Avvo Legal Services won’t work in Tennessee without RPC 7.6 compliance, but should it be so?

The evolution of Avvo from its origins as a lawyer-rating service to something with a much, much more extensive impact in the legal marketplace continued this week with the news of the launch of Avvo Legal Services.  Robert Ambrogi was, as often is the case, the first to break the news online about the development, briefly describing the nature of the service and helpfully linking to the FAQ Avvo offers attorneys about it.

The nutshell version of what exactly this is can be found in the Attorney FAQ under “What are Avvo Legal Services?

Avvo Legal Services are fixed-fee, limited scope legal services determined by Avvo and fulfilled by local attorneys.  Avvo defines the services and prices.  Attorneys choose which services they would like to offer in their geographical area.  Local clients purchase legal services, choose the attorney they want to work with, and pay the full price of the service up front.  The chosen attorney then completes the service for the client and is paid the full legal fee.  As a separate transaction, the chosen attorney pays a per-service marketing fee for the completed, paid service.

Now a writer at the Solo Practice University blog has already teed up a thoughtful piece asking some questions about fee-splitting concerns, which do seem significant when, despite the separate transactions involved there is no question that the “marketing fee” rises as the attorney fees charged rises, and whether it would be highly inadvisable for lawyers to run these transactions through their trust accounts.  I will, for the most, part omit further discussion of those two issues for now.

However, Avvo can say what it wants in its FAQ about why this service is not a lawyer referral service (just as it can attempt to analogize its marketing fee to a credit card processing fee if it thinks that might fly), but I don’t think there is any doubt that, under current ethics rules in a number of states, lawyers who participate with Avvo Legal Services will be taking on significant risk.

Should a lawyer in Tennessee, for example, want to participate in this arrangement (assuming a future roll out here), the likely outcome of any scrutiny would be that the lawyer would violate RPC 7.2(c) unless and until Avvo Legal Services can manage to obtain approval as a registered intermediary organization under our RPC 7.6.

This becomes clear when you look at each of those two Tennessee rules.

Our RPC 7.2(c) generally prohibits a lawyer from “giv[ing] anything of value to a person for recommending or publicizing the lawyer’s services” but provides 4 specific exceptions.  Two of those exceptions are unquestionably unavailable with respect to Avvo Legal Services (publicity in exchange for charitable sponsorships/contributions or purchase of a law practice).  One of the exceptions involves the usual charges of a registered intermediary organization permitted by RPC 7.6.  The other allows payment for “the reasonable costs of advertisements permitted by [RPC 7.2].”

Now, perhaps a lawyer handling cases through Avvo Legal Services could muster an argument that the “marketing fee” being paid is just the reasonable cost of an advertisement.  But nothing about the way Avvo Legal Services describes the program lends itself to such a view as everything about the explanatory materials point to the idea that the lawyer is paying for a result — a paying client — and not just an advertisement.  It’s also paying more for a more lucrative client engagement.  From paying $40 to earn $149 in attorney fees, up to paying $400 to earn $2,995 in attorney fees.

Nevertheless, paying the “marketing fee” could be justifiable under RPC 7.2(c) if it is the “usual charge” of a registered intermediary organization.

Given how broadly Tennessee RPC 7.6(a) defines the term “intermediary organization,” it seems difficult to figure a way that the Avvo Legal Services program would not meet the definition:

An intermediary organization is a lawyer-advertising cooperative, lawyer referral service, prepaid legal insurance provider, or a similar organization the business or activities of which include the referral of its customers, members, or beneficiaries to lawyers for the provision of legal services to the organization’s customers, members, or beneficiaries in matters for which the organization does not bear ultimate responsibility.

Whether or not Avvo Legal Services becomes properly registered will matter to Tennessee lawyers not only because then they could ethically pay a “usual charge,” but also because a Tennessee lawyer would be ethically prohibited by RPC 7.6(b) from “seek[ing] or accept[ing] a referral of a client, or compensation for representing a client, from” Avvo Legal Services unless several specific things were true.  For today’s purposes, the most significant would be that Avvo Legal Services would have to have “registered with the Board of Professional Responsibility and complied with all requirements imposed [on it] by the Board.”  RPC 7.6(b)(iv).

Tennessee lawyers can check, at any time, the list of entities that are properly registered with the Board in this respect at this link.  You’ll see that Avvo Legal Services is not on that list; of course, their current roll out explains that they are only launching in a few cities to start.  Presumably, Avvo Legal Services might pursue registration under our RPC 7.6/Supreme Court Rule 44 before opening the program up to lawyers in any Tennessee cities.

But should it have to?  What really is the rationale that would be used to justify why this sort of service should be off-limits to lawyers?

In jurisdictions that do not have Tennessee’s approach under RPC 7.2(c) and  RPC 7.6, this service may be more viable, albeit still burdened by a few thorny issues regarding arguments that this is fee sharing or what role Avvo Legal Services has (an agent/fiduciary for the client or an agent for the attorney or what exactly?) while it holds money paid by the client for the rendering of legal services.

Unlike Tennessee’s RPC 7.2(c), the ABA Model Rule does not include the words “or publicizing” and only imposes restrictions on the ability to pay someone for “recommending the lawyer’s services.”  Further, language in the Comment  to ABA Model Rule 7.2 further distinguishes between “recommendations” and “channeling” of work to the lawyer, as [5] indicates that while payments for recommendations are off limits altogether but that paying others for “channeling work” is only a problem if the channeling is “in a manner that violates RPC 7.3.”  Further, that same Comment elaborates 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 Rule 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).

Yet, even with that seeming additional flexibility in jurisdictions that track the ABA Model Rules approach, issues would remain that will depend significantly on how the program actually works — particularly the consumer side of the interactions.  The very next sentence of that Comment exhorts that a lawyer “must not pay a lead generator that states, implies, or creates a reasonable impression that it is recommending the lawyer, is making the referral without payment from the lawyer, or has analyzed a person’s legal problems when determining which lawyer should receive the referral.”

A review of what appears to be the consumer-side FAQ for Avvo Legal Services does not contain any explicit disclosure of the fact that the attorney providing the service will be paying Avvo Legal Services for getting to work for the client.  In addition to what it doesn’t say, it has some language that could be construed as at least “implying” a recommendation of the particular lawyer doing the work:

You will work with the lawyer you selected during checkout. For phone call advice sessions, you can also choose to speak to the next available lawyer. In that case, Avvo will connect you with a highly reviewed attorney who is experienced in your topic area and licensed to practice in your state.

But, again, a question worth asking is:  should this be something the ethics rules work to prohibit?  Avvo Legal Services certainly seems to think that this endeavor can be sufficiently profitable, which strongly implies that there are a large number of consumers of legal services who would be willing to make use of such an arrangement and, ultimately, a significant number of lawyers who would be willing to provide services to such consumers in this manner and on these financial terms.  So, the larger question ought to be — if the rules governing our profession will not abide this kind of arrangement, then what is the rationale for nixing it?

Just who exactly are we seeking to protect, and why?