:

"Should I be concerned about fee-splitting?  No. Avvo always sends you 100% of the client’s payment. As a completely separate transaction, you will pay a per-service marketing fee. We know this issue is extremely important to participating attorneys. Here’s what ethics expert and Avvo General Counsel Josh King says on the matter, "Fee splits are not inherently unethical. They only become a problem if the split creates a situation that may compromise a lawyer’s professional independence of judgment. We believe that Avvo Legal Services fees, like credit card fees, would involve the sort of technical fee split that would not create such a potential for compromise. Nonetheless, we have tried to keep things simple and clear by making the per-service marketing fee a separate charge."

. . . . Does this count as fee splitting?  No. As mentioned in the ethics section of this FAQ, Avvo always sends you the entire legal fee paid by the client. The per-service marketing fee is a completely separate transaction. We know this is extremely important to participating attorneys. Here’s what ethics expert and Avvo General Counsel Josh King says on the matter, "Fee splits are not inherently unethical. They only become a problem if the split creates a situation that may compromise a lawyer’s professional independence of judgment. We believe that Avvo Legal Services fees, like credit card fees, would involve the sort of technical fee split that would not create such a potential for compromise. Nonetheless, we have tried to keep things simple and clear by making the per-service marketing fee a separate charge.”

Of course, I am sure that Avvo believes its service does not violate the rules of professional conduct, but the fact they believe it, by itself, does not make it so.  Do your own research before you commit to something that might become a problem.

Start by taking a look at what Avvo says about fee splitting:  "Fee splits are not inherently unethical. They only become a problem if the split creates a situation that may compromise a lawyer’s professional independence of judgment."

That statement is, at best, confusing.  Let’s start with the basics.  Model Rule 5.4, which has been adopted in pretty much every jurisdiction, states clearly that a it is misconduct to share a fee with a non-lawyer except under one of four enumerated circumstances and, at least the way I read it, the agreement described by Avvo does not fall within any of them.  Of course, however, it is possible that a particular jurisdiction has different language that would recognize the validity of this type of agreement, and some jurisdictions have ethical opinions that have concluded it would be OK to share a fee with a non professional under certain circumstances.

Thus, at least as far as the Model Rule is concerned, unless allowed by one of the specific exceptions, splitting fees with a non lawyer is unethical, inherently or otherwise.  It just is. Why?  Because the rules say so, period.  Because the rules take the view that splitting fees with a non lawyer inherently creates a situation that may compromise a lawyer's professional independent judgment.  In other words, according to the Model Rules, splitting fees with non-lawyers is inherently unethical.

If you are going to argue the specific agreement does not violate the rule, you are going to have to develop some sort of analysis to show the agreement is not an example of splitting a fee.

Avvo wants it both ways.  They claim, without analysis, that their program does not constitute splitting fees, but, just in case, they also claim that even if it is, splitting fees is not unethical unless there is a conflict of interest.  Problem is there is no analysis to support the first part of this conclusion and the second part is contrary to the state of the law.  

As an aside, I am assuming here, of course, that Avvo does not want to be considered a law firm.  If it is a law firm, then the applicable rule is 1.5(e), which allows the splitting of fees among lawyers in different firms.  Yet, Avvo would not want that rule to apply because this is allowed only if the requirements in that rule are strictly met, which is not the case in the Avvo type business relationship with the lawyer. 

So, this brings us back to the question of whether the Avvo-Lawyer agreement does or does not constitute splitting of a legal fee with a non-lawyer (which, as stated above would be a clear violation of the rules).

According to Avvo, here is how the service works: A customer selects a lawyer for a particular legal need through the Avvo website and pays for the service the full flat fee assigned for that service up-front.  Avvo retains that money until after the service is performed.  Then, on the 7th of the month, Avvo will send the lawyer the full fee, and in a separate transaction will deduct a “per-service marketing fee” for each completed legal service. The amount of this fee depends on the service, and ranges from a $40 marketing fee for a $149 service to a $400 marketing fee for a $2995 service.  Avvo specifically says the withdrawal of the service fee is a separate transaction “to avoid any fee-splitting concerns.”

