State Bar of Arizona Ethics Opinions

06-06: Internet; Referral Service
9/2006

An online service that matches prospective clients with potential lawyers based on the appropriate geographic and practice areas, makes representations about the qualifications of its member lawyers, and provides a monetary satisfaction guarantee, is a “lawyer referral service” within the meaning of ER 7.2(b). Unless the service is a non-profit service or is approved by an appropriate regulatory authority, Arizona attorneys may not pay a fee to participate.

FACTS[1]

The particular online attorney/client matching service at issue in this request (“the Service”) advertises itself to prospective clients as a method to “Find the Right Lawyer” for their particular legal problem. A prospective client submits a description of her legal problem to the Service, which then notifies member lawyers in the prospective client’s geographic area and the relevant area of practice that a prospective client has submitted a potential case. Member lawyers can view the prospective client’s description of her legal problem without any identifying or contact information. Any member lawyer who is interested in working with that client submits a return message through the Service providing information about his or her relevant experience and fee structure. Return messages, which are marked as “ADVERTISING MATERIAL,” are available for review by the prospective client along with profiles and customer ratings for the responding lawyers. The prospective client may then choose to contact a member lawyer. Only if the prospective client does so does the lawyer learn the prospective client’s identity or contact information.

Prospective clients are not required to pay for the Service or to select any of the lawyers whose names they receive through the Service. However, prospective clients can choose to pay for “priority” service. If they do so then a staff lawyer employed by the Service will speak with them by phone or review their case description and prepare or edit the written summary so that potential lawyers are more likely to recognize it as a “high value” case or one that is “legally compelling” and to ensure that the correct area of legal specialty is selected.

The Service provides a satisfaction guarantee to prospective clients who choose a lawyer designated by the Service as “verified.” If the prospective client has a serious dispute with the “verified” lawyer, takes the dispute to arbitration and obtains a judgment, the Service will guarantee payment of up to $1,000 of the arbitration award ($2,000 for clients who also paid for “priority” service) if the client is unable to collect. To attain “verified” status, member lawyers must submit letters of recommendation, work regularly with the Service’s marketing professionals, and use the Service with a specified frequency to contact prospective clients. In addition to being the only lawyers for whom the Service provides its satisfaction guarantee, “verified” lawyers will have their messages placed first in the list of responses made available to prospective clients, above the messages of regular member attorneys and any subsequently “verified” attorneys.

The Service specifically and repeatedly disclaims being a “referral” service, instead calling itself a “matching” service. According to the Service’s materials, it differs from a referral service in two respects: (1) it leaves the choice of lawyer up to the prospective client and (2) it provides the prospective client with information, including ratings by other clients, about the lawyers with whom the client is matched. The Service nonetheless describes the “matching” process as one that will match the prospective client with the “right” lawyer, one who is “specifically qualified” to handle the client’s case and located in the right geographic area. The Service also makes representations about the quality of the lawyers with whom prospective clients will be matched, claiming that they are pre-screened, “knowledgeable” and “competent,” and providing the satisfaction guarantee described above to clients who select “verified” lawyers.

To participate in the Service, an attorney must apply for membership and pay a fee. The Service is not generally open to all attorneys. In addition to the requirement that attorneys be licensed and in good standing in the jurisdictions in which they practice, the Service limits membership in each geographic and practice area via an “allocation model” designed to ensure the appropriate balance of prospective clients and member attorneys and to permit the Service to guarantee members that they will recoup at least the amount of their membership fee via clients obtained through the Service.

The Service is a for-profit entity. It has not been approved by any regulatory authority in Arizona.

QUESTION PRESENTED

May an Arizona attorney participate in the Service?

RELEVANT ETHICAL RULES

ER 7.2  Advertising

. . . .

(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 legal service plan or 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; and
(3)  pay for a law practice in accordance with ER 1.17.

. . . .

RELEVANT ARIZONA ETHICS OPINIONS

Ariz. Ops. 85-8, 95-13, 99-06, 02-03 (withdrawn December 2002), 05-08[2].

OPINION

The resolution of this inquiry depends on whether the Service is a “referral service” within the meaning of ER 7.2(b). If it is a referral service, then Arizona lawyers may not participate unless the Service seeks and receives the approval of an “appropriate regulatory authority.” ER 7.2(b)(1) (Arizona lawyers may pay referral service fees only if the service is non-profit or has been approved by an appropriate regulatory authority). If it is not a referral service, then participation would constitute advertising subject to the requirements of the ethical rules for advertising activities.

