Avvo's New Legal Services Program Deserves Answers to Ethical Questions

The form and substance of Avvo’s new program should cause the profession to pause and answer some fundamental ethical questions as we move into our future.

The ABA Journal reported last week that Avvo is about to implement its new fixed-fee, legal services arrangement called the Legal Services Program.

Avvo will establish the list of services and prices to be charged for the legal services provided. Clients accessing the service will choose a lawyer from a list of local lawyers and pay Avvo the full amount of the fee in advance. After the service is completed, Avvo pays the lawyer.

And, in a separate later transaction, the attorney pays Avvo a fixed marketing fee for each service purchased, determined by reference to the value of the service provided. As the Journal puts it, “This is done as a separate transaction to avoid fee-splitting, according to Avvo. Attorneys pay nothing to participate except for the per-case marketing fee.”

The Legal Services Program may well be a harbinger for the legal profession. It also raises ethical questions for attorneys who participate and those questions should be answered clearly and definitively at the outset for the benefit of attorneys, clients and Avvo.

At the outset, let me say that I do not believe anyone at Avvo to be unethical. Legal ethical rules apply only to attorneys. Non-attorneys have every right to explore, probe and expand the commercial marketplace in which legal services are performed. And, if attorneys seek to self-regulate, it is up to attorneys to act when new ideas raise questions about our ethical rules. My purpose here is not to impugn Avvo or throw water on the Legal Services Program but, rather, to raise questions about our rules that the profession should answer for itself and for Avvo.

Our ethical rules appear generally in our Model Rules of Professional Conduct, adopted with variations in 49 states. Rule 5.4 deals generally with the professional independence of lawyers. Rule 5.4(a) generally prohibits the sharing of fees. Rule 5.4(b) prohibits forming partnerships with non-lawyers if “…any of the activities of the partnership involve the practice of law.” Rule 5.4(c) prohibits lawyers from allowing a referral source “…to direct or regulate the lawyer's professional judgment in rendering such legal services.”

Based on the analysis below, participating attorneys have to answer the question of whether they can participate without violating these three rules.

At the outset, potential participants in the Legal Services Program might be concerned generally about forming a partnership with Avvo prohibited by Rule 5.4(b).

At its core, a partnership exists where the partners benefit jointly from a shared economic activity. In this case, Avvo provides fee research, marketing and collection services directly related to the practice of law and benefits from its incremental success in doing so. One would assume that Avvo’s success in making a sale would be tied to the underlying reputation of the listed attorneys. When the lawyer performs well, Avvo benefits. When Avvo advertises and analyzes the market well, the lawyer benefits. Some might see a partnership, albeit not in a legal form, here.

The provisions of Rules 5.4(a) and (c) come into question because of particular aspects of program structure.

The “marketing fee” arrangement appears to a two-step, fee sharing arrangement which may be prohibited by Rule 5.4(a). In this instance, Avvo actually collects the fee and later accepts a payment from an attorney in a fixed amount related to the same underlying transaction so there is little question of the tracing of funds. Common sense governs here. If I give someone an entire peanut butter pie with the understanding that they will hand me ¼ of the pie in ten minutes, I know that I have shared that pie with them. More importantly, when they later give me my piece of pie, they certainly have shared that pie with me.

In an FAQ for attorneys, Avvo points out its view that that the only prohibited fee-splitting arrangements are those that threaten the "...professional independence of judgment..." of an attorney. No specific authority or opinion for this exception is cited.

Instead, Avvo explains in the FAQ that lawyers should be comfortable with the fee-splitting issues by comparing the Legal Services Program to the "...technical fee splitting..." that takes place when a credit card company collect fees for attorneys. Credit card companies, the argument goes, are fee-splitting arrangements that do not impair the judgment of the attorney.

But credit card companies do not set the fees or the conditions of service for the legal services for which they collect. Nor do they market the services of attorneys for whom they collect. These features are hallmarks of the Legal Services Program.

Avvo will be setting response and turnaround times. The Avvo Terms of Use provide, “…it is critical to continued participation in the program that you meet or exceed all turnaround and response time expectations.”

Avvo will likely have no choice but to intervene in many client-attorney relationships because they are receiving the payment from the client. According to the FAQ, “Will I get paid if the client demands a refund? If you do not deliver the agreed upon service, you will not be paid for the service.” Who determines whether the service has been provided? Neither the client nor the lawyer can resolve this dispute between them: that leaves Avvo alone to step into the core of the client-attorney relationship. Avvo knows this may happen as it will remit payments to attorneys net of client refunds.

