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Ethics Opinion

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R-6

December 15, 1989

SYLLABUS

    A lawyer may not participate in a lawyer referral service program:

  1. Which is not registered with the State Bar;
  2. Which interferes with the professional judgment of the lawyer in handling the client's representation;
  3. Which uses a marketing plan or other communication which violates ethics rules;
  4. In which the lawyer pays for the referral from a for-profit agency;
  5. In which legal fees are split with nonlawyers, include impermissible charges or impermissible terms; or
  6. In which conduct of a nonlawyer supervised by the lawyer, or employed by or otherwise associated with the LRS, is incompatible with the professional obligations of the lawyer.

    References: MRPC 1.2, 1.6, 1.7(b), 1.16, 1.8(e), 5.3, 5.4(a), 5.4(c), 6.3(b), 7.1, 7.2(c), 7.3; R-1; RI-7, RI-9, RI-14, RI-15, RI-17, RI-18; C-233; CI-723, CI-1026, CI-1132, CI-1192, CI-1209; MCR 8.121(E); Shapero v. Kentucky Bar Ass'n, 486 US 466 (1988); In re Primus, 436 US 412 (1978); Ohralik v. Ohio State Bar Ass'n, 436 US 447 (1978); Woll v. Attorney General, 116 Mich App 791 (1982).

TEXT

The Committee has received numerous inquiries from lawyers wondering whether it is ethical to participate in one or another lawyer referral service (LRS) currently operating or proposing to operate in the state.

Rather than review the propriety of each individual program, the Committee has decided that the bar would be better served by the publication of an opinion addressing the various ethical issues lawyers may face in personally evaluating the propriety of participation in an LRS.

It must be stressed that (1) the Committee does not have jurisdiction to review the propriety of the LRS, but concerns itself with whether participation in the LRS by Michigan lawyers would comply with the Michigan Rules of Professional Conduct; (2) these are guidelines based upon the experience of the Committee in reviewing particular LRS to date, and are not meant to be an exhaustive list of criteria. A lawyer should consult the Michigan Rules of Professional Conduct for the answers to questions that are not covered.

1. REGISTRATION

Under amendments adopted by the Supreme Court and effective October 23, 1989, and March 1, 1990, a lawyer may participate in and pay the usual charges of an LRS only if the LRS has filed information outlining its operations with the State Bar. The amendments to MRPC 6.3 and 7.2 state:

    "6.3(b) A lawyer may participate in and pay the usual charges of a not-for-profit lawyer referral service, or a legal service organization that recommends, furnishes, or pays for legal services to its members or beneficiaries, if that service or organization:

      "(1) has filed with the State Bar of Michigan a written plan disclosing the name under which it operates, the name, address and telephone eligibility, schedule of benefits, subscription charges and agreements with counsel;

      "(2) updates its filings within 30 days of any change; and

      "(3) in January of each year following its inception files a statement representing that it continues to do business under the terms and conditions reflected in its prior filings as amended to date."

    "7.2(c) A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertising or written communication permitted by this rule and may participate in and pay the usual charges of a not-for-profit lawyer referral service or other legal services organization that satisfies the requirements of Rule 6.3(b)."

The registration with the State Bar is for informational purposes only, not to obtain State Bar approval of the operations of the LRS, and lawyers may not rely on the fact of registration as a determination that participation in the particular LRS is proper.

2. INDEPENDENT PROFESSIONAL JUDGMENT OF THE LAWYER

A lawyer may not participate in an LRS which interferes with the professional judgment of the lawyer in handling the client's case.

MRPC 5.4(c) and (d) state:

    "(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services.

    "(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

      ". . .

      "(3) a nonlawyer has the right to direct or control the professional judgment of the lawyer."

Once the lawyer-client relationship between the LRS referred client and the participating lawyer has been established, it is subject to all the ethical standards applicable to that relationship. The rules of conduct prohibit any interference by the LRS with the professional judgment of the lawyer who is rendering the legal services. Therefore the lawyer may not acquiesce in any LRS rules which purport to control the substance of the representation provided. A lawyer may not participate in an LRS which prescribes the types of cases that may be filed, CI-1026. A lawyer may not participate in an LRS that involves supervision of the lawyer's handling of the client's case by a nonlawyer; involves a third party resolving disputes between the lawyer and the client about the conduct of the representation, RI-7,; or allows a third party to intermediate communications between the lawyer and the client, RI-15. The lawyer and the client should be the only ones participating in decisions about the conduct of the case, whether to file actions, whether to settle or negotiate, etc. A requirement that fee disputes arising between the lawyer and the client be arbitrated is permissible.

MRPC 1.2 requires that the scope of representation be established by the lawyer and the client. A lawyer cannot participate in an LRS which requires the lawyer to breach the duty of maintaining client confidences by, for example, instituting quality control mechanisms which rely upon disclosure by the lawyer of client confidences or secrets in violation of MRPC 1.6.

