State Bar of Arizona Ethics Opinions
94-04: Advertising; Lawyer Referral Program
A lawyer referral program that derives profits from subscription fees paid to it by organizations such as employers and unions is in compliance with the Ethical Rules where participating attorneys would pay a one-time fee for listing in a directory.
An attorney desires to join an organization to be established as a for-profit attorney referral service, referred to herein as "the Program." Attorneys participating in the Program would pay a one-time fee to be listed in a directory to be distributed to subscribing organizations and their members such as employers and unions. The Program would derive its profits from subscription fees paid by such organizations. Members call an "800" number and are referred to specific attorneys in their geographic area. The organization members would receive discounted legal services directly from the attorney of their choice, and the Program would not receive any portion of the fee paid by clients for the rendition of legal services. The profits earned by the Program are derived directly from the subscribers.
Will the operation of the Program violate any of the Rules of Professional Conduct?
ETHICAL RULES INVOLVED
ER 1.6. Confidentiality of Information
(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraphs (b), (c) and (d) or ER 3.3(a)(2).
(b) A lawyer shall reveal such information to the extent the lawyer reasonably believes necessary to prevent the client from committing a criminal act that the lawyer believes is likely to result in death or substantial bodily harm.
(c) A lawyer may reveal the intention of his client to commit a crime and the information necessary to prevent the crime.
(d) A lawyer may reveal such inf6rmation to the extent the lawyer reasonably believes necessary to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceedings concerning the lawyer's representation of the client.
ER 7. 1. Communications and Advertising concerning a Lawyer's Services
(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:
(4) any bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries, provided the following conditions are satisfied:
(A) such organization, including any affiliate, is so organized and operated that no profit is derived by it from the rendition of legal services by lawyers, and that, if the organization is organized for profit, the legal services are not rendered by lawyers employed, directed, supervised or selected by it, except in connection with matters where such organization bears ultimate liability of its members or beneficiary;
(B) neither the lawyer, nor his partner or associate, nor any other lawyer affiliated with him or his firm, nor any non-lawyer, shall have initiated or promoted such organization for the primary purpose of providing financial or other benefit to such lawyer, partner, associate or affiliated lawyer;
(C) such organization is not operated for the purpose of procuring legal work or financial benefit for any lawyer as a private practitioner outside of the legal services program of the organization;
(D) the member or beneficiary to whom the legal services are furnished, and not such organization, is recognized as the client of the lawyer in the matter;
(E) any member or beneficiary who is entitled to have legal services furnished or paid for by the organization may, if such member or beneficiary so desires, select counsel other than that furnished, selected or approved by the organization for the particular matter involved; and the legal service plan of such organization provides appropriate relief for any member or beneficiary who asserts a claim that representation by counsel furnished, selected or approved would be unethical, improper or inadequate under the circumstances of the matter involved and the plan provides an appropriate procedure for seeking such relief;
(F) the lawyer does not know or have cause to know that such organization is in violation of applicable laws, rules of court and other legal requirements that govern its legal service operations; and
(G) such organization has filed with the appropriate disciplinary authority at least annually a report with respect to its legal service plan, if any, showing its terms, schedule of benefits, subscription charges, agreements with counsel, and financial results of its legal service activities, or if it has failed to do so, the lawyer does not know or have cause to know of such failure.
According to ER 7.1(r), an attorney may not accept referrals from an organization unless it complies with one of the many enumerated exceptions set forth in the rule. Generally speaking, a lawyer referral service must be operated, sponsored or approved by a bar association, or otherwise must comply with the numerous requirements of ER 7.1(r) (4). Since the Program is apparently not sponsored, approved, or operated by a bar association, ER 7.1(r) (4) sets forth the requirements that must be met if an attorney wishes to participate with this particular organization.
The facts submitted presume that many of these requirements, specifically ER 7.1(r) (4) (B), (C), (D), (E), (F) and (G), have been met.
