A lawyer may not pay to participate in the for-profit client/attorney internet matching service described in this opinion (referred to hereinafter as “the Service”) because the Service substantially functions as, and holds itself out as, a referral service and because the information presented by the Service on behalf of participating lawyers is materially misleading.
Participating lawyers pay fees to the Service. Potential clients need not. A lawyer pays a one-time application fee of $500 and an annual fee of about $4000. The application fee covers the expenses of verifying credentials and set-up expenses. The Service explains that the annual fee is fixed in amount and is deemed earned upon receipt. A participating lawyer must be licensed and in good standing with the State Bar, carry malpractice insurance, and comply with the Service’s membership agreement.
The Service advertises for prospective clients on the internet. The home page of the Service web site states that a prospective client will provide information just as he or she would during an initial consultation with an attorney and that this information will be sent to lawyers in the specific practice areas and geographic locations selected by the prospective client. The prospective client is also told that the participating lawyers are licensed and in good-standing with their state bars. They are not told that lawyers pay a substantial sum of money to participate.
A prospective client registers on the Service’s web site and is given an identification number that allows the client to initially maintain anonymity. The client submits an explanation of the legal problem and, without being identified, assents to being contacted by participating lawyers. The Service notifies participating lawyers when an inquiry has been made that matches their practice areas and geographic locations. A lawyer who then is interested in representing a particular client contacts that client through the Service’s web site with a message that sets forth the lawyer’s interest, qualifications, and related information. Direct real-time communication between the prospective client and the lawyer does not occur unless initiated by the client. When a prospective client requests a lawyer’s contact information, however, that client’s name and zip code are revealed to that lawyer.
Nothing on the Service’s website, or in the lawyer’s communication to the prospective client suggests that the communication is a form of advertising.
The inquiring attorney asks whether the attorney can ethically enter into a business relationship with the Service. This Opinion more specifically addresses:
1. Does the Service’s fee arrangement violate the prohibition against lawyers making payment to a for-profit referral service?
2. Does participation in the Service violate the lawyer’s restrictions on advertising?
RELEVANT ETHICAL RULES
ER 7.1 Communications Concerning a Lawyer’s Services
A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.
ER 7.2 Advertising
(a) Subject to the requirements of ERs 7.1 and 7.3, a lawyer may advertise services through ... electronic communication.
(b) A lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may:
(1) pay the reasonable costs of advertisements or communications permitted by this Rule;
(2) pay the usual charges of ... a not-for-profit or qualified lawyer referral service. A qualified lawyer referral service is a lawyer referral service that has been approved by an appropriate regulatory authority;
(c) Any communication made pursuant to this Rule shall include the name and office address of at least one lawyer or law firm responsible for its content.
ER 7.3 Direct Contact with Prospective Clients
(a) A lawyer shall not by ... real-time electronic contact solicit professional employment from a prospective client when a motive for the lawyer’s doing so is the lawyer’s pecuniary gain ....
RELEVANT ARIZONA ETHICS OPINIONS
Ariz. Ops. 85-8, 90-09, 94-04, 97-04, 99-06, 02-08.
1. The Service entails improper payment to a for-profit referral service.
There is a “fundamental problem” if an attorney pays a for-profit entity for a referral. Ariz. Op. 85-8. The Service is clearly for-profit. The question, therefore, is whether the Service is paid by the attorney for “recommending the lawyer’s services.” ER 7.2(b)(2). We find that it is and, therefore, we do not approve a lawyer participating in the Service.
In so doing, we apply a broader scope to the prohibition against payment for referrals than is suggested in Nebraska Op. 95-5, which proscribes payment to a for-profit referral service because the service only provided the name and contact information of the lawyer. This implies that payment might be proper if the referral service provides more information about the lawyer. We disagree. ER 7.2 makes an unqualified proscription against payment to a for-profit referral service. For this purpose, a referral service is
“any organization in which a person or entity receives requests for lawyer services, and allocates such requests to a particular lawyer or lawyers or that holds itself out to the public as a lawyer referral service. Such referral services are understood by laypersons to be consumer-oriented organizations that provide unbiased referrals to lawyers with appropriate experience in the subject matter of the representation and afford other client protections, such as complaint procedures or malpractice insurance requirements.”
ER 7.2 cmt. . We disapprove payment to any entity that fits this definition.
In Ariz. Op. 94-04, this Committee approved payment to a for-profit program that shared some of the characteristics of the Service. That program charged a one-time fee to participating lawyers and referred inquiring potential clients to a participating lawyer or lawyers in their geographic area. That program differed from the Service in that a subscription fee was paid by participating organizations, such as unions, that entitled their members to use the program, the program derived its profits from these subscription fees, and lawyers discounted their fees to members. The reason that we approved this program, however, is no longer valid. In so doing, we applied former ER 7.1, which unlike the present version of ER 7.2 did not proscribe payment to a for-profit referral service unless the service is approved by an “appropriate regulatory authority.” See ER 7.2(b)(2), ER 7.1(r)(4) (1994). The determinative inquiry under the present version of the Ethical Rules is whether the for-profit entity is a referral service.