[By the way, note that Avvo pays the attorney on the 7th of the month, not when the work is completed, so God forbid you finish the work on the 8th or you’ll have to wait a month for your check...  But I digress.]

What could go wrong?  Let’s review. 

Let’s start with the fact that when a client pays for services up-front, a lawyer has an ethical obligation to keep a client’s money in a separate trust account, which in many jurisdictions has to be an interest bearing account (IOLTA) account.  Since most jurisdictions have held that flat fees are not earned upon payment, by definition (at least in those jurisdictions) they fall in the category of fees that need to be in a trust account.  According to the Avvo plan, however, the lawyer is allowing Avvo to handle those fees with (to my knowledge) no assurance that the fee will be held in a trust account, much less an IOLTA account, with the interest paid to the appropriate state agency.  That could be a problem.

Then let’s think about the second transaction.  The first thing to notice is that the amount of the so-called marketing fee varies depending on the amount of the flat fee.  Unless I am missing something, this sounds to me like the marketing fee is really a percentage of the attorney’s fee.  You’d have to do the math to determine the amount of the percentage, but since both fees are pre-determined, it shouldn’t be difficult.  So, what is really happening here is that Avvo is collecting a percentage of the fee the client pays the attorney.  The fact it does it separately, in a second transaction, does not change that fact.  Does that sound to you like splitting a fee with a non-lawyer?

Next, does anyone see anything wrong with a lawyer giving Avvo direct access to a lawyer’s (or the firm’s) bank account so Avvo can make withdrawals directly?  I see two issues here.  You can see the problem if the attorney gives Avvo access to the firm's trust account, right?  First, giving anyone (other than the bank) access to that account in and of itself is a problem.  Second, when Avvo takes money out of that account to pay for the marketing fee, the lawyer is by definition using client money to pay for operating expenses.  That's, at least, commingling.

Maybe these problems can be avoided by giving Avvo access to the firm's operating or general account.  I suppose that would be OK in terms of ethical issues, but I wonder whether it is a good idea.  This is a personal decision, but I wouldn't feel comfortable giving others the ability to take money out of my bank account directly... but that's just me...  I would want assurances on the security measures taken to protect my bank account information.  I don't want my account to be vulnerable if the other company gets hacked and my information is stolen or misplaced or something... Maybe, the best option is for the lawyer to open an account to be used only for transactions with Avvo.  That could work, if that is something Avvo would agree to.   None of this has to do with the rules of professional conduct or ethics, though... So let's get back to that discussion.

So after all this, what is Avvo and what is it doing?  If Avvo is not a referral service, and it doesn't want to be considered to be a provider of legal services (a law firm) either, we are forced to go back to the issue of splitting fees with a non-lawyer.

When it talks to consumers Avvo says it "offers legal services" but when it talks to lawyers and its regulators it says we offer "a platform" for "marketing" of legal services.  If Avvo is offering legal services then it should be subject to the same regulations that all legal services providers are subject to.  If it isn't then the lawyers it serves need to make sure that by entering into agreements with it, the lawyers don't violate the rules the lawyers are subject to.  

Maybe I am missing something here.  Please explain it to me if I am.

Now, having said all that, I want to be clear that what I am saying here is simply that I have some concerns over whether agreeing to participate in the system designed by Avvo would violate the rules.  I am not saying that it is necessarily a bad idea to find a way to make it work.  Maybe it is a good idea for potential clients to have access to legal services through platforms like Avvo, RocketLawyer or LegalZoom.  That is a different question.  If it is, then we need to work to change the current rules.  I have no problem with that.

For more on this go here.

UPDATE (2-10-16):  Part II of my comment on Avvo Legal Services.

UPDATE (4-9-16):  Avvo now offers legal forms.  My comments here.

UPDATE (6-19-16):  Ohio opinion suggests participating in Avvo Legal Services might be unethical

UPDATE (8-1-16):  Florida adopts rules that make it unethical to participate in program like Avvo Legal Services

UPDATE (8-12-16):  South Carolina opinion finds participating in program like Avvo Legal services unethical

UPDATE (10-10-16):  Pennsylvania issues opinion finding participating in program like Avvo Legal Services is unethical.