Although the LRS does not have to screen for conflicts between a lawyer's clients, a lawyer must avoid obligations to the LRS which interfere with obligations to the client, MRPC 1.7(b). When the interests of the client and the LRS conflict, the lawyer's duty to the client may require withdrawal, MRPC 1.16.

3. ADVERTISING

A lawyer is responsible for seeing that LRS communications about the lawyer's services comport with ethics rules. RI-7, RI-17, RI-18. MRPC 7.1 states:

    "A lawyer may, on the lawyer's own behalf, on behalf of a partner or associate, or on behalf of any other lawyer affiliated with the lawyer or the lawyer's law firm, use or participate in the use of any form of public communication that is not false, fraudulent, misleading or deceptive. A communication shall not:

      "(a) contain a material misrepresentation of fact or law, or omit a fact necessary to make the statement considered as a whole not materially misleading;

      "(b) be likely to create an unjustified expectation about results the lawyer can achieve, or state or imply that the lawyer can achieve results by means that violate the Rules of Professional Conduct or other law; or

      "(c) compare the lawyers' services with other lawyers' services, unless the comparison can be factually substantiated."

In addition, a lawyer may not participate in an LRS which suggests that lawyers in order to acquire business, contact clients by telephone or in person in violation of MRPC 7.3. RI-9; Shapero v. Kentucky Bar Ass'n, 486 US 466 (1988); Ohralik v. Ohio State Bar Ass'n, 436 US 447 (1978).

The lawyer should have the opportunity to review and monitor the advertising and communications about the lawyer's services. The lawyer cannot be relieved of the responsibility for compliance with MRPC 7.1. MRPC 7.2, RI-7, RI-9, RI-17, RI-18.

4. PAYING FOR A REFERRAL

A lawyer is allowed to pay for advertising permitted by the Rules, but is not permitted to pay another person or for-profit agency for channeling professional work. MRPC 7.2(c) states:

    "(c) A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertising or written communication permitted by this rule and may pay the usual charges of a not-for-profit lawyer referral service or other legal services organization." Emphasis added.

A profit-making entity which markets lawyers' services generally as well as to a defined interest group for a fee to be paid by the lawyers participating is a lawyer referral service violating MRPC 7.2(c). RI-9, RI-17; In re Primus, 436 US 412 (1978); Woll v. Attorney General, 116 Mich App 791 (1982).

It does not matter whether the LRS calls itself a "referral service," "group advertising," or some other name, if in fact a referral is made, CI-723. A so-called "group advertising plan" which urges clients to call a toll free number and which then connects the caller to a lawyer who has signed up with the advertiser for exclusive rights to an area code or zip code, is in fact a referral service governed by MRPC 7.3(c). RI-9, RI-17, CI-1192.

If an LRS is operated for-profit, a participating lawyer may pay thereasonable costs of advertising but may not pay other costs of the for-profit LRS, MRPC 7.2(c); RI-17; Shapero v. Kentucky Bar Ass'n, 486 US 466 (1988). It should be noted that a lawyer may pay the usual charges of not-for-profit referral services.

5. FEES

Fee-splitting with nonlawyers is prohibited under MRPC 5.4(a). A lawyer may not collect a fee for legal services from a client and then turn over a portion of that fee to an LRS operated by nonlawyers.

A lawyer must advise a client, before entering into a contingent fee arrangement, that lawyers may be employed under other fee arrangements in which the lawyer is compensated for the reasonable value of the services performed, such as on an hourly or per diem basis, MCR 8.121(E); RI-15, RI-17.

A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation with two exceptions. First, a lawyer may advance costs and expenses associated with litigation as long as repayment is the ultimate responsibility of the client. Second, a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the indigent client without any provision for repayment. Any other financial support or assistance by the lawyer and/or the LRS is not permitted, MRPC 1.8(c); RI-14.

6. SUPERVISION OF NONLAWYERS

If lawyers are involved in the operation of the referral service, they must ensure that nonlawyer employees and agents of the LRS are properly supervised. MRPC 5.3 and R-1 require that a lawyer employing, retaining, associating with or having direct supervisory authority over a nonlawyer shall make reasonable efforts to ensure that the nonlawyer's conduct is compatible with the professional obligations of the lawyer. Nonlawyers should receive training which ensures their conduct is compatible with the professional obligations of the lawyer. There is a duty of confidentiality governing the substance of any communication between nonlawyer LRS employees and what prospective clients have communicated about their legal problems.

CONCLUSION

It is incumbent upon a lawyer to ensure that the lawyer's participation in an LRS comports with the Michigan Rules of Professional Conduct before the lawyer begins to participate, and, once participating, to monitor the LRS for continuing compliance. The LRS must be structured to ensure that participating lawyers can comply with all applicable provisions of the Rules.

 
     

 

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