Avvo Legal Services has been meeting with North Carolina bar regulators, resulting in a draft proposal that would amend several legal ethics rules and make it easier for Avvo to operate in the Tar Heel State, according to Prof. Alberto Bernabe, a Chicago law professor who has seen some of the relevant documents, and blogged about them last week.
Several state legal ethics opinions have recently found client-referral services using an Avvo-like model to be ethically problematic, including opinions from regulators in Pennsylvania, South Carolina, and my home state, Ohio. Rule revisions in Florida now pending for approval by the state supreme court there likewise call aspects of the model into some question.
Some of the identified ethical issues raised by Avvo-like referral services, as identified by various ethics opinions are:
- the company — and non-lawyers — control significant aspects of the attorney-client relationship, including functions that can constitute the practice of law (see Model Rule 5.5(a));
- the structure can interfere with the lawyer’s exercise of independent legal judgment on behalf of the client (see Model Rule 5.4(c));
- the way the fees are managed could constitute or invite commingling of clients’ funds and lawyers’ funds (see Model Rule 1.15(a));
- the fee structure makes it difficult to comply with the duty to refund unearned fees at the end of the representation (see Model Rule 1.16(d));
- a model where the lawyer is paid only after the representation is concluded makes the fees contingent on the outcome, which can violate the prohibition on contingent fees for certain kinds of cases (see Model Rule 1.5(d));
- receiving and holding client funds paid in advance may violate the lawyer’s duty to hold those funds in a trust account (see Model Rule 1.15(c));
- although part of the fee paid by the client and kept by the company may be designated as a “marketing fee,” the fact that such fees are calculated as a percentage of the full fee makes the arrangement likely to be impermissible fee-splitting with a non-lawyer (see Model Rule 5.4(a));
- the business model can threaten the confidentiality of the lawyer-client relationship (see Model Rule 1.6).
North Carolina considers amendments
In light of these issues, Avvo has tried to allay concerns, including by saying that its model actually comports with ethics rules, and that it is providing advertising that is protected by the First Amendment. (A recent Georgetown Law Journal article by Prof. Bernabe details Avvo’s arguments.)
According to Prof. Bernabe, North Carolina may now be considering a different regulatory approach: amending its lawyer conduct rules to “make it acceptable for lawyers to participate in services like Avvo.”
Documents he has seen include a proposal to amend the fee-splitting rule to permit payment of a portion of the lawyer’s fee to an on-line platform if the amount is a reasonable charge for administrative or marketing services and there is no interference with the lawyer’s independent professional judgment.
Another proposed comment amendment would allow lawyers to participate in Avvo-like rating services without fear of being held in violation of the prohibition against giving something of value in exchange for a recommendation of employment. (See Model Rule 7.2(b).)
Yet another amendment would allow the company to keep the client’s payment until the end of the representation, imposing on the lawyer the obligation of ensuring that such “intermediaries” “adequately protect client funds” — instead of placing such advance payments in the lawyer’s trust account.
Brave New World
Although nothing is certain yet, and the documents that Prof. Bernabe describes are certainly preliminary and might be incomplete, the path that North Carolina appears to be contemplating significantly departs from the road that bar regulators in other jurisdictions have so far taken. Whether acquiescing to market trends — even ones that seem to be irresistible — is in the true best interest of legal consumers and the legal profession remains to be seen.