State Bar of Arizona Ethics Opinions

02-94: Advertising; Lawyer Referral

This is a formal opinion of the Advertising Committee of the State Bar of Arizona. This is not an opinion of the Committee on the Rules of Professional Conduct.  However, this opinion should be filed with the Formal Opinions of the Ethics Committee because the Advertising Committee was disbanded in January of 1994 and issued only three opinions.

This opinion reviews a lawyer referral program for members of a trade association. A non-profit referral service may earn revenues in excess of its costs. [ER 7.1(r)(4)]


"The LegaLine" (LegaLine) is a service of a trade association.  The Association apparently offers four classes of membership.  Eligibility requirements, dues and member benefits vary for each membership category.

Apparently, the "Supporting Membership" class is a category established exclusively for lawyers who wish to participate in the Association's LegaLine service.

The Association describes itself as a "trade association" for participants and those interested in a  certain industry.  It provides an array of direct and support services which broadly are categorized as:  (1)  Legislative support services; (2) Legal Support Services; (3) Market Support Services; and (4) General Benefits.

Of these services, only the "Legal support services" benefits are the subject of the Association's inquiry to this Committee of the State Bar of Arizona.  Specifically, the Association's LegaLine service will be examined in this Opinion.

The Association describes its LegaLine service as follows:

LegaLine is a national referral network of attorneys who are experienced in representing the interests of participants in this industry.  LegaLine attorneys are all members of the Association who have agreed to provide free initial consultations to members, as well as additional legal services, at significantly discounted rates.  LegaLine is available exclusively to Association members who may use it once for a free consultation with a LegaLine attorney.  Rates for subsequent consultations with the same attorney will cost at least 20% less than their usual fee.  If additional consultations with other LegaLine attorneys are desired, they may be purchased for $50.00.  All attorneys affiliated with the Association are experienced in the applicable industry law and familiar with relevant laws in their geographical jurisdiction.

Initial Legal Review.  May LegaLine attorneys have agreed to provide members with a special cost-effective legal review service.  The review costs $500.00 per report and analyzes a variety of public available information. All materials are reviewed and discussed by a member LegaLine attorney, who will explain the legal impact of the proposed transaction and the material reviewed.

Dispute Evaluation.  LegaLine also provides a cost-effective service for reviewing and evaluating disputes between members and other parties to the transaction.  For a flat fee of $500.00, a LegaLine attorney will review the documentation germane to the member's grievance, and provide up to 5 hours of review and consultation services necessary to evaluate the complaint and recommend available courses of action.  The Evaluation includes a written report of the attorney's evaluation, conclusions and recommendations.

Discounted Legal Services.  All LegaLine attorneys have agreed to offer Association members special hourly rates that are at least 20% below their standard rates.

LegaLine services are available exclusively to Association members.  According to the requesting attorney, the Association receives no direct payments for offering the LegaLine service other than the receipt of membership dues for LegaLine attorneys and from regular members of the Association.

An attorney may participate in the Association's LegaLine service by meeting the following requirements:

  1. An attorney must join the Association as a "Supporting Member." use for this class of membership are $500 annually;
  2. An attorney must be a member of a specific American Bar Association subcommittee;
  3. An attorney must "certify" that a substantial part of his or her practice is involved in the representation of participants in this industry;
  4. An attorney must maintain "minimum" errors and omission coverage.

Supporting Membership, and participation in the Association's LegaLine program is available to all lawyers who meet the Association's requirements.

Although the Association does not require adherence to its recommended fee guidelines, it does "encourage" participating attorneys to offer certain services at "special member rates."  These services include:

  • An Initial Consultation for which the client is not charged by the attorney.  "Subject to certain conditions and limitations," member attorneys will receive $25 per consultation, paid by the Association.  Apparently, member attorneys are required to provide these initial consultations without charging the client for them.
  • The Initial Legal Review.  This service includes a review of certain specified materials, a personal consultation, and a written report summarizing the attorney's findings and conclusions.  The recommended fee for this service is $500.
  • Discounted Hourly Rates.  Member attorneys are encouraged to give Association members a discount of at least 20% off the attorney's standard hourly rates for the services provided.

The Association's LegaLine service presently is promoted in several ways, including:

  • Display advertisements in a specific national publication with a circulation of approximately 100,000, published quarterly.
  • Direct mail advertising employing brochures produced by the Association.  The costs of this program are paid by the member attorney who wishes to use the program.
  • Descriptions of the LegaLine service that appear in the Association's solicitation material and regular member communication services (newsletters, general mailings, etc.).