The Service is unquestionably a lawyer referral service. According to the comments to ER 7.2, 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.” ER 7.2, cmt 6.

The Service meets both definitions. According to the Service’s own website, it matches (or allocates) prospective clients to particular lawyers who it represents to be appropriately qualified to handle the prospective client’s case. Neither the fact that the Service provides more than one lawyer from which the prospective client may choose nor the fact that the client makes the choice after receiving information about the member lawyers change the essential nature of the transaction – a prospective client comes to the Service seeking the names of potential lawyers to handle a case, and the Service responds with the names of lawyers it has chosen from among its members as appropriate. Any recipient of information from a referral service must obtain information and choose from among the lawyers whose names are provided. It is the act of providing the name of an attorney who the provider claims would meet the client’s needs that constitutes a referral. See Ariz. Ethics Op. 95-13 at 4 (the defining characteristic of a lawyer referral service is “[t]he process of ascertaining the caller’s legal needs and then matching them to a member having the appropriate ‘area of expertise’”); see also Ariz. Ethics Op. 99-06 (website that routed inquiries to member lawyers based on the “match between the subject matter of the question and the members’ claimed expertise” was a referral service).

Moreover, despite its express rejection of the term “referral service,” the Service holds itself out to the public as providing a service through which members of the public may obtain the names of lawyers who are specifically qualified to handle their particular legal matter. That is precisely what a referral service does, and the public will understand the Service’s offerings as such.

That the Service is providing referrals, and not merely directory listings or some similar advertising venue, is even more clear when the “verified” attorneys and satisfaction guarantee are considered. The Service not only matches the client with prospective lawyers, but prioritizes certain of those lawyers in the list the client receives based on the Service’s professed evaluation of those lawyers’ qualifications and then provides a monetary guarantee that the client will not be dissatisfied and unable to collect in the event of a dispute with those lawyers. A mere directory listing does not do that.

A mere directory also does not provide users with assistance in formulating their requests to ensure that they will attract the attention of the listed professionals or to ensure that the right group of professionals is contacted, as the Service does for those prospective clients who choose “priority” service.

We recognize that there is a split of authority on this issue among state ethics authorities on this issue. The Washington State Bar Association has found, as we do, that the Service makes subjective judgments about which lawyers to connect to which prospective clients and that it therefore functions as a referral service. Wash. Ethics Op. 2106 (2006). In so doing, it relied upon the Ohio Supreme Court’s characterization of a referral service as one that “go[es] beyond the ministerial function of placing the attorney’s or law firm’s information into the public view.” Ohio Ethics Op. 2001-02 (2001).  We believe that is an accurate description of what distinguishes a referral service from mere advertising, and we agree with the Washington Bar’s conclusion that the Service is a referral service. Cf. Ariz. Ethics Op. 95-13 at 4.

The Texas State Bar Association recently issued a similar opinion, holding that an Internet service providing information about prospective lawyers was not a “referral” service unless it selects or recommends lawyers. See Tex. Ethics Op. 573 (July 2006). In this case, however, the Service holds itself out as providing access to the “right” lawyers, and provides a satisfaction guarantee for clients who select lawyers awarded “verified” status by the Service. It therefore falls within the definition of a referral service as set forth in the Texas opinion.[3] Moreover, unlike a directory or advertising listing open to most or all lawyers in an area, the Service selects the lawyers whose names it will provide to prospective clients by restricting membership to a small number of lawyers in each practice and geographic area. The Texas opinion recognized that this kind of membership selection can itself constitute a referral.  See id.

Our decision is also consistent with an opinion of the South Carolina Bar evaluating a different Internet-based service. In that opinion, the South Carolina Ethics Advisory Committee considered a proposed Internet site that would permit attorneys to place advertisements for their services and to pay either by the number of “hits” (the number of times a user accessed the advertisement) or on a set monthly or yearly fee. South Carolina Ethics Advisory Op. 01-03 (2001). The Committee found that payment by the number of “hits” was ethically permissible because it represented an appropriate calculation of the value of the advertisement, akin to a newspaper pricing advertisements according to the estimated circulation or readership of the publication. Id. The Committee specifically distinguished that website advertisement, which was permissible, from a service that either (1) actively directed users to or recommended a particular attorney or (2) restricted the number of potential attorneys in a subject area that could purchase advertisements. Id. Either of those types of programs, the Committee opined, would be a referral service and not a mere advertisement. Id. The Service at issue here does both: it directs consumers to specific attorneys that it recommends (and some whose services it guarantees) and it restricts membership to a specific number of lawyers in each practice and geographic area. Therefore, under the logic of the South Carolina opinion, as under our analysis above, it is a referral service. Cf. Ariz. Ethics Op. 85-8 (payment to service routing prospective clients through 800 number to lawyer who purchased exclusive rights to a particular zip code was a payment for referring lawyer’s service).