1. Profit Derived from Legal Services
ER 7.1 (r) (4) (A) provides that the organization may not derive any profit from "the rendition of legal services by lawyers." This requirement goes beyond the general requirement of ER 5.4(a) that a lawyer may not share legal fees with a nonlawyer. In our Opinion No. 81-34 ( December 9, 1981 ), the committee determined that a financial services organization that wished to contract with an attorney to provide legal services at a discounted rate to its clients violated DR 2-103(D)(4 ), the (94-04) 3predecessor rule to ER 7.1(r)(4 ). We reasoned that the purpose of the proposed arrangement was that of attracting additional clients to the· financial services organization by offering legal services at a discounted rate, hence profit was derived by the organization from the rendition of legal services by the participating lawyer. Here, it is clear that the Program is organized in such a way that its profit is not derived from the rendition of legal services by the participating lawyers. Instead, its profit is derived from fees paid by subscribers who contract with the Program to provide them with an assortment of financial and other services. To the extent that our Opinion No. 81-34 conflicts with this provision, or suggests that the organization must be a not-for-profit organization, it is overruled.
2. Selection of Attorneys
ER 7.1(r) (4) (A) states that, if an organization is a for-profit entity, none of the legal services rendered may be provided by attorneys “employed, directed, supervised or selected by it, except in connection with matters where such organization bears ultimate liability of its members or beneficiary." Since the program merely makes available a list of attorneys within the member's geographical area, the Program's service never amounts to the employment, direction, supervision or selection of attorneys. Members who participate and receive a referral to an attorney remain free to engage the program attorney or to choose an attorney outside of the Program. Thus, the Program's services fall within the exception described in ER 7.1 (r) (4) (A), in that the Program does not employ, direct, supervise or select the attorneys referred to the Program members.
3. Disclosure of Confidential Information
Pursuant to ER 1.6(a), an attorney must maintain the confidentiality of all information "relating to representation of a client," unless the client consents after consultation, or one of the other narrow exceptions set forth in the rule applies. This committee held in its Opinion No. 81-4 (February 23, 1981) that a lawyer referral service could not require a participating attorney to disclose information protected by this rule. Therefore, the Program must ensure that any statement of the nature of the matters handled for each member provided to the organization does not contain any information protected by ER 1.6, unless the client has consented to such disclosure after consultation.
This committee has construed ER 1.6 very broadly to include all information about a client or a client's case gained during the course of representation. See our Opinion No. 91-02 (January 15, 1991). Another useful opinion in this area is our opinion No. 92-04 (March 26, 1992), where we determined that ER 1.6 prohibits an attorney from disclosing a law firm’s list of accounts receivable to a financial institution, identifying the names of the clients, the amount owing on each client's account, and the age of an account, without the client's express consent. Therefore, such basic information as the client's name and the account (94-04) 4balance is deemed confidential. To the extent that the Program requests that an attorney disclose information protected by ER 1.6, the attorney may only disclose such information when he or she has obtained the consent of the client.
4. Appropriate Relief
The ability of providers of legal services to refuse representation to the extent that the provider is not competent to undertake the representation, or to the extent that representation would be prohibited by the provider's existing work load, raises the question of whether there is "appropriate relief" under ER 7.1 (r) (4) (E) afforded to a member who is unable to obtain an attorney through the legal services plan when the attorney refuses representation. In our opinion No. 85-3 (January 30, 1985), we discussed this issue, and denied ethical approval to the plan of an organization which, in the committee's opinion, did not provide appropriate relief to the organization's members:
. . . should there be a conflict, the only recourse such subscriber would have would be that he would "not be covered by the plan" for that particular dispute. So it, in effect, is on a "first come, first served" basis and does not give the second subscriber any protection at all, which would contravene DR 2-103(D) (4) (e). (See now ER 7.1(r) (4) (E).)
There are not enough facts submitted here to enable us to determine whether this arrangement violates ER 7.1(r) (4) (E). However, our Opinion No. 85-3 mandated that, if one attorney declines a case, for whatever reason, the organization's member must have access to another attorney participating in the organization. As stated above, that attorney may not be "selected" by the organization.
In conclusion, we hold that the Program, as described, appears to comply with the Rules of Professional Conduct. ER 7.1 (r) (4) permits organizations such as the Program despite its for-profit nature. Since the attorneys who participate in the Program are not selected by the Program, but are selected by members, the Program falls within the class of for-profit organizations allowed by the rule. Presuming that the Program makes effective steps to address the availability of legal counsel and to limit the improper disclosure of attorney-client privileged information, the Program appears to meet the requirements of ER 7.1(r)(4 ). ER 7.1(r) (4) (E) requires that the Program afford appropriate relief to a member by way of making available legal counsel when the member's initial choice of a lawyer affiliated with the Program proves not to be able or willing to accept the client. Finally, ER 1.6 would limit a lawyer's communication of attorney-client privileged information to the Program absent the client's consent.
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 1994