The change in the current version of the Ethical Rules is also demonstrated by Ariz. Op. 99-06, which also applied the former version of ER 7.1. In that opinion we addressed payment to an internet-based, for-profit referral service and looked at the nature of the payment. We found that payment to be unethical because the lawyer paid a fee for each referral and paid a percentage of the revenue that was ultimately generated from the referral. Applying the present version of ER 7.2(b)(2), we now no longer look at the nature of the payment. If the entity is a for-profit referral service (and not approved by the bar), payment in any form is proscribed.
Applying comment  of ER 7.2, we hold that participation in the Service violates the Ethical Rules if the Service either functions as a referral service or if it merely holds itself out as a referral service. We find that the Service functions as a referral service because it “receives requests for lawyer services and allocates such requests to a particular lawyers or lawyers.” ER 7.2 cmt. . Comment  tells us to regard linking a prospective client to a particular lawyer or lawyers as a referral. That is what occurs when the Service presents a potential client’s inquiry to its lawyers. It simply does not matter, for the purpose of applying ER 7.2, if a lawyer’s payment is not linked to each referral or if the potential client is provided with detailed information about the lawyer.
We also find that the Service holds itself out to the public as a referral service. Comment  explains that an organization holds itself out as a referral service if it suggests that it is “unbiased” such as by stating that it provides “protections” to participating clients such as “complaint procedures” and “malpractice insurance.” On its home page, the Service tells the public that it matches them “with the right lawyers” and that its lawyers are “prescreened.” In other materials, the Service tells the public that its lawyers carry malpractice insurance and that it offers dispute resolution procedures. All this strongly implies that the Service’s selection of its lawyers is unbiased.
Because the Service both functions and holds itself out as a referral service, we conclude that an attorney who makes payments to the Service violates ER 7.2. In so doing, we disagree with North Carolina Op. 2004-1. That opinion holds that online case matching as occurs in the Service “is not strictly a referral service” because it provides the client with the kind of information and options provided by a lawyer directory along with what could be seen as a referral. Id. Op. 2004-1 concludes that a lawyer’s payment for this sort of case matching carries little appearance of impropriety because the prospective client is given substantial information to consider before deciding whether to make an initial contact with the lawyer. Id. We disagree. Although the Service provides the sort of information found in a lawyer directory, this does not cure the fact that the Service both functions and holds itself out as a referral service. Substantial appearance of impropriety remains because the Service suggests that it is unbiased and client oriented when, in fact, it is profit motivated and a lawyers’ primary qualification to participate is a willingness to pay a substantial fee.
2. Participation in the Service would be improper advertising by a lawyer.
Insofar as it is advertising a lawyer or a lawyer’s services, the Service must comport with ERs 7.1 to 7.4. We address two aspects of these rules and find that participation in the Service, as it currently is operated, necessarily violates ER 7.1 but comports with ER 7.3.
a. Violation of ER 7.1.
ER 7.1 provides that advertising “shall not make a false or misleading communication about the lawyer or the lawyer’s services.” A communication violates this rule if it “omits a fact necessary to make the statement considered as a whole not materially misleading.” Id. This applies to communications generated by an intermediate entity, Ariz. Op. 90-09, or posted on the internet, Ariz. Op. 97-04. In so far as the information displayed on the Service web site violates ER 7.1, a lawyer participating in the Service is violating ER 7.1.
The home page of the Service’s web site violates ER 7.1 because it fails to disclose that lawyers pay a substantial fee to participate in the Service. Because the Service claims that prospective clients are matched to the “right” lawyers, omission of this fact --- that payment of a substantial fee is a necessary and largely sufficient qualification to be a “right” lawyer --- is material and misleading. Nor does the website disclose that lawyers who participate are engaged in a form of advertising, akin to a directory listing. We conclude, therefore, that an attorney who participates in the Service violates ER 7.1.
b. Compliance with ER 7.3.
ER 7.3 provides, with exceptions not relevant here, that “[a] lawyer shall not by in-person, live telephone or real-time electronic contact solicit professional employment from a prospective client.” This proscription applies to internet communication. See Ariz. Op. 97-04 (recognizing that ER 7.3(b) regulates attorney-initiated communication, via chat room or e-mail, with someone known to that attorney to be in need of particular legal services). Attorneys participating in the Service do not initiate communication with prospective clients. Neither telephone nor e-mail contact occurs unless initiated by the potential client. The Service, therefore, is analogous to the arrangement addressed in Ariz. Op. 02-08 (approving sponsoring a booth at a business exposition as long as the attorney does not initiate contact with potential clients). Consequently, participation in the Service does not violate ER 7.3.
Based upon the information provided by the inquiring attorney and available on the Service’s web site home page, it appears that a lawyer cannot participate in the Service without violating the Ethical Rules against payment for referrals and misleading advertising.