We must respectfully disagree with the opinions of ethics authorities in two other states. Both North Carolina and Rhode Island have considered whether the Service is a “referral service” in which their attorneys may participate, and have concluded that it is not.

The North Carolina State Bar reasoned that the Service was not “strictly” a referral service because a user of the Service’s website “must evaluate the information and offers he receives from potentially suitable lawyers and decide for himself which lawyer to contact.” North Carolina Formal Ethics Op. 1 (2004). As discussed above, the fact that the prospective client may choose from multiple lawyers is common among referral services, and it is to be expected that a prospective client will obtain information about the referred lawyers before hiring one. We therefore disagree with the North Carolina State Bar’s conclusion that the Service is not a referral service.

The Rhode Island State Bar’s opinion, which specifically addresses the Service at issue in this request, is based on information about how the Service operates that differs materially from the information currently available on the Service’s website, on which our opinion is based. The Rhode Island opinion found that payment to participate in the Service was not a payment “for recommending a lawyer’s services” within the meaning of ER 7.2 because it believed that the Service did not “recommend, refer, or electronically direct consumers, i.e. potential clients, to a specific attorney” and that “all requests for legal services by consumers are accessible to every attorney who registers to receive them.” Rhode Island Supreme Court Ethics Advisory Panel Op. No. 2005-01 (2005). Neither of these statements accurately describes the Service in its current form, according to the Service’s own website.[4] The Service expressly recommends member attorneys as “knowledgeable,” “competent,” and “pre-screened.” It prioritizes the responses of its “verified” attorneys and provides a monetary satisfaction guarantee to clients who select those attorneys. And it repeatedly states that its purpose is to match prospective clients with the “right” lawyer. The Service recommends, refers, and electronically directs potential clients to specific member attorneys. Moreover, requests for legal services are not accessible to all attorneys who register. Registration as a member is limited by practice and geographic area and “verified” attorneys receive priority in responding to prospective clients, as well as the advantage of having their services backed by a monetary satisfaction guarantee. Because the facts available to us differ substantially from those relied upon by the Rhode Island State Bar, we disagree with its conclusion that the Service does not provide referrals.

In rendering this opinion, we do not make any comment on the merit of the idea of legal matching services or the possibility that they may provide useful information to prospective clients seeking legal representation. We recognize that the Service has actually been adopted by another jurisdiction as a substitute for its traditional bar association referral service, and that the Federal Trade Commission has opined that the Service may provide valuable information to prospective clients. However, the relevant ethical rules simply do not permit participation in a for-profit entity that, like the Service, provides referrals of lawyers to prospective clients, unless that entity has obtained the approval of an appropriate regulatory authority. Because the Service has not done so, Arizona attorneys may not participate.

Because we find that the Service is a lawyer referral service, and that participation is not permitted unless and until it receives the approval of an appropriate regulatory authority, we do not reach any other questions about the propriety of participating in the Service. We do, however, note that if the Service were to be approved by an appropriate authority, lawyers participating in the Service would be responsible for following the mandates of ERs 7.1, 7.2, 7.3, and 7.4 regarding advertising materials and communications with prospective clients when communicating via the Service.

CONCLUSION

An Arizona lawyer cannot participate in the Service because it is a for-profit lawyer referral service within the meaning of ER 7.2(b) and it has not been approved by an appropriate regulatory authority.

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 2006

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[1]These facts are compiled from information submitted by the Inquiring Attorney as well as from the website of the Service about which the inquiry was made.

[2]To the extent Ariz. Ethics Op. 05-08 is inconsistent with the analysis in this opinion, that opinion is no longer effective. We do not, however, withdraw that opinion, but instead issue this superceding opinion.

[3]The Texas rule also differs from our rule. It lacks the definition of referral service, found in the comments to ER 7.2, indicating that a service that “allocates ... requests to a particular lawyer or lawyers” is a referral service. As explained above, the Service meets Arizona’s definition of referral service.

[4]We have no way of knowing the source of the Rhode Island Ethics Advisory Panel’s information or whether it was accurate at the time the opinion was rendered, and we intend no disrespect to our Rhode Island colleagues.