The Illinois Attorney Registration and Disciplinary Commission this week published for comment its report that recommends loosening rules on attorneys’ participation in for-profit referral services such as Avvo Legal Services.
Loosening of the rules would help Illinois address the unmet legal needs of poor and moderate-income individuals in the state, the study says.
“Prohibiting lawyers from participating in or sharing fees with for-profit services that refer clients to or match clients with participating lawyers is not a viable approach, because the prohibition would perpetuate the lack of access to the legal marketplace,” the study says.
The report is critical of the legal profession for resisting change that could enhance access to justice and help close the justice gap. “The legal profession’s resistance to change impacts potential clients’ access to the legal market and lawyers’ access to new and innovative ways to reach clients,” it says.
The ARDC proposes a framework that would regulate both lawyers who participate in for-profit referral services and the services themselves. The framework has two primary components:
- Amend the Illinois Rules of Professional Conduct to allow lawyers to participate in qualified lawyer-client matching services and to pay the service “a fee calculated as a percentage of legal fees earned by the lawyer to whom the service has referred or matched a matter.” Note that while services such as Avvo typically characterize the fee paid by the lawyer as a marketing fee, this proposal would explicitly allow a percentage of the legal fee.
- Create a new rule providing for the qualification and registration of lawyer-client matching services. Services would register with and be regulated by the ARDC and would have to meet certain standards, including that it will not interfere with an attorney’s independent professional judgment or require the attorney to violate the professional conduct rules.
The report is notable for going against the tide on this issue. The report says that only one state, California, explicitly allows lawyers to pay a referral fee to a for-profit referral service, and that three other states – Florida, Georgia and Tennessee – “seem to permit” for-profit services.
In recent years, several states have issued ethics opinions concluding that lawyers who participate in Avvo Legal Services or similar services violate professional conduct rules. States that have issued such rulings include New York, Ohio, Pennsylvania, South Carolina, New Jersey, Utah, Virginia (proposed opinion) and Indiana.
The ARDC report suggests that there is some hypocrisy in these opinions, in that the majority of states permit lawyers to participate in non-profit referral services and pay referral fees to those services. Many of those non-profit services are run by the same bar associations that have opined against for-profit services.
“Despite the fact that some bar associations have adopted flat-fee referral service approaches similar to Avvo Legal Services, many states either have prohibited their lawyers from participating in for-profit services like Avvo Legal Services, or have not proposed any modifications to their rules,” the report says.
The rationale for this discrepancy, the report says, “is the purported concern that a for-profit company will affect a lawyer’s independence and will control the lawyer-client relationship.”
The report recommends addressing this concern by directly regulating the referral service. This approach, it says, “would better protect clients, cultivate attorney-client transactions, and maintain the integrity of the legal profession.”
The detailed, 124-page report, written by ARDC Administrator Jerome Larkin, includes a detailed exploration of other states’ approaches to this issue, as well as a discussion of potential constitutional and antitrust issues.
“The ARDC recognizes that the decision whether to allow client lawyer matching services requires examination of competing core values of the profession,” Larkin says in the statement. “The obstacles consumers encounter in seeking lawyers to solve challenging legal problems and the under-employment of lawyers are among the circumstances warranting our attention and discussion.”