September 3, 1986
A lawyer may not permit a lay organization to recommend his/her professional employment to the organization's clients when it is the agent of the lawyer in, (1) obtaining the client, (2) determining the nature of the legal services required, and (3) determining and collecting the fee for legal services.
References: MCPR DR 2-103, DR 2-104, DR 3-102, DR 3-103, DR 5-107(B); CI-1212; Op-54; State Bar Grievance Administrator v. Jacques (on remand), 407 Mich 26 (1979).
A local organization assists members of ethnic groups in completing forms required by such governmental agencies as Social Security, Immigration and Welfare. Some of the organization's clients require legal work in connection with their immigration applications. The organization proposes to refer these clients to law firms with the consent of the client.
The organization would determine fees and collect monies for both the nonlegal service which it provides and the legal service performed by the law firm. By forwarding the legal fee to the law firm after the legal service is performed, the organization intends to ensure that it will be paid for the nonlegal service which the organization provided the client.
A lawyer asks whether the arrangement violates ethics rules.
In State Bar Grievance Administrator v. Jacques (on remand), 407 Mich 26 (1979), the Michigan Supreme Court found no violation of the disciplinary rules under an arrangement whereby the respondent through a neutral intermediary asked union officials to solicit victims of a tunnel explosion involving union members. Based upon that holding, a lawyer may permit an organization in certain circumstances to recommend the lawyer's professional employment, notwithstanding MCPR DR 2-103 and DR 2-104.
Jacques is clearly distinguishable from the facts of the inquiry. In Jacques the union business agent possessed the expertise to make a detached and informed evaluation of the lawyer's qualifications before making any recommendation to union members. The union business agent was not a "runner" or agent of the lawyer. The union business agent served as a buffer between the lawyer and prospective client. In the subject inquiry the organization is the agent of the lawyer in (1) obtaining the client, (2) determining the nature of the legal services required, and (3) determining and collecting the fees for legal services. Therefore the referral arrangement is not permissible under applicable ethical standards and authority.
Organizations do organize and administer prepaid legal services programs under which they receive premiums, limit the number of lawyers available to the participants and pay the lawyers. But a lawyer may not request or knowingly permit an organization to promote the use of the lawyer's services unless there is compliance with MCPR DR 2-103 and DR 2-103(D)(1) through (4). The subject organization does not qualify and, consequently, the referrals are not proper.
A lawyer cannot permit a person who recommends his employment to influence his professional judgment. MCPR DR 5-107(B). A lawyer may not divide a legal fee with a nonlawyer, or form a partnership with a nonlawyer, if any of its activities consist of the practice of law. MCPR DR 3-102, DR 3-103. The financial arrangement of the proposed referral plan implicate these Rules to a degree which suggests their contravention.
A lawyer's relationship with a client must be direct and unimpeded. Ideally, compensation should be agreed upon with the client and paid directly to the lawyer. In this situation the organization will determine and collect the monies for both the nonlegal and legal services. Dependence upon the organization for receipt of a fee paid by the client impinges on the lawyer/client relationship and enables the organization to exert economic pressure on the lawyer. Economic pressure can endanger independent judgment; direct compensation by the client removes the pressure point. See, ABA i1212, C-54.
The organization wishes to collect and forward the lawyer's fee once the legal work is complete to ensure payment for its own services. Plainly stated, the legal fee is leverage for the conduct of a nonlegal business. The organization's retention and use of any portion of a sum designated by the client as payment of the lawyer's fee may be viewed as a division of that fee and economic partnership with a nonlawyer. The lawyer should also consider the situation in which a mutual client requires continuing representation but is engaged in a dispute with the organization over payment of its fee for nonlegal services.
However well-intentioned the association, it is possible that the organization may benefit from it. The availability of the lawyer's services to clients of the organization may become an inducement to individuals to use the organization's services. A lawyer may not accept employment by or through a lay intermediary knowing that the intermediary expects to profit from the lawyer's services. Op 54.
The referral plan is impermissible.