LegaLine is accessed by Association members through the use of a toll free 800 telephone number.  Calls are referred to the participating LegaLine attorney nearest the caller's residence or business.


1.  Does the Association's LegaLine service comply with the requirements of ER 7.1(r)(4) pertaining to organizations that recommend, furnish or pay for legal services to their members or beneficiaries?

NOTE:  This opinion does not address any particular advertisement published by the Association or its participating lawyers, as no such advertisements were presented to the COmmittee.  By inference, however, ER 7.1(r)(4)(F) would appear to impose an obligation on participating attorneys to insure that communications designed to promote  their services comply with all pertinent Rules of the Arizona Supreme Court.

In addition, this Committee takes no position on the possible antitrust implications of the Association's fee arrangements with its members or participating attorneys.  Such an inquiry is beyond the scope of the Advertising Committee's authority.


ER 7.1(r)(4) permits a lawyer or law firm to "be recommended, employed or paid by, or...cooperate with...any bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries" subject to conditions listed in subparagraphs (A) through (G) of 7.1(r)(4).

The common meaning of "bona fide" is an absence of fraud or deceit -- something that is neither specious nor counterfeit.  It is clear that the Association, by this definition, is a "bona fide organization."  It purports to be a properly organized nonprofit trade association representing the interests of participants in a certain industry.  The organization is national in scope.  it offers a wide array of services to this members, of which the LegaLine is but one.

There is nothing in the materials reviewed by the Committee to suggest that the Association is other than a legitimate trade association.

Subparagraph (A) of ER 7.1(r)(4) requires that the organization be "so organized and operated that no profit is derived by it from the rendition of legal services by lawyers..."

While it can be argued that a non-profit organization makes no profit from any of its activities, we do not believe this is the definition of "profit" contemplated by the rule. Even non-profit groups might "profit" form the delivery of legal services.

The spirit of ER 7.1(r)(4)(A) must be intended to prohibit a division of fees for legal services among lawyers and sponsoring organizations.  The Association's revenues from supporting Memberships (paid by lawyers) may exceed its costs of operating and marketing its LegaLine program. Regardless of revenues derived that might exceed costs, the operation of a lawyer referral service like the Association's does not appear to violate the spirit of the Ethical Rule.

The Association share no fees with lawyers.  A participating attorney pays an annual fixed fee for membership in the organization.  All fees for services collected by a participating attorney are retained by the attorney.  Success, or lack of it, has no bearing on a lawyer's cost of participating in LegaLine.

ER 7.1(j) specifically permits a lawyer to "pay the reasonable cost of advertising or written or recorded communications permitted by these rules and may pay the usual charges of a lawyer referral service or other legal service organization."

ER 7.1(j) does not require that advertising media, agencies or other sponsoring organizations make no profit on transactions involving lawyers.  Implicitly, the rules assumes a profit element.  Thus, if a lawyer may pay a for-profit advertising agency sums that include profit for the agency, then surely a non-profit organization may collect revenues in excess of its actual costs of operating a lawyer referral service, as long as fees paid for legal services are not shared between participating lawyers and the sponsoring organization.

Should ER 7.1(r)(4)(A) be construed to require a lawyer who participates in a lawyer referral service to obtain and analyze detained financial records of a sponsoring organization, this would impose an unreasonable burden on lawyers and organizations that operate such plans.  Furthermore, such a requirement would greatly impair the formation of group legal services plans that can have the effect of reducing the cost of legal services to consumers and facilitating the development of professional relationships between consumers and lawyers who are best able to serve their needs.

It is unlikely that a lawyer who is not professionally committed to serving the legal needs of participants in a particular industry would maintain membership in a particular AMerican Bar Association subcommittee.  The learning curve for providing such specialized services is too long.

The highest duty of any professional should be to insure that services are provided to those who need them.  The Association's LegaLine appears to serve this important purpose.

This Committee sees nothing more in the Association's group legal services plan that would place participating attorneys at risk of violating the provisions of ER 7.1(r)(4).

The Committee does, however, direct the Association's attention to subsection (G) of the rules regarding the annual reporting requirement for its legal services plan.


For the reasons set-out above, we conclude that Arizona attorneys are not precluded by ER 7.1(r)(4) from participating in the Association's group legal services plan as described herein.

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