State Bar of Arizona Ethics Opinions

98-10: Referrals
12/1998

A lawyer may receive referrals from a nonprofit organization to whom the lawyer has made a charitable donation as long as the referrals are incidental to the charitable activity and not consideration for the lawyer's charitable donations. [ER 7.1(j), 7.1(r)(3)]

FACTS[1]

 

The inquiring attorney asks whether it is unethical for a lawyer to make charitable contributions to a nonprofit organization and after having made such contributions, accept referrals from the same organization.  The inquiring attorney further states that the referrals would be as a result of the charity's activities.

 

The inquiring attorney is concerned about ER 7.1(j), Ariz. R.S.Ct. 42, which states:

 

A lawyer shall not give anything of value to a person for

recommending the lawyer's services, except that a lawyer

may pay the reasonable cost of advertising or written or

recorded communication permitted by these rules . . . .

 

It is assumed for the purposes of this opinion that the charitable organization in question is not a recognized lawyer referral service, but rather it is an organization such as a religious charity, an organization for the assistance of indigent persons, or an organization for the assistance of battered or abused persons, etc.

 

One of the most likely factual settings where such a question may arise could be where a lawyer donates to an organization designed to help those who are indigent and/or of low income and then receives a referral that would allow the lawyer to receive compensation, such as for handling personal injury claims on a contingent fee basis.

 

Question Presented

 

Whether a lawyer ethically may receive referrals from a nonprofit organization to whom the lawyer has made charitable donations?

 

Relevant Ethical Rules

 

ER 7.1             Communications and Advertising Concerning a Lawyer's Services

 

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(j)  A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may 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.

 

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(r)  A lawyer or his partner or associate or any other lawyer affiliated with him or his firm may be recommended, employed or paid by, or may cooperate with, one of the following offices or organizations that promote the use of his services or those of his partner or associate or any other lawyer affiliated with him or his firm if there is no interference with the exercise of independent professional judgment in behalf of his client:

 

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(3)  a lawyer referral service operated, sponsored, or approved by a bar association.  A lawyer shall not accept referrals from a lawyer referral service unless the service:

 

(A)  engages in no communication with the public and in no direct contact with prospective clients in a manner that would violate the rules of professional conduct if the communication or contact were made by the lawyer;

 

(B)  receives no fee or charge that constitutes a division or sharing of fees:

 

(C)  refers clients only to lawyers lawfully permitted to practice law in Arizona when the services to be rendered constitute the practice of law in Arizona;

 

(D)  furnishes the state bar on a quarterly basis with the names of all lawyers participating in the service; and

 

(E)  neither represents nor implies to the public that this service is operated, endorsed, sponsored or approved by the state bar, unless the services is operated, endorsed, sponsored or expressly approved by the state bar.

 

Opinion

 

This issue has been addressed several times by the Committee in formal opinions.  In Formal Opinion No. 91-06, issued March 5, 1991, the Committee discussed former

ER 7.2 (now ER 7.1) in the context of advertising and stated:

 

The inquiring attorney is concerned primarily with the

question as to whether his providing the checklist and

wallet as parts of his advertising mailing constitutes

"giv[ing] anything of value to a person for recommending

the lawyer's services . . .," prohibited to Arizona attorneys

by ER 7.2(c).  [now ER 7.1(j)] Op. 91-06 at 1.

 

* * * * *

 

ER 7.2(c) is intended to prohibit payments to "touts,"

"shills," "runners," and others who receive compensation

for the actual "recommendation" itself.  See 2 Hazard &

Hodes, The Law of Lawyering (2d ed. 1990), § 7.2:401,

at 871.  It is, by its terms, not intended to prohibit payments

by an attorney of the reasonable costs of advertising or

written communication permitted by the rule which is sent

to one who, if the advertising is successful, will become the

attorney's client.  The proposed advertising here is not being

sent to specific individuals with the intent that they will

"tout" the attorney to others.  Op. 91-06 at 3.

 

In Formal Opinion No. 92-05, issued March 26, 1992, the Committee discussed

former ER 7.2(c) related to a lawyer giving anything of value to a person for recommending the lawyer's services in the context of being listed in a union's "preferred provider guide" and said:

 

The union's proposal contemplates visits to the union office

by attorneys listed in the Guide.  The purpose of the visits

will not be to solicit professional employment from prospec-

tive clients known to need legal services.  Rather, the visits

are intended to educate union members regarding their various

legal rights.  The attorneys' in-person visits to the union office

are not prohibited by ER 7.3(a).  Op. 92-5 at 5.

 

Based upon the facts submitted, the committee is of the opinion

that it will be permissible, under the Arizona Rules of Professional

Conduct, for an attorney to be listed in the Guide and to visit the

union office to give seminars to union members about their legal

rights.  Op. 92-5 at 6.

 

In Formal Opinion No. 94-14, the facts were that the inquiring attorney wanted to advertise on television that the law firm would donate ten percent of its legal fees to a charitable organization of the client's choice if retained.  The Committee relied on a Pennsylvania opinion in which the Philadelphia Bar Association determined that it was acceptable for an attorney to advertise that the lawyer would prepare a living will for "free" provided that the client made a donation to a charitable organization.

 

Formal Opinion 94-14 concluded:

 

The ultimate concern in any situation where a nonlawyer is

involved is that the lawyer's independent professional judgment

cannot be affected by the nonlawyer.  Once a charity is designated

by a client to receive a donation, the lawyer should assure that

both the client and the charity understand that the attorney has

loyalties only to the client and will only consider what is in the

best interests of the client; the charity cannot and will not play

any role in determining what occurs in the attorney-client

relationship.  Op. 94-14 at 6, 7.

 

Conclusion

 

It appears from the cited opinions that as long as donations to the charitable organization are casual in nature, i.e., unrelated to and not conditioned on the receipt of referrals, they would be permissible under the rules of ethics.  Presumably the charity will not function as a lawyer referral service in violation of ER 7.1(r)(3).  If, however, the purpose of a donation is to secure referrals and is aimed at persons known to need legal services, such conduct may violate ER 7.3.  The facts provided state in part that the charitable contribution to the nonprofit organization "would be as a result of the charities' activities." 

It is unclear whether or not this means that the specific goal of participating in the charity is to receive referrals.  Even if this were the case, it seems permissible so long as the referrals are incidental to the charitable activity and not consideration for the lawyer's charitable donations.



[1] Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.  © State Bar of Arizona 1998