Hello everyone and welcome to this Ethics Alert which will discuss the recent approval of a Virginia ethics opinion which finds that AVVO and similar matching services unethical. Proposed Legal Ethics Opinion 1885 is here: http://www.vsb.org/site/regulation/leo_1885
On October 27, 2017, the Virginia State Bar voted to approve a draft ethics opinion regarding online attorney-client “matching services”, such as AVVO, which are called “attorney-client matching services” (ACMS),. The opinion finds that a lawyer’s participation in the matching services would violate the Virginia Rules of Professional Conduct.
The opinion does not name any specific services; however, the description of the is similar to the business model of Avvo Legal Services, which allows consumers to purchase legal services for a flat fee. The opinion describes a business model that it calls an “attorney-client matching service” (ACMS), which it describes as a for-profit entity that provides an online platform for matching attorneys and clients. An ACMS gives a client a limited scope fee agreement, and the client pays the full fee to the ACMS.
The lawyer does not negotiate the scope of services or the fee or receive any of the client’s money until the services have been performed. Under ACMS’s terms, the lawyer agrees to provide flat fee legal services. When the matter is completed, the attorney receives the full amount of the legal fee paid by the client. ACMS then debits the attorney’s account for a “marketing fee” which varies depending upon the amount of the legal fee received.
The opinion identifies five problems with the ACMS business model:
- The lawyer is not properly handling the client’s advanced fee because it is allowing a third party to hold the funds. Thus, the funds are not being held in an IOLTA account as required.
- Since the lawyer has no access to the client’s money until he is paid in full by the platform, he is unable to fulfill his obligation to refund any unearned fees at the conclusion of the matter.
- Without being in control of the definition of the scope of legal services or negotiation of the fee, the lawyer may well be undertaking representation which violates any number of ethics rules. The services may not be appropriate to the client. The fee may not be commensurate with the value of the services provided. The services may be inadequate for the client’s needs. And so on.
- The payment of the marketing fee to ACMS constitutes the sharing of legal fees with a non-lawyer.
- The payment of the marketing fee constitutes payment for recommending the lawyer’s services.
The opinion criticizes the fact that Avvo holds the fee between the time that the prospective client pays for the services until the lawyer completes the services and states that “the ACMS collects advanced legal fees from a prospective client before the prospective client has had any contact with the lawyer whom she might engage” and that this is a violation of the Bar rules which require that advance fees be held in an the lawyer’s trust account until services are completed.
Under lawyer trust account rules, unearned fees are to remain in trust. As an ACMS is not a law firm, it cannot have an IOTA trust account or hold client fees in trust. Since the fees are not paid to the lawyer, the lawyer is unable hold the funds in trust if same is required under the Bar rules. In addition, under the Bar rules, a lawyer has an to refund any unearned fees at the end of the representation.
The opinion also discusses some potential solutions to the problems with the current model. Regarding the issue of the lawyer not having control over the fee and the scope of the representation, the opinion did not flatly state that lawyers are prohibited from participating in the ACMS model. It concluded that a lawyer could participate if the lawyer consults with the client and is satisfied that the services can be performed competently and in compliance with the ethical rules before accepting a matter. The lawyer would also have to exercise independent professional judgment to insure that the fee is not unreasonable or excessive.
The opinion held that the arrangement results in unethical fee sharing with the matching service and “(t)he fact that the ACMS executes a separate electronic debit from the lawyer’s bank account for its ‘marketing fee’ following the firm’s electronic deposit of the full legal fee to the lawyer’s bank account does not change the ethically impermissible fee-sharing character of the transaction.” The opinion left the possibility that fee splitting might be avoided if the lawyer’s fee was based upon the number of clients received through the platform or the number of inquiries or clicks on their profile.
Bottom line: If this opinion is approved by the Virginia Supreme Court, Virginia will join five other states, New York, New Jersey, Ohio, South Carolina, and Pennsylvania, in disapproving or criticizing the AVVO business model. The New York and New Jersey opinions, which were issued this year, determined that the “marketing fee” taken from the lawyer’s account involves improper fee splitting.
Be careful out there…and stay tuned.
Disclaimer: this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
29605 U.S. Highway 19, N., Suite 150
Clearwater, Florida 33761
Office (727) 799-1688
Fax (727) 799-1670