Avvo's Terms of Service further provide “In addition to program guidelines, there may be additional terms applicable to categories of service or a specific services. We will let you know what those terms are when you sign up to offer a particular service, and you must agree to those terms before you can participate in such offers.” And, in the end, “Avvo is the sole arbiter of the application of its guidelines.”

Taken as a whole, the fee payment, collection and program administration provisions may well place Avvo squarely in the middle of the client-attorney relationship; the program rules, such as they exist today, create a question of whether Avvo will, or can, become a “…referral source…” that potentially directs or regulates a “…lawyer’s professional judgment…” as described in Rule 5.4(c).

Another fundamental issue may lie in the provisions of Rule 7.2 which generally proscribe the payment of anything of value for a referral of a client except for qualified legal services plans.

Avvo’s analysis of the ethical issues is, of course, handicapped by a lack of specific guidance. Certainty on these issues would be helped by citations to specific rules or advisory opinions confirming the ethical validity of its approach. These would provide practitioners with ethical comfort. These opinions are often available from legal regulators and would be invaluable here for the sake of all parties. Unfortunately, and not unpredictably because the arrangement is brand new, Avvo is unable to cite any clear pronouncements upon which attorneys can rely.

Avvo does suggest that this program will be ethically permissible because “…Avvo Legal Services has a similar structure to Avvo Advisor which has been operating in many states without complaint from state bar associations.” This, of course, begs the questions of whether it is appropriate for a state bar association to complain or whether a lack of complaints constitutes approval which a bar association may not have authority to grant. And, the absence of complaints certainly provides no defense to an attorney against a disciplinary filing from a dissatisfied client who comes to believe that a lawyer allowed Avvo’s program rules to limit their activity.

The Advisors program is far more simple than the Legal Services program which fact limits its comparability generally. An Avvo Advisor client picks an attorney from a list of attorneys and pays $39 for a single 15-minute telephone conference. The Advisors program represents a simple proposition: Avvo connects a potential client and an attorney for a single task at a predetermined single fixed fee. There is no opportunity to interfere in the relationship. More importantly, as I understand the Advisor program, Avvo deposits the entire fee into the attorney’s account: there is no possibility of fee splitting because no fee is split.

In the end, our structures and rules matter. Prohibiting non-lawyer ownership of legal practice forms an integral part of the current regulatory landscape. Consider one small aspect of the regulatory world: Avvo is not subject to legal professional regulation over the form and content of its advertising about attorneys. One would likely posit that the First Amendment protects, and does not limit, Avvo’s commercial speech.

Questions ensue. Can Avvo refer to its participating lawyers as “experts”, even if the lawyer could not ethically claim the same about himself or herself? How does Avvo's rating system interplay with our own advertising rules when Avvo is being paid for marketing by an attorney? Can Avvo solicit potential clients directly in circumstances in which a lawyer cannot? Can lawyers choose to avoid the ethical restrictions on advertising by paying Avvo to do so for them? How does Avvo's new role interplay with the rules regarding legal referral services?

Avvo has made great inroads in providing access to important review and reputational information about attorneys. This information accelerates the speed at which trust can be established between client and attorney. Access to well-formed reviews serves lawyers and clients well and facilitates efficient access to legal services. In the interests of full disclosure, I maintain an Avvo profile and enjoy participating in the program. Kudos to Avvo for a job well done and for serving our profession and the public well to date.

Importantly, the Avvo Legal Services Program may be the vanguard of the non-lawyer ownership of legal firms that already exists in other British common law legal jurisdictions. Market forces, accelerated by the Internet and services like Avvo, will bring even greater changes to legal practice and the client-attorney relationship than those set out in the Legal Services Program.

In the end, the interests of Avvo, its participating attorneys and the client public all would be well served by a formal exploration of the ethical issues only touched upon here. We are at a key point in looking at the future of our profession: those charged with the development and enforcement of our ethical rules should be proactive in conducting a thorough and constructive review of the issues. These reviews would likely create a certainty regarding the ethical framework of the Legal Services Program. Intelligent discussion may develop clarifications, limits and tweaks to the program that can eliminate any questions and allow both Avvo and practitioners to participate with full certainty of their ethical standing.

Discussion among those impacted may well cause an important and fundamental re-evaluation of the fundamental issues in non-lawyer ownership of legal practices. In that way, Avvo may be more than a harbinger; Avvo may be bringing the future to us right now. It is time to ask the questions and get the answers