Opinion 2116

The inquiring attorney requests an opinion from the WSBA Rules of Professional Conduct Committee regarding his participation in a lawyer referral service. The lawyer referral service, Consumer Legal Referrals, is a California nonprofit corporation created in 2005. CLR currently operates only in five Southern California counties, North Carolina, and Florida, but plans to expand into a nationwide internet-based referral service. CLR currently provides two services: lawyer referrals and low-cost pre-petition bankruptcy counseling to consumers. CLR has applied for, but not yet received, 501(c)(3) status.

For consumers looking to find legal bankruptcy representation, CLR will supply them, free of charge, with the names of up to three lawyers. It is up to the consumer to decide which, if any, of the lawyers, to retain. Each lawyer sets his or her own fees, but has agreed that the fees charged to clients obtained through CLR will not be higher than the fees charged to clients who did not go through CLR. Each lawyer has certified that he or she has sufficient expertise and experience in the subject matter, and carries malpractice insurance.

In order to participate in CLR, a lawyer agrees to place a listing which complies with applicable lawyer advertising rules in a directory. The directory is accessible from CLR’s website but is maintained and operated by a third party company, First Global Management. Currently the inquirer states there is no charge for listing in the directory, but in the future the cost may go up to $1,000 per year. Any advertising revenue would go to First Global Management, not to CLR. In addition, lawyers will pay a fee of $100.00 to a third party transmission provider to forward leads from CLR to both the lawyer and the consumer. This third party transmission provider may or may not be the same entity that owns the directory but will not be owned by CLR, any owner of CLR, or any member of the CLR Board of Directors. The $100 fee is waived if the lawyer does not convert a lead it received from CLR into an engagement.

The inquiring attorney wishes to know whether the Consumer Legal Referral arrangement is permissible under Washington rules relating to legal referral services and the payment of fees associated with a lawyer obtaining new clients.

The Committee reviewed your inquiry concerning your participation in a nationwide, internet-based, not-for-profit lawyer referral service for consumers seeking bankruptcy counsel.
Lawyer referral services are governed by WRPC 7.2(b)(2):
(b) A lawyer shall not give anything of value to a person for recommending the lawyer’s services, except that a lawyer may:
(2) pay the usual charges of a legal services plan or a non-for-profit lawyer referral service;

Comment No. 6 to the American Bar Association (ABA) Model Rules of Professional Conduct further clarifies the definition of a not-for-profit lawyer referral service. Washington’s proposed Comment No. 6 adopts the ABA language:
“A lawyer referral service… is any organization 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. Consequently, this Rule only permits a lawyer to pay the usual charges of a not-for-profit lawyer referral service.”
Based upon the information provided by you, the Committee believes Consumer Legal Referrals is not a nonprofit lawyer referral service within the definition of Rule 7.2(b)(2). The $100 fee paid by the lawyer to the service when a referred client retains the lawyer is paid to a third party transmission provider, not Consumer Legal Referrals. That third party transmission provider appears to be a profit corporation.

Further, you note that while there is currently no fee to place a listing in the lawyer directory, Consumer Legal Referrals has indicated that in the future it may charge up to $1,000 annually to maintain the listing, potentially with the same company that the referral fee is paid to. This fee also appears to be a violation of RPC 7.2(b)(1) as it is not a reasonable cost of advertising and may be intertwined with the referral fee that is also paid to a profit corporation.