United States: N.Y. State Bar Ethics Committee Takes On Avvo Legal Services, Says Model Violates Ethics Rules

Recently the New York State Bar Ethics Committee issued a pair of opinions about the limitations on a lawyer's ability to take advantage of certain on-line legal marketing services. NYSBA 1132 concluded that New York practitioners may not use Avvo Legal Services in its current form. NYSBA 1131 — issued the same day — outlined more generally what an online lead generation service must do to comply with the New York Rules of Professional Conduct (the "New York Rules"). Taken together, these opinions are certain to make waves as the legal profession struggles to adapt new technologies, unbundle legal services, and offer clients cost-effective solutions. Here's what lawyers and law firm general counsel need to know.

NYSBA 1132 (2017) - Avvo Legal Services

In Opinion 1132, the Committee addressed whether a lawyer could participate in Avvo Legal Services, a service introduced in 2016 by the lawyer rating website Avvo. Specifically, the Committee addressed whether Avvo Legal Services' payment structure violated New York Rule 7.2, which prohibits (in most instances) a lawyer from paying another to recommend the lawyer's services. The Opinion described Avvo Legal Services as follows: a prospective client (the "client") in need of legal services can visit a section of Avvo's website and answer a series of questions about the prospective client's specific legal matter. The client can choose a specific "package" which includes a combination of services including "advice sessions, document reviews, and start-to-finish support." The client can then choose to be connected to a lawyer either at random or by selecting a lawyer among a list presented on the website. On the back end, Avvo pays the participating attorney all of the legal fees generated when the client purchases the "package" but then separately charges the attorney a "marketing fee" for each completed service. The marketing fee depends on the price of the legal service the lawyer provided. Avvo also displays a "rating" for each lawyer based on an internal formula which generates a numerical value between 1 and 10.

Prohibited Referral Fee

The Committee concluded that Avvo Legal Services' marketing fee was a prohibited referral fee under the New York Rules. The reason: Avvo's rating system — combined with marketing promising the lawyer ratings as a tool to help clients find the "right" lawyer — created "the reasonable impression that Avvo is 'recommending' those lawyers."

With Opinion 1132, New York became one of several jurisdictions to challenge Avvo Legal Services, while acknowledging the vigorous debate that the service has spawned both inside and outside the legal profession. For instance, the Opinion noted that "[t]he number of lawyers and clients who are using Avvo Legal Services suggest that the company fills a need that more traditional methods of marketing and providing legal services are not meeting." The Committee concluded that "changes to Avvo's mode of operation — or future changes to the Rules of Professional Conduct — could lead us to alter our conclusions." Notably, however, the Opinion declined to address whether Avvo Legal Services' model constituted impermissible fee sharing with nonlawyers — an issue central to the debate in other jurisdictions.

NYSBA 1131 (2017) - Online Lead Generator

In Opinion 1131, the Committee addressed whether a lawyer could pay for an online lead generator, which would provide the lawyer with the contact information for potential clients in need of legal services. The Opinion concluded that such a payment was permissible so long as (i) the website selected the lawyer by "transparent and mechanical methods" and did not otherwise analyze the client's legal issue or the qualifications of the lawyer; (ii) the website did not explicitly or implicitly recommend the lawyer; and (iii) the website's communications about the lawyer's services were not prohibited by the attorney advertising rules. It is important to note that Opinion 1131 was turned on the fact that the lawyer would pay the lead generator either a fixed monthly fee or a fee for the name of each potential client. The lead generator's fee did not vary depending on whether the potential client actually retained the lawyer, or the amount of the lawyer's fee. Thus, unlike Opinion 1132 (which did not address the issue), Opinion 1131 suggested that the lawyer would be engaged in improper fee sharing if the lead generator's fee were tied to the amount the lawyer charged in legal fees.

The Takeaway

Over the past several years the "legal tech" world has exploded with numerous websites and other online tools geared towards delivering legal services in a non-traditional fashion. The goal of many of these services is to try and close the "justice gap" and provide affordable legal services to individuals who cannot otherwise pay for representation. However, as we previously wrote in an article for the New York Legal Ethics Reporter, these attempts have been met with significant resistance by bar regulators and ethics committees largely owing to the current state of the law and ethics rules. These regulatory bodies are facing increasing pressure to adapt to the times and allow some mechanism by which legal tech providers can coexist with the traditional law firm model. Only time will tell how this will play out. But as both sides press forward we will be sure to keep you updated with any new developments.

www.fkks.com

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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Authors
Nicole I. Hyland
Ronald C. Minkoff
Tyler Maulsby
 
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